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Merck (MRK) Outpaces Industry YTD: What's in Store for 2023?
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Merck’s (MRK - Free Report) stock has risen 30.4% this year so far compared with an increase of 4.3% for the industry.
Image Source: Zacks Investment Research
An ongoing recovery from the disruptions related to the pandemic and strong global underlying demand across its business, particularly for Keytruda and Gardasil, is improving Merck’s sales performance.
Merck’s blockbuster cancer medicine, Keytruda sales are gaining from continued strong momentum in metastatic indications, including in some types of NSCLC, renal cell carcinoma, head and neck squamous cell carcinoma, TNBC and MSI-H cancers. Keytruda is continuously growing and expanding into new indications and markets globally.
With continued label expansion into new indications & early-stage settings, Keytruda is expected to remain a key top-line driver. It is presently approved to treat six indications in earlier-stage cancers in the United States. Merck expects over half of Keytruda’s growth to come from indications in early-stage (neoadjuvant/adjuvant) treatment settings in the United States through 2025 and to represent roughly 25% of total global Keytruda sales by that time.
Alliance revenues from Lynparza and Lenvima are also boosting Merck’s oncology sales.
Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) .
AstraZeneca and Merck had formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types, namely, ovarian, breast, prostate and pancreatic. Lynparza is being evaluated in combination with Keytruda for colorectal cancer and lung cancer indications.
Beyond oncology, which is expected to drive durable growth into the next decade, Merck has important products in its portfolio, including the Gardasil vaccine to prevent HPV-related cancers. Sales of the Gardasil vaccine grew 31% in the first nine months of 2022. Merck expects Gardasil growth to benefit from increased supply as it is investing in expanding manufacturing capacity. Merck expects Gardasil sales to potentially double by 2030 compared to the 2021 level.
Merck’s Animal Health business has been a key contributor to its top-line growth with the company recording above-market growth. The trend is expected to continue in 2023.
Merck and partner Ridgeback Biotherapeutics’ COVID oral antiviral pill, Lagevrio has been a key top-line driver so far in 2022. However, sales are expected to be much lower in 2023 as the impact of the pandemic potentially declines.
Merck boasts a strong cancer pipeline, including Keytruda, which should help drive long-term growth.
Merck does have its share of problems like generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Key diabetes medicines, Januvia and Janumet will lose market exclusivity in the United States in January 2023. Januvia lost exclusivity in several markets in Europe in September 2022 while the additional exclusivity of Janumet expires in April 2023. Sales of the drugs are expected to decline significantly thereafter.
Nonetheless, strong sales of key products like Keytruda and Gardasil, a significant contribution from the Animal Health franchise and positive pipeline/regulatory developments can keep the stock afloat in 2023.
Some other stocks worth considering in the drugs/biotech sector are Vertex Pharmaceuticals (VRTX - Free Report) and Gilead Sciences (GILD - Free Report) , both carrying a Zacks Rank #2 at present.
Vertex Pharmaceuticals’ stock has risen 39.1% this year. Estimates for Vertex’s 2022 earnings have gone up from $14.21 to $14.61 per share, while those for 2023 have increased from $15.10 to $15.60 per share over the past 30 days.
Vertex has a four-quarter earnings surprise of 3.16%, on average.
Gilead’s earnings per share estimates for 2022 have increased from $6.57 per share to $7.09 per share, while that for 2023 have increased from $6.48 per share to $6.79 per share in the past 30 days. Gilead’s stock is up 14.1% in the year-to-date period.
Gilead beat earnings expectations in three of the trailing four quarters. The company delivered a four-quarter earnings surprise of 0.36%, on average.
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Merck (MRK) Outpaces Industry YTD: What's in Store for 2023?
Merck’s (MRK - Free Report) stock has risen 30.4% this year so far compared with an increase of 4.3% for the industry.
Image Source: Zacks Investment Research
An ongoing recovery from the disruptions related to the pandemic and strong global underlying demand across its business, particularly for Keytruda and Gardasil, is improving Merck’s sales performance.
Merck’s blockbuster cancer medicine, Keytruda sales are gaining from continued strong momentum in metastatic indications, including in some types of NSCLC, renal cell carcinoma, head and neck squamous cell carcinoma, TNBC and MSI-H cancers. Keytruda is continuously growing and expanding into new indications and markets globally.
With continued label expansion into new indications & early-stage settings, Keytruda is expected to remain a key top-line driver. It is presently approved to treat six indications in earlier-stage cancers in the United States. Merck expects over half of Keytruda’s growth to come from indications in early-stage (neoadjuvant/adjuvant) treatment settings in the United States through 2025 and to represent roughly 25% of total global Keytruda sales by that time.
Alliance revenues from Lynparza and Lenvima are also boosting Merck’s oncology sales.
Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN - Free Report) .
AstraZeneca and Merck had formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.
AstraZeneca and Merck’s Lynparza is approved for four cancer types, namely, ovarian, breast, prostate and pancreatic. Lynparza is being evaluated in combination with Keytruda for colorectal cancer and lung cancer indications.
Beyond oncology, which is expected to drive durable growth into the next decade, Merck has important products in its portfolio, including the Gardasil vaccine to prevent HPV-related cancers. Sales of the Gardasil vaccine grew 31% in the first nine months of 2022. Merck expects Gardasil growth to benefit from increased supply as it is investing in expanding manufacturing capacity. Merck expects Gardasil sales to potentially double by 2030 compared to the 2021 level.
Merck’s Animal Health business has been a key contributor to its top-line growth with the company recording above-market growth. The trend is expected to continue in 2023.
Merck and partner Ridgeback Biotherapeutics’ COVID oral antiviral pill, Lagevrio has been a key top-line driver so far in 2022. However, sales are expected to be much lower in 2023 as the impact of the pandemic potentially declines.
Merck boasts a strong cancer pipeline, including Keytruda, which should help drive long-term growth.
Merck does have its share of problems like generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Key diabetes medicines, Januvia and Janumet will lose market exclusivity in the United States in January 2023. Januvia lost exclusivity in several markets in Europe in September 2022 while the additional exclusivity of Janumet expires in April 2023. Sales of the drugs are expected to decline significantly thereafter.
Nonetheless, strong sales of key products like Keytruda and Gardasil, a significant contribution from the Animal Health franchise and positive pipeline/regulatory developments can keep the stock afloat in 2023.
Zacks Rank & Stocks to Consider
Merck currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other stocks worth considering in the drugs/biotech sector are Vertex Pharmaceuticals (VRTX - Free Report) and Gilead Sciences (GILD - Free Report) , both carrying a Zacks Rank #2 at present.
Vertex Pharmaceuticals’ stock has risen 39.1% this year. Estimates for Vertex’s 2022 earnings have gone up from $14.21 to $14.61 per share, while those for 2023 have increased from $15.10 to $15.60 per share over the past 30 days.
Vertex has a four-quarter earnings surprise of 3.16%, on average.
Gilead’s earnings per share estimates for 2022 have increased from $6.57 per share to $7.09 per share, while that for 2023 have increased from $6.48 per share to $6.79 per share in the past 30 days. Gilead’s stock is up 14.1% in the year-to-date period.
Gilead beat earnings expectations in three of the trailing four quarters. The company delivered a four-quarter earnings surprise of 0.36%, on average.