Merck & Co.’s stock rallied 1.5% in midday trade Thursday, after BMO Capital Markets upgraded the drug giant, citing increased optimism over the company’s drug pipeline and its management of current key drug franchises. Analyst Alex Arfaei raised his rating to outperform, after being at market perform for the past 15 months. He also raised his stock price target to $70, which is 18% above current levels, from $65. “We believe [Wall] Street is significantly underestimating Merck’s Hep-C franchise,” Arfaei wrote in a note to clients. “We are impressed with Merck’s management of the important Januvia franchise, which accounts for [about] 16% of revenues and we estimate at least 20%-25% of profits.” Januvia is an oral treatment for diabetes. The stock has now gained 4.2% year to date, while the Dow Jones Industrial Average has lost 2.3%.
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