Is Merck Ready for a Rebound?

Fundamental Analysis

Financial Performance

• Revenue Decline: Q2 revenue fell 2% year-over-year to $15.8 billion.
  
• Earnings Drop: Adjusted earnings per share decreased by 7% to $2.13.
  

Key Product Challenges

• Keytruda Competition: Facing increased competition for its top cancer drug, Keytruda.
  
• Patent Cliff: Keytruda’s patent expiration looms in 2028, posing a revenue risk.
  

Growth Highlights

• Winrevair Success: New pulmonary arterial hypertension drug generated $336 million in sales post-approval last year, with blockbuster potential.
  
• Animal Health Segment: Sales rose 11% year-over-year to $1.6 billion, showcasing strength in a leading segment.
  

Pipeline and Innovation

• Subcutaneous Keytruda: Aced phase 3 studies, extending patent protection.
  
• Pipeline Expansion: Enhanced through licensing agreements, including promising cancer and weight loss therapies.
  
• Innovation Potential: Likely to develop new therapies to offset Keytruda revenue risks.
  

Dividend Profile

• Forward Yield: Offers a 3.85% forward dividend yield.
  
• Dividend Growth: Increased dividends by 39% over the past five years.
  
• Investment Appeal: Remains attractive for dividend-seeking investors.
  

Technical Analysis

The stock price has fallen by over 45% from its ATH of $134.63 in June 2024. The price seems to be consolidating within the range of $74-$86 from April 2025. Moreover, the consolidation seems to be coinciding with the trendline support and 0.618 retracement level at $78.35 of the price rise from $43.57 in August 2015 to $134.63 in June 2024. Further, the daily RSI is just above 60, indicating that a rebound may be near the corner.

Entry: Above $86
Targets: $94.92, $99.84, and $102.48.
Stop Loss: $78.35-$77.