Why Billionaire Prem Watsa Is Bullish on Merck

Billionaire investor Prem Watsa, CEO of Fairfax Financial, has expressed a bullish stance on Merck, the global pharmaceutical company. Watsa's positive outlook is supported by several aspects of Merck's business strategy and financial performance. This article explores the reasons behind Watsa's confidence in Merck and the key factors contributing to the company's long-term growth potential.



1. Strong Financial Performance: Merck's financial results have been robust, with total worldwide sales increasing by 4% year-over-year in the third quarter of 2024, reaching $16.7 billion. Excluding the impact of foreign exchange, growth was 7%. This growth was driven by increased usage of KEYTRUDA, contributions from new launches like WINREVAIR and CAPVAXIVE, and strong growth in the Animal Health business.
2. Diversified Portfolio: Merck has successfully expanded its portfolio, which now includes a strong presence in cancer treatment (KEYTRUDA), vaccines (CAPVAXIVE), and animal health. This diversification helps the company mitigate risks associated with relying on a single product or market.
3. Innovation and Pipeline: Merck's pipeline is advancing and expanding, demonstrating the company's ability to create a sustainable innovation engine. The company has achieved significant milestones in vaccine programs, presented positive results for several pipeline candidates, and completed acquisitions of promising therapies like CN201 (MK-1045).
4. Growth in Key Markets: Merck's sales of GARDASIL/GARDASIL 9, a vaccine for human papillomavirus (HPV), grew at double-digit rates in almost every major region globally, excluding China. This indicates strong demand for the company's products in key markets.
5. Strategic Acquisitions: Merck has made strategic acquisitions, such as the purchase of Eyebiotech Limited (EyeBio) and CN201 (MK-1045) from Curon Biopharmaceutical, which have the potential to drive future growth and innovation.
6. Confident Leadership: Robert M. Davis, Merck's chairman and CEO, has expressed confidence in the company's ability to execute and create lasting value for patients, shareholders, and stakeholders. This confidence is reflected in the company's financial outlook for the full year 2024, with expected worldwide sales between $63.6 billion and $64.1 billion, and non-GAAP EPS between $7.72 and $7.77.

In conclusion, Prem Watsa's bullish view on Merck is supported by the company's strong financial performance, diversified portfolio, innovation and pipeline, growth in key markets, strategic acquisitions, and confident leadership. These factors contribute to Merck's long-term growth potential and make it an attractive investment opportunity.