Can Merck Keep Its Bull Run Going?

Shareholders in Merck have enjoyed the first couple of months of 2014, since shares in the company are up 15%. This easily beats the S&P's return of 1.5% over the same time period. However, can Merck keep the bull run going?

Potential catalysts
Merck released details this week of a phase 2 trial involving a combination of Merck's MK-5172 and MK-8742 to treat patients co-infected with HIV and hepatitis C. The administration of the combination for 12 weeks resulted in robust hepatitis C suppression, which is positive news for Merck. Further news flow concerning the combination could act as a catalyst on the share price, with further details set to be released in April.

In addition, Merck received positive news flow regarding a mid-stage study for an oral treatment for house dust mite reactions. In a phase 2b trial, Merck's MK-8237 improved 24-week nasal symptoms by 49% at its highest dosage, with the drug also delivering promising dose and time-dependent reductions compared to placebo at eight and 16 weeks. Merck will now push ahead with a phase 3 trial in the relatively near future.

Of course, the largest reason for Merck's shares performing strongly in 2014 are developments surrounding its PD-1 drug, MK-3475. Merck announced plans to partner with three major biopharma companies (Amgen, Pfizer, and Incyte) in January, with the group all set to combine MK-3475 with other drugs in clinical trials. Furthermore, Merck will also increase its own work on the drug, with the company announcing early-stage studies for 20 different PD-L1-positive solid tumor types that have not yet been explored. The results of the trials (and other developments surrounding MK-3475) could have a major impact on Merck's share price.

A potential challenge
Although developments surrounding MK-3475 have been encouraging, sector peer Bristol-Myers Squibb has just this week announced that it will commence a phase 3 trial by the end of the year for its rival to MK-3475, nivolumab. The market had been surprised at how slowly Bristol-Myers Squibb had moved to a phase 3 trial after the drug impressed in its phase 2 trial. Developments surrounding both drugs are likely to act as catalysts on the share prices of both Merck and Bristol-Myers Squibb going forward.

While Merck has a number of potential catalysts, sector peer AbbVie has also released positive news flow of late. For instance, AbbVie's hepatitis C combination treatment cured almost 100% of patients in a phase 3 trial recently. It is one of six late-stage studies that AbbVie completed to form part of an FDA application, with the company still aiming to make the submission by the end of the first half of 2014. The outcome could have a significant impact on AbbVie's share price as sales projections for the drug were not included in its most recent set of results.

Merck's 2014
So, recent news flow has been strong for Merck and has been a key reason why shares have made such a strong start to the year. Indeed, there are a number of potential catalysts (notably the potential progress of Merck's MK-3475 and Bristol-Myers Squibb's nivolumab) that could have a significant impact on the future share price of both companies. As a result, 2014 could continue to be a strong year for Merck, and it looks all set to keep its bull run going.

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