MT Insider: Barclays Cuts Merck to Equal Weight With $50 Price Target; Sees Top-Line Pressure on Core Businesses

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Barclays today cut its investment rating for Merck & Co. ( MRK ) to Equal Weight from Overweight, citing increasing pressure on the drug-maker's core businesses.

In particular, the analyst called out potential downside for the company's Januvia medication for Type 2 Diabetes.

According to the report, recent changes in market dynamics and pipeline setbacks will negatively impact revenues for MRK through 2015. Key brands such as Januvia/Janumet, Victrelis, and Isentress are unlikely to deliver expected sales owing to increasing competition.

Moreover, share repurchase and cost-cutting initiatives are not enough to prevent downside to earnings. As a result, Barclays is trimming its sales and earnings forecasts and lowering its price target by $10 to $50 a share.

Specifically, the analyst believes MRK's stock buybacks are unlikely to provide much support to EPS beyond anti-dilution. While the company's recently announced cost-cutting program is projected to save MRK $1.5 billion in 2015, that will only partially offset the sales shortfall.

The analyst's price target of $50 is based on 14.5x 2013 estimated earnings per share.

MRK 46.64 -0.65 -1.37



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

Referenced Stocks: MRK

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