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Will Merck's Keytruda Continue to Drive Growth Amid Looming LOE?
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Key Takeaways
Keytruda drives about 50% of MRK's pharma sales and grew 6% year over year in Q1 2025.
MRK is pursuing mRNA combos, new formulations, and new drugs to extend Keytruda's momentum.
Winrevair and pipeline strategies aim to cushion MRK's top line post-Keytruda patent expiry in 2028.
Merck (MRK - Free Report) boasts more than six blockbuster drugs in its portfolio, with the blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for around 50% of Merck’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, mainly early-stage non-small cell lung cancer. Keytruda is presently approved to treat nine indications in earlier-stage cancers in the United States. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
However, Merck is heavily reliant on Keytruda. Though Keytruda may be Merck’s biggest strength, it can also be argued that the company is excessively dependent on the drug, and it should look for ways to diversify its product lineup.
There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future. In 2024, Summit Therapeutics (SMMT - Free Report) reported positive data from a phase III study (conducted in China by partner Akeso) in patients with locally advanced or metastatic NSCLC, in which its lead pipeline candidate, ivonescimab, a dual PD-1 and VEGF inhibitor, outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple non-small cell lung cancer (NSCLC) settings.
Nonetheless, though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then. Merck is also working on different strategies to drive Keytruda's long-term growth. These include innovative immuno-oncology combinations, including Keytruda with 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 patients with certain types of melanoma and NSCLC. Merck and Moderna are conducting pivotal phase III studies on V940, in combination with Keytruda, for earlier-stage and adjuvant NSCLC and adjuvant melanoma.
Merck is also developing a subcutaneous formulation of Keytruda that can extend its patent life. It is under review in the United States and an FDA decision is expected in September.
Merck is also pinning hopes on the newly launched pulmonary arterial hypertension (PAH) drug Winrevair to boost its top line once Keytruda loses exclusivity. Keytruda generated sales of $7.21 billion in the first quarter of 2025, rising 6% year over year. Our model estimates for Keytruda suggest a CAGR of 5.4% over the next three years.
MRK’s Price Performance, Valuation and Estimates
Merck’s shares have lost 19.6% so far this year against an increase of 0.3% for the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.55 forward earnings, lower than 15.12 for the industry and its 5-year mean of 12.89.
Image Source: Zacks Investment Research
Estimates for both 2025 and 2026 earnings have declined over the past 60 days.
Image: Bigstock
Will Merck's Keytruda Continue to Drive Growth Amid Looming LOE?
Key Takeaways
Merck (MRK - Free Report) boasts more than six blockbuster drugs in its portfolio, with the blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for around 50% of Merck’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, mainly early-stage non-small cell lung cancer. Keytruda is presently approved to treat nine indications in earlier-stage cancers in the United States. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
However, Merck is heavily reliant on Keytruda. Though Keytruda may be Merck’s biggest strength, it can also be argued that the company is excessively dependent on the drug, and it should look for ways to diversify its product lineup.
There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future. In 2024, Summit Therapeutics (SMMT - Free Report) reported positive data from a phase III study (conducted in China by partner Akeso) in patients with locally advanced or metastatic NSCLC, in which its lead pipeline candidate, ivonescimab, a dual PD-1 and VEGF inhibitor, outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple non-small cell lung cancer (NSCLC) settings.
Nonetheless, though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then. Merck is also working on different strategies to drive Keytruda's long-term growth. These include innovative immuno-oncology combinations, including Keytruda with 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 patients with certain types of melanoma and NSCLC. Merck and Moderna are conducting pivotal phase III studies on V940, in combination with Keytruda, for earlier-stage and adjuvant NSCLC and adjuvant melanoma.
Merck is also developing a subcutaneous formulation of Keytruda that can extend its patent life. It is under review in the United States and an FDA decision is expected in September.
Merck is also pinning hopes on the newly launched pulmonary arterial hypertension (PAH) drug Winrevair to boost its top line once Keytruda loses exclusivity. Keytruda generated sales of $7.21 billion in the first quarter of 2025, rising 6% year over year. Our model estimates for Keytruda suggest a CAGR of 5.4% over the next three years.
MRK’s Price Performance, Valuation and Estimates
Merck’s shares have lost 19.6% so far this year against an increase of 0.3% for the industry.
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.55 forward earnings, lower than 15.12 for the industry and its 5-year mean of 12.89.
Estimates for both 2025 and 2026 earnings have declined over the past 60 days.
Merck has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.