VALUATION HIGHLIGHTS

1. Oncology Drugs constitute 38% of the Trefis price estimate for Merck's stock.
2. Vaccines constitute 17% of the Trefis price estimate for Merck's stock.
3. Animal Health & Others constitute 13% of the Trefis price estimate for Merck's stock.

WHAT HAS CHANGED?

Latest Earnings: Q4 and Full Year 2025

Merck reported full-year 2025 revenue of $64.2 billion, representing a 7% increase over the previous year. GAAP EPS for the full year was $5.12, a significant recovery from 2024 levels which were impacted by one-time acquisition charges. Growth was primarily driven by the sustained dominance of Keytruda and the successful commercial launch of Winrevair in the pulmonary arterial hypertension market.

Note: Merck's FY'25 ended on December 31, 2025.

Expansion into Cardiovascular Immunology

Merck has accelerated its strategic pivot to diversify beyond oncology through the rapid scale-up of Winrevair. This therapy represents a cornerstone of Merck's effort to mitigate the upcoming "patent cliff" for Keytruda later this decade. Initial uptake has exceeded analyst expectations, positioning the cardiovascular portfolio as a primary growth engine for the next five years.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Merck's value that present opportunities for upside or downside to the current Trefis price estimate:

Oncology and Specialized Therapeutics

• Keytruda Life Cycle Management: Keytruda remains the top-selling drug globally, but market concern focuses on the 2028 patent expiration. Merck's development of a subcutaneous formulation and combination therapies could preserve up to 50% of the current revenue base beyond the cliff, presenting significant upside compared to more bearish Trefis estimates of generic erosion.


• Pipeline Diversification Efficiency: Merck is aggressively pursuing Antibody-Drug Conjugates (ADCs) through its partnership with Daiichi Sankyo. Success in early-stage clinical readouts for these candidates could add an estimated $3 billion to $5 billion in unmodeled peak sales, providing a cushion against potential regulatory pricing pressures in the US.

For additional details, select a division from the interactive Trefis split for Merck at the top of the page.

BUSINESS SUMMARY

Merck is a global biopharmaceutical leader focused on delivering innovative health solutions through its prescription medicines, vaccines, biologic therapies, and animal health products. The company's business model relies on heavy R&D investment to maintain a dominant position in oncology while expanding into high-margin cardiovascular and immunology markets.

SOURCES OF VALUE

The Oncology segment remains the most significant contributor to Merck's valuation due to its massive scale and high barriers to entry in the immunotherapy space.

Immuno-Oncology Leadership

Merck's Keytruda is approved for over 30 indications, creating a massive installed base and a formidable competitive moat. This dominance allows for high operating margins and generates the cash flow necessary to fund the company's aggressive M&A strategy and dividend payments.

Animal Health Market Power

Merck possesses one of the largest animal health businesses in the world, providing a diversified, durable revenue stream that is less susceptible to the patent cycles seen in human pharma. This segment benefits from high brand loyalty and increasing global spend on pet care and livestock productivity.

KEY TRENDS

Drug Pricing Legislation Impacts

The implementation of Medicare price negotiations in the US continues to be a primary macro headwind. Merck is proactively managing this trend by focusing on biologics and complex therapies that may have longer periods of price protection compared to small-molecule drugs.

Strategic M&A and External Innovation

Merck is increasingly shifting its strategy toward "bolt-on" acquisitions to replenish its pipeline. By utilizing its strong balance sheet to acquire mid-stage biotech firms, Merck aims to reduce its reliance on a single blockbuster drug and build a more balanced portfolio across various therapeutic areas.