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Why Merck's 32% Rally Isn't Enough to Change the Bearish View
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Key Takeaways
MRK shares jumped 32% in three months, yet the stock is still viewed as a sell.
Keytruda drives over half of Merck's pharma sales, but faces 2028 patent expiry and rising competition.
Merck's Gardasil sales fell 40% amid China weakness, while earnings estimates slid on recent M&A costs.
Merck’s (MRK - Free Report) stock has risen 32.3% in the past three months. The stock has also been trading above its 50-day and 200-day simple moving averages (SMAs) since early November, indicating sustained bullish momentum.
However, do bullish signals always indicate future gains? It is important to understand the company’s strengths and weaknesses to better analyze whether to invest in a stock. Let’s break it down.
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 recorded sales of $23.3 billion in the first nine months of 2025, up 8% year over year.
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 the growth to continue, particularly in early lung cancer.
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 called intismeran autogene (V940/mRNA-4157) in combination with Keytruda in pivotal phase III studiesfor earlier-stage and adjuvant NSCLC and adjuvant melanoma. Merck’s subcutaneous formulation of Keytruda, known as Keytruda Qlex, was approved by the FDA in September 2025. Keytruda Qlex can offer substantially quicker administration time than the intravenous infusion of Keytruda.
With Keytruda’s intravenous or IV formulation set to lose exclusivity in 2028, the newly approved SC version comes with its own set of patents that extend protection well beyond that date.
Merck’s other oncology drugs, Welireg, AstraZeneca-partnered Lynparza and Eisai-partnered Lenvima, are also contributing to top-line growth.
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.
Merck has been on an acquisition spree in the past year, as it faces the looming patent expiration of Keytruda in 2028. Earlier this month, it closed the previously announced acquisition of Cidara Therapeutics for $9.2 billion. The acquisition will add CDTX’s lead pipeline candidate, CD388, a first-in-class long-acting, strain-agnostic antiviral agent, currently being evaluated in late-stage studies for the prevention of seasonal influenza in individuals at higher risk of complications.
Last year, it also acquired Verona Pharma for around $10 billion, which added the latter’s lead drug Ohtuvayre, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. The Verona acquisition strengthened Merck’s cardio-pulmonary portfolio, as the drug’s differentiated profile provides a significant edge over its competitors. Ohtuvayre's commercial launch is off to a solid start.
Declining Sales of MRK’s Gardasil & Other Vaccines
Sales of the Gardasil vaccine, which is Merck’s second-largest product, declined 40% in the first nine months 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 expects Gardasil sales to decline significantly in 2025 from 2024 levels. The company is also seeing lower demand for the vaccine in Japan.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, also declined in the first nine months of 2025.
MRK is seeing declining demand for its diabetes products and the generic erosion of some drugs as well.
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 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 (“LOE”) of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ (SMMT) ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda.
In a phase III study (conducted in China by Summit’s partner Akeso) in patients with locally advanced or metastatic NSCLC, ivonescimab outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings. Merck is also developing its own PD-1/VEGF inhibitor. Last year, Pfizer also acquired exclusive global ex-China rights to develop, manufacture and commercialize SSGJ-707, a dual PD-1 and VEGF inhibitor, from China’s 3SBio.
MRK Share Price, Valuation & Estimates
Merck’s shares have risen 10.3% in the past year compared with an increase of 21.6% for the industry.
Image Source: Zacks Investment Research
Merck Stock Underperforms 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 13.15 forward earnings, significantly lower than 17.86 for the industry. The stock is, however, trading above its 5-year mean of 12.48. The stock is also much cheaper than other large drugmakers like AbbVie (ABBV - Free Report) , Novo Nordisk, Eli Lilly (LLY - Free Report) , AstraZeneca, J&J and others.
MRK Stock Valuation
Image Source: Zacks Investment Research
Estimates for MRK’s 2026 earnings have declined from $9.23 per share to $7.94 over the past 60 days. This is probably due to costs related to Merck’s various M&A deals, like the Verona acquisition, which closed in October, and the Cidara Therapeutics acquisition, which closed this month.
MRK Estimate Movement
Image Source: Zacks Investment Research
Short-Term Investors May Sell MRK Stock
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 the company is recording above-market growth.
Over the last couple of years, it has been acquiring new products like Ohtuvayre. The new products can be long-term growth drivers and help fill the potential revenue gap created by Keytruda’s upcoming LOE.
However, Merck faces several near-term challenges, 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 LOE period successfully. Also, estimates have declined recently due to costs related to its various M&A deals. Even though the stock price is improving, short-term investors may stay away from this Zacks Rank #5 (Strong Sell) stock as there seems to be limited upside from current levels. Declining earnings estimates temper the stock’s near-term gains.
