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Merck Stock Down 4% Since Q2 Results: How to Play the Stock
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Key Takeaways
MRK Q2 earnings beat estimates but revenues fell 2% to $15.8B hit by weaker vaccine sales.
Keytruda sales rose 9% in Q2, driving growth alongside Capvaxive and Winrevair launches.
MRK trades at a P/E of 8.64, below the industry average, with a pipeline of 20+ potential launches.
Merck (MRK - Free Report) stock has declined 4% since it announced second-quarter results on July 29 before market open. While the company’s earnings beat estimates, its sales came in line. Earnings of $2.13 per share declined 7% year over year.
Revenues of $15.8 billion declined 2% year over year as higher sales of Keytruda, new products like Winrevair and Capvaxive and the Animal Health segment were offset by lower sales of Gardasil vaccine and some other vaccines.
Keytruda, the biggest product in Merck’s portfolio, generated sales of $7.96 billion in the quarter, up 9% year over year.
Merck narrowed its sales guidance for the year while raising the lower end of its EPS outlook. The company now expects revenues to be in the range of $64.3-$65.3 billion, compared with the previous expectation of $64.1-$65.6 billion. Adjusted EPS is expected to be between $8.87 and $8.97 versus the prior estimated range of $8.82 and $8.97.
However, a single quarter’s results are not so important for long-term investors, and the focus should rather be on the company’s strong fundamentals. Let’s understand the company’s strengths and weaknesses to better analyze how to play Merck stock in the post-earnings scenario.
Keytruda: Merck’s Biggest Strength
Merck boasts more than six blockbuster drugs in its portfolio, with Keytruda being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for more than 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth over the past few years.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications, mainly 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. Keytruda’s sales rose around 7% in the first half of 2025.
Merck is 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 non-small cell lung cancer (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. This formulation is under review in the United States, and an FDA decision is expected in September.
MRK’s Pipeline Progress & Strategic M&A Deals
Merck has been making meaningful regulatory and clinical progress across areas like oncology (mainly Keytruda), vaccines and infectious diseases while executing strategic business moves.
MRK’s phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. This has positioned Merck to launch around 20 new vaccines and drugs over the next few years, with many having blockbuster potential. These include Merck’s new 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension drug, Winrevair, which have the potential to generate significant revenues over the long term. Both products have witnessed a strong launch.
Merck’s RSV antibody, Enflonsia (clesrovimab), was approved in the United States in June 2025, while it is under review in the EU. A fixed-dose combination of doravirine and islatravir for the treatment of HIV is under review in the United States, with an FDA decision expected in April next year.
Merck has other promising candidates in its late-stage pipeline, such as enlicitide decanoate/MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody-drug conjugates.
In early July, Merck announced adefinitive agreement to acquire Verona Pharma (VRNA - Free Report) for approximately $10 billion. The deal will add Verona’s Ohtuvayre, approved for the maintenance treatment of chronic obstructive pulmonary disease (COPD). This addition will strengthen Merck’s cardio-pulmonary pipeline and portfolio as the drug’s differentiated profile provides a significant edge over its competitors.
Declining Sales of MRK’s Gardasil
Sales of Gardasil, which is Merck’s second-largest product, declined 48% in the first half of 2025. Sales of Gardasil are declining due to weak performance in China, which resulted from sluggish demand trends amid an economic slowdown. Lower demand in China resulted in above-normal channel inventory levels at Merck’s commercialization partner in China, Zhifei.
Accordingly, Merck decided to temporarily halt shipments of Gardasil in China to allow Zhifei to burn down existing inventory. Merck does not expect to resume shipments in China through at least the end of 2025, extended from the prior expectation of mid-2025.
Gardasil sales are expected to decline significantly in 2025 from 2024 levels. The company is also seeing lower demand for the vaccine in Japan. Sales are expected to remain weak in Japan in the second half of 2025.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, also declined in the second quarter.
MRK is also seeing declining demand for its diabetes products and generic erosion of some drugs.
MRK’s Keytruda Faces Patent Expiration in 2028
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 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 iivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings.
MRK Share Price Valuation & Estimates
Merck’s shares have lost 17.4% so far this year against a decrease of 6.7% for the industry. The stock has also underperformed the sector and the S&P 500, as seen in the chart below.
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.64 forward earnings, lower than 13.71 for the industry as well as its 5-year mean of 12.79.
MRK Stock Valuation
Image Source: Zacks Investment Research
Estimates for MRK’s 2025 earnings have risen from $8.88 per share to $8.92 per share over the past 30 days, while those for 2026 have declined from $9.70 per share to $9.61 per share.
MRK Estimate Movement
Image Source: Zacks Investment Research
Long-Term Investors Should Stay Invested in MRK Stock
Merck’s problems are numerous at present, including persistent challenges for Gardasil in China, potential competition for Keytruda and rising competitive and generic pressure on some of its drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda loss-of-exclusivity period successfully. Consistently declining estimates and price depreciation reflect analysts’ pessimistic outlook for the stock.
However, Merck 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’s new products, Capvaxive and Winrevair, are witnessing strong launches and have the potential to generate significant revenues over the long term.
Merck’s Animal Health business is a key contributor to its top-line growth, as Merck is recording above-market growth, and the trend continues in 2025.
After a weak sales performance in the first half, Merck expects to return to growth in the second half. It expects growth to be driven by oncology drugs, Animal Health, as well as new products, which will be partially offset by lower sales of Gardasil in China and Japan.
In July 2025, Merck announced a new multi-year optimization initiative, which is expected to save $3 billion in annual costs by the end of 2027.
The VRNA deal, once closed, should also help fill the potential revenue gap created by Keytruda’s upcoming loss of exclusivity. Ohtuvayre's commercial launch is off to a solid start.
