Merck Stock Surges 46% to 52-Week High on Post-Keytruda Pipeline Strength

Merck & Co. Inc. stock reached a 52-week high, closing at $122.69, marking a 46.25% increase over the past 12 months. The stock has risen 7.4% in the past month, driven by better-than-expected fourth-quarter results and a more confident outlook for future growth.

In the fourth quarter, Merck beat estimates for both earnings and sales. Earnings of $2.04 per share increased 19% year over year, while sales of $16.40 billion rose 5%. The performance reflects strong investor confidence and positive market sentiment toward the pharmaceutical giant's strategic initiatives.

Merck issued a fresh earnings and sales outlook for 2026, which fell slightly short of consensus expectations. The company expects revenues to be in the range of $65.5-$67.0 billion in 2026, representing year-over-year growth of 1% to 3%. Adjusted earnings per share are expected to be between $5.00 and $5.15, which represents a significant decline from adjusted EPS of $8.98 in 2025 due to higher charges related to business development transactions.

On the conference call, Merck said it expects over $70 billion of potential non-risk-adjusted commercial opportunity for the current pipeline by the mid-2030s. The company pointed out that this estimate was more than double the peak consensus sales estimate for its blockbuster cancer drug, Keytruda, of $35 billion in 2028. Keytruda is set to lose patent exclusivity post-2028. Merck said that the estimate of $70 billion was $20 billion higher than what they expected just one year ago. This improved outlook for long-term growth in the post-Keytruda loss of exclusivity period pushed the stock up post-earnings despite slightly weak 2026 guidance.

Keytruda remains Merck's biggest strength, accounting for around 55% of the company's pharmaceutical sales. The drug, approved for several types of cancer, has played an instrumental role in driving Merck's steady revenue growth over the past few years. Keytruda recorded sales of $31.7 billion in 2025, up 7% year over year.

Keytruda's sales are gaining from rapid uptake across earlier-stage indications. Continued strong momentum in metastatic indications is also boosting sales growth. The company expects the growth to continue till it loses patent exclusivity in 2028. Merck is working on different strategies to drive Keytruda's long-term growth, including innovative immuno-oncology combinations with LAG3 and CTLA-4 inhibitors. In partnership with Moderna, Merck is developing a personalized mRNA therapeutic cancer vaccine called intismeran autogene (V940/mRNA-4157) in combination with Keytruda in pivotal phase III studies for earlier-stage and adjuvant NSCLC and adjuvant melanoma.

Merck's subcutaneous formulation of Keytruda, known as Keytruda Qlex, was approved by the FDA in September 2025. Keytruda Qlex can offer substantially quicker administration time than the intravenous infusion of Keytruda. Merck expects Keytruda to achieve peak sales of $35 billion by 2028. The company's other oncology drugs, Welireg, AstraZeneca-partnered Lynparza and Eisai-partnered Lenvima, are also contributing to top-line growth.

The FDA approved Keytruda to treat certain ovarian cancer patients, specifically those with platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal carcinoma. This approval expands Keytruda's use in oncology.

Merck's phase III pipeline has almost tripled since 2021, supported by in-house pipeline progress as well as the addition of candidates through M&A deals. Some key new products with blockbuster potential are its 21-valent pneumococcal conjugate vaccine, Capvaxive, and pulmonary arterial hypertension drug, Winrevair. Both products have witnessed a strong launch and have the potential to generate significant revenues over the long term.

The company's RSV antibody, Enflonsia (clesrovimab), was approved in the United States in June 2025, while it is under review in the EU. A fixed-dose combination of doravirine and islatravir for the treatment of HIV is under review in the United States, with an FDA decision expected in April next year.

Merck has other promising candidates in its late-stage pipeline, such as enlicitide decanoate/MK-0616, an oral PCSK9 inhibitor for hypercholesterolemia, tulisokibart, a TL1A inhibitor for ulcerative colitis and Daiichi-Sankyo-partnered antibody-drug conjugates.

The company has been on an acquisition spree in the past year, as it faces the looming patent expiration of Keytruda in 2028. The acquisition of Verona in 2025 added Ohtuvayre, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. Ohtuvayre's commercial launch is off to a solid start. The drug recorded sales of $178 million in the fourth quarter since the acquisition.

In analyst activity, price targets have been raised across multiple firms. One firm upgraded the stock rating from Hold to Buy, with a new price target of $150, citing potential growth following the patent expiration of Keytruda. Another raised its price target to $140, maintaining a Buy rating, although it noted that the company's 2026 revenue guidance fell short of consensus estimates. A third firm increased its price target to $100, maintaining a Market Perform rating, highlighting optimism around Merck's pipeline and new product launches. A fourth firm raised its price target to $135, based on potential extensions of Keytruda's patent protection.