Merck & Company (MRK)

Sector's low beta makes it immune to economic shocks. YOY revenue growth of 9%. New products in pipeline, promising collaborations, JV with Moderna. FDA-approved hypertension drug has great growth prospects. Forward PE of 15.4x, still attractive. Generous dividend yield of over 2%. Another 12% upside from here.

The pharma sector is always in the political crosshairs. Both candidates have vowed reforms, but in different approaches. But both like to attack drug prices, both in amount and how they are paid (third party insurance, medicare, etc.). In other elections, though, the 'talk' is often worse than what actually happens. Both candidates know the sector is important for US growth, and the population is getting older. MRK and others can best compete with their drug pipeline, so that they can grow even with restrictions on revenue/prices. For MRK in specifically, consensus calls for very strong EPS growth in each of the next two years. If MRK can meet expectations, we think it can overcome any political fallout. It is also quite cheap at 14X earnings so some uncertainty is embedded in prices already.
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Healthcare was out of favour for a long time, but is starting to enjoy some love. Keytruda, their drug, sells over $25 billion revenues--the most in history--and this patent won't expire until 2028-9, so there's time

Keytruda keeps working.

Chart looks pretty good, trading above 200-day MA. Higher highs and higher lows this year. Pretty good PEG ratio, fairly cheap valuation. Trades at 15x estimated earnings, not bad at all.

Prefers growthier areas, such as weight loss and diabetes, and distributors such as CAH and MCK.

Owns neither. If had to choose, go with MRK based on valuation. Pretty good product pipeline, investing a lot in R&D to keep it strong. Looking to expand operating margins.

It reports Thursday. He expects them to announce new drug applications, the anti-cancer portfolio and their acquisitions.

Shares jumped today after getting approval for their pulmonary hypertension drug. This is huge. In 2023, 40% of their sales were from the keytruda drug, but this will go off patent in 2028

Absolutely a reasonable choice in the sector. Beat numbers last quarter. Lots of cash, ability to buy assets in areas of growth or where they want to add expertise. Increased guidance. Worth owning.

Better pipeline than PFE. Very strong oncology drug, proving effective in cocktail form against different cancers. This one drug represents over 40% of revenues. Patent on this one runs off around 2027-28, but pipeline is robust.

He owns ELI and AZN instead. MRK's key drug, Keytruda, is an anti-cancer treatment which drove their sales up 21% last year, and amounts to nearly 30% for their sales, but the patent cliff will happen in 2028. So, MRK must replace those sales (drug pipeline or buy a company). Be cautious here.

Portfolio of cancer-fighting stars. Great portfolio and great pipeline. Low valuation of 12x earnings. AAA balance sheet, good future. Good times ahead. Yield is 3%.

A cheap stock. Their Keytruda drug did very well, perhaps the best-selling drug of all time.

Upgraded today and he agrees. His #1 healthcare pick this year. A key drug will come off patent in 2028, but they have tons of drugs to replace it. They beat and bottom lines.

Healthcare is having a poor year, but they have a tremendous drug pipeline and strong balance sheet.