Merck Stock Valuation Hits Ceiling as Oncology Franchise Decelerates

Merck's stock has been on an impressive run, increasing by 85.5% over the past twelve months. The company is now trading at about 98% of its fifty-two-week high, leaving little room for disappointment. A key factor in determining whether the stock holds will be how much of Merck's top line remains tied to its core oncology franchise rather than early pipeline headlines.

In the second quarter of 2026, the KEYTRUDA family sold $8.4 billion, which accounts for roughly half of what Merck sells. The growth rate of this franchise slowed from 8% year over year in the first quarter to 4% in the second quarter. This deceleration is a concern, as the company's management frames the loss-of-exclusivity period as a hill rather than a cliff.

However, Merck's pipeline offers some promise, with commercial opportunities of more than $70 billion across over 20 new products by the mid-2030s. The clinical proof points behind the rally are real, and so are the regulatory ones: the FDA approved LIPFENDRA, the first and only oral PCSK9 inhibitor.

The stock is trading near its ten-year ceiling of 5.7 times sales, which raises concerns about its valuation. Revenue growth has been strong at 4.6% over the past twelve months, but it may not be enough to justify the current price.