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Merck Stock Down More Than 14% in 6 Months: Buy, Sell or Hold?
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Merck’s (MRK - Free Report) stock has declined 14.4% in the past six months against an increase of 9.7% for the Large Cap Pharmaceuticals industry. The stock has also underperformed the sector and the S&P 500 Index, as seen in the chart below. The stock is also trading below its 200- and 50-day moving averages.
Merck boasts more than six blockbuster drugs in its portfolio, with blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Merck’s Animal health and vaccine products are core growth drivers. It has a strong cancer pipeline, including Keytruda. Merck is investing in M&A activity to strengthen its pipeline. However, Merck is heavily reliant on Keytruda. Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug and should look for ways to diversify its product lineup. The company’s second-largest product human papillomavirus (HPV) vaccine, Gardasil, is also seeing grim sales in China.
Let’s understand these factors in detail to better analyze how to play the stock after the price decline.
Keytruda is Merck’s Biggest Strength
Keytruda, approved for several types of cancer, alone accounts for around 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
Merck is working on different strategies to drive the long-term growth of Keytruda. These include innovative immuno-oncology combinations, including Keytruda with TIGIT, LAG3 and CTLA-4 inhibitors. In partnership with Moderna (MRNA - Free Report) , Merck is developing a personalized mRNA therapeutic cancer vaccine (V940/mRNA-4157) in combination with Keytruda for treating adjuvant melanoma and non-small cell lung cancer.
Pipeline Progress & Strategic M&A Deals
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. It also expanded its existing cancer deal with Japan’s Daiichi Sankyo. Last week, it announced a collaboration with Exelixis (EXEL - Free Report) to advance the development of the latter’s cancer candidate, zanzalintinib.
Merck also has some key new products lined up for launch. We believe that among these, Capvaxive and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension in the United States in March and in the EU in August. Capvaxive (V116), Merck’s 21-valent pneumococcal conjugate vaccine, was approved in the United States in June 2024 while it is under review in the EU.
Merck has other promising candidates in its late-stage pipeline like MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody drug conjugates or ADCs.
MRK Stock Valuation & Estimates
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 11.69 forward earnings, lower than 19.08 for the industry as well as its 5-year mean of 13.58.
MRK Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 earnings has declined from $8.13 to $7.85 per share over the past 60 days. For 2025, earnings estimates have declined from $9.76 to $9.65 per share over the same timeframe.
MRK Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in MRK Stock
We believe the strong demand for Keytruda, higher sales of Gardasil in the United States and other international markets and a significant contribution from new products like Welireg and Vaxneuvance vaccine can keep driving top-line growth in the mid-to-long term.
However, Merck has its share of problems, like declining sales of Gardasil in China, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
We believe those who hold the stock may stay invested as the company has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then. Merck is pinning hopes on PAH drug Winrevair to boost its top line once Keytruda loses exclusivity.
Merck’s reasonable valuation can be a good reason to buy the stock on the dip for long-term investors.
Image: Bigstock
Merck Stock Down More Than 14% in 6 Months: Buy, Sell or Hold?
Merck’s (MRK - Free Report) stock has declined 14.4% in the past six months against an increase of 9.7% for the Large Cap Pharmaceuticals industry. The stock has also underperformed the sector and the S&P 500 Index, as seen in the chart below. The stock is also trading below its 200- and 50-day moving averages.
Merck Stock Underperforms Industry, Sector & S&P 500
Merck boasts more than six blockbuster drugs in its portfolio, with blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Merck’s Animal health and vaccine products are core growth drivers. It has a strong cancer pipeline, including Keytruda. Merck is investing in M&A activity to strengthen its pipeline. However, Merck is heavily reliant on Keytruda. Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug and should look for ways to diversify its product lineup. The company’s second-largest product human papillomavirus (HPV) vaccine, Gardasil, is also seeing grim sales in China.
Let’s understand these factors in detail to better analyze how to play the stock after the price decline.
Keytruda is Merck’s Biggest Strength
Keytruda, approved for several types of cancer, alone accounts for around 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
Merck is working on different strategies to drive the long-term growth of Keytruda. These include innovative immuno-oncology combinations, including Keytruda with TIGIT, LAG3 and CTLA-4 inhibitors. In partnership with Moderna (MRNA - Free Report) , Merck is developing a personalized mRNA therapeutic cancer vaccine (V940/mRNA-4157) in combination with Keytruda for treating adjuvant melanoma and non-small cell lung cancer.
Pipeline Progress & Strategic M&A Deals
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. It also expanded its existing cancer deal with Japan’s Daiichi Sankyo. Last week, it announced a collaboration with Exelixis (EXEL - Free Report) to advance the development of the latter’s cancer candidate, zanzalintinib.
Merck also has some key new products lined up for launch. We believe that among these, Capvaxive and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension in the United States in March and in the EU in August. Capvaxive (V116), Merck’s 21-valent pneumococcal conjugate vaccine, was approved in the United States in June 2024 while it is under review in the EU.
Merck has other promising candidates in its late-stage pipeline like MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody drug conjugates or ADCs.
MRK Stock Valuation & Estimates
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 11.69 forward earnings, lower than 19.08 for the industry as well as its 5-year mean of 13.58.
MRK Stock Valuation
The Zacks Consensus Estimate for 2024 earnings has declined from $8.13 to $7.85 per share over the past 60 days. For 2025, earnings estimates have declined from $9.76 to $9.65 per share over the same timeframe.
MRK Estimate Movement
Stay Invested in MRK Stock
We believe the strong demand for Keytruda, higher sales of Gardasil in the United States and other international markets and a significant contribution from new products like Welireg and Vaxneuvance vaccine can keep driving top-line growth in the mid-to-long term.
However, Merck has its share of problems, like declining sales of Gardasil in China, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
We believe those who hold the stock may stay invested as the company has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then. Merck is pinning hopes on PAH drug Winrevair to boost its top line once Keytruda loses exclusivity.
Merck’s reasonable valuation can be a good reason to buy the stock on the dip for long-term investors.
Merck has a Zacks Rank #3 (Hold) stock currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.