Core Insights - A significant portion of Merck's revenues is derived from its oncology franchise, primarily from Keytruda, which accounts for over 50% of the company's pharmaceutical revenues [2] - Keytruda sales reached $23.3 billion in the first nine months of 2025, reflecting an 8% year-over-year increase, although third-quarter sales were weaker than expected due to unfavorable channel movements [2][3][9] Sales Performance - Keytruda's sales in the third quarter of 2025 increased by 8% year-over-year, but management indicated that the softness was due to channel movements rather than a decline in underlying demand [3][9] - The Zacks Consensus Estimate for Keytruda's fourth-quarter sales is $8.27 billion, while the internal estimate is $8.21 billion, indicating expected growth driven by earlier-stage indications and strong momentum in metastatic indications [4] Future Growth Prospects - Merck anticipates continued growth for Keytruda in 2026, with expansion into new indications and markets, particularly as FDA decisions for ovarian cancer and other indications approach [5] - The recent FDA approval of the subcutaneous formulation of Keytruda, known as Keytruda Qlex, is expected to enhance patient convenience and further boost sales [5] Competitive Landscape - Keytruda faces competition from other PD-L1 inhibitors such as Bristol Myers' Opdivo, Roche's Tecentriq, and AstraZeneca's Imfinzi, with Opdivo generating $7.35 billion in sales during the first nine months of 2025, also up 8% year-over-year [6][7] - Tecentriq recorded CHF 2.61 billion in sales, while Imfinzi achieved $4.32 billion in sales, reflecting a 25% increase driven by demand in lung and liver cancer indications [7] Valuation and Market Performance - Over the past six months, Merck's shares have increased by 32.8%, outperforming the industry average of 23.2% [8] - Merck's current price/earnings ratio stands at 12.83, which is lower than the industry average of 17.81 but higher than its five-year mean of 12.48, indicating an attractive valuation relative to the industry [10] Earnings Estimates - The Zacks Consensus Estimate for Merck's earnings per share for 2025 remains stable at $8.97, while the estimate for 2026 has decreased from $9.33 to $7.94 over the past 60 days [11]