MRK Analysis: Merck's Keytruda Patent Cliff Looms — But a $305 Billion Pipeline Bet Could Rewrite the Bear Case
Merck & Co. (NYSE: MRK) is trading at $122.26, just pennies from its 52-week high of $123.33, capping a remarkable 67% recovery from its $73.31 low. The $305 billion pharmaceutical giant has delivered full-year 2025 revenue of approximately $65 billion on the strength of Keytruda, the world's best-selling drug with annual sales exceeding $25 billion. At a trailing P/E of 16.8x on $7.28 in earnings per share, Merck trades at a meaningful discount to the S&P 500 — but the market is pricing in a very specific risk. That risk is the Keytruda patent cliff. The blockbuster cancer immunotherapy's U.S. composition-of-matter patent expires in 2028, and biosimilar competition will follow. Keytruda alone represents roughly 40% of Merck's total revenue, making this one of the largest single-product revenue cliffs in pharmaceutical history. Management has spent aggressively on pipeline development, subcutaneous reformulations, and acquisitions to bridge the gap — but whether those efforts will be enough remains the central question for MRK shareholders. With the stock near all-time highs and analyst sentiment turning increasingly bullish — Seeking Alpha recently noted the 6.8% year-over-year increase in pembrolizumab franchise sales to $8.37 billion in Q4 — this analysis examines whether Merck's valuation adequately prices in the patent cliff or if the pipeline offers enough upside to justify buying at these levels.