Merck's long-term data shows sustained survival benefits with KEYTRUDA in lung cancer

Merck announced robust long-term data for its blockbuster cancer drug KEYTRUDA in non-small cell lung cancer at ESMO 2025, demonstrating sustained survival benefits and reinforcing its standard-of-care status. This comes as the pharmaceutical giant reported a 2% decline in Q2 2025 revenues to $15.8 billion, though sales grew 7% excluding GARDASIL in China, alongside a non-GAAP EPS of $2.13. Strategically, Merck completed a $10 billion acquisition of Verona Pharma and initiated a $3 billion manufacturing facility construction, while InvestingPro analysis suggests the company, with its 77% gross profit margin, may be undervalued amidst broader industry discussions on drug pricing.

Analysis

Merck (MRK) presented compelling long-term data for KEYTRUDA at ESMO 2025, reinforcing its position as a standard of care in non-small cell lung cancer (NSCLC). Five-year follow-up from KEYNOTE-671 demonstrated superior overall survival (64.6% vs 53.6%) and event-free survival (49.9% vs 26.5%) for the KEYTRUDA regimen, building on prior long-term benefits seen in other trials. This strong clinical performance underpins the company's impressive 77% gross profit margin.

Financially, Merck reported Q2 2025 revenues of $15.8 billion, a 2% decrease year-over-year, though sales grew 7% excluding GARDASIL in China, with non-GAAP EPS at $2.13. Strategically, the company completed a $10 billion acquisition of Verona Pharma, adding the COPD treatment Ohtuvayre, and initiated construction on a $3 billion manufacturing facility, signaling continued investment in growth and diversification.

InvestingPro analysis suggests MRK is currently undervalued, supported by a strong financial health score of 3.22. These internal developments occur amidst broader industry discussions, including a potential U.S. drug pricing deal, which could introduce regulatory considerations for the pharmaceutical sector.

Key Decisions for Investors

• Investors should monitor the sustained clinical efficacy of KEYTRUDA as a key driver of Merck's long-term revenue stability and market share in oncology.
• Evaluate Merck's strategic acquisitions and manufacturing investments for their potential to diversify revenue streams and enhance operational efficiency, offsetting any near-term revenue fluctuations.
• Consider the InvestingPro 'undervalued' assessment in conjunction with potential regulatory impacts from upcoming drug pricing discussions, which could influence future profitability and market sentiment.