Is Merck a Better Buy After Announcing Spinoff?
When companies focus on their strengths and core competencies, it can make them better investments. That's what Merck (NYSE: MRK) is hoping will happen, as the company announced on Feb. 5 that it will be spinning off its women's health business along with legacy brands and biosimilars into a new company as it attempts to focus on "key growth pillars:" oncology, vaccines, animal health, and hospital.
A leaner business and a greater focus on growth may make the stock a better buy for investors. But it could also leave the company riskier by being less diversified. Let's take a closer look at whether the new Merck will be a good buy or if it will still have the old Merck's problems.
The same day that Merck announced the spinoff, it also released its year-end financials. Revenue of $46.8 billion for 2019 was up 11% over the prior-year tally of $42.3 billion. It's a decent growth rate but the company's financials continue to be weighed down by poorly performing items. Merck's key drug, Keytruda, which treats multiple cancers, made up more than $11 billion in revenue all on its own in 2019 and was up 55% year over year. Now making up about one-quarter of the company's total revenue, it's a big part of Merck's business and it will be responsible for an even bigger piece of the leaner Merck, post-spinoff.
Source Fool.com
