Investors snapped up shares of Merck & Co. Wednesday after a Credit Suisse analyst said the stock could rise as Wall Street takes a closer look at the drugmaker's pipeline.
Catherine Arnold upgraded the shares to "Outperform" from "Neutral," and raised her price target to $47 per share, which suggests the stock could rise about 25 percent over the next year. She said investors will probably become more optimistic about the company's anti-clotting drug candidate TRA. Arnold said three other experimental drugs could create more optimism: boceprevir for hepatitis C, staph infection vaccine V710, and heart drug candidate betrixaban.
TRA and Boceprevir are in late-stage clinical testing, while V710 and betrixaban are in mid-stage trials. Arnold said late-stage trial data for TRA is due late this year or early in 2010, and investors will increase their focus on the drug as that date approaches.
Merck stock has traded between $20.05 and $38.42 over the past 52 weeks. Arnold's previous price target had been $35 per share. Since the beginning of November, the shares are up 21.4 percent.
Arnold said the Whitehouse Station, N.J., company may also be able to realize greater-than-expected cost savings as it combines its operations with Schering-Plough Corp. Merck is currently estimating $3.5 billion in savings.
The analyst raised her 2009 profit estimate to $3.27 per share from $3.23, and trimmed her 2010 expectation to $3.60 per share from $3.69. Analysts are expecting $3.27 and $3.48 per share, respectively, according to Thomson Reuters. Arnold's 2010 estimate had been the highest of any analyst surveyed.
In afternoon trading, Merck shares rose $1.70, or 4.5 percent, to $39.25. The stock was the top gainer in the Dow Jones industrial average and earlier traded at $39.32, its highest level since May 2008.