MRK Stock Up 5.6% in a Month as Estimates Fall: Buy, Hold or Sell?

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 55% of the company’s pharmaceutical sales. In the United States, Keytruda is approved for 44 indications spanning 19 tumor types as well as for many of these indications worldwide.

The drug has played an instrumental role in driving Merck’s steady revenue growth over the past few years. Keytruda sales are gaining from continued strong momentum in metastatic indications and rapid uptake across earlier-stage launches. The company expects the growth to continue till it loses patent exclusivity in 2028. More than 2,800 clinical studies are currently evaluating Keytruda across multiple cancer types and treatment settings.

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, Merck is developing a personalized mRNA therapeutic cancer vaccine called intismeran autogene (V940/mRNA-4157) in combination with Keytruda in pivotal phase III studies for earlier-stage and adjuvant NSCLC and adjuvant melanoma. Merck’s subcutaneous formulation of Keytruda, known as Keytruda Qlex, was approved in the United States and EU in 2025 and generated sales of $590 million in the first half of 2026. Keytruda Qlex can offer substantially quicker administration time than the intravenous infusion of Keytruda.

Merck expects Keytruda to achieve peak sales of $35 billion by 2028. Merck’s other oncology drugs, Welireg, AstraZeneca AZN-partnered Lynparza and Eisai-partnered Lenvima, are also contributing to top-line growth.

Merck’s Animal Health business is also a key contributor to its top-line growth, with sales expected to more than double by the mid-2030s.

MRK’s Pipeline Progress & Recent M&A Spree

Merck’s expanding drug pipeline and potential new blockbuster drugs beyond Keytruda look encouraging.

Its phase III pipeline has almost tripled since 2021, supported by in-house progress as well as the addition of candidates through M&A deals. Merck expects to launch 20 new drugs by 2030, with many already launched.

Its new products, pulmonary arterial hypertension drug Winrevair, cancer drug Welireg and 21-valent pneumococcal conjugate vaccine Capvaxive, have begun to contribute significantly to top-line growth.

Some new products approved/launched recently are RSV antibody, Enflonsia (clesrovimab), Idvynso, a once-daily, single-tablet two-drug regimen of doravirine and islatravir, and Lipfendra (enlicitide), an oral PCSK9 inhibitor to help reduce LDL cholesterol in adults with hypercholesterolemia.

Some key candidates in late-stage development are sacituzumab tirumotecan or sac-TMT, an anti-TROP2 antibody-drug conjugate for multiple tumor types, MK-8591D/islatravir plus lenacapavir, a once-weekly oral treatment for HIV, and alimatravir, a monthly oral HIV PrEP candidate.

In the past couple of years, Merck has been actively pursuing acquisitions as it prepares for the 2028 patent expiration of Keytruda. Its 2025 acquisition of Verona Pharma added Ohtuvayre, a first-in-class maintenance therapy for chronic obstructive pulmonary disease with multibillion-dollar sales potential that has enjoyed a strong commercial launch. In 2026, Merck further strengthened its pipeline by acquiring Cidara Therapeutics, adding the late-stage influenza candidate MK-1406, and Terns Pharmaceuticals, bringing in MK-4208 (previously TERN-701), a promising chronic myeloid leukemia therapy with blockbuster potential.

Declining Sales of MRK’s Gardasil & Other Vaccines

Merck’s Gardasil/Gardasil 9 franchise is facing a significant slowdown, with sales declining 9% in the first half of 2026 due to weaker demand in China, Japan and the United States. China remains the biggest challenge, as economic weakness has dampened demand and led to elevated channel inventories at partner Zhifei, prompting Merck to temporarily halt shipments.

Although limited shipments resumed in the second quarter under a revised agreement, the growing availability of lower-cost domestic HPV vaccines could further put pressure on Gardasil, an imported premium-priced vaccine, with China revenues expected to remain immaterial in 2026. In the United States, demand is also being hurt by changes in vaccination recommendations, including greater use of single-dose schedules.

Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Vaxneuvance, also declined in the first half of 2026.

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, the company is excessively dependent on the drug. Keytruda’s core U.S. patent is expected to expire around 2028, with additional patents expiring slightly after that. Keytruda is expected to face significant biosimilar competition around 2028-2029. Once biosimilars enter, Keytruda’s sales are likely to decline sharply.

Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors 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.

MRK’s Generic Headwinds in 2026

MRK is seeing declining demand for its diabetes products (Januvia/Janumet) and the generic erosion of some drugs like Isentress/Isentress HD and Bridion in the European Union and Dificid in the United States. Bridion lost market exclusivity in the United States in July 2026 and sales are expected to decline further in future quarters. Januvia and Janumet lost market exclusivity in the United States in May 2026 and Janumet XR in July 2026. Sales of Januvia/Janumet are expected to decline steeply in future quarters due to the government price setting in 2026 and 2027, the patent expiry in 2026 and ongoing competitive pressure.

MRK Share Price, Valuation & Estimates

Merck’s shares have risen 24.4% so far this year compared with an increase of 11.3% for the industry. The stock has also outperformed the sector as well as the S&P 500 index, as seen in the chart below.

Merck Stock Outperforms Industry, Sector & S&P 500

Image Source: Zacks Investment Research

From a valuation standpoint, Merck is slightly expensive. Going by the price/earnings ratio, the company’s shares currently trade at 18.73 forward earnings, higher than 18.52 for the industry. The stock is trading above its 5-year mean of 12.86.

MRK Stock Valuation

Image Source: Zacks Investment Research

Estimates for MRK’s 2026 earnings have declined from $3.81 per share to $2.78 per share over the past 30 days, while those for 2027 have declined from $9.89 per share to $9.67 per share.

MRK Estimate Movement

Image Source: Zacks Investment Research

MRK Stock: Long-Term Hold, Short-Term Exit

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. 

It expects more than $70 billion of potential non-risk-adjusted commercial opportunity for the current pipeline by the mid-2030s. This estimate is more than double the peak consensus sales estimate for Keytruda of $35 billion in 2028.

Merck faces several near-term challenges, including persistent challenges for Gardasil, potential competition for Keytruda, and rising competitive and generic pressure on some of its drugs. However, itsnew products, strong progress in its pipeline, and business development and acquisitions have increased confidence that Merck may be able to maintain growth even after Keytruda loses exclusivity. Long-term investors can continue to retain this stock as its long-term prospects remain intact.

However, near-term profitability remains affected by costs related to Merck’s various acquisitions. Short-term investors may consider exiting this Zacks Rank #4 (Sell) stock for now as estimates are declining and investing in some better-performing drug stocks like Lilly and J&J.

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This article originally published on Zacks Investment Research (zacks.com).

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