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Core Viewpoint - Merck (MRK) remains a compelling buy despite a price increase, with a current P/E ratio of approximately 14.6x, which is still reasonable when considering its growth potential and Graham P/E of about 23.7x, indicating a significant margin of safety [3][4][11] Valuation and Growth Potential - The stock is currently undervalued with a PEG ratio of only 0.78, suggesting that growth from pipeline drugs, particularly Molnupiravir, is not fully reflected in the stock price [1] - Analysts project a compound annual growth rate (CAGR) of 7.6% for EPS from fiscal years 2024 to 2028, with EPS expected to grow from $8.64 in FY2024 to nearly $12.5 by FY2028 [6][7] - The forward P/E ratio is anticipated to decline to about 10x by the end of FY2028, further supporting the investment thesis [7] Key Profit Drivers - Merck's diversified business model mitigates risks by generating revenue from both established therapies and vaccines in developing markets, unlike many peers reliant on blockbuster drugs [8] - The Keytruda franchise has shown strong sales growth, with a 21% increase in Q4 2023 sales to $6.61 billion, and is expected to maintain momentum due to its patent protection until 2028 [9] Financial Strength - Merck has demonstrated strong financial health, with an A+ rating and a low financial debt-to-equity ratio of 0.108, indicating a solid balance sheet [12] - The company has a relatively low payout ratio of about 35% on FY1 EPS, allowing for sustainable dividend growth despite a lower-than-average dividend yield of 2.38% [10][12]

Core Insights - Merck has over six blockbuster drugs, with Keytruda being a major contributor, accounting for more than 45% of pharmaceutical sales and driving steady revenue growth [1] - The company reported better-than-expected first-quarter results, with Keytruda sales rising 24% and Gardasil sales increasing by 17% [1][2] - Merck raised its 2024 earnings per share guidance to between $8.53 and $8.65 and increased its revenue guidance range to $63.1 to $64.3 billion [2] Financial Performance - Merck's stock has increased by 20.3% this year, outperforming the industry average increase of 15.3% [2] - The strong first-quarter performance and guidance increase have contributed to the stock's rise [2] Product Pipeline and Acquisitions - Merck made significant regulatory and clinical progress in oncology, vaccines, and infectious diseases, including the acquisition of Harpoon Therapeutics, which added HPN328 to its pipeline [4] - Keytruda continues to expand into new indications and markets, with ongoing growth expected [4] - Merck is developing innovative immuno-oncology combinations and personalized mRNA therapeutic cancer vaccines in collaboration with Moderna [5] Future Prospects - Merck anticipates eight potential new product approvals between 2025 and 2030, with V116 and Winrevair expected to generate significant long-term revenues [7] - Winrevair was approved for pulmonary arterial hypertension in March 2024, and V116 is under priority review with an FDA decision expected on June 17, 2024 [7] Challenges - Merck faces challenges such as generic competition and rising pressure in its diabetes franchise, raising concerns about growth in its non-oncology business ahead of Keytruda's loss of exclusivity [6]

Core Viewpoint - Merck (MRK) is showing potential for investment due to its recent technical indicators and positive earnings estimate revisions [1][3] Technical Analysis - MRK has recently broken through the 20-day moving average, indicating a short-term bullish trend [1] - The 20-day simple moving average is favored by traders for its ability to smooth out short-term price trends and signal trend reversals [1] Performance Metrics - MRK has experienced a rally of 5.1% over the past four weeks, suggesting upward momentum [3] - The company currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [3] Earnings Estimates - In the past two months, there have been 10 upward revisions to MRK's earnings estimates for the current fiscal year, with no downward revisions [3] - The consensus earnings estimate for MRK has also increased, reinforcing the positive outlook [3]

Merck & Co., Inc. (NYSE:MRK) BofA Securities 2024 Health Care Conference May 15, 2024 4:40 PM ET Company Participants Caroline Litchfield - EVP & CFO Conference Call Participants Geoff Meacham - Bank of America Securities Geoff Meacham [Call Starts abruptly] Caroline Litchfield, CFO. Caroline, good to see you. Caroline Litchfield Great to see you again too. Geoff Meacham Thanks for joining. I know we have a list of questions, but maybe just kind of give us the post 1Q highlights and kind of how you see mayb ...

