Does This Move Make Merck Stock a Buy?

Core Viewpoint - Merck is facing pressure on its stock due to reliance on Keytruda, which will face a patent cliff by the end of the decade, prompting the company to seek ways to mitigate competition risks [1][2]. Group 1: Recent Acquisitions and Product Pipeline - Merck announced the acquisition of Verona Pharma for $10 billion to expand its portfolio with Ohtuvayre, a promising COPD treatment [4]. - Ohtuvayre has potential peak sales estimated at around $4 billion, but it may not be sufficient to replace Keytruda's $29.5 billion sales from last year [5][7]. - Merck's acquisition of Acceleron Pharma for $11.5 billion led to the launch of Winrevair, projected to have peak sales of around $3 billion [6]. - In 2023, Merck invested $10.8 billion in Prometheus Biosciences for a candidate targeting ulcerative colitis, MK-7240, which could enhance its portfolio if it gains FDA approval [8]. Group 2: Internal Development and Future Prospects - Merck is developing a subcutaneous version of Keytruda, which has shown noninferiority in a phase 3 trial, potentially attracting significant business [9][10]. - The company has over 80 programs in its phase 2 and phase 3 pipeline, indicating a strong potential for new product launches [12]. - A 25% success rate on new clinical compounds could lead to several novel launches in the next five years, demonstrating Merck's capability to move beyond Keytruda [13]. Group 3: Financial Considerations - Merck's shares are currently trading at 9.3 times forward earnings estimates, significantly lower than the healthcare sector average of 16.2 [14]. - The company offers a solid dividend yield of around 4%, with an 88.8% increase in payouts over the past decade [14]. - Despite lagging the market over the past year, Merck's long-term prospects remain strong for investors willing to hold the stock [15].