Merck & Co.: A Discounted Pharmaceutical Giant

Merck & Co. is a pharmaceutical giant that offers a discounted investment opportunity. As a leading player in the industry, it has a diversified portfolio of products and a strong R&D pipeline. Despite recent challenges, the company is well-positioned for long-term growth and has a competitive advantage due to its established presence and innovative products.

Merck & Co. (MRK), a leading pharmaceutical giant, presents an intriguing investment opportunity despite recent challenges in its Gardasil HPV vaccine business. The company's diversified portfolio, strong R&D pipeline, and established presence in the industry make it well-positioned for long-term growth.

In Q1 2025, Merck reported a 41% slump in Gardasil sales, primarily due to China's inventory overhang and weak demand [1]. However, this setback is seen as a temporary pause rather than a failure. The company's CEO, Robert Davis, highlighted the long-term tailwinds, such as the 120 million unvaccinated women in China and the recent male approval (ages 16–26) [1]. Sales outside China grew 16% in Q1, led by Japan and the U.S., where pricing power remains strong [1].

Despite the Gardasil blues, Merck's dividend remains intact. The company hiked its quarterly dividend to $0.81 per share in Q2, showing confidence in its cash flow [1]. The 3.97% yield provides a cushion for investors as shares trade near 52-week lows [1].

Merck's pipeline is firing on all cylinders. Two near-term catalysts, Winrevair and Enflonsia, could supercharge growth by 2026 [1]. Winrevair, a breakthrough in PAH, has received FDA priority review, with approval expected by October 25, 2025 [3]. Enflonsia, an RSV prevention vaccine, is FDA-approved and expected to be endorsed by the CDC's ACIP by late Q3, just in time for the 2025–2026 RSV season [1].

TD Cowen maintains a Hold rating on Merck with a $100 price target, acknowledging the potential of Merck's vaccine portfolio and the ACIP vote for Enflonsia [2]. Despite the potential of AI stocks, Merck remains a strong investment due to its diversified portfolio and established presence in the industry.

Merck's stock is priced at a P/E of 11.5, making it dirt-cheap given its dividend and pipeline [1]. The roadmap for Merck includes Enflonsia's ACIP nod in Q3 2025, Winrevair's FDA approval in Q4 2025, and a potential Gardasil rebound in 2026 [1]. The $64.1–65.6 billion 2025 revenue guidance is a floor, with Winrevair and Enflonsia potentially pushing 2026 sales to $70 billion+ [1].

While risks, such as China's economy staying weak and competition eroding margins, exist, the reward outweighs the risk. Investors who buy now at $58/share, targeting $65–70 by end-2026, will be positioned to capitalize on Merck's comeback story [1].

References:
[1] https://www.ainvest.com/news/merck-gardasil-stumble-creates-buying-opportunity-dividend-pipeline-mrk-winner-2507/
[2] https://finance.yahoo.com/news/td-cowen-maintains-hold-rating-072240793.html
[3] https://finance.yahoo.com/news/fda-grants-priority-review-merck-073540198.html