Unlocking Rare Oncology Value: Merck’s WELIREG Approval Signals a New Growth Era

The FDA’s May 14, 2025, approval of Merck’s WELIREG (belzutifan) for the treatment of pheochromocytoma and paraganglioma (PPGL), a rare neuroendocrine tumor, marks a pivotal moment for Merck’s oncology pipeline. This decision not only addresses a critical unmet medical need but also unlocks substantial commercial potential for the company. With ~2,000 annual PPGL cases in the U.S., WELIREG’s 7-year orphan drug exclusivity, robust efficacy data, and high-margin profile position Merck to capitalize on niche markets with limited competition. This is no minor victory: it is a catalyst for margin expansion and a harbinger of sustained oncology growth.

Orphan Drug Advantages: A Fortified Moat

WELIREG’s approval leverages the orphan drug designation’s triple advantage:
1. Market Exclusivity: A 7-year monopoly in the U.S. shields Merck from generic or biosimilar competition, even as global trials expand.
2. Tax Credits: A 50% R&D tax credit reduces the net cost of developing this niche therapy.
3. Pricing Power: Orphan drugs command premium pricing, with PPGL’s small patient population minimizing pricing backlash.

At an estimated $150,000–$200,000 annual cost per patient, WELIREG could generate $300–$400 million in peak U.S. sales, even with limited case numbers. Crucially, the market is underserved: the prior option, iobenguane I 131 (Azedra), is no longer commercially available, leaving WELIREG as the only FDA-approved therapy for advanced PPGL.

Mechanism Differentiation: HIF-2α as a Platform Play

WELIREG’s success hinges on its role as a first-in-class HIF-2α inhibitor. This mechanism targets tumors driven by mutations in the succinate dehydrogenase (SDH) or von Hippel-Lindau (VHL) pathways, which are common in PPGL, clear cell renal cell carcinoma (ccRCC), and VHL-associated tumors.

• Proven Efficacy: In the LITESPARK-015 trial, WELIREG achieved a 26% confirmed objective response rate (ORR) in PPGL patients, with a median duration of response (DOR) of 20.4 months. This outperforms off-label tyrosine kinase inhibitors (TKIs), which have lower ORRs and higher toxicity.
• Pipeline Synergy: WELIREG is already approved for ccRCC (2023) and VHL (2021), creating cross-selling opportunities. The HIF-2α platform’s broader applicability could expand into other rare tumors, such as chondrosarcoma, driving incremental revenue.

Merck’s focus on mechanism-based oncology—rather than one-off drugs—creates a defensible, scalable business model.

Financial Upside: High Margins, Low Risk

WELIREG’s oral formulation offers operational and cost advantages over injectable therapies or radiopharmaceuticals. With no direct competitors, Merck can command pricing without eroding margins.

• Cost Structure: Manufacturing an oral drug typically requires lower capital expenditure than biologics or specialty injectables.
• Payer Dynamics: PPGL’s rarity means insurers have little leverage to negotiate discounts, preserving WELIREG’s profit margins.

The LITESPARK-015 trial’s safety profile—while requiring monitoring for anemia and hypoxia—is manageable in outpatient settings, reducing hospitalization costs and enhancing reimbursement viability.

Investment Thesis: A Catalyst for Re-Rating

1. Near-Term Growth: WELIREG’s PPGL approval will immediately boost Merck’s oncology revenue, with upside from global launches (Europe’s MAA submission is expected by Q4 2025).
2. Pipeline Catalysts: Upcoming data in VHL-associated tumors (2026) and ccRCC combination studies could validate WELIREG’s broader utility, extending its commercial life.
3. Undervalued Pipeline: Merck’s stock trades at 12.5x 2025E EPS, below peers like Roche (16.2x) and BMS (14.8x), despite its rare disease focus. WELIREG’s success could narrow this gap.

Why Act Now?

WELIREG’s approval is a strategic inflection point for Merck:
- It solidifies the company’s position in high-value, low-competition niches, where pricing power and exclusivity drive returns.
- The HIF-2α platform’s scalability reduces reliance on blockbuster drugs like Keytruda, which face biosimilar erosion post-2030.
- With $35 billion in cash and a 3.2% dividend yield, Merck can reinvest in acquisitions or partnerships to bolster its rare disease portfolio.

Conclusion: A Rare Opportunity in a Crowded Market

In an era of generic drug pressure and pricing scrutiny, Merck’s WELIREG approval exemplifies how targeted innovation in rare diseases can deliver outsized returns. With minimal competition, robust margins, and a platform capable of expanding into adjacent indications, this approval is more than a single drug win—it’s a signal of Merck’s reinvention as a precision oncology leader.

Investors should act now: WELIREG’s commercial success could re-rate Merck’s stock, unlocking value long overlooked by the market. This is a buy at current levels, with a 12-month price target of $100—a 25% upside from current prices.

Disclaimer: The author holds no positions in Merck or related entities. This analysis is for informational purposes only.