Merck stock is trending down in September despite starting a study in Covid prevention with partner Ridgeback Biotherapeutics and winning U.S. approval for Keytruda in bladder cancer.
The company has a deal with the U.S. government for Ridgeback-partnered molnupiravir. Merck (MRK) will supply 1.7 million doses to treat patients with mild to moderate Covid and a pre-existing condition. In September, Merck and Ridgeback started a pivotal study testing the pill in preventing infection in people living with a Covid-positive person.
Late last month, the Food and Drug Administration converted the accelerated approval of Keytruda to a full approval in bladder cancer treatment. Previously, a split committee of medical experts voted that the benefits of Keytruda for this use outweigh its risks. But the company withdrew its application for Keytruda as a third option in stomach cancer.
Keytruda also won new approvals in Japan. Further, the FDA approved a combination of Keytruda and Lenvima in advanced kidney cancer.
Merck also finished spinning off its women’s health, biosimilars and established drugs businesses into a new company, Organon (OGN).
So all in all, is Merck stock a buy or sell now?
Merck Stock Fundamentals: Sales Top
During the second quarter, adjusted earnings climbed 28% to $1.31 per share and sales soared 22% to $11.4 billion. While sales beat forecasts, earnings were just in line with Merck stock analysts’ views.
Merck also provided guidance following its Organon spinoff. The pharma company now expects to earn $5.47-$5.57 per share on $46.4 billion to $47.4 billion in sales.
More than a third of sales stemmed from cancer treatment Keytruda. Keytruda sales increased 23% to almost $4.18 billion. Sales of its human papillomavirus vaccine, Gardasil, soared 88% to $1.23 billion. But revenue from diabetes medicine Januvia fell 6% to $1.26 billion.
Second-quarter metrics were in line with CAN SLIM rules for investing, which advise investors to look for companies with recent quarterly growth of 20%-25%, or better. But part of its bullish growth comes from poor year-earlier comparisons at the height of the pandemic.
In the third quarter, analysts polled by FactSet expect Merck to earn $1.55 per share on $12.32 billion in sales. On a year-over-year basis, earnings would fall 6.6% and sales would drop 1.9%.
What Do Annual Metrics Say About Merck?
As of midday Sept. 1, Merck stock was down slightly for the year.
Last year, Merck’s sales grew 2.5% to $47.99 billion. That decelerated from 11% growth in 2019.
For 2021, analysts expect sales to fall 2.3% to $46.9 billion. Income is projected to fall about 1.8% to $5.56 a share. That follows 14% growth in 2020.
The stock ranks seventh by Composite Rating in the industry group of pharma companies. The 33-company Medical-Ethical Drugs group ranks No. 28 out of 197 groups tracked by Investor’s Business Daily.
Technical Analysis Of The Pharmaceutical Company
Merck stock has a Composite Rating of 71 out of a best-possible 99. The CR is a measure of a stock’s key growth metrics over the past 12 months. This puts Merck stock narrowly below the top three-quarters of all stocks, regardless of industry group.
Shares also have a Relative Strength Rating of 39, reflecting the 12-month performance of Merck stock. This means the pharmaceutical company’s stock performed in the bottom one-half of all stocks in the past year.
It’s also key to watch chart patterns. Merck stock broke out of a saucer-with-handle base with a 78.87 buy point on Aug. 17. But shares have since dipped back below their entry, according to MarketSmith.com.
Merck Stock News: Merck Grabs Covid Deal
Merck inked a deal with the U.S. government for 1.7 million doses of its Covid treatment pill in June. The company is collaborating with Ridgeback on the treatment. The deal is worth $1.2 billion if the pill is authorized for emergency use in the U.S. The companies are also testing molnupiravir as a preventative measure for people living with a Covid-positive person.
Merck also just wrapped its spinoff of Organon. Organon will focus on women’s health, biosimilars and established, off-patent drugs. Its biggest product is implantable contraceptive Nexplanon.
In early March, President Joe Biden announced Merck would help Johnson & Johnson (JNJ) produce its Covid vaccine. Merck will receive $268.8 million from the Biomedical Advanced Research and Development Authority to help expand and make available facility space to do so.
But Merck has scrapped development of two potential Covid vaccines that proved inferior to others and natural infection.
Merck also finished buying Pandion Therapeutics for $60 per share. Pandion went public last July.
Is Merck Stock A Buy Now?
Based on CAN SLIM rules for investing, Merck stock isn’t a buy right now. Shares topped a buy point on Aug. 17, but are now back below their entry. Investors are encouraged to buy when a stock is in a buy zone, and to sell when a stock falls 7%-8% below its buy point.
Both Merck’s sales and earnings met CAN SLIM guidelines in the second quarter. But that was partly due to the poor year-ago comparison. Further, both measures are expected to drop in the third quarter. Still, big stocks like Merck can add gains without hitting massive growth streaks.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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