Orally Administered Covid-19 Treatment Should Bolster Merck’s Value

Since the early-2020 onset of the Covid-19 pandemic, pharmaceutical giant Merck (NYSE:MRK) hasn’t generally been the center of attention. On Wall Street, there hasn’t been much buzz about MRK stock as the company’s competitors stole the spotlight. However, with a new Covid-19 treatment gaining traction, this could be changing.

merck stock

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Competition can be a good thing in the healthcare market, but investors shouldn’t dismiss Merck’s influence. After all, this is a company with a $200 billion-plus market capitalization.

Moreover, generations of investors have held shares of MRK stock for steady returns. You might even call it a safety stock as Merck has survived throughout the ups and downs of economic cycles.

Besides, the battle against Covid-19 isn’t over yet. Merck’s role in that battle, as we’ll see, could be bigger than some folks might think.

MRK Stock at a Glance

What makes MRK stock so attractive to sensible buy-and-hold investors?

Let’s start with the stock’s five-year monthly beta, which is 0.47. This implies that the Merck share price moves about half as fast as the overall stock market. In other words, MRK stock is typically a low-volatility asset, so investors can sleep soundly at night even if the broader market gets shaken up.

Next, we should observe that Merck’s trailing-12-month price-to-earnings ratio is 28.8. In a time when there are plenty of high flyers on Wall Street, it’s refreshing to focus on a stock with a reasonable valuation.

Furthermore, income-seeking investors won’t be left out as Merck pays a generous forward annual dividend yield of 3.2%.

Additionally, MRK stock recently pulled back from its 52-week high of $91.40. Hence, you may have an opportunity to add to your position at a favorable price, or start a position if you don’t have one already.

First Authorization

Sometimes, U.S.-based biopharmaceutical-market investors get so caught up in Food and Drug Administration (FDA) approvals that they ignore the rest of the world. Yet, informed traders should consider regulatory entities in other regions. Their influence can be significant.

Just to give you an example, the United Kingdom Medicines and Healthcare products Regulatory Agency (MHRA) recently granted authorization in the United Kingdom for Molnupiravir. Merck and Ridgeback Biotherapeutics developed Molnupiravir as a potential treatment for some Covid-19 patients.

With the MHRA’s decision, Molnupiravir is the first oral antiviral medicine authorized in the U.K. for the treatment of mild-to-moderate Covid-19 in adults with a positive SARS-CoV-2 diagnostic test and who have at least one risk factor for developing severe illness. Admittedly, this is a very specific group of patients. Nevertheless, it’s a win for Merck and, potentially, for that group of patients in the U.K.

Justifiably, Merck CEO and President Robert M. Davis characterized this event as a “major achievement in Merck’s singular legacy of bringing forward breakthrough medicines and vaccines to address the world’s greatest health challenges.”

A Multi-National Battle

The fight against Covid-19 is taking place on multiple fronts. Merck is heeding the call and advancing Molnupiravir at home and abroad.

Along with the progress in the U.K., Merck and Ridgeback Biotherapeutics recently announced a potentially game-changing order in Japan. Reportedly, the Japanese government will purchase, upon authorization or approval, around 1.6 million courses of Molnupiravir.

Assuming Molnupiravir receives authorization/approval from Japan’s Pharmaceuticals and Medical Devices Agency, Merck will supply the doses of Molnupiravir to the Japanese government for roughly $1.2 billion, “including applicable taxes.”

On top of all that, Merck and Ridgeback Biotherapeutics just disclosed that the U.S. government may exercise two of its options to purchase a total of 1.4 million additional courses of Molnupiravir.

That event would be conditional, however, upon Molnupiravir receiving Emergency Use Authorization (EUA) or approval by the FDA.

The Takeaway for MRK Stock

The case for a long position in MRK stock is crystal-clear now. The stock’s valuation is reasonable, and Merck’s dividend payouts are attractive.

Most of all, Merck remains an underappreciated but significant multi-national force in the ongoing war against the Covid-19 pandemic. MRK gets a grade of “B” in my Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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