Merck’s (MRK - Free Report) stock has declined around 10.3% in the past three months, losing almost $32 billion of its market value.
Merck boasts more than six blockbuster drugs in its portfolio, with blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Merck’s Animal health and vaccine products are core growth drivers. It has a strong cancer pipeline, including Keytruda. Merck is investing in M&A activity to strengthen its pipeline. However, Merck’s shares have declined in the past three months as in July, along with its second-quarter results, Merck cut its earnings guidance to account for acquisition costs.
The company also provided a grim outlook for sales of the key human papillomavirus (HPV) vaccine, Gardasil, due to lower sales in China. The stock is also trading below its 200-day moving averages since the end of July.
Let’s understand the company’s strengths and weaknesses to better analyze how to play the stock after the price decline.
Keytruda is Merck’s Biggest Strength
Keytruda, approved for several types of cancer, alone accounts for around 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years. 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 should look for ways to diversify its product lineup.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
Merck is working on different strategies to drive the long-term growth of Keytruda. These include innovative immuno-oncology combinations, including Keytruda with TIGIT, 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 the treatment of adjuvant melanoma and non-small cell lung cancer.
MRK's Pipeline Progress & Strategic M&A Deals
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. It also expanded its existing cancer deal with Japan’s Daiichi Sankyo.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, Capvaxive and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension in the United States in March and in the EU in August. Capvaxive (V116), Merck’s 21-valent pneumococcal conjugate vaccine, was approved in the United States in June 2024 while it is under review in the EU.
Merck has other promising candidates in its late-stage pipeline like MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody drug conjugates or ADCs.
MRK Stock Price, Valuation & Estimates
Merck’s stock has risen 7.6% this year underperforming an increase of 24.1% for the industry. The stock has also underperformed the sector and S&P 500 index, as seen in the chart below.
Merck Stock Underperforms Industry, Sector & S&P 500
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 12.7 forward earnings, lower than 19.76 for the industry as well as its 5-year mean of 13.66.
MRK Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 earnings has declined from $8.54 to $8.01 per share over the past 60 days. For 2025, earnings estimates have declined from $9.99 to $9.70 per share over the same timeframe.
MRK Estimate Movement
Image Source: Zacks Investment Research
Short-Term Investors May Sell MRK Stock
We believe the strong demand for Keytruda, higher sales of Gardasil in the United States and other international markets and a significant contribution from new products like Welireg and Vaxneuvance vaccine can keep driving top-line growth in the mid-to-long term.
However, Merck has its share of problems, like declining sales of Gardasil in China, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Considering the declining estimates and the recent price drop and market cap dilution, short- term investors may consider selling this Zacks Rank #4 (Sell) stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, we believe long-term investors may stay invested as the company 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 (MRK - Free Report) stock has declined around 10.3% in the past three months, losing almost $32 billion of its market value.
Merck boasts more than six blockbuster drugs in its portfolio, with blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Merck’s Animal health and vaccine products are core growth drivers. It has a strong cancer pipeline, including Keytruda. Merck is investing in M&A activity to strengthen its pipeline. However, Merck’s shares have declined in the past three months as in July, along with its second-quarter results, Merck cut its earnings guidance to account for acquisition costs.
The company also provided a grim outlook for sales of the key human papillomavirus (HPV) vaccine, Gardasil, due to lower sales in China. The stock is also trading below its 200-day moving averages since the end of July.
Let’s understand the company’s strengths and weaknesses to better analyze how to play the stock after the price decline.
Keytruda is Merck’s Biggest Strength
Keytruda, approved for several types of cancer, alone accounts for around 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years. 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 should look for ways to diversify its product lineup.
Keytruda’s sales are gaining from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.
Merck is working on different strategies to drive the long-term growth of Keytruda. These include innovative immuno-oncology combinations, including Keytruda with TIGIT, 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 the treatment of adjuvant melanoma and non-small cell lung cancer.
MRK's Pipeline Progress & Strategic M&A Deals
Merck made meaningful regulatory and clinical progress this year across areas like oncology (mainly Keytruda), vaccines and infectious diseases while also executing strategic business moves like the acquisitions of Eyebiotech Limited, Harpoon Therapeutics and Elanco Animal Health Incorporated’s (ELAN - Free Report) aqua business. It also expanded its existing cancer deal with Japan’s Daiichi Sankyo.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, Capvaxive and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension in the United States in March and in the EU in August. Capvaxive (V116), Merck’s 21-valent pneumococcal conjugate vaccine, was approved in the United States in June 2024 while it is under review in the EU.
Merck has other promising candidates in its late-stage pipeline like MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody drug conjugates or ADCs.
MRK Stock Price, Valuation & Estimates
Merck’s stock has risen 7.6% this year underperforming an increase of 24.1% for the industry. The stock has also underperformed the sector and S&P 500 index, as seen in the chart below.
Merck Stock Underperforms Industry, Sector & S&P 500
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 12.7 forward earnings, lower than 19.76 for the industry as well as its 5-year mean of 13.66.
MRK Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2024 earnings has declined from $8.54 to $8.01 per share over the past 60 days. For 2025, earnings estimates have declined from $9.99 to $9.70 per share over the same timeframe.
MRK Estimate Movement
Image Source: Zacks Investment Research
Short-Term Investors May Sell MRK Stock
We believe the strong demand for Keytruda, higher sales of Gardasil in the United States and other international markets and a significant contribution from new products like Welireg and Vaxneuvance vaccine can keep driving top-line growth in the mid-to-long term.
However, Merck has its share of problems, like declining sales of Gardasil in China, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about the firm’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.
Considering the declining estimates and the recent price drop and market cap dilution, short- term investors may consider selling this Zacks Rank #4 (Sell) stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, we believe long-term investors may stay invested as the company 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.
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