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UBS upgraded Merck (NYSE:MRK) to Buy from Neutral and raised its 12-month price target to $122 from $117 per share on Friday, expecting consensus estimates for the company’s blockbuster products Keytruda and Gardasil to improve in the near term.
“We believe consensus continues to underestimate Keytruda revenues as it moves higher up the treatment algorithm and Gardasil’s growth in China,” analyst Trung Huynh wrote, assuming coverage on MRK.
However, UBS says the stock’s multiple expansion will be primarily driven by the company’s underappreciated readouts expected this year and next, including data for its chronic cough candidate gefapixant.
An orally administered, selective P2X3 receptor antagonist, gefapixant has a mechanism similar to camlipixant, which GSK (GSK) acquired through its $2.0B acquisition of BELLUS Health this year.
UBS argues that management’s track record and financial discipline in business development should complement its above-consensus sales forecast of $15.5B for Merck’s (MRK) pipeline in 2030.
Meanwhile, Citi reaffirmed its Buy rating and $130 per share target on MRK, arguing that the multibillion-dollar deal the company struck with Daiichi Sankyo (OTCPK:DSKYF) (OTCPK:DSNKY) on Thursday is the “missing piece” to solve the risk of losing exclusivity for Keytruda.