Merck Strikes Deal to Provide Molnupiravir to Canadian Government

Pharmaceutical company Merck (MRK) has entered a deal with the Government of Canada to provide one million patient courses of molnupiravir.

Molnupiravir is an investigational oral COVID-19 antiviral drug that can be used for the treatment of mild-to-moderate COVID-19 in adults, who could be at risk of progressing to severe COVID-19 and becoming hospitalized. The pill is being developed in collaboration with Ridgeback Biotherapeutics.

With this deal, in 2022, the Canadian Government will have access to 500,000 patient courses, along with options for up to 500,000 more. (See Merck stock chart on TipRanks)

However, the success of the deal depends on the approval of the Health Canada. Last month, Merck Canada made the final submission of evidence related to molnupiravir to the Health Canada for review.

The President and Managing Director of Merck Canada, Marwan Akar, said, “We applaud the leadership of the federal government who has worked tirelessly to bolster pandemic preparedness against COVID-19. While vaccines continue to play a primary role in helping prevent the spread and seriousness of cases, more treatment options are urgently needed to help reduce the burden of COVID-19.”

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Stock Rating

Last week, Mizuho Securities analyst Mara Goldstein assigned a Buy rating to the stock with a price target of $100 (upside potential of 36.35%).

Goldstein noted, “Given the favorable vote and the FDA’s internal review, we see EUA likely in the next few weeks. As MRK has secured/in-process government contracts we anticipate that roughly $1 billion of revenue could be recognized in 2021. MRK has indicated that global orders of $5-7 billion are either secured or in process, given overall supply constraints near-term, this could be achievable.”

Overall, the stock has a Moderate Buy consensus rating based on 5 Buys and 6 Holds. The average Merck price target of $93.73 implies 27.8% upside potential.

Hedge Fund Trading Activity

TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Merck is currently Very Negative, as the cumulative change in holdings across all 21 hedge funds that were active in the last quarter was a decrease of 8.8 million shares.

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