Can Merck's New Drugs Offer Growth Cushion Ahead of Keytruda LOE?

Merck MRK is increasingly relying on the growing portfolio of newer products, recent acquisitions and pipeline candidates to support long-term growth as it prepares for the eventual loss of exclusivity (“LOE”) of the blockbuster cancer drug Keytruda.

Keytruda remains Merck’s biggest revenue driver, accounting for more than 55% of its total pharmaceutical sales. The drug generated sales of $16.40 billion in the first half of 2026, up nearly 4.2% year over year. Keytruda Qlex, the subcutaneous formulation of Keytruda, contributed $590 million during the period.

Though Keytruda will lose patent exclusivity in 2028, its sales are expected to remain strong until then.

With Keytruda’s LOE expected in 2028, Merck has been working to diversify its revenue base and build a portfolio capable of offsetting the anticipated pressure on the top line. During the recently reported second-quarter 2026 earnings, management highlighted encouraging momentum across several newer products and expressed confidence in its post-Keytruda growth strategy.

Several of Merck’s newer products have already emerged as important contributors to top-line growth. These include Winrevair, a treatment for pulmonary arterial hypertension (“PAH”), Capvaxive, a 21-valent pneumococcal conjugate vaccine, and the cancer drug Welireg.

Capvaxive and Winrevair generated sales of $325 million and $1.1 billion, respectively, in the first half of 2026. We believe Capvaxive and Winrevair have the potential to generate significant revenues for Merck over the long term, given the strong launch they have witnessed so far.

Welireg sales surged approximately 57% year over year to $470 million in the first six months of 2026, driven by higher demand in the United States and continued launch uptake across international markets. Continued expansion of Welireg across the approved indications could further strengthen its contribution to Merck’s oncology franchise.

Meanwhile, Merck has gained approval for a few other products recently, including RSV antibody Enflonsia (clesrovimab), Idvynso, a once-daily, single-tablet, two-drug regimen of doravirine and islatravir, and Lipfendra (enlicitide), an oral PCSK9 inhibitor designed to help lower LDL cholesterol in adults with hypercholesterolemia.

The company has also accelerated acquisitions over the past year as it prepares for the 2028 patent expiry of Keytruda. The company strengthened its pipeline with the 2025 acquisition of Verona Pharma, adding COPD drug Ohtuvayre. The 2026 buyouts of Cidara Therapeutics and Terns Pharmaceuticals added late-stage influenza and hematology/cancer pipeline assets, respectively.

Merck expects more than $70 billion of potential non-risk-adjusted commercial opportunity for the current pipeline by the mid-2030s. This estimate is more than double the peak consensus sales estimate for Keytruda of $35 billion in 2028.

Management expects the Keytruda LOE period to look like a “shallow dip with a fast return back to growth” as the company assembles a multi-product growth bridge.

As we approach the second half of 2026, it remains to be seen how Merck’s newer products, recent launches and acquired assets will shape the next wave of growth and help mitigate the impact of Keytruda’s 2028 LOE.

MRK's Competition in the Target Market

Despite the strong potential of Merck’s new products, competitive pressure in the target market remains a major challenge.

Winrevair is likely to face stiff competition in the PAH market, which remains highly competitive. Significant players in the PAH market are United Therapeutics UTHR and J&J JNJ.

United Therapeutics markets four drugs to treat PAH in the United States — Remodulin, Orenitram, Tyvaso and Adcirca. UTHR’s Tyvaso recorded sales of $910.1 million, while Remodulin and Orenitram generated sales of $252.9 million and $261.3 million, respectively, in the first six months of 2026. Adcirca sales were $9.6 million during this period.

J&J’s key PAH drugs include Opsumit and Uptravi. JNJ recorded revenues of $2.28 billion from its PAH franchise in the first six months of 2026.

Meanwhile, Enflonsia faces competition from AstraZeneca/Sanofi’s RSV antibody Beyfortus, which is also approved for a similar indication.

Besides antibodies, several vaccines have been approved for preventing RSV in certain patients in the United States. These include Pfizer’s Abrysvo, GSK’s Arexvy and Moderna’s mRESVIA.

MRK's Price Performance, Valuation and Estimates

Year to date, shares of Merck have rallied 43.6% compared with the industry’s 21.3% rise. The stock has also outperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

Image Source: Zacks Investment Research

From a valuation standpoint, Merck appears to be trading at a premium compared with the industry. Going by the price/earnings ratio, MRK’s shares currently trade at 20.56 forward earnings, higher than 19.73 for the industry. The stock is also trading above its 5-year mean of 12.86.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2026 earnings per share has declined from $3.21 to $2.98 while the same for 2027 has decreased from $9.71 to $9.67 over the past 30 days.

Image Source: Zacks Investment Research

MRK's Zacks Rank

Merck currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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