Will Keytruda Continue to Aid MRK's Top Line Ahead of Q2 Earnings?

Core Insights - Merck's primary strength is in oncology, driven by its PD-L1 inhibitor, Keytruda, which constitutes nearly 50% of the company's pharmaceutical sales and is a significant contributor to top-line growth [1][9] Sales Performance - Investors are keenly awaiting the second-quarter results, particularly the sales performance of Keytruda, which is estimated to reach $7.90 billion according to the Zacks Consensus Estimate, while the company's own estimate is $7.87 billion [2] - In the last reported quarter, U.S. sales of Keytruda were negatively impacted by approximately $250 million due to the timing of wholesaler purchases, but this negative impact is expected to have reversed in the upcoming report [3] Growth Drivers - Keytruda's sales are benefiting from rapid uptake in earlier-stage indications, especially early-stage non-small cell lung cancer, along with strong momentum in metastatic indications [4] - The company anticipates continued growth from Keytruda, particularly in early lung cancer, with a projected compound annual growth rate (CAGR) of 5.4% over the next three years [4] Competitive Landscape - Keytruda faces competition from other PD-L1 inhibitors such as Bristol Myers' Opdivo, Roche's Tecentriq, and AstraZeneca's Imfinzi, which are also approved for multiple cancer types [6] - Opdivo generated $2.26 billion in sales during the first quarter of 2025, reflecting a 9% year-over-year increase, while Imfinzi and Tecentriq reported sales of $1.26 billion (up 16%) and CHF 870 million, respectively [6][7] Financial Performance - Year-to-date, Merck's shares have decreased by 17.9%, contrasting with a 2.7% decline in the industry [8] - From a valuation perspective, Merck's shares trade at a forward price/earnings ratio of 8.79, which is lower than the industry average of 14.60 and its 5-year mean of 12.81 [10] Earnings Estimates - The Zacks Consensus Estimate for Merck's 2025 earnings has decreased from $8.93 per share to $8.85, and for 2026, it has declined from $9.74 to $9.63 over the past 60 days [11]