German company Merck KGaA (DE:MRK) is facing a major setback as the late-phase trials of its multiple-sclerosis (MS) drug evobrutinib failed to show efficacy. The drug maker had hoped that evobrutinib would emerge as a “blockbuster” drug (drugs generating more than $1 billion in annual sales) for treating relapsing MS diseases. MRK shares were down 14% as of writing.
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Merck in Trouble
The company’s evobrutinib drug did not display the required efficacy in the Phase III trials for people suffering from relapsing MS. The drug could not reduce the annualized relapse rate of MS compared to rival Sanofi’s (FR:SAN) Aubagio.
Merck had projected the yearly revenues from the drug to exceed 1 billion euros once it was commercially sold. This is not the first time that evobrutinib has hit a roadblock. In April this year, the U.S. Food and Drug Administration (FDA) put the drug trial on partial hold after two patients reported liver injuries.
Merck operates three primary units: healthcare, life sciences, and performance materials (electronics). For Merck KGaA, the healthcare operations are globally recognized for developing branded pharmaceuticals with a focus on oncology, multiple sclerosis, and fertility. The company has witnessed dwindling sales in its performance materials segment, which produces materials used in biotech drugs and semiconductors.
Is Merck a Good Stock to Buy Now?
Following the news of the clinical failure of evobrutinib, J.P. Morgan analyst Richard Vosser reiterated a Buy rating on MRK stock but lowered the price target to €190 from €220.
Overall, with nine Buys and two Hold ratings, MRK stock commands a Strong Buy consensus rating on TipRanks. The Merck KGaA share price target of €188.30 implies 16.2% upside potential from current levels. Year-to-date, MRK shares have lost 8.8%.
