The Most Important Catalyst For Merck's Stock In 2024 Could Be Sotatercept Launch, Analyst Says

Tuesday, the FDA approved Merck & Co Inc’s MRK Winrevair (sotatercept) for adults with pulmonary arterial hypertension to increase exercise capacity, improve WHO functional class, and reduce the risk of clinical worsening events. 

Cantor Fitzgerald writes that the label was better than anticipated. There is no Black Box, no Risk Evaluation and Mitigation Strategy (REMS), and only initial monitoring.

Cantor analyst writes that Merck’s stock has shown robust performance year-to-date, with a gain of approximately 15% compared to the S&P 500’s 10% increase. 

This upward trend began towards the end of the previous year. While some investors may consider reducing their holdings in Merck, Cantor analyst says it’s premature to do so, especially with the upcoming launch of sotatercept and the approval and launch of V116 for the adult pneumococcal conjugate vaccine.

The analyst writes that introducing sotatercept would significantly impact Merck’s stock performance this year. Cantor keeps the Overweight rating with a price target of $135.

While approval was anticipated, the debate over its peak sales potential remains unresolved, with optimistic projections suggesting $8 billion in sales (no specific year agreed upon) and conservative estimates at around $1 billion. 

A successful launch could lead to upward revisions in earnings estimates and expansion of the stock’s multiple. However, the extent of these effects is uncertain until the initial launch performance is observed.

Merck has indicated that physicians are holding onto patients in anticipation of the drug’s launch, indicating a likelihood of quick adoption. 

Most physicians are enthusiastic about the approval of sotatercept and intend to incorporate it into their practice. 

Approximately 40,000 potential patients in the U.S. for sotatercept are treated in 150 specialized centers. Merck has established a separate business unit exclusively for sotatercept.

Price Action: MRK shares are up 4.63% at $131.22 on the last check Wednesday.

Photo via Company