Merck gets a lift, Pfizer a ding as analysts assess immuno-oncology, M&A outlook

Merck
Barclays analysts like Merck's positioning in the first-line lung cancer space. (Merck)

Barclays analysts did a roll call this week, checking in on each of their stocks and adjusting their ratings and price targets. The results? A bump-up for Merck and a ding for Pfizer.

Analyst Geoff Meacham and company upgraded Merck to overweight from equal weight and took their price target up by $2 to $64, pointing to a “better relative” immuno-oncology outlook versus key rivals—“namely” Bristol-Myers Squibb.

RELATED: With ASCO data tallied, Bristol-Myers loses ground to Merck in I-O field

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Keytruda has boasted better positioning in the all-important first-line lung cancer space than Bristol for years now; in fact, it’s currently the only immuno-oncology med to boast a first-line approval in lung cancer at all, and it has two to its name.

But Bristol, which squandered its chances to score a monotherapy nod a while back with a failed trial, has a different combo approach that pairs PD-1 contender Opdivo with CTLA4 player Yervoy, and it’s still unclear how it’ll measure up to Keytruda’s chemo combo strategy.

And while Meacham estimates there’s about 15% to 20% of the first-line market “up for grabs” in the U.S., he expects to see Merck “continue to take share” driven by positive data from key studies.

For Pfizer, on the other hand, the outlook isn’t as rosy as it once seemed, the analysts concluded, downgrading shares to equal weight from overweight and knocking their price target down by $3 to $38.

RELATED: Does Pfizer really want Bristol-Myers? Likely, says one analyst. What's it waiting for?

The way they see it, “current levels largely capture the upside for key products such as Prevnar, Ibrance, Xeljanz and Xtandi.” They had based their previous overweight rating on the potential for a “transformative acquisition,” as the pharma giant is wont to chase. But after months of investor speculation that Pfizer would make a play for BMS or AstraZeneca, Meacham now views such a deal as “less likely in the near term.”

Pfizer isn’t the only stock the analysts aren’t as keen on lately. They also downgraded Biogen, citing “limited pipeline events that are high impact before the 1H20 Alzheimer's readouts.” And overall, biopharma sentiment “has been negative” since the start of the year, “despite a modest pick-up in M&A and diminished rhetoric on drug pricing,” they said, noting that “sentiment feels much worse than performance.”

So what can be done? “We think more transformative M&A, clean phase 3 wins, and even a relatively strong 1Q18 earnings season could help re-rate the sector and get investors more engaged in the group,” they wrote.