Merck & Co

Social and industry-specific factors make the global healthcare sector attractive to investors, characterised as it is by ageing populations, clinical breakthroughs and necessary regulatory barriers to entry. Healthcare is also seen as relatively defensive, as revenues and profits typically hold up well through the economic cycle.

The company continues to grow impressively, supported by a substantial level of reinvestment of earnings towards research & development (R&D) into further new treatments for the future. 

The company is highly rated from a sustainability standpoint, receiving recognition from several respected organisations. Merck’s valuation is attractive both in absolute terms and relative to the broader market. It is a high-quality company with a great record of long-term shareholder value creation. Merck also has a policy of returning capital to shareholders through dividends and buybacks. 

Like many other pharmaceutical companies, Merck faces scrutiny over access to essential treatments, patent practices and drug pricing. Whilst the company is actively involved in combatting neglected tropical diseases, pressure to expand access in low and middle-income countries while maintaining profitability remains. Potential risks include regulatory pressures and reputational damage. 

The company faces risks related to product safety and clinical trial transparency. Full transparency over trial structure and outcomes are vital to prevent an erosion of public trust and regulatory confidence.

The use of animal testing in medical discovery and development, while often mandated by regulatory authorities to ensure human safety, raises ethical concerns.  These topics are critical for pharmaceutical companies to address.