Morgan Stanley Upgrades Merck Stock Following Positive Trial Results

Morgan Stanley upgraded Merck's stock rating to overweight from equal weight and increased its price target to $179 from $116. The upgrade followed a 13% rise in Merck shares on Wednesday, triggered by promising late-stage trial results conducted in collaboration with Moderna.

Analyst Terence Flynn noted that Merck's pipeline optionality, specifically drugs for oncology and inflammatory bowel disease, could sustain company growth beyond the 2028 patent expiration of the cancer drug Keytruda. Keytruda remains a primary revenue driver, generating over $16 billion in sales during the first half of the year.

To mitigate the impact of the upcoming patent cliff, Morgan Stanley suggests that co-formulations of Keytruda could provide additional stability. Flynn indicated that the company could see multiple expansion as new products launch and the pipeline de-risks.