Merck maintains outperform rating, $148 target amid EyeBio deal

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On Thursday, Merck & Co. Inc. (NYSE:MRK) retained its Outperform rating with a steady price target of $148.00 as BMO Capital Markets responded to the pharmaceutical giant’s latest strategic move. Merck announced its intentions to acquire EyeBio, a significant step that propels the company into the ophthalmology sector with a $1.3 billion upfront payment and the potential for an additional $1.7 billion tied to milestone achievements.

Merck’s foray into eye care comes with the acquisition of Restoret, EyeBio’s leading drug candidate, which is a tetravalent tri-specific Wnt pathway antibody. This asset is in the pipeline for treatment of diseases such as Diabetic Macular Edema (DME) and Neovascular Age-related Macular Degeneration (NVAMD). Restoret is expected to enter phase 2b/3 trials for DME in the second half of 2024.

The acquisition is seen as a strategic expansion for Merck, as it aims to diversify its portfolio. This move is particularly significant as it prepares for the upcoming loss of exclusivity (LOE) on its blockbuster cancer drug, Keytruda. The transaction with EyeBio marks an effort by Merck to bolster its presence in new therapeutic areas and sustain its revenue streams.

BMO Capital Markets views the acquisition positively, noting that although it is relatively small, it represents progress for Merck in broadening its revenue base. The firm’s endorsement of Merck’s stock performance comes amidst this proactive step by the company to mitigate the impacts of Keytruda’s patent expiration.

Merck’s stock retains the confidence of BMO Capital Markets as it embarks on this new chapter in ophthalmology, with Restoret’s clinical advancements being a key factor to watch in the company’s growth trajectory. The anticipated phase 2b/3 trial commencement for Restoret in DME during the latter half of 2024 is a critical milestone in the company’s expansion into new therapeutic domains.

In other recent news, Merck & Co., Inc. has been actively making strides in the pharmaceutical industry. In a significant development, the U.S. Food and Drug Administration (FDA) has accepted for priority review the supplemental Biologics License Application (sBLA) for Merck’s KEYTRUDA, a potential treatment for malignant pleural mesothelioma. The FDA has set a target action date of September 25, 2024, for the review. The application is supported by data from the Phase 2/3 IND.227/KEYNOTE-483 trial, which demonstrated a significant improvement in overall survival for patients treated with KEYTRUDA and chemotherapy.

Merck also announced the acquisition of EyeBio, a company specializing in the development of drugs for eye diseases. The deal, worth up to $3 billion, is expected to significantly enhance Merck’s footprint in the ophthalmology sector, adding EyeBio’s novel late-phase candidate Restoretâ„¢ for diabetic macular edema (DME) and neovascular age-related macular degeneration (NVAMD) to its pipeline.

Furthermore, Merck’s anti-PD-1 therapy, KEYTRUDA, has shown a survival benefit in a Phase 3 KEYNOTE-522 trial for patients with high-risk early-stage triple-negative breast cancer (TNBC). This marks the first instance where an immunotherapy-based regimen has demonstrated a significant overall survival benefit in this patient group.

These developments reflect Merck’s commitment to advancing science and improving patient outcomes in cancer care and other therapeutic areas. As these are recent developments, it will be interesting to follow how they unfold and impact the company’s trajectory in the healthcare industry.

InvestingPro Insights

As Merck & Co. (NYSE:MRK) ventures into the ophthalmology sector with the strategic acquisition of EyeBio, the company’s financial metrics and analysts’ expectations provide a broader context for its future growth prospects. Merck’s market capitalization stands at a robust $319.82 billion, reflecting the company’s significant presence in the pharmaceutical industry. This is complemented by a revenue growth of 6.11% over the last twelve months as of Q1 2024, indicating a steady upward trajectory in the company’s financial performance.

InvestingPro Tips reveal that Merck has consistently raised its dividend for 13 consecutive years, a testament to its financial stability and commitment to shareholder returns. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling confidence in Merck’s growth potential. Importantly, the company’s net income is expected to grow this year, which is crucial as it diversifies its portfolio and prepares for the loss of exclusivity on Keytruda.

Merck’s foray into new therapeutic areas, such as the treatment of Diabetic Macular Edema (DME) and Neovascular Age-related Macular Degeneration (NVAMD) with Restoret, is a strategic move that aligns with analysts’ positive outlook. Investors and stakeholders can explore more InvestingPro Tips for Merck at, and use the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With over 11 additional tips listed in InvestingPro, users can gain deeper insights into Merck’s financial health and market position.

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