Merck Stock Soars as Pipeline Proves Itself

Merck's stock price has nearly doubled over the past year, rising from $79 to $147. This growth is unusual because there hasn't been a significant change in the company's revenue growth.

The medicines Merck sells today are growing at their usual pace, with revenue increasing by 4.6% over the trailing twelve months and reaching $66.6 billion. However, profitability has not kept pace, with an operating margin of 10.5%, down from a three-year average of 22.4%. The main reason for this discrepancy is Merck's recent purchase of Terns Pharmaceuticals, which included MK-4208, a candidate for chronic myeloid leukemia.

The $5.7 billion charge related to the acquisition has significantly impacted earnings, and the medicine won't be available until later. Despite this setback, Merck's pipeline is starting to show promise, with several key approvals and positive trial results. The FDA approved LIPFENDRA, an oral PCSK9 inhibitor, which lowered LDL cholesterol by up to 60% when added to a statin.

Merck has also seen success with its TROP2 antibody-drug conjugate sac-TMT, which produced its first positive Phase III result in endometrial cancer. Additionally, its anti-TL1A antibody tulisokibart met its primary endpoint in ulcerative colitis.