Merck Eyes COVID-19 Vaccine Plans

Merck is set to acquire Themis Bioscience and work on a COVID-19 vaccine

by Jake Scott

Published on May 26, 2020 at 10:30 AM
Updated on Jun 24, 2020 at 10:16 AM

Unlike many sector peersMerck & Co., Inc. (NYSE:MRK) has been quiet with its COVID-19 vaccine development plans. That's all changed now, after the blue-chip biotech company announced the acquisition of Themis Bioscience, an Austria-based company to begin development of a potential coronavirus vaccine. As a result, MRK is now up 1% to trade at $77.15 this morning.

In addition to acquiring Themis, Merck announced collaborations with the International AIDS Vaccine Initiative (IAVI) and Ridgeback Biotherapeutics to aid in the development of the COVID-19 vaccine.

Since hitting an all-time high of $92.64 at the end of December, MRK has jumped around a lot on the charts. During the broader market's mid-March pullback, Merck fell to a two-year low at just above the $65 mark. Now up 17% from that low, Merck stock is edging closer to breakeven levels year-over-year, but resistance remains at its overhead 80-day moving average.

Analysts are more bullish on Merck stock. Of the 12 in coverage, nine brokerages rate it a "strong buy" and the remaining three all sporting a "hold." Meanwhile, the 12-month consensus target price of $93.59 sits up in uncharted territory.

Options traders have responded in kind today. In just the first hour of trading, over 11,000 MRK options have changed hands, double the average intraday amount and volume pacing for the 94th percentile of its annual range. Leading the charge is the weekly 5/29 80-strike call, but there are also new positions being opened at the 77-strike call from the June series.

The good news for options traders is that the Dow stock sports attractively priced premium, per Schaeffer's Volatility Index (SVI) of 28% which sits in the 25th percentile of its annual range. This suggests that near-term options traders are pricing in relatively low volatility expectations, a boon for premium buyers.

A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!