The FDA Approves Merck's Anti-HIV-1 Drugs
- By Alberto Abaterusso
The health care company Merck & Co. Inc. (MRK) informed the market Thursday that it has received approval from the Food and Drug Administration for its drugs Delstrigo and Pifeltro for the treatment of U.S. adult patients who are chronically infected with type one of the human immunodeficiency virus (HIV-1).
The approval is for a once-per-day therapy based on a combined use of the twoproducts and coupled with other antiretroviral medications. The therapy has been approved for treatment-naive patients.
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The intrinsic value of MRK
"As part of Merck's 30-year commitment to the care of people with HIV, we are pleased to now bring forward these two new antiretroviral treatment options, DELSTRIGO and PIFELTRO, which we believe offer a compelling clinical profile for clinicians and people living with HIV," said Dr. George Hanna, vice president and head of therapeutic area for infectious diseases at Merck Research Laboratories.
The market was cold following the news. Merck & Co. closed down 0.4% at $68.50 per share on the New York Stock Exchange, with a market capitalization at $182.28 billion.
After a 7% climb for the 52 weeks through Thursday, the share price is far above the 200-, 100- and 50-day simple moving average lines. Thursday's share price was also nearly 30% above the 52-week low of $52.83 and only 1% off the 52-week high of $69.24.
Merck stock is not trading cheaply or at least not at compelling prices for the value investor. The stock has a price-book ratio of 5.63 versus an industry median of 2.64, a price-sales ratio of 4.51 versus an industry median of 3.10 and a price-earnings ratio of 137.08 versus an industry median of 23.77.
At these valuations, however, the investment can guarantee a forward annual dividend of 2.8%, which is much higher than the current dividend yield of the S&P 500 index of 1.76% . Even though the earnings yield is standing low at 0.7%, a retreat in share price is likely coming closer for an investment in Merck at a higher earnings yield level.
According to GuruFocus, the 14-day Relative Strength Index is 65.74, within a historical range of 30 to 70.
But the dividend yield is still qualifying Merck as a good acquisition. The global pharmaceutical company has a solid financial condition to continue with the distribution of its free cash flow and to sustain further hikes in the quarterly cash dividend.
Merck & Co. has been a loyal dividend payer for several decades.
GuruFocus assigns it a financial strength rating of 6 out of 10 and a profitability & growth rating of 5 out of 10.
For Wall Street, Merck & Co. is a buy, and the average target price is $71.62 per share.
Disclosure: I have no positions in any securities mentioned in this article.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 7 Warning Signs with MRK. Click here to check it out.
The intrinsic value of MRK