Merck & Co., Inc. (NYSE:MRK) Conference Call Summary Company Overview - **Company**: Merck & Co., Inc. - **Event**: BofA Securities 2024 Health Care Conference - **Date**: May 15, 2024 - **Participants**: Caroline Litchfield (EVP & CFO), Geoff Meacham (Bank of America Securities) Key Highlights Financial Performance - **Q1 Growth**: Merck reported a 9% growth in revenue driven by oncology (KEYTRUDA), vaccines (GARDASIL, VAXNEUVANCE), and contributions from LAGEVRIO [3][4] - **Guidance Update**: The company raised and narrowed its guidance for both top line and bottom line for the year [4] Product Pipeline and Launches - **Phase 3 Studies**: Over 20 Phase 3 studies initiated across 8 novel candidates in 2023, with expectations for more in 2024 [4] - **WINREVAIR Launch**: Positive initial reception from prescribers and patient groups for WINREVAIR, aimed at treating pulmonary arterial hypertension (PAH) [6][8] - **Market Potential**: Approximately 40,000 patients in the U.S. identified with PAH, with prescriptions coming from both Centers of Excellence (COEs) and outside [7] Oncology Developments - **KEYTRUDA**: The company aims to mitigate the impact of KEYTRUDA's loss of exclusivity (LOE) through innovation and a strong pipeline in oncology [12][14] - **Pipeline Expansion**: Focus on individualized neoantigen therapy, precision molecular targeted agents, and antibody-drug conjugates (ADCs) [14][15] - **TIGIT Program**: Ongoing studies in non-small cell lung cancer and small cell lung cancer, despite setbacks in early-stage melanoma [17][19] GARDASIL and Vaccination Strategy - **GARDASIL Performance**: Strong performance, especially in ex-U.S. markets, with a focus on increasing vaccination rates globally [28][29] - **Market Opportunities**: Emphasis on gender-neutral vaccinations and targeting older age cohorts for vaccination [30][31] Upcoming Products - **V116**: Anticipated approval for the adult pneumococcal vaccine, with clinical studies showing effectiveness in various age groups [34] - **RSV Treatment**: Development of a monoclonal antibody (clesrovimab) for RSV, with a focus on a single fixed dose for infants [36] Capital Allocation and Business Development - **Investment Focus**: Commitment to investing in the pipeline and pursuing business development opportunities across various therapeutic areas [38][39] - **Strategic Approach**: No specific strategy for rare diseases, but a focus on unmet medical needs and leveraging scientific advancements [41] Cardiometabolic Disease - **GLP Dual Agonist**: Researching a dual agonist for NASH with promising data on liver fat loss and weight reduction [43][44] - **Obesity Market**: Exploring opportunities in obesity treatment with potential for innovative oral agents and combination products [44] Additional Insights - **Market Dynamics**: The company is confident in its ability to compete against local HPV vaccines in China while expanding its market presence [32] - **Future Growth**: Anticipation of continued growth in KEYTRUDA driven by earlier-stage cancer treatments and expanding indications [23][25] This summary encapsulates the key points discussed during the conference call, highlighting Merck's strategic focus, product pipeline, and market opportunities.

