NEW YORK (TheStreet) -- Shares of Merck & Co. (MRK) closed up 1.36% to $58.83 on Monday as analysts believe new drugs from Merck's pipeline, including treatments for cancer and Alzheimer's diseases, could boost the company's finances, according to Barron's.
Shares are expected to hit $70 in the next year, up 22% from a recent $58, Sanford C. Bernstein analyst Tim Anderson said.
One of the new drugs that has already been approved for advanced skin cancer is Keytruda, which helps patients' immune system attack tumors, Barron's noted. Sales hit $83 million in the latest quarter but if approved for wider use, analysts expect annual sales to reach $5 billion within six years.
Other drugs that will ring in profits include diabetes drug Januvia and drugs to treat Hepatitis C and HPV, the most common sexually transmitted diseases in the U.S.
Additionally, the Food and Drug Administration last year approved 41 new drugs, which is the most it approved in 18 years, Barron's reported.
Separately, TheStreet Ratings team rates MERCK & CO as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MERCK & CO (MRK) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MERCK & CO is currently very high, coming in at 94.01%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MRK's net profit margin of 10.11% significantly trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, MERCK & CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- MRK, with its decline in revenue, slightly underperformed the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 8.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: MRK Ratings Report