Merck Stock: Buy the Dip Amidst Challenges

Merck has underperformed the market due to the upcoming loss of exclusivity for its key drug, Keytruda, and expensive acquisitions. Despite these challenges, the company has a strong pipeline and a history of innovation. Investors may consider buying Merck during times of weakness to take advantage of potential long-term growth opportunities.

Merck & Co., Inc. (MRK) has been facing challenges in recent quarters, primarily due to the upcoming loss of exclusivity for its key drug, Keytruda, and expensive acquisitions. Despite these setbacks, the company maintains a strong pipeline and a history of innovation, making it an attractive investment for long-term growth.

In the latest Zacks Research Daily, Merck's shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the year-to-date period (-15.7% vs. -4.2%) [1]. The company has been grappling with rising competitive and generic pressure on some drugs, persistent challenges for Gardasil in China, and concerns about its ability to successfully navigate the Keytruda loss of exclusivity and potential competition for the drug. However, Merck's second-quarter earnings beat estimates while sales met, with its blockbuster drug, Keytruda, and new products driving sales.

Keytruda, a cornerstone of Merck's oncology portfolio, has been a significant driver of growth. The recent positive topline results from Merck's Phase 3 KEYNOTE-905 trial, showcasing efficacy for Keytruda in patients with muscle-invasive bladder cancer, adds substantial promise to their oncology pipeline [2]. This development may bolster Merck's leadership in oncology, potentially driving future revenue as Keytruda applications expand.

Merck's underperformance over the past year (-15.7% vs. the US market's 19.4%) highlights potential areas for growth despite the positive trial results. However, over a longer five-year period, Merck's total shareholder return, including dividends, increased by 15.68%, providing broader context compared to its recent quarterly performance.

Investors may consider buying Merck during times of weakness to take advantage of potential long-term growth opportunities. The company's strong pipeline, history of innovation, and recent trial results indicate that Merck is well-positioned to navigate the challenges ahead and continue to deliver long-term value for shareholders.

References:
[1] https://finance.yahoo.com/news/top-analyst-reports-merck-palo-204600295.html
[2] https://simplywall.st/stocks/us/pharmaceuticals-biotech/nyse-mrk/merck/news/merck-mrk-announces-positive-phase-3-trial-results-for-keytr