Core Insights - Merck is discontinuing a phase III study of the co-formulation of Keytruda and vibostolimab for high-risk melanoma due to failure to meet the primary endpoint of recurrence-free survival [1][2] - An independent Data Monitoring Committee recommended unblinding the study and switching patients to Keytruda monotherapy [2] - This marks the second recent failure for Keytruda, following a similar outcome in a study for endometrial cancer [4] Company Performance - Keytruda accounts for approximately 45% of Merck's total pharmaceutical sales and continues to show strong momentum in metastatic indications [5] - Merck's stock has increased by 18.6% this year, outperforming the industry average of 13.4% [2] - The company is actively pursuing new indications and markets for Keytruda, with ongoing studies for over 30 types of cancer [6] Pipeline Developments - Merck is exploring innovative immuno-oncology combinations and has partnered with Moderna to develop a personalized mRNA therapeutic cancer vaccine in combination with Keytruda [6] - Recent pipeline setbacks, particularly with Keytruda, may negatively impact Merck's long-term growth prospects [6] Market Comparisons - Merck currently holds a Zacks Rank of 3 (Hold), while competitors like Ligand Pharmaceuticals and ANI Pharmaceuticals have higher rankings [8][9] - Ligand's earnings estimates have improved recently, and its stock has risen by 17.7% this year, indicating strong market performance [8] - ANI Pharmaceuticals has also seen a rise of 22.2% in its stock this year, with improved earnings estimates [9]

Sector Rotation - Sector rotation involves moving funds between sectors based on macroeconomic factors, with healthcare stocks being a prime example during the pandemic [1] - As pandemic concerns eased, funds shifted to sectors like retail, travel, and tourism, while technology became the hottest sector [1] - The healthcare sector remains evergreen due to the increasing global disease burden, suggesting potential for strong returns from undervalued stocks [1] Pfizer (PFE) - Pfizer stock is trading at 10-year lows with a dividend yield of 6%, reflecting market concerns over lower growth post-pandemic and revenue impacts from drugs going off-patent [2] - Despite these concerns, Pfizer appears undervalued with a forward price-earnings ratio of 12.1 and has a pipeline of 113 candidates, expecting at least $20 billion in incremental revenue from new molecular entities by 2030 [2] - Pfizer anticipates $25 billion in incremental revenue from new business deals by 2030 and has recently acquired Seagen to enhance its oncology business [3] Merck (MRK) - Merck stock has increased by 9.5% over the past 12 months and trades at a forward price-earnings ratio of 15, with a dividend yield of 2.36% [5] - Analyst estimates show 83% have a buy rating, with a potential upside of 20% to $155, indicating possible total returns of 30% to 35% in the next 12 to 18 months [5] - For Q1 2024, Merck reported sales growth of 9% year-on-year to $15.8 billion and has a sales growth guidance of 5% to 7% for the full year [5][6] Teladoc Health (TDOC) - Teladoc stock has significantly declined from $300 in February 2021 to $12.2, primarily due to weak growth in a post-pandemic environment [7] - For Q1 2024, Teladoc reported revenue growth of 3% to $646.1 million and a 20% increase in EBITDA to $63.1 million [7] - The company has guided for full-year revenue of $2.7 billion and adjusted EBITDA of $370 million, with optimism for steady growth in international revenues over the next five years [7]

Merck (MRK) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Shares of this pharmaceutical company have returned +2.2% over the past month versus the Zacks S&P 500 composite's -0.3% change. The Zacks Large Cap Pharmaceuticals industry, to which Merck belongs, has gained 1.1% over this period. Now the key question is: Where could the stock be headed in the near term?Although media ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2024, including income, balance sheet, cash flows, and detailed notes [Condensed Consolidated Statement of Income](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Income) Merck's Q1 **2024** sales increased **9%** to **$15.8 billion**, with net income surging **69%** to **$4.8 billion**, resulting in a diluted EPS of **$1.87** Q1 2024 vs Q1 2023 Income Statement Highlights | Metric | Q1 2024 ($M) | Q1 2023 ($M) | YoY Change | | :--- | :--- | :--- | :--- | | Sales | 15,775 | 14,487 | +8.9% | | Income Before Taxes | 5,670 | 3,650 | +55.3% | | Net Income Attributable to Merck & Co., Inc. | 4,762 | 2,821 | +68.8% | | Diluted EPS | $1.87 | $1.11 | +68.5% | [Condensed Consolidated Balance Sheet](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of **March 31, 2024**, total assets were **$105.8 billion**, total equity increased to **$40.4 billion**, and total debt decreased