Image: Bigstock
Why Merck's 32% Rally Isn't Enough to Change the Bearish View
Key Takeaways
Merck’s (MRK - Free Report) stock has risen 32.3% in the past three months. The stock has also been trading above its 50-day and 200-day simple moving averages (SMAs) since early November, indicating sustained bullish momentum.
However, do bullish signals always indicate future gains? It is important to understand the company’s strengths and weaknesses to better analyze whether to invest in a stock. Let’s break it down.
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 recorded sales of $23.3 billion in the first nine months of 2025, up 8% year over year.
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 the growth to continue, particularly in early lung cancer.
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 called intismeran autogene (V940/mRNA-4157) in combination with Keytruda in pivotal phase III studiesfor earlier-stage and adjuvant NSCLC and adjuvant melanoma. Merck’s subcutaneous formulation of Keytruda, known as Keytruda Qlex, was approved by the FDA in September 2025. Keytruda Qlex can offer substantially quicker administration time than the intravenous infusion of Keytruda.
With Keytruda’s intravenous or IV formulation set to lose exclusivity in 2028, the newly approved SC version comes with its own set of patents that extend protection well beyond that date.
Merck’s other oncology drugs, Welireg, AstraZeneca-partnered Lynparza and Eisai-partnered Lenvima, are also contributing to top-line growth.
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.
Merck has been on an acquisition spree in the past year, as it faces the looming patent expiration of Keytruda in 2028. Earlier this month, it closed the previously announced acquisition of Cidara Therapeutics for $9.2 billion. The acquisition will add CDTX’s lead pipeline candidate, CD388, a first-in-class long-acting, strain-agnostic antiviral agent, currently being evaluated in late-stage studies for the prevention of seasonal influenza in individuals at higher risk of complications.
Last year, it also acquired Verona Pharma for around $10 billion, which added the latter’s lead drug Ohtuvayre, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. The Verona acquisition strengthened Merck’s cardio-pulmonary portfolio, as the drug’s differentiated profile provides a significant edge over its competitors. Ohtuvayre's commercial launch is off to a solid start.
Declining Sales of MRK’s Gardasil & Other Vaccines
Sales of the Gardasil vaccine, which is Merck’s second-largest product, declined 40% in the first nine months 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 expects Gardasil sales to decline significantly in 2025 from 2024 levels. The company is also seeing lower demand for the vaccine in Japan.
Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, also declined in the first nine months of 2025.
MRK is seeing declining demand for its diabetes products and the generic erosion of some drugs as well.
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 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 (“LOE”) of Keytruda in 2028.
Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ (SMMT) ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda.
In a phase III study (conducted in China by Summit’s partner Akeso) in patients with locally advanced or metastatic NSCLC, ivonescimab outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings. Merck is also developing its own PD-1/VEGF inhibitor. Last year, Pfizer also acquired exclusive global ex-China rights to develop, manufacture and commercialize SSGJ-707, a dual PD-1 and VEGF inhibitor, from China’s 3SBio.
MRK Share Price, Valuation & Estimates
Merck’s shares have risen 10.3% in the past year compared with an increase of 21.6% for the industry.
Merck Stock Underperforms 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 13.15 forward earnings, significantly lower than 17.86 for the industry. The stock is, however, trading above its 5-year mean of 12.48. The stock is also much cheaper than other large drugmakers like AbbVie (ABBV - Free Report) , Novo Nordisk, Eli Lilly (LLY - Free Report) , AstraZeneca, J&J and others.
MRK Stock Valuation
Estimates for MRK’s 2026 earnings have declined from $9.23 per share to $7.94 over the past 60 days. This is probably due to costs related to Merck’s various M&A deals, like the Verona acquisition, which closed in October, and the Cidara Therapeutics acquisition, which closed this month.
MRK Estimate Movement
Short-Term Investors May Sell MRK Stock
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 the company is recording above-market growth.
Over the last couple of years, it has been acquiring new products like Ohtuvayre. The new products can be long-term growth drivers and help fill the potential revenue gap created by Keytruda’s upcoming LOE.
However, Merck faces several near-term challenges, 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 LOE period successfully. Also, estimates have declined recently due to costs related to its various M&A deals. Even though the stock price is improving, short-term investors may stay away from this Zacks Rank #5 (Strong Sell) stock as there seems to be limited upside from current levels. Declining earnings estimates temper the stock’s near-term gains.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term investors may stay on the sidelines and wait for clearer signs of more sustainable growth and profitability.