Merck Stock Shows Sustained Strength: Time to Buy, Sell or Hold?

Merck shares are up 39% year to date and have traded above their 200-day average for over a year, but the outlook is mixed: Keytruda generated $23.6 billion in the first nine months of 2026, up 1% year over year, and accounts for more than 55% of pharmaceutical sales, with U.S. patent expiry expected around 2028. Merck expects moderate revenue growth in 2027 and more than $2 billion in generic-related headwinds; Gardasil sales fell 9% in the first half of 2026, while $250 million of third-quarter vaccine purchasing benefits is expected to reverse in 2027. New products, acquisitions and a pipeline with more than $70 billion in potential non-risk-adjusted commercial opportunity by the mid-2030s may help offset the patent cliff; the article recommends retaining the stock (Zacks Rank #3, Hold).

Analysis

The asymmetry is shifting from “Keytruda has a 2028 cliff” to whether Merck can fund a credible replacement before investors begin discounting post-exclusivity cash flows. That discount can arrive well ahead of biosimilar entry: a strong 2026 tape and pipeline opportunity estimates do not, by themselves, establish durable replacement earnings. Qlex may defend convenience and some utilization, but a new delivery format does not remove molecule-level competition. Treat the mid-2030s opportunity figure as un-risk-adjusted until assets demonstrate approval, launch uptake and economics.

The nearer earnings risk is a quality-of-growth problem: Gardasil’s reported rebound includes purchasing timing that reverses, while Keytruda growth is moderating and other product LOEs add pressure. With spending rising to support launches and acquisitions, revenue offsets may not translate cleanly into near-term operating leverage. This could drive estimate cuts or multiple compression before the patent event itself. Conversely, broad biosimilar uptake may be slower than a simple cliff narrative implies; indication protection, contracting and manufacturing capacity could moderate the initial decline.

For Moderna, the Keytruda-vaccine collaboration is clinical optionality, not yet evidence of material standalone revenue; the article provides no economics or launch timing. Similarly, Merck’s acquisition pipeline should not be capitalized as certain value without deal terms and clinical de-risking. The stock’s outperformance raises the hurdle for further positive surprises, but does not alone justify an outright short. Key verification points are underlying Gardasil demand excluding purchasing shifts, 2027 guidance, non-Keytruda launch growth, and post-LOE biosimilar timing and erosion assumptions.

Key Decisions for Investors

• Prefer a measured MRK underweight versus a broad healthcare benchmark over an outright short; initiate/maintain into strength, with 1–3 month catalysts being 2027 guidance and evidence of underlying Gardasil demand. Reassess if non-Keytruda growth consistently offsets disclosed LOE headwinds without worsening operating leverage.
• Falsify the underweight if Merck delivers sustained launch-led growth and maintains 2027 guidance despite Gardasil reversals and generic pressure; reduce it if guidance or forward estimates are cut, or if Keytruda growth slows faster than expected.
• Keep MRNA as a watch/optional catalyst exposure rather than treating the Merck collaboration as near-term earnings support. Verify partnership economics, regulatory path and commercialization timing before assigning meaningful value.
• Avoid valuing Merck’s stated pipeline opportunity or recent acquisitions as committed replacement revenue; track clinical readouts, approvals, launch uptake and acquisition-related costs over the next 6–18 months.