Credit Suisse Upgrades Merck (MRK) to Outperform
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Credit Suisse upgraded Merck (NYSE: MRK) from Neutral to Outperform with a price target of $73.00 following news Friday that Bristol-Myers' CheckMate-026 (CM-026) Study for Opdivo in 1st line non-small cell lung cancer (NSCLC) missed its primary endpoint.
Analyst Vamil Divan commented, "Friday's developments help answer one of the main concerns we had on MRK as we struggled to see where they would find near to mid-term growth in the face of patent loss for Vytorin/Zetia, biosimilar competition for Remicade and increasing competition for Januvia/Janumet. Our MRK sales estimates increase by $1.6-$2.4 Bn for the next few years and our EPS estimates move to $4.06- $5.00 from $3.70-$4.45, suggesting a 2015-2019 EPS CAGR of 8.6%. Our DCF for MRK increases to $72. Our blended target price of 75% DCF/25% relative, with the relative based off of 18.0x our new 2017 EPS of $4.06, is $73. We acknowledge the lack of a CTLA-4 antibody could eventually limit MRK's potential in combination therapy. However, Keytruda will be a dominant player in monotherapy and MRK has quietly been developing a broad range of combination approaches as well."
Shares of Merck closed at $63.86 yesterday.
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