BMO Capital Upgrades Merck To Outperform, Bullish On Co

On Friday, BMO Capital Markets analyst Alex Arfaei upgraded shares of Merck & Co., Inc. MRK from Market Perform to Outperform, boosting his price target by $10, to $72.

Bristol said that its CheckMate-026 study in first-line NSCLC had not managed to meet its primary PFS endpoint, and BMO analysts see this as a positive event for Merck’s Keytruda. In fact, they anticipate “seismic commercial market share implications,” given that they expect NSCLC to be the biggest IO indication.

Following this development, BMO now argues that Keytruda will probably dominate the first line (1L) NSCLC space, where patients are not only healthier, but also receive more aggressive treatment over a longer period of time.

Related Link: Bristol's Opdivo Misses Endpoint In Late-Stage Trial: Merck Rallies Sharply Amid Keytruda Potential

The report explained that the most relevant difference with its own KN-042 trial and Bristol’s CM-026 study is that “the primary endpoint for KN-042 is OS (NOT PFS), where there is better data.” Thus, they now see a higher chance of success for KN-042, and have consequently upped their estimates to reflect this potential. The firm now forecast that Merck will see revenue CAGR of 5 percent and EPS growth of at least 14 percent from 2016 to 2020.

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.