Merck: Expensive Acquisition

Apr. 17, 2023 7:00 AM ETMerck & Co., Inc. (MRK) StockXLV, MRK4 Comments

Summary

  • Merck demonstrates its dominant position with its bold move to acquire Prometheus Biosciences for nearly $11 billion, offering a premium of over 75% above RXDX's Friday closing price.
  • Merck faces a critical challenge in reducing its dependence on Keytruda, as the blockbuster drug contributed almost 40% of its revenue in FY22.
  • MRK has outperformed its healthcare peers, as its rock-solid profitability and balance sheet encouraged investors to return. However, its valuation is looking steep now.
  • Investors eager to increase their holdings in MRK stock should tread carefully, as its recent price action suggests that sellers may be poised to reduce their exposure.
  • I do much more than just articles at Ultimate Growth Investing: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Merck & Co. headquarters in Silicon Valley

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Big news for Merck & Co., Inc. (NYSE:MRK) investors as the leading pharma giant announced a $10.8B deal (at about $200 per share) to acquire Prometheus Biosciences, Inc. (RXDX).

The deal is expected to be completed by

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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