Merck & Co (MRK) is a global biopharmaceutical company with strong leadership in the immuno-oncology space. It generated nearly $60 billion in sales in 2022 with a 37% operating margin resulting in very strong cash flow generation which has led to the company consistently growing its dividend by 5-6% in recent years. A key driver for these sales has been uptake of Keytruda with its impressive profile for use against an array of cancers. This drug generated $20 billion in sales in 2022 and is expected to grow until it loses patent protection in 2028.
The position in Merck was taken when the multiple on future earnings post the 2028 patent loss on Keytruda appeared undemanding, while at the same time the expectations for other growth drivers had increased, which would bolster the post 2028 earnings stream. Since then, outstanding Phase 3 data for a drug in peripheral arterial hypertension has been presented that supports a multi-billion dollar opportunity. In addition, manufacturing capacity for Gardasil, an HPV vaccine that prevents certain cancers, will come online in 2023 for a product that has been capacity constrained for the last few years. Finally, excellent Phase 2b data for an oral cholesterol lowering drug supports the Phase 3 development and points to a multi-billion dollar opportunity as Merck expects to price the drug at a level that will optimize payer coverage. Confidence that Merck will generate longer term growth has increased, suggesting that efforts to improve margins by the company should be successful.
Merck has a strong history where it has been on the forefront of efforts to enable patient access to drugs. The company focuses on developing drugs that can reach 75% of the world, with a view towards enabling access from developing countries and underserved populations in the US. Merck has targeted enabling 100 million people to gain access to its medicines by 2025 through a variety of strategies, solutions, and partnerships. And Merck is specifically trying to reach 30 million people from lower and middle income countries as well as underserved US populations with its social investments.
The company provides annual updates to measure progress against these goals.