| Valuation method | Value, £ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 58.60 | -47 |
| Intrinsic value (DCF) | 58.29 | -47 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 75.30 | -32 |
Merck & Co., Inc. (NYSE: MRK) is a global healthcare leader headquartered in Kenilworth, New Jersey, with a storied history dating back to 1891. The company operates through two key segments: Pharmaceutical and Animal Health. The Pharmaceutical segment focuses on groundbreaking treatments in oncology, immunology, infectious diseases, and vaccines, including blockbuster drugs like Keytruda (pembrolizumab), a leading immunotherapy for cancer. The Animal Health segment provides veterinary pharmaceuticals, vaccines, and digital health solutions for livestock and companion animals. Merck's diversified portfolio serves drug wholesalers, hospitals, government agencies, veterinarians, and managed care providers. With strategic collaborations with AstraZeneca, Bayer, and Gilead Sciences, Merck continues to innovate in long-acting HIV treatments and other therapeutic areas. The company's strong R&D pipeline and global footprint position it as a dominant player in the $1.5 trillion pharmaceutical industry, with particular strength in biologics and vaccines.
Merck & Co. presents a compelling investment case as a defensive healthcare stock with a beta of 0.44, offering stability during market volatility. The company's $187.8B market cap reflects its industry leadership, particularly in oncology through Keytruda (which generated ~$25B in 2023 sales). Strong financials include $64.2B revenue, $17.1B net income, and robust operating cash flow of $21.5B. However, investors should monitor patent cliffs (Keytruda loses exclusivity in 2028) and the company's ability to replenish its pipeline. The 3.2% dividend yield (payout ratio ~47%) provides income appeal, while debt levels ($37.1B) remain manageable given cash reserves ($13.2B). Merck's animal health division provides diversification, but growth depends on successful clinical trials and market expansion for pipeline assets like sotatercept (pulmonary arterial hypertension).
Merck maintains competitive advantages through its dominant position in immuno-oncology (Keytruda holds ~45% of the PD-1/L1 inhibitor market) and vaccines (Gardasil franchise). The company spends ~$13B annually on R&D (20% of revenue), focusing on targeted oncology and infectious diseases. Merck's scale allows for superior commercialization capabilities, especially in the U.S. and China. However, it faces intensifying competition in key therapeutic areas: Bristol-Myers Squibb's Opdivo challenges in oncology, while Eli Lilly and Novo Nordisk lead in diabetes/obesity. Merck's animal health division competes with Zoetis in companion animals but has stronger livestock vaccines. The company's late-stage pipeline (15 Phase 3 programs as of 2024) mitigates but doesn't eliminate Keytruda dependency risks. Strategic partnerships (e.g., with Daiichi Sankyo in antibody-drug conjugates) enhance its oncology moat. Merck's manufacturing complexity (biologics vs. small molecules) creates barriers to entry but requires continuous CAPEX ($3.4B annually). Pricing pressures in ex-U.S. markets and biosimilar threats to older drugs remain challenges.