MRK Down 21% YTD: Should You Buy, Hold or Sell the Stock?
May 26, 2025
Merck
’s MRK shares have lost 21.3% so far this year compared with a decrease of 4.5% for the industry. The stock has also underperformed the sector and the S&P 500 Index, as seen in the chart below. The stock is also trading below its 50-day and 200-day moving averages.
Though Merck faces several challenges at present, broader macroeconomic uncertainty has also contributed to the stock’s decline.
Stocks have been on a roller-coaster ride since President Trump unveiled sky-high tariffs in early April and China came up with retaliatory tariffs. Earlier this month, China and the United States struck a deal that eased trade tensions and resulted in a stock market recovery. However, last week, the U.S. president threatened a 50% tariff on all goods imported from the European Union. Though the President has now agreed to extend the deadline to negotiate tariffs with the European Union, it is quite clear that the tariff-related tensions are only on a temporary pause. The uncertainty around tariffs and trade production measures remains, which has muted economic growth.
Although pharmaceuticals have been exempted from tariffs in the first round, they could be Trump’s target in the next round, considering the President’s goal to shift pharmaceutical production back to the United States, primarily from European and Asian countries.
Trump and the Republican government also continue to stress on the control of drug prices with the latest attempt being his “most favored nations’ policy.”
Let’s understand MRK’s strengths and weaknesses to better analyze how to play Amgen’s stock in the uncertain macro environment.
Keytruda: Merck’s Biggest Strength
Merck boasts more than six blockbuster drugs in its portfolio, with the blockbuster PD-L1 inhibitor Keytruda being the key top-line driver. Keytruda, approved for several types of cancer, alone accounts for around 50% of the company’s pharmaceutical sales. The drug has played an instrumental role in driving Merck’s steady revenue growth in the past few years.
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
MRNA, 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). Merck and Moderna are conducting pivotal phase III studies on V940, in combination with Keytruda, for earlier-stage and adjuvant NSCLC and adjuvant melanoma.
Merck is also developing a subcutaneous formulation of Keytruda that can extend its patent life. It is under review in the United States, and an FDA decision is expected in September.
MRK’s Pipeline Progress & Strategic M&A Deals
Merck has been making meaningful regulatory and clinical progress across areas like oncology (mainly Keytruda), vaccines and infectious diseases while executing strategic business moves.
Merck’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. Merck’s new 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension (PAH) drug, Winrevair, have the potential to generate significant revenues over the long term. Both products have witnessed a strong launch.
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. A regulatory application seeking approval for clesrovimab, its respiratory syncytial virus vaccine, is under review in the United States, with an FDA decision expected in June.
To foray into the lucrative obesity market, Merck has in-licensed global rights to an investigational oral GLP-1 receptor agonist, HS-10535, from Chinese biotech Hansoh Pharma.
MRK’s Keytruda Faces Patent Expiration in 2028
Merck 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. In 2024,
Summit Therapeutics
SMMT reported positive data from a phase III study (conducted in China by partner Akeso) in patients with locally advanced or metastatic NSCLC, in which its lead pipeline candidate, ivonescimab, a dual PD-1 and VEGF inhibitor, outperformed Keytruda. Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings.
Declining Sales of MRK’s Gardasil in China
Sales of Gardasil, which is Merck’s second-largest product, are declining due to a 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. At the midpoint of the total revenue guidance for 2025, Merck assumes no further Gardasil shipments to China this year.
However, Gardasil sales remain strong in almost every major region outside China, including the United States.
Merck is also seeing declining demand for its diabetes products and the generic erosion of some drugs.
MRK Valuation & Estimates
From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.39 forward earnings, lower than 14.51 for the industry as well as its 5-year mean of 12.93.
MRK Stock Valuation
Image Source: Zacks Investment Research
Merck’s EPS estimates for both 2025 and 2026 have declined over the past 60 days.
MRK Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in MRK Stock
Merck 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 has its share of headwinds in the form of persistent challenges for Gardasil in China, potential competition for Keytruda and rising competitive and generic pressure on some drugs. All these factors have raised doubts about Merck’s ability to navigate the Keytruda loss of exclusivity period successfully. Consistently declining estimates reflect analysts’ pessimistic outlook for the stock.
However, Merck’s new products, Capvaxive and Winrevair, are witnessing strong launches and have the potential to generate significant revenues over the long term. The company also has a promising pipeline.
Interestingly, on its first-quarter conference call in April, Merck said it believes the potential impact of additional tariffs on pharmaceutical imports is manageable. Merck believes that its global supply chain and inventory levels can help manage the impact of tariffs in the short term.
We believe investors with a long-term horizon should stay invested in this Zacks Rank #3 (Hold) stock due to its strong fundamentals, a promising pipeline and potential strong sales from its new products. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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