๐ Executive Summary
As Merck & Co. (MSD) enters 2026, the pharma giant faces a defining inflection point shaped by an impending patent cliff, stringent regulatory scrutiny, fierce competition in oncology, and the urgent need for pipeline-driven renewal. At the center of Merck's challenge is Keytruda (pembrolizumab) โ the world's top-selling drug in 2024 at $29.5 billion in sales โ which loses U.S. market exclusivity in late 2028.
๐ก "With Keytruda alone accounting for an estimated 40% of Merck's pharmaceutical revenues, its patent expiry represents an outsized revenue risk. Merck's leadership is executing a multi-pronged strategy to build 'pipeline-driven resilience' through new formulations, diverse pipeline therapies, and strategic acquisitions."
CEO Robert Davis is executing a multi-pronged strategy to soften this blow: extending Keytruda's lifecycle via new subcutaneous formulations and indications, accelerating a diverse pipeline of therapies, and pursuing strategic business development. The analysis finds that while Merck's post-2025 outlook carries substantial risks, the company is actively leveraging its scientific and strategic muscle to cultivate new growth drivers.
Keytruda 2024 Sales ($B)
Revenue Concentration (%)
Pipeline Revenue Target ($B)
Potential Blockbusters
๐ฏ Key Strategic Priorities for 2026
SC formulation (Keytruda Qlex), new combination regimens, and 40+ approved indications to retain franchise value
$4B+ Daiichi partnerships, VelosBio acquisition, and Kelun TROP2 ADC to build next-gen oncology
Oral PCSK9 (MK-0616), Winrevair for PAH, and $10B Prometheus acquisition for immunology
Verona ($10B), Prometheus ($10.8B), SpringWorks ($3.9B) to fill pipeline gaps and diversify revenue
โฐ Patent Cliff & Exclusivity Risk Map (2025โ2029)
Merck faces a concentrated loss-of-exclusivity (LOE) wave from 2025 through 2029 that puts nearly half of its 2024 pharmaceutical revenue at risk. The most critical is Keytruda, whose primary U.S. patents expire in late 2028 (with two patent-term-adjusted extensions to 2029 that Merck expects will be litigated vigorously).
Critical Keytruda Exposure
Analysts project Keytruda sales to peak around $33โ34B in 2028 and then drop ~19% to ~$27.4B by 2029 as biosimilars begin to erode U.S. market share. Historical analogs suggest sharper declines are possible โ Europe saw Humira's price slashed ~80% in some markets within a year of biosimilar entry.
Key Patent Expiry Timeline
Januvia/Janumet & Lenvima
Januvia ($4.7B) U.S. generics by mid-2026 via settlement; Lenvima (~$3B, Eisai partnership) faces LOE in 2026
Lynparza & Bridion
Lynparza (AZ partnership) loses U.S. exclusivity; Bridion (sugammadex, anesthesia) patent expiry 2026
KEYTRUDA & Gardasil 9
Keytruda ($29.5B) primary U.S. patents expire late 2028; Gardasil 9 U.S. patents expire (EU 2030); IRA Medicare price cuts active Jan 2028
Prevymis & Keytruda Extensions
Prevymis global LOE 2029; Lynparza EU protection 2029; Keytruda EU exclusivity until 2031
LOE Revenue at Risk by Product
Estimated 2024 revenue exposed to LOE 2025-2030 ($B)
Keytruda Revenue Projection
Projected Keytruda trajectory through LOE
๐ก๏ธ Merck's Defense & Mitigation Strategies
FDA approved Sept 2025 for 38 tumor indications. Under-skin injection offers dosing convenience and clinic/office administration vs IV infusion centers. May retain patient loyalty even after IV biosimilars launch.
Two patents tied to Keytruda's active ingredient extend to 2029. Merck expects vigorous litigation. Competitors (Celltrion, Samsung Bioepis, Amgen) have biosimilar candidates in late-stage development.
Pairing pembrolizumab with Merck's own agents (belzutifan HIF-2ฮฑ, ADCs) could yield new combination approvals patent-protected beyond Keytruda's LOE, creating protected niches.
