Summary
- MRK reported a great sales effort in Q3, marred only by a writedown that the Street is ignoring.
- Keytruda is demonstrating amazing sales momentum, and looks to me as though it has lots of running room.
- MRK's oncology division has massive present value in my estimation, though there are many uncertainties.
- I consider that MRK has a fair value around $115/share and that it therefore has an attractive margin of safety given its large size and many strengths.
Merck shows who's king of the hill
Merck (NYSE:MRK) MRK is looking like the most-own large-cap biotech stock. The way it is dispatching the anti-PD-1/PD-1 (PD) competitors reminds me of the story of NBA great Larry Bird and the way he handled the first 3-point contest during halftime of the All-Star game. Apparently he walked into the locker room a little late and asked something like, "Who's playing for second place?" He then went on to win this and the next two such contests, only one of two 3-peats in this contest.
MRK's cancer drug Keytruda is almost laughing at strong competition from Opdivo from BMS (BMY) and Tecentriq from Roche (OTCQX:RHHBY), as well as scrappy Imfinzi from AstraZeneca (AZN). With approximately 1000 company-sponsored and externally-sponsored clinical trials involving Keytruda ongoing, and sales jumping quarter-on-quarter at what would be a healthy YoY growth rate, Keytruda's lead over its PD competitors is reminiscent of what has been rated the 2nd greatest single event sports achievement, that of Secretariat in the 1973 Belmont Stakes:
Source: New York Race Track Association track photographer Bob Coglianese.
Keytruda is looking like Big Red, but unlike Secretariat, it has many years of winning left. Let's try to quantify the unknowable financial future for Keytruda. My take is that it, plus the allied cutting-edge partnered oncology drugs Lynparza and Lenvima, have a present value that could approximate the entire market value of MRK.
