Merck's $15 bln gain is stingy

2 minute read

Pharmaceutical tablets and capsules are arranged in the shape of a U.S. dollar sign on a table in this picture illustration taken in Ljubljana August 20, 2014. Picture taken August 20. REUTERS/Srdjan Zivulovic

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NEW YORK, Oct 1 (Reuters Breakingviews) - Merck’s (MRK.N) potential pill for Covid-19 hit it out of the park, at least for investors. In patients with less serious illness but with risk factors like old age, it cuts hospitalizations and deaths by about 50%, the company said read more , sending the New Jersey-based company’s market value up $15 billion Friday. That might be too stingy.

Merck said in June the U.S. government agreed to pay about $700 per patient for the drug read more . Some countries will pay less, and the firm has licensed it to Indian drugmakers.

But assume Merck charges $700 and earns a net margin of 60%, an assumption based on Gilead Sciences’ (GILD.O) experience with its Hepatitis C drug. That would mean $420 of profit per patient. It would take about 35 million, less than 5% of the U.S. and European Union population, to justify Merck’s gain in value.

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About two-thirds of Americans have had at least one vaccine dose, and new American cases of Covid-19 are on the decline for now. But the pandemic has taught the value of preparation and things like booster shots read more . Merck plans to produce 10 million courses this year. It’s easy to imagine governments ordering multiples more. (By Robert Cyran)

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Editing by Lauren Silva Laughlin and Amanda Gomez

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