BMO Reduces Merck’s Price Target — In Part On Payments Needed To Cover BMS/Ono Keytruda® Patent Royalties…

life-bmo-01-25-2017 An about three per cent foreign currency headwind is expected by BMO analysts, at the sales line, as the primary driver — as well as moderating sales increases in Hep C franchises. But the patent settlement with Ono/BMS on pembrolizumab we mentioned last week is also a factor in the new drop in the price target, for Alex Arfaei — at BMO Capital Markets.

Here’s the bit from StreetInsider, overnight:

. . . .Alex Arfaei of BMO reiterated his Outperform rating on shares of Merck, but cut his price target to $70 even though Keytruda should be in line (~$460MM) because he is expecting a slower ramp up in Hep-C. . . .

2017 revenue forecast is ~1% below consensus (3% foreign exchange headwind, cautious on mature franchises) while EPS is ~5% below partly because of lower gross margin (Keytruda royalty; lower foreign exchange gains). . . .

12 month price target drops to $70 from $72. . . .

Now you know. A stronger US dollar is not a welcome development — for multinational companies resident in the US (like Merck) — as general rule. [US tourists benefit from it, if they are willing to brave a trip to Europe, though — as an example.] So, Kenilworth will need to more broadly enter into hedges — in the foreign exchange forwards, futures and options markets, to at least partially mitigate against the very likely Trump effect, on the US dollar-denominated sales revenue line — during 2017.

Separately, Merck is paying ex-Buffalo Bills QB, and Hall of Famer Jim Kelly (who is a cancer survivor) to promote its immuno-oncology efforts in head and neck cancers. So it goes. Onward. Busy but good here.



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