Merck & Co., Inc. (MRK): A Bull Case Theory

We came across a bullish thesis on Merck & Co., Inc. on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on MRK. Merck & Co., Inc.'s share was trading at $101.03 as of December 2nd. MRK’s trailing and forward P/E were 13.47 and 10.83 respectively according to Yahoo Finance.

Merck & Co. (MRK) stands at a pivotal crossroads as its success with Keytruda, one of the most profitable drugs in history, has created both immense wealth and an existential challenge. Keytruda generated nearly $29.5 billion in 2024—about half of Merck’s total revenue—but its primary patents expire in 2028, setting up a severe patent cliff that could erase a significant portion of earnings.

Compounding this, other key franchises like Lenvima (2025), Januvia (2026), Lynparza (2027), and Gardasil (2028) also face loss of exclusivity, creating simultaneous revenue pressures. Merck’s third-quarter 2025 results captured this duality: Keytruda’s sales rose 10% YoY to $8.1 billion, but Gardasil revenue fell 24%, mainly due to a collapse in Chinese demand, forcing shipment halts and withdrawal of long-term guidance.

To mitigate the 2028 impact, Merck is executing a three-pronged strategy. Defensively, it launched Keytruda Qlex, a subcutaneous version offering unmatched convenience and intended to retain patients as biosimilars emerge, potentially extending franchise life beyond 2030. Offensively, it is building new growth pillars through Winrevair (from Acceleron; peak >$6 billion) for pulmonary hypertension, Ohtuvayre (from Verona; peak ~$4 billion) for COPD, and Welireg for renal cell carcinoma.

Supported by 80+ late-stage programs and next-generation antibody-drug conjugates with Daiichi Sankyo, Merck is diversifying aggressively. Acquisitions remain central to this plan, with management targeting further deals in the $15 billion range to accelerate portfolio renewal. Merck is also pursuing $3 billion in cost savings by 2027 and cutting 6,000 jobs to streamline operations. Trading at ~11x earnings versus the sector’s ~18x, the market largely prices in the worst-case Keytruda loss. Bulls view this as an opportunity—betting on flawless execution of its transition and sustained innovation—while its 3.8% dividend yield rewards patience during the rebuild.

Previously we covered a bullish thesis on Merck & Co., Inc. (MRK) by Charly AI in April 2025, which highlighted the company’s strong revenue growth, margin expansion, and disciplined execution in oncology and cardiovascular franchises. The company’s stock has appreciated approximately 23.34% since our coverage as the thesis played out. The thesis still stands as Merck’s fundamentals remain solid. Darius Dark Investing shares a similar view but emphasizes the 2028 patent cliff and Merck’s strategic response.

Merck & Co., Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 92 hedge fund portfolios held MRK at the end of the second quarter which was 93 in the previous quarter. While we acknowledge the potential of MRK as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.