Merck KGAA's Strategic Moves to Prepare for the Post-Keytruda Era

Merck KGAA is diversifying its portfolio to prepare for the post-Keytruda era, which represents nearly 50% of its sales. The company is developing a new formulation of Keytruda and pursuing targeted acquisitions, such as SpringWorks Therapeutics and Prometheus Biosciences, to expand its presence in oncology and other therapeutic areas. Merck's strategy aims to mitigate the risks associated with its dependence on Keytruda and position the company for long-term growth.

Merck KGaA, a global leader in pharmaceuticals and biotechnology, is actively diversifying its portfolio to prepare for the post-Keytruda era. Keytruda, a highly successful immuno-oncology drug, accounts for nearly 50% of Merck's sales. To mitigate the risks associated with its dependence on this single product, Merck is developing a new formulation of Keytruda and pursuing targeted acquisitions to expand its presence in oncology and other therapeutic areas.

One of Merck's key acquisitions is SpringWorks Therapeutics, which was acquired for $3.9 billion in July 2025. This acquisition marks a strategic pivot toward rare oncology and high-margin therapies. SpringWorks brings two FDA-approved drugs to Merck's portfolio: Ogsiveo (desmoid tumors) and Gomekli (NF1-related tumors). These drugs address critical unmet medical needs and are projected to have combined peak sales exceeding $1 billion by 2030 [1].

The acquisition of SpringWorks not only enhances Merck's pipeline but also expands its reach into genetically targeted tumors. The company's $15 billion cash reserves and 43.7% leverage ratio provide ample firepower for follow-on transactions in rare disease and oncology. This strategic move signals that M&A in biopharma is not just about cost-cutting but innovation-led growth [1].

Additionally, Merck is exploring the acquisition of Prometheus Biosciences, a company focused on liquid biopsy technology. This acquisition would further diversify Merck's portfolio and strengthen its position in the oncology market. By investing in targeted acquisitions and developing new formulations, Merck aims to position itself for long-term growth and reduce its dependence on Keytruda.

Merck's strategic diversification efforts are part of a broader trend in the health care sector. The sector is at an inflection point, with strategic acquisitions and insurer rebounds positioning it as a compelling investment opportunity. UnitedHealth Group, for instance, has experienced a 40% stock decline since early 2025, creating a compelling entry point for investors. The company's valuation is now at a 13.7x forward P/E, a 37% discount to its 10-year average, with a 1.55% dividend yield [1].

Investors should closely monitor Merck's strategic moves and the broader health care sector for opportunities. The sector's dual engines—innovation-driven biopharma growth and value-priced insurers—make it a refuge in volatile markets. Merck's SpringWorks deal and UnitedHealth's undervalued position reflect two distinct but complementary opportunities: investing in companies with rare disease pipelines and strong M&A track records, and looking to insurers with Medicare Advantage dominance and dividend resilience [1].

In conclusion, Merck KGaA's strategic diversification is a prudent move to prepare for the post-Keytruda era. By developing new formulations and pursuing targeted acquisitions, Merck is positioning itself for long-term growth and reducing its dependence on a single product. Investors should closely monitor these developments and consider the broader trends in the health care sector.

References:
[1] https://www.ainvest.com/news/health-care-sector-resurgence-riding-wave-catalysts-insurer-turnarounds-2507/