Core Viewpoint - The "patent cliff" is raising concerns among investors, particularly for Merck, which has seen its stock price drop over a third in the past year. The company urgently needs to find blockbuster drugs to fill the gap left by its leading cancer drug, Keytruda, which is facing patent expiration in 2028 [1][3]. Group 1: Merck's Acquisition Strategy - Merck announced the acquisition of Verona Pharma for approximately $10 billion, marking its first major acquisition of the year and the largest in nearly two years [3]. - The inhaled drug Ohtuvayre, developed by Verona Pharma for chronic obstructive pulmonary disease, has received FDA approval and is projected to generate $42.3 million in sales in 2024, with peak revenue potential of $3-4 billion by the mid-2030s [3]. - Merck's CEO Rob Davis indicated that the company is considering acquisitions in the range of $1 billion to $15 billion [3]. Group 2: Market Trends and Challenges - The pharmaceutical market has seen fewer large-scale acquisitions in the past year and a half compared to previous years, with 2023 being a peak year for biopharmaceutical transactions [4]. - Major pharmaceutical companies are increasingly focusing on innovative drugs from China, often acquiring smaller biotech firms or licensing deals, with transaction values typically ranging from $1 billion to $2 billion [4]. - Year-to-date, licensing deals between Chinese companies and U.S. or European partners have reached a total value of $35 billion [4]. Group 3: Patent Expiration Impact - Research firm Evaluate Pharma estimates that over $180 billion in annual sales from drugs will face patent expiration between 2027 and 2028, representing about 12% of the global pharmaceutical market [3]. - Major companies like Bristol-Myers Squibb and Pfizer are also grappling with the challenges posed by the expiration of their blockbuster drugs [3].

Group 1 - The research achievements of Chinese innovative pharmaceutical companies are increasingly attracting the attention of multinational pharmaceutical giants, with approximately 31% of innovative drug candidates introduced by large multinational companies in 2024 coming from China, compared to zero in 2019 [1][3] - At the American Society of Clinical Oncology (ASCO) annual meeting in Chicago, over 70 studies from Chinese innovative pharmaceutical companies were selected for oral presentations, with a focus on bispecific antibodies and ADC drug research [1] - Kangfang Biopharma and its partner Summit Therapeutics released the first global Phase 3 clinical trial results for the PD-1/VEGF bispecific antibody ivonescimab, showing a 48% reduction in the risk of disease progression or death for previously treated patients with EGFR-mutant non-squamous non-small cell lung cancer (NSCLC) [1] Group 2 - IBI363, a globally innovative PD-1/IL-2α-bias bispecific fusion protein developed by Innovent Biologics, showed clinical data for treating immune-treated advanced melanoma at ASCO, along with a comparison study against Merck's Keytruda [2] - Kelun-Biotech presented six clinical research results at ASCO, including the ADC drug sac-TMT for previously treated advanced EGFR-mutant non-small cell lung cancer patients [2] - In the previous month, Zai Lab announced that the FDA granted fast track designation for its potential ADC drug ZL-1310 for the treatment of extensive-stage small cell lung cancer (ES-SCLC), with updates expected at ASCO [2] Group 3 - I-Mab presented preliminary results of its ADC drug DB-1310 for treating advanced solid tumors at ASCO, focusing on safety, tolerability, pharmacokinetics, and preliminary anti-tumor activity [3]

Group 1 - Anna Van Acker, the President of Merck China, will transition to a strategic management role in the Human Health Division after her four-year tenure in China [1] - Under her leadership, Merck China launched 36 new products and indications, benefiting over 20 million people in 2024 [1] - Kyle Tattle, the current President of Merck Japan, will succeed Anna Van Acker as the President of Merck China, bringing extensive experience in oncology and market growth [1] Group 2 - Merck reported total revenue of $64.168 billion for 2024, a 7% year-on-year increase, with pharmaceutical revenue at $57.4 billion, also up 7% [2] - Revenue from the Chinese market declined by 20% to $5.394 billion, accounting for 9.4% of Merck's global pharmaceutical business [2] - Keytruda (pembrolizumab) remains the primary revenue source, generating $29.482 billion with an 18% growth, representing approximately 45.95% of total revenue [2] Group 3 - Merck's HPV vaccine, Gardasil/Gardasil 9, achieved sales of $8.583 billion in 2024, a 3% decline primarily due to reduced demand in China, offset by growth in other international markets [2] - The nine-valent HPV vaccine received approval for new indications for males aged 16-26, marking a significant advancement in HPV prevention in China [3] - Merck is committed to talent development and organizational capability building to support its strategic implementation in China [3]