Goldman Upgrades Merck To Buy, Lifts PT

Goldman Sachs on Monday upgraded pharma giant Merck & Co. to Buy from Hold, citing its strong pipeline and cancer drug Keytruda.

Goldman analyst Terence Flynn lifted Merck’s (MRK) price target to $105 (27.2% upside potential) from $91, saying “the market seems to be underappreciating a potential opportunity of between $13 billion and $18 billion in pipeline assets”. Flynn also believes “Keytruda loss of exclusivity tail risk” is already priced into the stock.

The analyst added that “Merck has developed several earlier stage cancer assets that can be used in combination with Keytruda or in patients who do not respond to Keytruda”. He views “the stock’s risk/reward as attractive heading into a number of upcoming readouts later this year and into next for cancer, HIV and COVID-19”. Further, Merck might combine with another longer-acting drug “to create a long-acting injectable formulation that could represent the next innovation in the HIV market,” according to Flynn.

The company, which is in the process of developing two vaccines along with a COVID-19 vaccine, expects a gradual recovery in the third quarter.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 5 Buys and 3 Holds. The average price target of $93.5 implies an upside potential of 13.3%. (See MRK stock analysis on TipRanks).

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