MRK Stock Up Nearly 14% So Far This Week: What's Driving It?

Shares of Merck MRK have rallied almost 14% so far this week as investors’ optimism grew concerning the broader pharmaceutical sector in the United States after Pfizer PFE announced a landmark deal with the Trump administration. The deal aims to reduce prescription drug costs while boosting investment in U.S.-based innovation and manufacturing.

With the latest deal, PFE is looking to reduce prices of some of its drugs to align their cost with those in comparable developed countries, supporting President Trump’s Most Favored Nation (MFN) pricing proposal. Pfizer will also offer significant discounts through the new direct purchasing platform, TrumpRx.gov, while committing an additional $70 billion over the coming years to strengthen its U.S. research and production operations. In return, Pfizer will be granted a three-year exemption from tariffs on pharmaceutical imports if it increases U.S. manufacturing investment.

Stocks of most other large drugmakers like Merck gained too, as the Pfizer deal seems to have alleviated the two biggest concerns surrounding the drug and biotech industry this year – tariff and MFN pricing.

If Merck can sign a similar pricing deal with the Trump administration, it will provide more impetus to the stock.

The company tasted a major regulatory success last month, when the FDA approved the subcutaneous (SC) formulation of its blockbuster PD-L1 inhibitor, Keytruda. This SC version will be marketed as Keytruda Qlex and is approved across most solid tumor indications for which the drug’s intravenous (IV) version is already approved.

With Keytruda IV set to lose exclusivity in 2028, the newly approved SC version carries its own patents that extend protection well beyond that timeline. By helping physicians and patients toward the SC formulation, the company can maintain a significant portion of Keytruda’s revenues even after the original IV patents expire.

Benefits for Other Drug Makers

Pfizer’s latest drug pricing deal removes a significant overhang for the broader pharma industry and brings renewed interest from investors, triggering a price rally in the given sector. Besides Merck, stocks of other large drugmakers like AstraZeneca AZN, Eli Lilly LLY and AbbVie, among others, gained too. Both Lilly and AstraZeneca have already gained around 13% while AbbVie has risen around 7% so far this week. Investors’ confidence is growing on the belief that these companies could follow PFE’s footsteps and sign similar deals with the Trump administration, which could hugely benefit the broader pharma sector.

In response to Trump’s tariff threats, many large drugmakers have already committed billions to ramp up U.S. investments to boost domestic production.

Lilly has announced plans to invest $27 billion to develop four new manufacturing sites in the United States by 2025.

AstraZeneca announced plans to invest $50 billion in U.S. manufacturing and research and development (R&D) by 2030. AZN’s plan includes a new multi-billion-dollar manufacturing facility to be set up in Virginia.

Several other companies like J&J, GSK, Novartis and Roche have also committed billions in U.S. manufacturing and R&D investments.

MRK's Price Performance, Valuation and Estimates

Year to date, shares of Merck have declined 10% against the industry’s rise of 8.3%. The stock has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 9.49 forward earnings, lower than 15.93 for the industry and its 5-year mean of 12.67.

The Zacks Consensus Estimate for 2025 earnings per share has remained stable at $8.93 per share, while the same for 2026 has decreased from $9.61 to $9.59 over the past 60 days.

MRK’s Zacks Rank

Merck currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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