We believe investors with a long-term horizon should stay invested in this Zacks Rank #3 (Hold) stock due to its strong fundamentals, a promising pipeline and potential strong sales from its new products. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Merck Stock Down 4% Since Q2 Results: How to Play the Stock
Key Takeaways
Merck (MRK - Free Report) stock has declined 4% since it announced second-quarter results on July 29 before market open. While the company’s earnings beat estimates, its sales came in line. Earnings of $2.13 per share declined 7% year over year.
Revenues of $15.8 billion declined 2% year over year as higher sales of Keytruda, new products like Winrevair and Capvaxive and the Animal Health segment were offset by lower sales of Gardasil vaccine and some other vaccines.
Keytruda, the biggest product in Merck’s portfolio, generated sales of $7.96 billion in the quarter, up 9% year over year.
Merck narrowed its sales guidance for the year while raising the lower end of its EPS outlook. The company now expects revenues to be in the range of $64.3-$65.3 billion, compared with the previous expectation of $64.1-$65.6 billion. Adjusted EPS is expected to be between $8.87 and $8.97 versus the prior estimated range of $8.82 and $8.97.
However, a single quarter’s results are not so important for long-term investors, and the focus should rather be on the company’s strong fundamentals. Let’s understand the company’s strengths and weaknesses to better analyze how to play Merck stock in the post-earnings scenario.
Keytruda: Merck’s Biggest Strength
Merck boasts more than six blockbuster drugs in its portfolio, with Keytruda being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for more than 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth over the past few years.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications, mainly 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. Keytruda’s sales rose around 7% in the first half of 2025.
Merck is 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 non-small cell lung cancer (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. This formulation is under review in the United States, and an FDA decision is expected in September.
MRK’s Pipeline Progress & Strategic M&A Deals
Merck has been making meaningful regulatory and clinical progress across areas like oncology (mainly Keytruda), vaccines and infectious diseases while executing strategic business moves.
MRK’s phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. This has positioned Merck to launch around 20 new vaccines and drugs over the next few years, with many having blockbuster potential. These include Merck’s new 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension drug, Winrevair, which have the potential to generate significant revenues over the long term. Both products have witnessed a strong launch.
Merck’s RSV antibody, Enflonsia (clesrovimab), was approved in the United States in June 2025, while it is under review in the EU. A fixed-dose combination of doravirine and islatravir for the treatment of HIV is under review in the United States, with an FDA decision expected in April next year.
Merck has other promising candidates in its late-stage pipeline, such as enlicitide decanoate/MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody-drug conjugates.
In early July, Merck announced adefinitive agreement to acquire Verona Pharma (VRNA - Free Report) for approximately $10 billion. The deal will add Verona’s Ohtuvayre, approved for the maintenance treatment of chronic obstructive pulmonary disease (COPD). This addition will strengthen Merck’s cardio-pulmonary pipeline and portfolio as the drug’s differentiated profile provides a significant edge over its competitors.
Declining Sales of MRK’s Gardasil
Sales of Gardasil, which is Merck’s second-largest product, declined 48% in the first half of 2025. Sales of Gardasil are declining due to weak performance in China, which resulted from sluggish demand trends amid an economic slowdown. Lower demand in China resulted in above-normal channel inventory levels at Merck’s commercialization partner in China, Zhifei.
Accordingly, Merck decided to temporarily halt shipments of Gardasil in China to allow Zhifei to burn down existing inventory. Merck does not expect to resume shipments in China through at least the end of 2025, extended from the prior expectation of mid-2025.
Gardasil sales are expected to decline significantly in 2025 from 2024 levels. The company is also seeing lower demand for the vaccine in Japan. Sales are expected to remain weak in Japan in the second half of 2025.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, also declined in the second quarter.
MRK is also seeing declining demand for its diabetes products and generic erosion of some drugs.
MRK’s Keytruda Faces Patent Expiration in 2028
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 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 iivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings.
MRK Share Price Valuation & Estimates
Merck’s shares have lost 17.4% so far this year against a decrease of 6.7% for the industry. The stock has also underperformed the sector and the S&P 500, as seen in the chart below.
Merck Stock Underperforms Industry, Sector & S&P 500
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.64 forward earnings, lower than 13.71 for the industry as well as its 5-year mean of 12.79.
MRK Stock Valuation
Estimates for MRK’s 2025 earnings have risen from $8.88 per share to $8.92 per share over the past 30 days, while those for 2026 have declined from $9.70 per share to $9.61 per share.
MRK Estimate Movement
Long-Term Investors Should Stay Invested in MRK Stock
Merck’s problems are numerous at present, including persistent challenges for Gardasil in China, potential competition for Keytruda and rising competitive and generic pressure on some of its drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda loss-of-exclusivity period successfully. Consistently declining estimates and price depreciation reflect analysts’ pessimistic outlook for the stock.
However, Merck 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’s new products, Capvaxive and Winrevair, are witnessing strong launches and have the potential to generate significant revenues over the long term.
Merck’s Animal Health business is a key contributor to its top-line growth, as Merck is recording above-market growth, and the trend continues in 2025.
After a weak sales performance in the first half, Merck expects to return to growth in the second half. It expects growth to be driven by oncology drugs, Animal Health, as well as new products, which will be partially offset by lower sales of Gardasil in China and Japan.
In July 2025, Merck announced a new multi-year optimization initiative, which is expected to save $3 billion in annual costs by the end of 2027.
The VRNA deal, once closed, should also help fill the potential revenue gap created by Keytruda’s upcoming loss of exclusivity. Ohtuvayre's commercial launch is off to a solid start.
We believe investors with a long-term horizon should stay invested in this Zacks Rank #3 (Hold) stock due to its strong fundamentals, a promising pipeline and potential strong sales from its new products. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.