to **$34.2 billion** Balance Sheet Summary | Metric | March 31, 2024 ($M) | Dec 31, 2023 ($M) | | :--- | :--- | :--- | | Cash and cash equivalents | 5,579 | 6,841 | | Total current assets | 31,445 | 32,168 | | Total Assets | 105,849 | 106,675 | | Total current liabilities | 25,099 | 25,694 | | Total Debt (Current & Long-Term) | 34,219 | 35,055 | | Total Merck & Co., Inc. stockholders' equity | 40,364 | 37,581 | [Condensed Consolidated Statement of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Operating cash flow more than doubled to **$3.1 billion** in **Q1 2024**, while investing cash outflow decreased and financing cash outflow increased Q1 2024 vs Q1 2023 Cash Flow Highlights | Cash Flow Activity | Q1 2024 ($M) | Q1 2023 ($M) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 3,090 | 1,339 | | Net Cash Used in Investing Activities | (1,376) | (2,359) | | Net Cash Used in Financing Activities | (2,814) | (2,054) | | Net Decrease in Cash | (1,238) | (2,987) | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, business development, collaborations, restructuring, financial instruments, contingencies, and segment performance - In **March 2024**, Merck acquired **Harpoon Therapeutics** for **$765 million**, resulting in a **$656 million** charge to R&D expenses[18](index=18&type=chunk) - In **February 2024**, Merck agreed to acquire the aqua business of **Elanco Animal Health** for **$1.3 billion** in cash, with the deal expected to close by mid-**2024**[18](index=18&type=chunk)[19](index=19&type=chunk) - A new restructuring program was approved in **January 2024**, with estimated cumulative pretax costs of approximately **$4.0 billion**, expected to be substantially completed by the end of **2031**[38](index=38&type=chunk) Q1 2024 Alliance Revenue from Key Collaborations | Collaboration Partner | Product(s) | Q1 2024 Alliance Revenue ($M) | | :--- | :--- | :--- | | AstraZeneca | Lynparza / Koselugo | 330 | | Eisai Co., Ltd. | Lenvima | 255 | | Bayer AG | Adempas / Verquvo | 98 | | Bristol-Myers Squibb | Reblozyl | 71 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **Q1 2024** financial results, including **9%** sales growth to **$15.8 billion**, driven by Oncology and Vaccines, and impacts of pricing pressures Q1 2024 Sales Performance | Metric | Q1 2024 ($B) | YoY Change | YoY Change (ex-FX) | | :--- | :--- | :--- | :--- | | Total Sales | 15.8 | +9% | +12% | - Global sales growth was primarily driven by higher sales in the oncology franchise, particularly **Keytruda**, and the vaccines franchise, led by **Gardasil/Gardasil 9**[93](index=93&type=chunk)[94](index=94&type=chunk) - Pricing pressure continues due to global healthcare cost containment efforts, including the **Inflation Reduction Act (IRA)** in the U.S., which selected **Januvia** for its Drug Price Negotiation Program effective in **2026**[92](index=92&type=chunk) GAAP vs. Non-GAAP EPS Reconciliation (Q1 2024) | Metric | Amount per Share | | :--- | :--- | | EPS as reported under GAAP | $1.87 | | EPS difference | $0.20 | | Non-GAAP EPS assuming dilution | $2.07 | [Operating Results](index=27&type=section&id=Operating%20Results) Total sales reached **$15.8 billion** (**+9%**), with Pharmaceutical segment growth driven by Oncology and Vaccines, offsetting Diabetes declines Q1 2024 Sales by Segment | Segment | Q1 2024 Sales ($M) | Q1 2023 Sales ($M) | YoY Change | | :--- | :--- | :--- | :--- | | Pharmaceutical | 14,006 | 12,721 | +10.1% | | Animal Health | 1,511 | 1,491 | +1.3% | Key Product Sales Performance (Q1 2024) | Product | Q1 2024 Sales ($M) | YoY Change | | :--- | :--- | :--- | | Keytruda | 6,947 | +20% | | Gardasil/Gardasil 9 | 2,249 | +14% | | Januvia/Janumet | 670 | -24% | | Bridion | 440 | -10% | | Lagevrio | 350 | -11% | - **Keytruda** sales growth was driven by increased uptake in earlier-stage cancer indications globally. **Gardasil** growth was strong due to demand in China and U.S. public sector buying[95](index=95&type=chunk)[98](index=98&type=chunk) - **Januvia/Janumet** sales declined significantly due to lower pricing and demand in the U.S. from competitive pressures and the impact of the American Rescue Plan Act, as well as loss of exclusivity in Europe and other regions[105](index=105&type=chunk) [Costs, Expenses and Other](index=32&type=section&id=Costs,%20Expenses%20and%20Other) Total costs and expenses decreased **7%** to **$10.1 billion**, improving gross margin to **77.6%**, with R&D expenses down due to lower acquisition charges - Gross margin improved to **77.6%** from **72.9%** in **Q1 2023**, mainly due to favorable product mix, including lower royalty rates for **Keytruda** and **Gardasil**, and favorable foreign exchange[108](index=108&type=chunk) - R&D expenses declined **7%**, primarily because the **Q1 2024** charge for the **Harpoon Therapeutics** acquisition (**$656M**) was significantly lower than the **Q1 