Will the FDA's Nod for Subcutaneous Keytruda Ease Merck's Headwinds?

Merck secured FDA approval for Keytruda Qlex, a subcutaneous version of its blockbuster Keytruda, for most solid tumor indications, with a commercial launch expected later this month. This strategic approval is crucial for Merck, as the SC formulation extends patent protection beyond the IV version's 2028 expiry, enabling the company to preserve a significant portion of Keytruda's revenue—which constitutes over 48% of its topline—by shifting patients to the more convenient, one-minute administration option. This move effectively mitigates the looming patent cliff and strengthens Keytruda's long-term market position.

Analysis

Merck has secured a critical FDA approval for Keytruda Qlex, the subcutaneous (SC) formulation of its blockbuster drug, which accounts for over 48% of the company's topline revenue. This approval is a pivotal strategic success in its life-cycle management plan, designed to mitigate the impending 2028 patent expiry of the intravenous (IV) version. The new formulation's key advantage is a drastically reduced administration time—as little as one minute compared to over 30 minutes for the IV form—which is expected to drive strong patient and provider adoption, thereby preserving a significant revenue stream post-2028. While Keytruda sales grew 8% year-over-year to over $15 billion in the first half of 2025, this positive development is set against a backdrop of considerable headwinds. The company's second-largest product, Gardasil, experienced a 48% year-over-year sales decline due to weak demand in China, a trend expected to persist. Furthermore, competitive pressure is intensifying from dual-target inhibitors like Summit Therapeutics' ivonescimab, which outperformed Keytruda in a head-to-head study. Despite these challenges and recent stock underperformance, Merck's valuation appears attractive with a forward P/E ratio of 8.67, well below the industry average of 14.88, suggesting that some risks may already be priced in.

Key Decisions for Investors

• The approval of subcutaneous Keytruda is a major de-risking event for the 2028 patent cliff; investors should update long-term revenue models to reflect the higher probability of franchise durability.
• Given the stock's underperformance and its forward P/E of 8.67 versus the industry's 14.88, this positive catalyst may present a compelling entry point for investors with a long-term horizon who believe the market has overly discounted Merck's strategic execution.
• Investors must closely monitor the adoption rate of Keytruda Qlex, the continued sales trajectory of Gardasil in China, and clinical data from emerging competitors like Summit Therapeutics' ivonescimab, as these factors remain key variables for future growth.