Report
Valens Research

MRK - Embedded Expectations Analysis - 2018 05 16

Merck & Co., Inc. (MRK:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 14.9x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to decline from 13% in 2017 to 10% through 2022, representing levels not seen since 2008

Specifically, markets appear to lack confidence in the sustainability of demand for Keytruda, which has emerged as a leading therapy in lung cancer indication, particularly after MRK's recent phase 3 lung cancer study. Additionally, the market appears to expect the firm to be unsuccessful in driving growth through their Animal Health segment, which produced $413mn in profits during the quarter and a 39% operating margin
Underlying
Merck & Co. Inc.

Merck & Co. is a global health care company that delivers health solutions through its prescription medicines, vaccines, biologic therapies and animal health products. The company's segments are: Pharmaceutical, which includes human health pharmaceutical products that consist of therapeutic and preventive agents for the treatment of human disorders, and human health vaccine products that consist of preventive pediatric, adolescent and adult vaccines; and Animal Health, which discovers, develops, manufactures and markets veterinary pharmaceuticals, vaccines and health management solutions and services, as well as a suite of digitally connected identification, traceability and monitoring products.

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Valens Research
Valens Research

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