Critical Analysis: Innoviva (NASDAQ:INVA) & Merck & Co., Inc. (NYSE:MRK)

Innoviva (NASDAQ:INVA) and Merck & Co., Inc. (NYSE:MRK) are both medical companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, valuation, dividends, risk and profitability.

Volatility & Risk

Innoviva has a beta of 0.37, suggesting that its stock price is 63% less volatile than the S&P 500. Comparatively, Merck & Co., Inc. has a beta of 0.38, suggesting that its stock price is 62% less volatile than the S&P 500.

Profitability

This table compares Innoviva and Merck & Co., Inc.’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Innoviva	-16.15%	15.77%	8.41%
Merck & Co., Inc.	27.27%	43.23%	17.11%

Valuation and Earnings

This table compares Innoviva and Merck & Co., Inc.”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Innoviva	$358.71 million	3.68	$23.39 million	($1.01)	-20.79
Merck & Co., Inc.	$64.17 billion	3.10	$17.12 billion	$6.87	11.53

Merck & Co., Inc. has higher revenue and earnings than Innoviva. Innoviva is trading at a lower price-to-earnings ratio than Merck & Co., Inc., indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

99.1% of Innoviva shares are held by institutional investors. Comparatively, 76.1% of Merck & Co., Inc. shares are held by institutional investors. 2.3% of Innoviva shares are held by company insiders. Comparatively, 0.1% of Merck & Co., Inc. shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations for Innoviva and Merck & Co., Inc., as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Innoviva	0	0	2	0	3.00
Merck & Co., Inc.	1	12	6	2	2.43

Innoviva currently has a consensus price target of $55.00, suggesting a potential upside of 161.90%. Merck & Co., Inc. has a consensus price target of $109.19, suggesting a potential upside of 37.79%. Given Innoviva’s stronger consensus rating and higher probable upside, analysts clearly believe Innoviva is more favorable than Merck & Co., Inc..

Summary

Merck & Co., Inc. beats Innoviva on 10 of the 15 factors compared between the two stocks.

About Innoviva

Innoviva, Inc. engages in the development and commercialization of pharmaceutical products in the United States and internationally. The company’s products include RELVAR/BREO ELLIPTA, a once-daily combination medicine consisting of a LABA, vilanterol (VI), an inhaled corticosteroid (ICS), and fluticasone furoate; ANORO ELLIPTA, a once-daily medicine combining a long-acting muscarinic antagonist (LAMA) and umeclidinium bromide (UMEC) with a LABA, VI; GIAPREZA (angiotensin II), a vasoconstrictor to increase blood pressure in adults with septic or other distributive shock; XERAVA (eravacycline) for the treatment of complicated intra-abdominal infections in adults; and XACDURO, a beta lactamase inhibitor for the treatment of hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia. Its development pipeline includes zoliflodacin, a late-stage product candidate, a potential single oral dose cure for the treatment of uncomplicated gonorrhea. Innoviva, Inc. has a strategic partnership with Sarissa Capital Management LP. It has long-acting beta2 agonist (LABA) collaboration agreement with Glaxo Group Limited to develop and commercialize once-daily products for the treatment of chronic obstructive pulmonary disease and asthma. The company was formerly known as Theravance, Inc. and changed its name to Innoviva, Inc. in January 2016. Innoviva, Inc. was incorporated in 1996 and is headquartered in Burlingame, California.

About Merck & Co., Inc.

Merck & Co., Inc. is a health care company, which engages in the provision of health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. It operates through the following segments: Pharmaceutical, Animal Health, and Other. The Pharmaceutical segment includes human health pharmaceutical and vaccine products. The Animal Health segment discovers, develops, manufactures, and markets animal health products, such as pharmaceutical and vaccine products, for the prevention, treatment and control of disease in livestock, and companion animal species. The Other segment consists of sales for the non-reportable segments of healthcare services. The company was founded in 1891 and is headquartered in Rahway, NJ.