Merck's Oral COVID-19 Treatment Could Be Game-Changer: BofA Analyst

Merck & Co., Inc. MRK announced last week the oral COVID-19 pill it is co-developing with Ridgeback Biotherapeutics reduces the risk of hospitalization or death by 50%.

The announcement triggered an across-the-board, steep sell-off in COVID-19 vaccine stocks.

The Merck Analyst: BofA Securities analyst Geoff Meacham maintained a Neutral rating on Merck shares and increased the price target from $80 to $85.

The Merck Thesis: Merck's molnupiravir could be a game-changing therapy for COVID-19 as new cases continue to decline week-over-week, Meacham said in a note.

Effective drugs such as molnupiravir and neutralizing antibodies could accelerate recovery times in COVID-19 patients and expedite a true "return to normal," the analyst said. 

Such a scenario will likely be preferred over a "boosters forever" and periodic quarantine strategy, he said. 

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Readouts for more oral therapies from companies such as Pfizer Inc. PFE and Roche Holding AG RHHBY are due later this year, Meacham said.

This represents a significant narrative change for COVID-19 vaccines and could continue to weigh on vaccine manufacturers across the board such as Moderna, Inc. MRNA and Pfizer as well as Johnson & Johnson JNJ
and others, the analyst said. 

The consensus still assigns significant value to booster post-2025, about $5 billion each year for Moderna and $3 billion a year for Pfizer, he said. 

"In our view, the availability of orals to treat breakthrough infections will likely call into question the need for annual boosters for broad populations."

For molnupiravir, BofA estimates worldwide sales of $915 million in 2021, $1.5 billion in 2022, and $1 billion in 2023. 

JNJ, PFE, MRK Price Action: Johnson & Johnson shares were down 0.86% at $158.18 midday Wednesday. 

Pfizer shares were losing 1.22% to $41.80. Pfizer's German COVID-19 manufacturing partner BioNTech SE BNTX was moving down 3.23% at $242.05. 

Merck shares were down 1.46% at $80.41. 

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