Merck Indicates Better Growth Visibility in Post-Keytruda LOE Period

Merck MRK announced better-than-expected fourth-quarter 2025 results earlier this month. The company beat estimates for both earnings and sales. Importantly, on the fourth-quarter conference call, management provided an encouraging long-term growth outlook, which has likely raised investor optimism.Merck is approaching a significant patent cliff as its blockbuster PD-1 therapy Keytruda is set to lose exclusivity in 2028. While this poses a major revenue risk, the company projects more than $70 billion in potential non-risk-adjusted commercial opportunities from its current pipeline by the mid-2030s. Importantly, management noted that this figure ($70 billion) is more than twice the prior peak consensus sales estimate of $35 billion for Keytruda in 2028 and represents a $20 billion increase from what the company had expected just a year ago.Building on this optimism, Merck is pinning hopes on its new products, key pipeline progress and the expansion of the commercial portfolios through recent mergers and acquisitions (M&A) to deliver sustainable growth in the post Keytruda LOE period.Merck’s new products with blockbuster potential are its 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension drug, Winrevair. Capvaxive and Winrevair recorded sales worth $759 million and $1.4 billion, respectively, in 2025. Both products have witnessed a strong launch and have the potential to generate significant revenues over the long term.Another new product, Welireg, a novel HIF-2α inhibitor, which is approved for treating various types of cancer indications, generated sales worth $716 million in 2025.Merck is also focused on building a diversified pipeline to support long-term growth. The company’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. Merck is seeing a strong launch for Ohtuvayre, a first-in-class maintenance therapy for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. Added to the portfolio through the 2025 acquisition of Verona, the drug generated $178 million in fourth-quarter 2025 sales. The company is continuing to invest in the U.S. launch of Ohtuvayre, which should expand patient reach and support growth in 2026 and beyond.Merck recently acquired Cidara Therapeutics, which added the latter’s lead pipeline candidate, MK-1406 (formerly CD388), a first-in-class, long-acting, strain-agnostic antiviral agent, to its pipeline. The candidate is currently being evaluated in late-stage studies for the prevention of seasonal influenza in individuals at higher risk of complications.The new products and expansion of its respiratory and infectious disease portfolios with the recent M&A deals have improved Merck’s long-term growth prospects.With a diverse late-stage pipeline and projected over $70 billion in commercial opportunities beyond Keytruda, Merck’s long-term growth outlook can now be seen as more resilient and less dependent on a single drug like Keytruda.PD-L1 Inhibitors Competing With MRK's KeytrudaKeytruda faces competition from other PD-L1 inhibitors, including Bristol Myers’ BMY Opdivo, Roche’s RHHBY Tecentriq and AstraZeneca’s AZN Imfinzi.BMY’s Opdivo, like Keytruda, is approved across multiple cancer types, including lung, melanoma and kidney cancers. Bristol Myers recorded $10.05 billion in Opdivo sales in 2025, up 8% year over year.Tecentriq is Roche’s leading immuno-oncology drug approved for multiple cancer indications. RHHBY recorded CHF 3.56 billion in Tecentriq sales in 2025, increasing 3% year over year.AZN’s Imfinzi generated sales of $6.06 billion in 2025, up 28%, driven by demand growth in bladder and liver cancer indications. Imfinzi has strategically expanded its use across multiple cancer indications, strengthening AstraZeneca’s oncology portfolio.MRK's Price Performance, Valuation and EstimatesOver the past six months, shares of Merck have rallied 44.1% compared with the industry’s 28.4% rise. The stock has also outperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.Image Source: Zacks Investment ResearchFrom a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 18.77 forward earnings, lower than 18.83 for the industry but higher than its 5-year mean of 12.51.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for 2026 earnings per share has declined from $8.11 to $5.96, while the same for 2027 has declined from $10.02 to $9.98 over the past 30 days.Image Source: Zacks Investment ResearchMRK's Zacks RankMerck currently has a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Quantum Computing Stocks Set To SoarArtificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AstraZeneca PLC (AZN): Free Stock Analysis Report Roche Holding AG (RHHBY): Free Stock Analysis Report Bristol Myers Squibb Company (BMY): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks