This is shaping up to be a two-horse race for the best and most affordable one-pill-a-day regimen to treat what is a horrible disease that affects 2.7 million people in the U.S. alone.
Gilead is expected to take the lion’s share of this market, 60% to 75%. That means there is 25% to 40% of the market up for grabs. This is where Merck expects to make its money.
The other players here are Bristol-Myers Squibb Co(NYSE:BMY) and AbbVie Inc(NYSE:ABBV), but their systems require multiple drugs and pills. The market sees that as a negative.
And despite the lower market share from the Hep C race, Merck has lots of other reasons to own it.
It has initiated what has been described as an aggressive two-year restructuring plan. It also has several skin cancer drugs in the pipeline, as well as a much broader and stronger overall pipeline than Gilead. And a 3.1% dividend that will work very well while investors wait for the numbers to roll in on the Hep C situation.
The stock is trading slightly below the market at about 15.5 times 2015 earnings. Gilead is at about 16 times.
The dividend and its pipeline put it over the top for me. Take a look at Merck.