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Merck's Coronavirus Plan Of Attack: 2 Partnerships, M&A Deal Aimed At Treatment, Vaccine Development

Shanthi Rexaline

Merck & Co., Inc. (NYSE: MRK) announced a trio of initiatives Tuesday to combat the coronavirus pandemic. 

The Kenilworth, New Jersey-based, large-cap biopharma announced two partnerships: one to develop an antiviral treatment and another to develop a vaccine. In a third deal, Merck outright purchased a vaccine developer. 

Merck's 'Advantage' In Coronavirus Field 

Merck is likely to evolve as an important player in COVID-19 treatments and vaccines landscape, Cantor Fitzgerald analyst Louise Chen said in a Tuesday note. 

"In our view, MRK's expertise and legacy in vaccines and anti-infectives gives it an advantage in identifying promising candidates/technologies, accelerating development efforts, and achieving scale," the analyst said. 

Merck's multipronged approach is a positive, as it diversifies the risk, she said.

Cantor rates Merck with an Overweight and $107 price target.

Cantor sees upside to Keytruda sales estimates.

The firm is of the view that sales growth across oncology, vaccines, animal health and select hospital/ specialty care products is underappreciated, along with Merck's margin expansion opportunities, Chen said. 

"Therefore, we expect upward earnings revisions and multiple expansion in 2019+ to drive MRK's shares higher." 

Merck's Partnership With Ridgeback Bio

Merck announced a tie-up with privately held Ridgeback Biotherapeutics to develop EIDD-2801, an orally available antiviral candidate in the early stage of a clinical trial with COVID-19 patients.

The agreement with Ridgeback provides Merck the exclusive worldwide right to develop and commercialize EIDD-2801 and related molecules. Merck will assume the responsibility for clinical development, regulatory filings and manufacturing.

Ridgeback is eligible to receive an undisclosed upfront payment, specified milestones and a share of net proceeds of EIDD-2801 and related molecules, if approved.

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Merck's Partnership, M&A Deal For Coronavirus Vaccine Development

Merck announced another collaboration to develop a SARS-CoV-2 vaccine candidate.

The company is partnering with IAVI, a nonprofit scientific research organization, to develop the vaccine using recombinant vesicular stomatitis virus technology, which is the basis for Merck's Ebola virus vaccine ERVEBO.

Merck also said it has signed an agreement with the BARDA to provide initial funding for the effort.

The vaccine candidate is in preclinical development, with clinical studies set to start later in 2020.

Merck Buys Vaccine Developer Themis

In a third initiative, Merck announced an agreement to buy privately held Themis, a company focused on vaccine- and immune-modulation therapies for infectious diseases and cancer.

In March, Themis joined a consortium including Institut Pasteur and The Center for Vaccine Research at the University of Pittsburgh to develop a vaccine against the novel coronavirus, with the coalition supported by CEPI funding.

The vaccine candidate developed by the consortium is in preclinical development, with clinical studies set to start later in 2020.

The companies did not divulge the financial terms of the deal.

"We are eager to combine our strengths both to develop an effective COVID-19 vaccine in the near term and to build a pandemic preparedness capability directed toward emerging agents that pose a future epidemic threat," Dr. Roger Perlmutter, president at Merck Research Laboratories, said in a statement. 

Merck shares were trading 1.9% higher at $77.84 at the time of publication Tuesday. 

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Latest Ratings for MRK

Date Firm Action From To
Apr 2020 Guggenheim Maintains Buy
Apr 2020 Barclays Maintains Overweight
Apr 2020 SVB Leerink Maintains Outperform

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