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Here’s Why Merck-Orion Collaboration Is Important

Story Highlights

Merck has multiple drugs and vaccines in its portfolio. With its recent collaboration, the mega-cap company has upped the ante in its fight against cancer.

Drug manufacturing behemoth Merck & Co., Inc. (NYSE: MRK) has agreed to work jointly with Orion Corporation on ODM-208, a non-steroidal inhibitor developed by Orion. This inhibitor, if successful, could play an important role in the treatment of prostate cancer (a common type of cancer found in males) and add to the growth prospects of both companies.

Orion is a pharmaceutical company based in Finland. It has expertise in providing drugs for animals and humans. Likewise, Merck is well-renowned for its human and veterinary drugs and healthcare solutions. Shares of this $238.5-billion company closed at $93.60 on Tuesday.

Details of the Merck-Orion Deal

Merck Sharp & Dohme LLC, a subsidiary of Merck, will help Orion to develop and commercialize ODM-208. This inhibitor has been designed to target an enzyme called cytochrome P450 11A1 (CYP11A1).

“Targeting CYP11A1 provides a compelling approach to suppressing the production of steroid hormones, a key driver of prostate cancer,” said Dr. Dean Y. Li, the President of Merck Research Laboratories.

Per the agreement, Merck will pay $290 million (upfront) to Orion. It will recognize this expense in the third quarter of 2022. Orion will use a part of this amount for funding future development of ODM-208.

Also, the parties have an option to agree on providing Merck with a global exclusive license for ODM-208. If this happens, Merck will bear all expenses related to the inhibitor.

Wall Street’s Take on Merck

On TipRanks, Merck has a Moderate Buy consensus rating based on six Buys and three Holds. MRK’s average price forecast of $99.56 reflects 6.37% upside from the current level. Shares of MRK have increased 21.8% over the past year.

Five days ago, Terence Flynn of Morgan Stanley reiterated a Hold rating on MRK while increasing his price target to $88 (5.98% downside risk) from $87.

Bloggers Are Bullish on MRK

According to TipRanks, financial bloggers are 95% Bullish on MRK, compared to the sector average of 71%.

More Upside Likely for Merck Stock

The abovementioned collaboration would benefit Merck in strengthening its fight against cancer. If successful, the resultant treatment for cancer could provide more upside to its revenues and share price.

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