Barclays today cut its investment rating for Merck & Co. (
) 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
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