MRK Stock Up Nearly 14% So Far This Week: What's Driving It?

Core Insights - Merck's shares have increased nearly 14% this week due to rising investor optimism in the pharmaceutical sector following Pfizer's significant deal with the Trump administration aimed at reducing drug costs and enhancing U.S. innovation and manufacturing [1][10] Pharmaceutical Sector Overview - Pfizer's deal intends to lower drug prices to match those in other developed countries, supporting the Most Favored Nation pricing proposal by President Trump. Pfizer will also provide substantial discounts through a new purchasing platform and invest an additional $70 billion in U.S. operations [2] - The deal alleviates major concerns in the drug and biotech industry regarding tariffs and pricing, positively impacting stocks of other large drugmakers like Merck, AstraZeneca, Eli Lilly, and AbbVie, which have also seen significant gains [3][6] Merck's Recent Developments - Merck achieved a regulatory success with the FDA's approval of a subcutaneous formulation of its PD-L1 inhibitor, Keytruda, which will be marketed as Keytruda Qlex, extending its patent protection beyond the original intravenous version's exclusivity expiration in 2028 [4][5] - The approval of Keytruda Qlex allows Merck to maintain a substantial revenue stream from Keytruda even after the original IV patents expire [5] Investment and Manufacturing Commitments - In response to tariff threats, major drugmakers have pledged billions for U.S. investments. Lilly plans to invest $27 billion in new manufacturing sites by 2025, while AstraZeneca has committed $50 billion for U.S. manufacturing and R&D by 2030 [7] - Other companies like Johnson & Johnson, GlaxoSmithKline, Novartis, and Roche have also made significant commitments to U.S. manufacturing and R&D investments [8] Merck's Stock Performance and Valuation - Year-to-date, Merck's shares have declined by 10%, underperforming the industry, which has risen by 8.3% [11] - Merck's current price/earnings ratio stands at 9.49, which is lower than the industry average of 15.93 and its 5-year mean of 12.67, indicating an attractive valuation relative to the industry [12] - The Zacks Consensus Estimate for Merck's 2025 earnings per share remains stable at $8.93, while the estimate for 2026 has slightly decreased from $9.61 to $9.59 [13]