Stock Analysis & Valuation Merck & Co., Inc. (6MK.DE)

• Previous Close: €91.70
• Sector Valuation Confidence Level: High

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	69.20	-25
Intrinsic value (DCF)	47.83	-48
Graham-Dodd Method		n/a
Graham Formula	85.80	-6

Strategic Investment Analysis

Company Overview

Merck & Co., Inc. (6MK.DE) is a global healthcare leader listed on the Deutsche Börse (XETRA) with a market capitalization of €171.5 billion. Headquartered in Kenilworth, New Jersey, the company operates through two key segments: Pharmaceutical and Animal Health. The Pharmaceutical segment focuses on innovative treatments in oncology, immunology, vaccines, and chronic diseases, while the Animal Health division provides veterinary pharmaceuticals and digital health solutions. Merck’s strong R&D pipeline, strategic collaborations (e.g., with AstraZeneca and Gilead Sciences), and global distribution network position it as a dominant player in the Drug Manufacturers - General industry. With a legacy dating back to 1891, Merck combines scientific innovation with commercial scale, serving healthcare providers, governments, and animal producers worldwide. Its diversified portfolio and €64.2 billion annual revenue underscore its resilience in the dynamic healthcare sector.

Investment Summary

Merck & Co. presents a compelling investment case due to its robust pharmaceutical pipeline (notably in oncology and vaccines), stable cash flow (€21.5 billion operating cash flow), and consistent profitability (€17.1 billion net income in FY2024). The company’s low beta (0.44) suggests defensive characteristics, appealing to risk-averse investors. However, risks include high debt (€37.1 billion) and reliance on blockbuster drugs like Keytruda, which faces eventual patent expirations. The dividend yield (~1.8% at current prices) is modest but supported by strong cash reserves (€13.2 billion). Investors should monitor pipeline progress and competitive pressures in biologics.

Competitive Analysis

Merck & Co. competes in the global pharmaceutical market through its dual strengths in innovation and scale. Its key competitive advantage lies in its oncology franchise, led by Keytruda (pembrolizumab), the world’s top-selling drug, which benefits from first-mover status in PD-1 inhibitors and extensive label expansions. The company’s vaccine division (e.g., Gardasil) also holds a near-monopoly in HPV prevention. However, Merck faces intensifying competition in biologics from Roche and Bristol-Myers Squibb, as well as pricing pressures in generics. Its Animal Health segment differentiates through integrated digital solutions (e.g., ID traceability), but rivals like Zoetis dominate premium pet care. Merck’s partnerships (e.g., with AstraZeneca for Lynparza) mitigate R&D risks, while its manufacturing efficiency (evidenced by 26.7% net margins) provides cost advantages. Geographic diversification (45% of revenue outside the U.S.) buffers against regional market volatility.

Major Competitors

• Roche Holding AG (ROG.SW): Roche leads in oncology (e.g., Tecentriq) and diagnostics, with a stronger pipeline in neuroscience. Its biologics expertise and in-house diagnostics synergies give it an edge in personalized medicine, but Merck outperforms in vaccines and has lower reliance on a single therapeutic area.
• Bristol-Myers Squibb (BMY): BMY rivals Merck in immuno-oncology (Opdivo vs. Keytruda) and cardiovascular drugs. Its acquisition of Celgene bolstered its hematology portfolio, but Merck’s broader vaccine and animal health segments provide diversification BMY lacks.
• Pfizer Inc. (PFE): Pfizer’s scale and COVID-19 vaccine windfall (Comirnaty) give it short-term revenue boosts, but Merck’s non-vaccine pipeline is more robust. Pfizer’s recent spin-off of Upjohn weakens its branded drug focus compared to Merck’s integrated model.
• Zoetis Inc. (ZTS): Zoetis is the pure-play leader in animal health, with higher margins (28% vs. Merck’s ~22%) and strong companion animal focus. Merck’s Animal Health segment lags in innovation but benefits from cross-selling with its pharmaceutical operations.
• AstraZeneca PLC (AZN): AstraZeneca excels in respiratory and emerging markets, with a faster-growing oncology pipeline (e.g., Tagrisso). Merck’s broader portfolio and superior commercialization capabilities (especially in the U.S.) offset AZN’s R&D productivity.