Key Takeaways:
- Merck delivered strong Q1 results, with $15.5 billion in revenue, driven by growth in oncology and new product launches.
- The company has nearly tripled its Phase III pipeline since 2021, positioning for post-KEYTRUDA patent expiry in 2028.
- WINREVAIR and CAPVAXIVE continue strong launch trajectories, while subcutaneous KEYTRUDA awaits approval.
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Valued at a market capitalization of $200 billion, Merck (MRK) operates as a leading global pharmaceutical company focused on oncology, vaccines, and emerging therapeutic areas, including cardiovascular and immunology treatments.
Merck has undergone a significant strategic transformation since 2021 under the leadership of CEO Robert Davis, evolving from a KEYTRUDA-dependent organization into a diversified pharmaceutical powerhouse with multiple growth drivers across various therapeutic areas.
The healthcare stock has underperformed the broader markets in the last 12 months. However, the ongoing pullback has meant MRK stock trades at a compelling valuation right now.
Let’s explore why you might consider adding this large-cap healthcare stock to your equity portfolio today.
1. Merck Stock Benefits from Strong Q1 Execution
Merck delivered solid first-quarter 2025 results, demonstrating its successful diversification strategy. Revenue reached $15.5 billion, reflecting continued strength in oncology and meaningful contributions from new product launches, including WINREVAIR and CAPVAXIVE.
KEYTRUDA, the company’s flagship oncology treatment, generated $7.2 billion in quarterly sales, representing 6% growth, and maintained its position as the leading PD-1 therapy across 41 approved indications spanning 18 tumor types.
The growth was driven by increased adoption in earlier-stage cancers and robust demand in metastatic settings.
Merck’s newer launches are gaining significant traction. WINREVAIR, a groundbreaking treatment for pulmonary arterial hypertension, achieved $280 million in global sales during its early launch phase.
The drug represents the first activin signaling inhibitor approved for PAH and has demonstrated unprecedented clinical results, including the first trial in the indication being stopped early due to overwhelming efficacy.
CAPVAXIVE, Merck’s pneumococcal vaccine, generated $107 million in sales, primarily driven by retail pharmacy demand as the company continues expanding market access.
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2. Merck Operates a Robust Innovation Platform
Merck’s strategic transformation centers on its expanded late-stage pipeline, which has nearly tripled since 2021.
It now has over 20 unique Phase III assets, almost all of which have blockbuster potential, representing a potential $50 billion in non-risk-adjusted revenue opportunity by the mid-2030s.
The oncology portfolio alone accounts for more than $25 billion of this potential, anchored by a comprehensive antibody-drug conjugate program featuring nine ADCs in clinical development.
The lead ADC, sac-TMT, is being evaluated in 14 Phase III trials across multiple tumor types, with potential first-in-class positioning in nine indications.
Beyond oncology, Merck is building positions in cardiovascular medicine with enlicitide, an oral PCSK9 inhibitor designed to democratize cholesterol management, and in immunology through tulisokibart, a TL1A inhibitor targeting inflammatory bowel disease and other autoimmune conditions.
Merck’s manufacturing strategy has also evolved significantly, with $12 billion invested in U.S. facilities since 2018 and an additional $9 billion committed through 2028, positioning the company to navigate potential tariff implications while strengthening its domestic production capabilities.
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3. MRK Stock Should Benefit From a Competitive Advantage
Merck has established a unique competitive position through its foundational expertise in immuno-oncology and systematic approach to combination therapy development.
Its extensive experience with KEYTRUDA across multiple indications provides a roadmap for developing next-generation treatments.
The upcoming subcutaneous formulation of KEYTRUDA represents a notable advancement, offering 2-minute administration compared to traditional IV infusion.
This innovation has the potential to enhance patient experience and improve healthcare system efficiency, with an expected peak adoption rate of 30-40% among eligible patients.
Merck’s business development strategy has proven highly effective, with successful acquisitions including Acceleron (WINREVAIR), Prometheus (immunology), and EyeBio (ophthalmology), which have delivered first-in-class or best-in-class assets.
The company continues evaluating opportunities in the $1-15 billion range, focusing on innovative science that addresses unmet medical needs.
Valuation Setup for MRK Stock
Analysts tracking Merck stock expect its sales to rise from $64.2 billion in 2024 to $72.2 billion in 2027, an annual increase of 4%. Comparatively, adjusted earnings are forecast to expand from $7.65 per share to $10.7 per share in this period.
MRK stock currently trades at a forward price-to-earnings multiple of 9x, which is below its 10-year average multiple of 15x.
If the large-cap stock is priced at a multiple of 10x and reaches its projected $10.7 in normalized EPS, it will trade around $107/share in early 2027, indicating an upside potential of almost 35% from current levels.
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Average Analyst Price Target for MRK Stock
Wall Street remains bullish on MRK stock, with a consensus price target of $102/share. Analysts expect the stock to rise around 28% from current levels over the next 18 months.
Notably, Merck stock currently has a high target price of $138 and a low target price of $82.
Of the 25 analysts tracking MRK stock, 15 recommend “Buys”, and 10 recommend “Hold.” There are no “Sell” recommendations for the stock in June 2025.
TIKR Takeaway for MRK Stock
Merck represents a compelling investment opportunity for investors seeking exposure to pharmaceutical innovation with reduced single-product dependency risk.
The company’s systematic approach to pipeline development and proven track record of successful product launches position it well for sustained growth beyond the KEYTRUDA patent expiry.
The diversified revenue streams, strong financial position, and comprehensive clinical development program across multiple therapeutic areas create a foundation for long-term value creation in the evolving pharmaceutical landscape.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
