Stock Analysis & Valuation Merck & Co., Inc. (MRK.PA)

• Previous Close: €101.40
• Sector Valuation Confidence Level: High

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	73.80	-27
Intrinsic value (DCF)	53.96	-47
Graham-Dodd Method		n/a
Graham Formula	85.40	-16

Strategic Investment Analysis

Company Overview

Merck & Co., Inc. (MRK.PA) is a global healthcare leader headquartered in Kenilworth, New Jersey, and listed on Euronext Paris. Operating in the Drug Manufacturers - General industry, Merck specializes in pharmaceuticals and animal health solutions. Its Pharmaceutical segment focuses on oncology, immunology, vaccines, and chronic disease treatments, while its Animal Health segment provides veterinary pharmaceuticals and digital health management tools. With a market cap exceeding €260 billion, Merck is renowned for blockbuster drugs like Keytruda (oncology) and Gardasil (vaccines). The company collaborates with industry giants such as AstraZeneca, Bayer, and Gilead Sciences to advance treatments in HIV and other therapeutic areas. Merck’s diversified portfolio, strong R&D pipeline, and global distribution network position it as a key player in the healthcare sector, serving hospitals, governments, and animal producers worldwide.

Investment Summary

Merck & Co. presents a compelling investment case due to its strong financials, including €64.2 billion in revenue and €17.1 billion in net income (FY 2024). The company’s low beta (0.36) suggests stability relative to the market, supported by robust operating cash flow (€21.5 billion) and a solid dividend (€0.77/share). Keytruda, its top-selling oncology drug, continues to drive growth, though reliance on this product (~40% of revenue) poses concentration risks. Merck’s debt (€37.1 billion) is manageable given its cash reserves (€13.2 billion) and cash flow. Investors should monitor pipeline developments and patent expirations, but Merck’s leadership in vaccines and animal health provides diversification.

Competitive Analysis

Merck & Co. competes in the global pharmaceutical market through its strong R&D capabilities, diversified portfolio, and strategic collaborations. Its competitive advantage lies in blockbuster drugs like Keytruda (pembrolizumab), which dominates the PD-1 inhibitor market, and Gardasil, a leading HPV vaccine. The company’s Animal Health segment is a differentiator, offering integrated solutions from pharmaceuticals to digital tracking. However, Merck faces intense competition in oncology (e.g., from Bristol-Myers Squibb’s Opdivo) and immunology (AbbVie’s Humira biosimilars). Its reliance on Keytruda (~40% of revenue) is a vulnerability as patent expirations loom post-2028. Merck’s partnerships (e.g., with AstraZeneca) enhance its pipeline but also expose it to shared revenue streams. The company’s scale and global distribution network provide cost advantages, but pricing pressures in the U.S. and Europe remain a challenge. Merck’s focus on high-growth areas (oncology, vaccines) and animal health positions it well, but it must innovate to offset eventual Keytruda declines.

Major Competitors

• Pfizer Inc. (PFE): Pfizer is a Merck rival in vaccines (e.g., Comirnaty COVID-19 vaccine) and oncology (Ibrance). Its recent acquisition of Seagen strengthens its cancer pipeline, but Pfizer faces revenue declines post-pandemic. Merck’s broader animal health business gives it an edge.
• Bristol-Myers Squibb (BMY): Bristol-Myers Squibb competes closely with Merck in oncology (Opdivo vs. Keytruda) and immunology. Its recent acquisitions (e.g., Celgene) bolster its pipeline, but Merck’s Keytruda leads in market share. BMY’s cardiovascular portfolio diversifies its revenue.
• AstraZeneca PLC (AZN): AstraZeneca partners with Merck on Lynparza (oncology) but competes in immunology and vaccines. Its COVID-19 vaccine (Vaxzevria) and robust pipeline (e.g., Tagrisso) are strengths, but Merck’s animal health segment provides additional revenue streams.
• Novo Nordisk A/S (NVO): Novo Nordisk dominates diabetes and obesity care (Ozempic, Wegovy), areas where Merck has limited presence. Its metabolic focus contrasts with Merck’s oncology strength, but both face pricing pressures in the U.S.
• Zoetis Inc. (ZTS): Zoetis is Merck’s primary competitor in animal health, with a leading portfolio of vaccines and parasiticides. Merck’s digital ID solutions differentiate it, but Zoetis’s pure-play focus gives it agility in the veterinary market.