Merck Rises 13% in a Week: Should You Buy, Sell or Hold the Stock?

Merck’s MRK shares have risen almost 13% in the past week as Pfizer’s PFE landmark deal with the Trump administration to lower drug costs eased investor concerns over pricing and tariffs in the pharma sector, pushing up stock prices of most large drugmakers.As part of the deal, Pfizer will slash prices of some of its drugs to align their cost with those in comparable developed countries, supporting President Trump’s Most Favored Nation (MFN) pricing proposal. The company will also offer significant discounts on key treatments through the new direct purchasing platform, TrumpRx.gov.In exchange, Pfizer will receive a three-year exemption from tariffs on pharmaceutical imports if it increases U.S. manufacturing investment. To that end, Pfizer has committed an additional $70 billion over the coming years to strengthen its U.S. research and production footprint.Along with Pfizer, stocks of most large drugmakers like Merck, AstraZeneca, AbbVie and Eli Lilly, among others, gained, as these drugmakers could be the next in line to sign similar deals with the Trump administration.  Merck has already committed to investing billions to boost domestic investments.The recovery in Merck’s stock, which has struggled this year, raises the big question for investors: whether to buy, hold or sell the stock to book short-term gains. We believe it is important to understand the company’s strengths and weaknesses to better analyze how to play the stock. Let’s break down.Keytruda: Merck’s Biggest StrengthMerck boasts more than six blockbuster drugs in its portfolio, with its blockbuster drug, Keytruda, being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for more than 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth over the past few years. Keytruda’s sales rose around 7% in the first half of 2025.Keytruda’s sales are gaining from rapid uptake across earlier-stage indications, mainly early-stage non-small cell lung cancer. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects continued growth from Keytruda, particularly in early lung cancer.Merck is working on different strategies to drive Keytruda's long-term growth. These include innovative immuno-oncology combinations, including Keytruda with LAG3 and CTLA-4 inhibitors. In partnership with Moderna, Merck is developing a personalized mRNA therapeutic cancer vaccine (V940/mRNA-4157) in combination with Keytruda for patients with certain types of melanoma and non-small cell lung cancer (NSCLC).Last month, the FDA approved a subcutaneous formulation of Keytruda, known as Keytruda Qlex, which can enhance patient convenience. With Keytruda’s intravenous or IV formulation set to lose exclusivity in 2028, the newly approved SC version comes with its own set of patents that extend protection well beyond that date.MRK’s Pipeline Progress & Strategic M&A DealsMerck has been making meaningful regulatory and clinical progress across areas like oncology (mainly Keytruda), vaccines and infectious diseases while executing strategic business moves.MRK’s phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. This has positioned Merck to launch around 20 new vaccines and drugs over the next few years, with many having blockbuster potential. These include Merck’s new 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension drug, Winrevair, which have the potential to generate significant revenues over the long term. Both products have witnessed a strong launch.Merck’s RSV antibody, Enflonsia (clesrovimab), was approved in the United States in June 2025, while it is under review in the EU. A fixed-dose combination of doravirine and islatravir for the treatment of HIV is under review in the United States, with an FDA decision expected in April next year.Merck has other promising candidates in its late-stage pipeline, such as enlicitide decanoate/MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody-drug conjugates.In early July, Merck announced adefinitive agreement to acquire Verona Pharma VRNA for approximately $10 billion. The deal will add Verona’s Ohtuvayre, approved for the maintenance treatment of chronic obstructive pulmonary disease. This addition will strengthen Merck’s cardio-pulmonary pipeline and portfolio as the drug’s differentiated profile provides a significant edge over its competitors.Declining Sales of MRK’s Gardasil & Other VaccinesSales of Gardasil vaccine, which is Merck’s second-largest product, declined 48% in the first half of 2025. Sales of Gardasil are declining due to weak performance in China, which resulted from sluggish demand trends amid an economic slowdown. Lower demand in China resulted in above-normal channel inventory levels at Merck’s commercialization partner in China, Zhifei.Accordingly, Merck decided to temporarily halt shipments of Gardasil in China to allow Zhifei to burn down existing inventory. Merck does not expect to resume shipments in China through at least the end of 2025, as a result of which Gardasil sales are expected to decline significantly in 2025 from 2024 levels. The company is also seeing lower demand for the vaccine in Japan. Sales are expected to remain weak in Japan in the second half of 2025.Sales of some other Merck vaccines, like Proquad, M-M-R II, Varivax, Rotateq and Pneumovax 23, also declined in the second quarter.MRK is also seeing declining demand for its diabetes products and the generic erosion of some drugs.MRK’s Keytruda Faces Patent Expiration in 2028Merck is heavily reliant on Keytruda. Though Keytruda may be Merck’s biggest strength and a solid reason to own the stock, it can also be argued that the company is excessively dependent on the drug, and it should look for ways to diversify its product lineup.There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ SMMT ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda.In a phase III study (conducted in China by Summit’s partner Akeso) in patients with locally advanced or metastatic NSCLC, ivonescimab outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings. Merck is also developing its own PD-1/VEGF inhibitor. Pfizer also recently acquired exclusive global ex-China rights to develop, manufacture and commercialize SSGJ-707, a dual PD-1 and VEGF inhibitor, from China’s 3SBioMRK Share Price, Valuation & EstimatesMerck’s shares have lost almost 10.7% so far this year against an increase of 8.5% for the industry. The stock has also underperformed the sector and the S&P 500, as seen in the chart below.Merck Stock Underperforms Industry, Sector & S&P 500Image Source: Zacks Investment ResearchFrom a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 9.41 forward earnings, significantly lower than 15.96 for the industry as well as its 5-year mean of 12.66.MRK Stock ValuationImage Source: Zacks Investment ResearchEstimates for MRK’s 2025 earnings have been stable at $8.93 per share over the past 60 days, while those for 2026 have declined from $9.61 per share to $9.59 per share.MRK Estimate MovementImage Source: Zacks Investment ResearchWait-and-See Approach for MRK StockMerck has one of the world’s best-selling drugs in its portfolio, generating billions of dollars in revenues. Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then. Merck’s new products, Capvaxive and Winrevair, are witnessing strong launches and have the potential to generate significant revenues over the long term. The approval of Keytruda Qlex can help lower the negative impact of Keytruda's loss of exclusivity (LOE) in 2028. The VRNA deal, once closed, should also help fill the potential revenue gap created by Keytruda’s upcoming LOE. Ohtuvayre's commercial launch is off to a solid start. Merck’s Animal Health business is a key contributor to its top-line growth, as the company is recording above-market growth.After a weak sales performance in the first half, Merck expects to return to growth in the second half. It expects growth to be driven by oncology drugs, Animal Health, as well as new products, which will be partially offset by lower sales of Gardasil in China and Japan.However, Merck’s problems are numerous at present, including persistent challenges for Gardasil in China, potential competition for Keytruda and rising competitive and generic pressure on some of its drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda LOE period successfully. A wait-and-see approach seems more prudent for investors now despite MRK’s discounted valuation. It makes sense to stay on the sidelines and wait for clearer signs of sustainable growth and profitability.Marck carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Pfizer Inc. (PFE): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis Report Summit Therapeutics PLC (SMMT): Free Stock Analysis Report Verona Pharma PLC American Depositary Share (VRNA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks