Merck Stock Holds Above Key Moving Averages for Weeks—What's the Real Story?

Merck (MRK) has maintained positions above both its 50-day and 200-day moving averages consistently since November, reflecting persistent positive momentum in the market. Short-term indicators like the 50-day average and longer-term benchmarks like the 200-day average both suggest the stock is outperforming its intermediate and extended-term baseline levels. While this pattern presents an encouraging technical signal, understanding the company’s fundamental drivers becomes essential for making informed investment decisions.

Recent catalysts propelled the stock higher, including pipeline advancements and the $9.2 billion agreement to absorb Cidara Therapeutics (CDTX). This strategic move brings CD388, an innovative first-in-class long-acting antiviral candidate, into Merck’s portfolio. Currently undergoing late-phase testing for seasonal influenza prevention in vulnerable populations, CD388 represents meaningful diversification for the pharmaceutical giant.

The Keytruda Juggernaut: Engine of Growth

Keytruda stands as Merck’s most powerful revenue generator, commanding over half of the company’s pharmaceutical sales. This oncology blockbuster has been the primary force behind consistent revenue expansion over multiple years. Through the first nine months of 2025, Keytruda generated $23.3 billion in sales, marking an 8% year-on-year increase that demonstrates resilience in competitive markets.

The drug’s expansion across earlier-stage cancer treatments, particularly early-stage non-small cell lung cancer, continues fueling growth. Concurrent strength in advanced metastatic indications provides additional momentum. Management projects this trajectory will persist, with early-stage lung cancer representing a significant opportunity for market penetration.

Strategic combinations represent Merck’s playbook for sustaining Keytruda’s dominance. Experimental pairings with LAG3 and CTLA-4 inhibitors are under investigation. Most notably, a collaboration with Moderna (MRNA) is advancing intismeran autogene (V940/mRNA-4157), a customized mRNA cancer vaccine combined with Keytruda, through pivotal phase III evaluations for adjuvant NSCLC and melanoma settings.

The September 2025 FDA clearance of Keytruda Qlex—a subcutaneous formulation requiring substantially faster administration than intravenous delivery—introduces a defensive strategy. With patent protection for the intravenous version expiring in 2028, this subcutaneous variant carries patent extensions that extend exclusivity considerably beyond that date.

Expanding Arsenal: New Products Gaining Traction

Merck’s oncology portfolio extends beyond Keytruda. Welireg, the AstraZeneca-partnered Lynparza, and the Eisai-partnered Lenvima all contribute meaningfully to pharmaceutical revenues.

The company’s overall pipeline has shown remarkable expansion. Since 2021, the phase III candidate count has nearly tripled, supported by internal development and strategic M&A activity. This positions Merck to introduce approximately 20 new therapeutic options over coming years, with numerous candidates holding blockbuster potential.

Two recent launches exemplify this momentum. Capvaxive, a 21-valent pneumococcal conjugate vaccine, and Winrevair, targeting pulmonary arterial hypertension, have both demonstrated robust commercial performance with potential to generate substantial long-term revenues.

Enflonsia (clesrovimab), Merck’s RSV antibody, received U.S. approval in June 2025 and currently undergoes European Union review. A combination therapy of doravirine and islatravir for HIV treatment awaits U.S. regulatory decision, with April 2026 as the expected timeline.

Additional late-stage candidates include enlicitide decanoate/MK-0616, an oral PCSK9 inhibitor for elevated cholesterol, tulisokibart for ulcerative colitis, and collaboratively-developed antibody-drug conjugates with Daiichi Sankyo.

The $10 billion acquisition of Verona in 2025 introduced Ohtuvayre, a differentiated first-in-class maintenance therapy for chronic obstructive pulmonary disease with multibillion-dollar commercial potential. This acquisition significantly strengthens the cardio-pulmonary division, and commercial uptake has begun positively.

Vaccine Portfolio Under Pressure

Gardasil, Merck’s second-largest product, encountered headwinds with 40% sales decline during the first nine months of 2025. China’s economic slowdown created weak market conditions, leaving excessive inventory at commercialization partner Zhifei. Consequently, Merck temporarily suspended Gardasil shipments to China, with no resumption anticipated through year-end 2025, further pressuring revenue expectations.

Japanese demand for the vaccine has also softened. Additional vaccine products including Proquad, M-M-R II, Varivax, Rotateq, and Pneumovax 23 experienced sales contractions during the same period. Diabetes product performance has deteriorated, and generic competition continues eroding several established drugs.

Competitive Threats and Patent Cliff Concerns

The concentration of revenues around Keytruda creates vulnerability. While undeniably a cornerstone asset, this dependency raises questions about Merck’s capacity to advance non-oncology segments before Keytruda’s 2028 exclusivity loss.

Competitive challenges are mounting. Dual PD-1/VEGF inhibitors, such as Summit Therapeutics’ (SMMT) ivonescimab, target multiple pathways simultaneously, addressing limitations of single-mechanism therapies like Keytruda. A phase III study in China demonstrated ivonescimab’s superiority against Keytruda in locally advanced or metastatic NSCLC cases. Summit projects ivonescimab could establish itself as the new standard-of-care option across multiple NSCLC applications.

Merck is developing its own PD-1/VEGF inhibitor to address this competitive evolution. Additionally, Pfizer obtained exclusive global ex-China rights to SSGJ-707, another dual PD-1/VEGF inhibitor licensed from China’s 3SBio, further fragmenting the competitive landscape.

Valuation Metrics and Estimate Movements

Year-to-date, MRK shares have declined 0.5%, underperforming the pharmaceutical industry’s 14.1% appreciation. The stock has also trailed its sector and the S&P 500.

From a valuation perspective, Merck offers attractive relative pricing. At a forward price-to-earnings ratio of 11.21, it trades substantially below the industry average of 16.68 and its own five-year median of 12.52, suggesting potential undervaluation compared to peers.

Analyst estimates for 2025 earnings have modestly shifted upward from $8.94 to $8.98 per share over the past 60 days. However, 2026 estimates have declined, moving from $9.54 to $8.81 per share, signaling some deterioration in longer-term expectations.

The Prudent Path Forward

Merck commands one of the pharmaceutical industry’s most profitable drugs, generating multibillion-dollar annual revenues. Although Keytruda faces patent expiration in 2028, sales should remain robust until that inflection point.

Capvaxive and Winrevair have launched successfully with meaningful revenue potential ahead. Keytruda Qlex’s approval mitigates some negative effects from the 2028 exclusivity loss. Recent acquisitions like Ohtuvayre position the company to address the potential revenue gap created by Keytruda’s transition.

The Animal Health division contributes substantially to top-line expansion through above-market growth rates.

However, meaningful obstacles persist. Gardasil’s China difficulties, potential Keytruda displacement by newer therapies, and generic pressures on legacy products all complicate the narrative. These challenges collectively raise legitimate questions about Merck’s ability to execute smoothly through the Keytruda patent cliff period.

Despite recent technical strength and appealing valuation, a measured approach appears warranted. Waiting for more concrete evidence of sustainable growth momentum and profitability trajectory makes strategic sense. Observers should remain watchful rather than committing capital at this juncture, allowing a clearer picture to emerge regarding long-term sustainability. Merck maintains a Zacks Rank #3 (Hold) rating reflecting this balanced perspective.