Merck KGaA: Shares Fall Toward Fair Value as FDA Pauses Evobrutinib Trial Enrollment

Shares in narrow-moat Merck KGaA declined in the midsingle digits on a percentage basis after the announcement that the Food and Drug Administration had paused new patient enrollment on its development-stage drug evobrutinib (for multiple sclerosis) on safety concerns. At first glance, we do not anticipate changing our fair value estimates on this announcement, given the relatively limited impact that this drug candidate will have on this diverse firm's long-term cash flow generation, especially when considering recently generated cash flows in our model. Shares appear to be falling toward roughly fair valuations at Merck KGaA, in our opinion.