2023** charges for the Imago acquisition (**$1.2B**) and a Kelun-Biotech agreement (**$175M**)[110](index=110&type=chunk) - A new restructuring program was initiated in **January 2024** to optimize the manufacturing network, with an estimated total cost of **$4.0 billion** through **2031**. The company recorded **$123 million** in restructuring costs in **Q1 2024**[111](index=111&type=chunk)[112](index=112&type=chunk) [Research and Development Update](index=35&type=section&id=Research%20and%20Development%20Update) Merck has key candidates under regulatory review, including **MK-1022** for NSCLC and **V116** vaccine, with **Keytruda** also under review for new indications - **MK-1022** (patritumab deruxtecan), a HER3-directed ADC for EGFR-mutated NSCLC, is under priority review by the FDA with a target action date of **June 26, 2024**[121](index=121&type=chunk) - **V116**, an investigational **21**-valent pneumococcal conjugate vaccine for adults, is under priority review by the FDA with a PDUFA date of **June 17, 2024**[121](index=121&type=chunk) - **Keytruda** is under priority review for primary advanced or recurrent endometrial carcinoma, with a PDUFA date of **June 21, 2024**, and is also under review in the EU and Japan for several other indications[121](index=121&type=chunk) [Analysis of Liquidity and Capital Resources](index=37&type=section&id=Analysis%20of%20Liquidity%20and%20Capital%20Resources) As of **March 31, 2024**, Merck held **$5.9 billion** in cash, with strong operating cash flow of **$3.1 billion**, and continued share repurchases - Cash provided by operating activities was **$3.1 billion** in **Q1 2024**, a significant increase from **$1.3 billion** in **Q1 2023**, reflecting stronger operating performance[124](index=124&type=chunk) - In **Q1 2024**, the company paid **$2.0 billion** in dividends and repurchased **$122 million** of its common stock. The remaining share repurchase authorization is **$3.6 billion**[125](index=125&type=chunk) - The company maintains a **$6.0 billion** credit facility maturing in **May 2028** for backup liquidity, which has not been drawn upon[125](index=125&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk exposures have occurred since the **2023** Form **10-K** filing - There have been no material changes in market risk exposures affecting the disclosures presented in the Company's **2023** Form **10-K**[128](index=128&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of **March 31, 2024**, with no material changes to internal control - The **CEO and CFO certifications** concluded that as of **March 31, 2024**, the Company's disclosure controls and procedures are effective[129](index=129&type=chunk) - No changes in internal control over financial reporting occurred in **Q1 2024** that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[129](index=129&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note **7** for legal proceedings, including product liability and ongoing patent litigation for key products - The company is a defendant in product liability lawsuits related to alleged asbestos in **Dr. Scholl's** foot powder and alleged injuries from **Gardasil/Gardasil 9** vaccines[64](index=64&type=chunk) - Merck is actively defending its patents for key products, including **Bridion**, **Januvia**, **Keytruda**, and **Lynparza**, against challenges from generic manufacturers[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - Legal defense reserves were approximately **$220 million** as of **March 31, 2024**[73](index=73&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Merck repurchased **990,671** shares for **$122 million** in **Q1 2024**, with **$3.6 billion** remaining in share repurchase authorization Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid | Total Value ($M) | | :--- | :--- | :--- | :--- | | Jan 2024 | 147,500 | $112.29 | ~$16.6 | | Feb 2024 | 209,200 | $127.83 | ~$26.7 | | Mar 2024 | 633,971 | $123.45 | ~$78.2 | | **Total Q1** | **990,671** | **$122.71** | **~$121.5** | - As of **March 31, 2024**, the approximate dollar value of shares that may yet be purchased under the plans or programs is **$3.6 billion**[125](index=125&type=chunk)[134](index=134&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated **Rule 10b5-1** or **non-Rule 10b5-1** trading arrangements in **Q1 2024** - No directors or executive officers adopted or terminated any **Rule 10b5-1** or **non-Rule 10b5-1** trading arrangements during the three months ended **March 31, 2024**[135](index=135&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form **10-Q**, including corporate documents, **CEO/CFO certifications**, and **XBRL** data - The exhibits include **CEO and CFO certifications** pursuant to Rule **13a-14(a)/15d-14(a)** and Section **1350**[137](index=137&type=chunk) - Interactive data files (**XBRL**) are included as part of the filing[137](index=137&type=chunk)