The stock Chart for Merck & Co., Ink. (NYSE:MRK) was not healthy. In the past year, the stock has lost about 13% of their value. And Yes, of course, there are legitimate reasons for the weakness with the Merck stock.
The company has seen a slowdown in all major sectors such as drugs such as Zetia and Remicade. The fact that the competitive environment for prescription drugs is intense.
Merck shares also declined due to uncertainty in the healthcare market. For the most part, the Federal government is considering approaches to cut costs on medication. There are also mega acquisitions of health insurers, which could mean even more pressure. Hey, even Amazon.com ink. (Nasdaq:events of the week) is looking for ways to undermine the industry.
However, despite all this, Merck stock still has some key advantages. Actually, I think the shares look quite attractive at current levels. So let’s see why:
Advantage No. 1 Stock Merck: Keytruda
Last week, Merck got some negative news with Keytruda. The combination of this drug with Incyte Corp. in (Nasdaq:Internet) the Treatment is not in phase three trials.
But it was a much bigger problem for incy than stock MRK. The reason is that Keytruda has many other applications and is likely to stimulate growth in the long term. For the last quarter of the proceeds of the drugs increased by 169% to $ 1.3 billion. It’s actually the Number 2 best seller for IRC.
Please note that Keytruda is the cancer immunotherapy that use their own immune system of the patient. Treatment relies on anti-PD-1 (programmed receptor-1 death) treatment.
Some of the most recent approval of the FDA indications are mismatch repair-deficient solid tumors; locally advanced or metastatic urothelial cancer (bladder cancer); and relapsed or refractory classical Hodgkin Lymphoma (CHL).
Advantage # 2 Stock Merck: Manufacturing
For many years, MRC has done a good job in the fight with the expiry of various major drugs. Again, the company has been disciplined with acquisitions, investments and R & d in the past year, the company spent R $10.2 billion&D.
It’s true that drug development is very risky. But the good news is that MRK has a strong pipeline.
For example, there is Lynparza, which includes a partnership with AstraZeneca PLC ADR (NYSE:AZN). The drug has received FDA approval for ovarian/fallopian tube cancer. There is also an indication of breast cancer.
That is Steglatro and Steglajan, which focused on diabetes. Of course, MRK has a long history of success with this disease, as seen with his number 1 drug, Januvia.
Advantage # 3 stock Merck: the scale and finances
MRK, which is expected this year’s earnings of $41.2% to 42.7 billion dollars, is the world leader. Because of this, the company is one of the few operators that can commercialize the drug in the scale.
MRK also has the advantage of significant cash flow. In 2017, cash flow from operating activities came to 6.4 billion dollars. Therefore, companies should have the firepower to more share repurchases and increasing dividends (current yield is 3.5%).
In fact, the law On the tax reform should also provide a good advantage. The company plans to spend a hefty $ 12 billion on capital projects over the next five years with savings.
Finally, the rating on MRK shares attractive, with a forward price-earnings multiple at 12.6 X. in comparison, Bristol-Myers Squibb company index (my) and Johnson & Johnson (US:after the last holiday) are about 15 times.
Tom Taulli is the author of high-profit IPO strategies, All about commodities and all about short sales. Follow him on Twitter at @ttaulli. At the time of this writing, he has not held positions in any of the above securities.