From Keytruda Cash Cow to Pipeline Powerhouse: How MRK Is Bracing for 2028's Patent Cliff

Merck faces a critical juncture as its blockbuster PD-L1 inhibitor Keytruda heads toward patent expiration in 2028, signaling an impending loss of exclusivity (LOE). With Keytruda accounting for over 50% of the company’s pharmaceutical revenue—raking in $23.3 billion in the first nine months of 2025, a solid 8% year-over-year growth—the looming LOE presents both a formidable challenge and a catalyst for transformation.

Why the 2028 Keytruda LOE Matters More Than You Think

The stakes couldn’t be higher. A single drug generating more than half your pharma sales creates inherent concentration risk. Once Keytruda loses patent protection in 2028, cheaper generics will flood the market, eroding revenue streams that have powered Merck’s recent growth trajectory. However, MRK’s leadership isn’t caught flat-footed. The company has been strategically rebuilding its portfolio to cushion the impact of the Keytruda LOE.

Merck’s Three-Part Offensive: New Drugs, Mega Acquisitions, and Expanded Pipeline

New Commercial Winners

Merck has already deployed fresh firepower to offset future Keytruda revenue decline. The company’s 21-valent pneumococcal conjugate vaccine Capvaxive and pulmonary arterial hypertension (PAH) drug Winrevair are gaining traction in the market. Most recently, the FDA approved Enflonsia (clesrovimab), an RSV antibody, in June 2025, with EU regulatory review ongoing. These launches signal Merck’s ability to commercialize innovation beyond oncology.

Pipeline Explosion: A 3x Expansion Since 2021

MRK’s phase III pipeline has nearly tripled since 2021, fueled by internal R&D momentum and strategic M&A. The company is positioned to launch approximately 20 new vaccines and drugs over coming years, many carrying blockbuster potential. Late-stage candidates include enlicitide decanoate/MK-0616 (oral PCSK9 inhibitor for cholesterol), tulisokibart (TL1A inhibitor for ulcerative colitis), and bomedemstat/MK-3543 (for essential thrombocythemia and myelofibrosis). Additionally, Merck co-develops three DXd antibody-drug conjugates with Daiichi Sankyo for various cancer types. A fixed-dose HIV combination (doravirine and islatravir) awaits FDA decision in April 2026.

Acquisition Blitz to Fill the Pipeline

Recognizing that internal innovation alone won’t suffice to navigate the Keytruda LOE, Merck has deployed billions in strategic acquisitions. The company recently agreed to acquire Cidara Therapeutics for $9.2 billion, bringing CD388—a late-stage seasonal influenza prevention candidate—into its stable. Earlier in 2025, MRK completed the $10 billion acquisition of Verona Pharma, securing Ohtuvayre, a first-in-class COPD maintenance therapy. Merck also signed multi-billion-dollar partnerships with Chinese biotech firms including Hansoh Pharma, LaNova Medicines, and Hengrui Pharma to diversify across multiple therapeutic areas.

The Valuation Play: MRK Trading Below Historical Norms Amid Pipeline Uncertainty

From a fundamental perspective, Merck’s stock presents an intriguing asymmetry. Year-to-date, shares have declined 0.4% while the broader pharma industry rallied 13.6%—a notable underperformance that created a valuation discount.

Trading at a forward P/E of 11.22x versus the industry average of 16.59x and its own 5-year mean of 12.51x, MRK appears attractively priced. Consensus 2025 earnings estimates have ticked up slightly from $8.94 to $8.98 per share, though 2026 estimates moderated from $9.46 to $8.81 per share over the past 60 days—reflecting lingering concerns about the Keytruda LOE transition period.

The Bottom Line: Will Pipeline Density Overcome Keytruda’s LOE?

Merck’s transformation from a Keytruda-dependent company to a diversified pharmaceutical innovator is well underway, but execution remains the ultimate test. The company’s aggressive pipeline expansion, coupled with targeted M&A, signals confidence that new blockbusters can fill the revenue gap left by the 2028 LOE. However, the market’s cautious stance—reflected in below-valuation-average multiples—suggests investors are adopting a “show me” attitude until these pipeline candidates prove commercial viability.

The next three years will determine whether MRK’s portfolio diversification strategy genuinely neutralizes the Keytruda LOE risk or merely delays an inevitable period of revenue headwinds.