Merck & Co., Inc. (MRK): A Bull Case Theory

Core Thesis - Merck & Co., Inc. is at a critical juncture due to the impending patent expiration of Keytruda, which generated nearly $29.5 billion in 2024, accounting for about half of the company's total revenue [2][3] Revenue Challenges - Keytruda's primary patents are set to expire in 2028, leading to a potential significant decline in earnings [2] - Other key products like Lenvima (2025), Januvia (2026), Lynparza (2027), and Gardasil (2028) also face loss of exclusivity, compounding revenue pressures [3] - In Q3 2025, Keytruda's sales increased by 10% year-over-year to $8.1 billion, while Gardasil's revenue fell by 24% due to decreased demand in China [3] Strategic Response - To address the 2028 patent cliff, Merck is implementing a three-pronged strategy: launching Keytruda Qlex to retain patients, developing new growth pillars through drugs like Winrevair and Ohtuvayre, and pursuing Welireg for renal cell carcinoma [4] - The company is diversifying its portfolio with over 80 late-stage programs and next-generation antibody-drug conjugates [5] Financial Outlook - Merck is targeting $3 billion in cost savings by 2027 and plans to cut 6,000 jobs to streamline operations [5] - The stock is trading at approximately 11 times earnings, compared to the sector's average of 18 times, indicating that the market may be pricing in worst-case scenarios regarding Keytruda [5] - The company offers a 3.8% dividend yield, which may attract investors during the transition period [5] Historical Context - Previous bullish analyses highlighted Merck's strong revenue growth and disciplined execution, with the stock appreciating approximately 23.34% since April 2025 [6]