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].

Core Viewpoint - Pfizer is facing significant challenges due to upcoming patent expirations, which could lead to a substantial decline in revenue, but the company has a strong pipeline of new products that may help maintain its dividend growth. Group 1: Current Financial Situation - Pfizer's stock has declined approximately 60% from its peak in 2021, yet the company has consistently raised its dividend since 2009, currently offering a yield of 7.1% [2][4] - The yield from Pfizer is over four times higher than the average dividend payer in the S&P 500, but maintaining this payout is uncertain [4] Group 2: Patent Expiration Impact - Pfizer's CEO has indicated that the loss of exclusivity (LOE) could reduce annual revenue by $17 billion to $18 billion from 2026 to 2028 [7] - Eliquis, a key product, is expected to face generic competition starting next year in the EU and in 2028 in the U.S., contributing to revenue loss [8] - Sales of other products, such as Ibrance, are already declining due to competition, with Ibrance sales down 7% year over year [9] Group 3: Growth Opportunities - Pfizer's total revenue reached $62.5 billion over the trailing 12 months, and the company aims to fill the revenue gap with new products expected to generate $20 billion annually by 2030 [11][12] - The acquisition of Seagen for around $43 billion is expected to enhance Pfizer's manufacturing capabilities and margin expansion [13] - If gross margins recover and new product launches succeed, Pfizer could continue to meet and raise its dividend commitments [15] Group 4: Future Outlook - Despite the challenges, Pfizer's extensive pipeline of upcoming and recently launched treatments positions the company to potentially overcome patent cliffs and maintain its dividend-raising streak [17] - The unpredictability of drug launches remains a concern, but the likelihood of continued dividend increases appears stronger [18]