Morgan Stanley Sees Merck's Pipeline as Catalyst for Growth

Morgan Stanley upgraded Merck to 'buy' on August 20, citing its robust oncology pipeline as a buffer against the impending patent expiration of Keytruda in 2028.

The pharmaceutical giant's cancer treatment drug generates over $25 billion annually, accounting for half of Merck's total revenue. Analysts at Morgan Stanley believe that this worst-case scenario is already priced into the company's valuation, providing a compelling entry point for investors who recognize Merck's pipeline potential.

To mitigate the patent cliff, Merck has diversified its portfolio with recent multi-billion-dollar acquisitions, including Harpoon Therapeutics and Kelun-Biotech's ADC portfolio. These next-generation therapies are designed to bypass resistance mechanisms that make PD-1 inhibitors like Keytruda ineffective over time.