Will Keytruda Aid MRK's Growth in 2026 After a Subdued Q3?

Merck’s MRK strong position in the oncology market is largely driven by its biggest revenue driver, Keytruda. The blockbuster PD-L1 inhibitor contributes over half of the company’s pharmaceutical revenues.

Keytruda, approved for different types of cancer indications, has played an instrumental role in driving Merck’s steady revenue growth in recent years.

Keytruda generated sales of $23.30 billion in the first nine months of 2025, out of which $8.14 billion was recorded during the third quarter. Though Keytruda sales increased 8% year over year during the third quarter of 2025, they were weaker than expected.

Keytruda sales missed the Zacks Consensus Estimate of $8.40 billion in the third quarter.

Management defended that Keytruda's soft sales in the third quarter were due to unfavorable channel movements and not due to a drop in underlying demand.

Keytruda sales are gaining rapid uptake across earlier-stage indications and continued strong momentum in metastatic indications. The company expects continued growth from Keytruda, particularly in early lung cancer.

In 2026, the company expects Keytruda to grow and expand into new indications and markets globally continuously, as the FDA decision for ovarian cancer, as well as other cancer indications, draws closer. Keytruda is not approved to treat ovarian cancer.

MRK Seeks Keytruda's Long-Term Growth Amid Upcoming Patent Loss

With Keytruda set to face patent loss in 2028, Merck is working on different strategies to drive its long-term growth.

The FDA recently approved the subcutaneous (SC) formulation of Keytruda, known as Keytruda Qlex, which improves patient convenience. With Keytruda's intravenous (IV) formulation losing exclusivity in 2028, Keytruda Qlex’s own patents extend protection beyond that date, which can help offset the impact of the IV version’s patent expiry.

Merck is also advancing innovative immuno-oncology combinations, such as pairing Keytruda with LAG3 and CTLA-4 inhibitors.

In partnership with Moderna MRNA, Merck is developing a personalized mRNA therapeutic cancer vaccine (V940/mRNA-4157) in combination with Keytruda for patients with certain types of melanoma and non-small cell lung cancer (NSCLC).

Merck and Moderna are conducting pivotal phase III studies on V940, in combination with Keytruda, for earlier-stage and adjuvant NSCLC and adjuvant melanoma.

While Keytruda continues to drive Merck’s growth, the company’s heavy dependence on the drug remains a concern.

Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors like Summit Therapeutics’ SMMT ivonescimab that inhibit both the PD-1 pathway and the VEGF pathway at once.

Summit believes ivonescimab has the potential to replace Keytruda as the next standard of care across multiple NSCLC settings. Ivonescimab previously outperformed Keytruda in a phase III study in patients with locally advanced or metastatic NSCLC.

Though Keytruda IV is set to face loss of exclusivity in 2028, its sales are expected to stay strong until then. Recent approvals and the expected launch of many additional indications, including in earlier lines of therapy, are likely to propel Keytruda’s sales in 2026 and beyond.

MRK's Price Performance, Valuation and Estimates

Year to date, shares of Merck have declined 13.2% against the industry’s rise of 6.4%. 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 9.28 forward earnings, lower than 15.57 for the industry and its 5-year mean of 12.58.

The Zacks Consensus Estimate for 2025 earnings per share has inched up from $8.94 to $8.95, while the same for 2026 has decreased from $9.54 to $9.35 over the past 30 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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