Stable Dow Component Merck, how does it make money?

merck

Introduction

Company profile

Merck (ticker: MRK) Since the mid-20th century, Merck, a component of the Dow Jones Index, has been the top pharmaceutical company because Merck spends more on research and development than other companies. While Merck occasionally loses to companies with hot new drugs (such as Pfizer’s Viagra), or sales to related competitors with significant nonpharmaceutical businesses.

Spun off Organon

In 2022, Merck spun off a $6.5 billion business into a new public company, Organon (ticker: OGN), including women’s health products and biosimilars, a move allows Merck to focus on high-growth areas such as cancer drugs and vaccines. After the spin-off, Ogallon will be responsible for the management of the drug’s post-market life cycle, while Merck will focus on drug research and development.

Merck’s most famous drug

But all in all, Merck is a long-term investment target that can stand the test of time due to its wide product line and stable revenue. Its most famous drug is Keytruda, a monoclonal antibody that boosts the body’s immunity by boosting T-cell immune responses and is used to treat patients with unresectable or metastatic melanoma. This oncology drug is the fourth-largest drug in the world by revenue in 2021.

Business performance and share price

2021 Revenue Breakdown of Each Division

PharmaceuticalAreaProduct nameRevenue ($ million)Annual growth rate
 Oncology 18,87920.36%
  Keytruda17,18619.51%
  Alliance revenue – Lynparza98936.41%
  Alliance revenue – Lenvima70421.38%
 Vaccines 9,68723.09%
  Gardasil/Gardasil 95,67344.06%
  ProQuad/M-M-R II/Varivax2,13513.68%
  Pneumovax 23893-17.85%
  RotaTeq8071.25%
  Vaqta1795.29%
 Hospital Acute Care 2,8338.42%
  Bridion1,53227.88%
  Prevymis37031.67%
  Primaxin2593.19%
  Noxafil259-21.28%
  Cancidas212-0.47%
  Invanz202-4.27%
  Zerbaxa-1-100.77%
 Immunology 1,124-3.77%
  Simponi825-1.55%
  Remicade299-9.39%
 Neuroscience 318-2.75%
  Belsomra318-2.75%
 Virology 1,721100.82%
  Molnupiravir952100.00%
  Isentress/Isentress HD769-10.27%
 Cardiovascular 59418.56%
  Alliance revenue – Adempas/Verquvo34221.71%
  Adempas25214.55%
 Diabetes 7,5980.12%
  Januvia3,3240.54%
  Janumet1,964-0.36%
  Other pharmaceutical2,310-0.09%
     
Total Pharmaceutical segment sales  42,75416.78%
  Animal Health:  
  Livestock3,29512.11%
  Companion Animals2,27328.85%
Total Animal Health segment sales  5,56818.39%
  Other segment sales              –  -100.00%
  Total segment sales48,32216.90%
Other  382109.89%
Total Company Revenue   48,70417.31%

Current stock valuation

6/23/2022Merck
Market capitalization ($ billion)225.469
Share price86.16
P/E15.96
Dividend yield3.26%
Stock performance in past 5 years (S&P 500 was+65.13%)+41.32%

How is the performance vs. peers?

business performance comparison

In 2021, Johnson’s and Johnson’s, Abbvie, Merck and Pfizer’s business performance are shown in below table, respectively.

IndexJNJPFEABBVMRK
2021 total revenue ($ billion)93.775 +13.55%81.288 +95%56.197 +22.69%48.704 +17.31%
Pharmaceuticals52.08 +14.28%79.557+95%56.197 +22.69%48.704 +17.31%
Medical devices / Pfizer is CDMO27.06 +17.86%1.731 +87%00
Nutrition14.645 +4.1%0Spin off as AbbottSpin off as Organon
Gross margin68.27%62.28%69.65%72.81%
Operating margin26.92%33.02%35.29%32.56%
Net margin22.26%27.04%22%26.79%
Merck
Credit: Merck

Stock price comparison

In the past 10 years, the stock prices of Johnson & Johnson, Pfizer, Merck, and AbbVie, as shown in the chart below, have risen by 119.75%, 46.11%, 84.56%, 140.82%, and 297.71%, respectively.

Stock performance comparision

JNJPFEABBVMRK
Market captalization (billion)474.54277.14259.43221.61
Share price180.4649.07146.8887.65
P/E24.3112.522.7615.68
P/S5.083.514.914.1
Dividend yield2.5%3.26%3.84%3.15%

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