Merck reports positive phase 2 trial results for HS treatment

Merck's Phase 2b trial of tulisokibart met its primary endpoint in moderate-to-severe hidradenitis suppurativa: HiSCR50 response rates were 72% for high-dose and 64% for medium-dose treatment, versus 35% for placebo at week 16. HiSCR75 reached 41% and 40% in the high- and medium-dose arms, respectively, compared with 15% for placebo, while serious adverse-event rates were broadly comparable at 2.4% versus 2.3%. The positive proof-of-concept data support further development of the TNF-like cytokine 1A antibody, which is also in Phase 3 trials for ulcerative colitis and Crohn's disease.

Analysis

This is a platform-validation signal rather than a near-term earnings driver for MRK. The small cohorts make the efficacy estimate directionally compelling but statistically wide; the investable question is whether deeper-response, durability, pain reduction, drainage/tunnel outcomes, and discontinuation rates can differentiate against established HS biologics from ABBV, NVS, and UCB. Without those data, the addressable-market contribution should receive little standalone NPV in MRK shares.

The more important read-through is reduced probability of failure for MRK's TL1A franchise in inflammatory bowel disease, where commercial stakes are substantially larger and the pipeline can help offset the market's concern over post-Keytruda revenue concentration. Over the next 1-3 months, sell-side models may incrementally raise pipeline probability weighting, but material multiple expansion requires Phase 3 IBD efficacy and safety that supports a best-in-class—not merely viable—profile. A weak durability or safety update would reverse this de-risking quickly because TL1A is increasingly crowded.

Contrarian view: the market may over-credit a placebo-controlled Phase 2 result in a volatile disease with fast-moving competitive standards. ABBV's Skyrizi, NVS's Cosentyx, and UCB's Bimzelx mean physicians will demand meaningful incremental clearance and practical dosing advantages; a modestly effective entrant could dilute MRK development spend without changing the HS profit pool. The better MRK thesis remains franchise optionality across IBD and adjacent immune indications, not an immediate HS launch narrative.

Key Decisions for Investors

• Do not chase MRK solely on this release; maintain or initiate only a modest 1-3 month long ahead of the next independently reported TL1A/IBD update, with the position sized as pipeline optionality rather than an HS revenue trade.
• Add to MRK only if subsequent disclosures show sustained response beyond induction, competitive deep-response outcomes, and no infection/liver-safety imbalance; these are the metrics most likely to drive meaningful probability-of-success revisions.
• Use a 6-18 month long MRK versus a broad pharma hedge such as short IHE only if MRK's IBD program remains on schedule. Thesis is falsified by Phase 3 delay, guidance that implies increased development spend without a timeline, or efficacy that fails to establish differentiation versus leading IBD biologics.
• Monitor ABBV, NVS, and UCB for competitive response rather than shorting them now: the current data do not establish substitution risk. Reassess a relative-value trade only after MRK provides cross-comparable durability, dosing, and quality-of-life data.