Merck & Co. has signed a $356 million deal with the U.S. government to develop, manufacture, and distribute an experimental COVID-19 therapy. The experimental drug, called MK-7110, was developed by the privately held biopharmaceutical company, OncoImmune, which Merck acquired for $425 million in November.
Merck (MRK) will manufacture and supply approximately 60,000 – 100,000 doses of MK-7110 to the U.S. government over the next six months to meet the government’s Operation Warp Speed goals.
The intention is to be able to distribute MK-7110 to the American people as quickly as possible, following approval from the U.S. Food and Drug Administration (FDA). Merck is also expanding its manufacturing capacity to increase the supply of MK-7110.
In September 2020, OncoImmune reported that hospitalized patients with COVID-19 treated with a single dose of MK-7110 showed a 60% higher probability of improvement compared to the placebo. The risk of death or respiratory failure was reduced by more than 50%. The study is currently ongoing. (See MRK stock analysis on TipRanks)
Morgan Stanley analyst David Risinger reiterated his Buy rating on the stock two days ago, raising his price target from $89 to $90 (13% upside potential).
Consensus among analysts is a Strong Buy based on 7 Buys and 2 Holds. The average price target of $95.56 implies upside potential of around 20% over the next 12 months.
Merck shares were trading slightly higher, around 0.5%, in pre-market trading at the time of writing and are down 13% year-to-date.
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