Zacks_Analysts' Blog : Merck & Parexel Enter Pact - Analyst Blog

Merck & Co. Inc. (MRK) recently entered into an agreement with Parexel International Corporation (PRXL). Per the terms of the deal, Merck BioVentures (a division of Merck) will have access to Parexel’s range of regulatory, strategic and clinical development planning capabilities for the development of broad classes of biosimilars across various therapeutic areas.

We view the agreement with Parexel as a positive for Merck, given that Parexel has the expertise and resources to conduct clinical development of a diverse portfolio of candidates and to successfully deliver the products to the market on time.

Merck also announced that the US Food and Drug Administration (FDA) accepted the company’s new drug application (NDA) for the extended-release formulation of Janumet for standard review. The company is on track for making regulatory filings for the extended-release formulation of Janumet in countries outside the United States.

The immediate-release formulation of Janumet is already on the market as an adjunct to diet and exercise. Janumet improves glycemic control in adults with type II diabetes and is a combination of sitagliptin and metformin.

While metformin is a commonly prescribed medication for type II diabetes, sitagliptin, an active component in Januvia, is used as an adjunct to diet and exercise to improve glycemic control in adult patients with type II diabetes.

Neutral on Merck

We currently have a Neutral recommendation on Merck, which is supported by a Zacks #3 Rank (short-term Hold rating). The company is currently facing issues like patent expirations of key drugs and European pricing pressure. However, Merck has a deep pipeline that should act as a cushion when its key products lose patent protection in the next few years.

Moreover, some of Merck's recent launches should start contributing significantly to the top line in the forthcoming quarters. The restructuring initiatives undertaken by the company should also improve its bottom line. We are also positive on Merck’s efforts to expand its portfolio through acquisitions and in-licensing deals.