โก IRA Double Impact: Keytruda was selected for Medicare price negotiation in 2026 (new discounted prices active Jan 2028), compounding the post-LOE revenue hit. This unprecedented situation โ a flagship oncology drug facing both biosimilar competition and government price-setting nearly simultaneously โ means Merck must prepare for Keytruda U.S. sales to peak in 2027โ28 and then fall sharply.
โ๏ธ Regulatory Exposure & 2025โ2026 Milestones
Merck's recent regulatory track record reflects the complexity of managing a broad portfolio in a stringent global environment. In the past 24 months, Merck has encountered both approvals and setbacks across the US (FDA), European (EMA), and UK (MHRA) regulatory fronts.
โ ๏ธ Recent Regulatory Setbacks & Responses
Patritumab Deruxtecan CRL (June 2024)
FDA issued Complete Response Letter for BLA of HER3-DXd (co-dev with Daiichi Sankyo) due to manufacturing deficiencies at third-party site. Crucially, FDA did not cite efficacy or safety issues โ purely CMC-triggered. Reflects regulatory emphasis on manufacturing robustness for complex biologics.
Manufacturing IssueIfinatamab Deruxtecan Partial Hold (Late 2025)
FDA placed partial clinical hold on Phase 3 I-DXd trial after "higher than anticipated" incidence of fatal interstitial lung disease (ILD). Trial paused for enrollment while Merck, Daiichi, and independent safety committee review data. ILD is a known class risk for DXd-based ADCs.
Safety Signalโ Major Approvals & Upcoming Milestones (2025โ2026)
Keytruda Qlex (SC Formulation)
FDA approved September 2025 for 38 tumor indications. Enabled by recombinant hyaluronidase โ offers comparable efficacy with shorter administration time. Key lifecycle extension strategy.
Approved Sept 2025mRNA Cancer Vaccine (mRNA-4157/V940)
Developed with Moderna. Compelling Phase 2b data in melanoma โ adding vaccine to Keytruda cut relapse risk in half. FDA granted Breakthrough Therapy designation. Phase 3 trial launched 2023; filing by late 2025/2026 conceivable for accelerated approval.
Breakthrough DesignationKeytruda + Welireg (Adjuvant RCC)
LITESPARK-022 Phase 3 showed Keytruda plus Welireg significantly improved disease-free survival in renal cell carcinoma after nephrectomy vs Keytruda alone โ first combination to beat PD-1 monotherapy in adjuvant RCC. sBLA filing expected 2025โ26.
Phase 3 Success๐ Key Pipeline Submissions & Decisions (2025โ2026)
| Asset | Indication | Expected Milestone | Strategic Importance |
|---|---|---|---|
| MK-0616 | Hypercholesterolemia (Oral PCSK9) | Ph3 readout 2025; Filing 2025/26 | First oral PCSK9 โ multi-billion potential |
| MK-7240 (PRA023) | IBD (UC, Crohn's) | Ph3 ongoing; Filing ~2026 | $10.8B Prometheus acquisition โ immunology entry |
| MK-2870 | Solid Tumors (TROP2 ADC) | Ph3 data 2025-26 | Kelun partnership โ competes with Gilead's Trodelvy |
| Zilovertamab vedotin | Hematologic Cancers (ROR1 ADC) | Pivotal trials; Launch 2026-27 | VelosBio acquisition โ heme oncology foothold |
| Islatravir | HIV PrEP | Ph3 late 2025; Filing 2026 | Long-acting oral PrEP (after dose-related safety pause) |
๐ Manufacturing & Compliance Considerations
๐ญ CMC Robustness
The patritumab CRL shows Merck isn't immune to CMC risks. Biologics manufacturing complexity and contract manufacturer dependencies can derail timelines. Merck investing in upgrades and new facilities.
๐ Post-Marketing Commitments
Merck needs to deliver required post-marketing studies for accelerated approvals (long-term survival data in early-stage breast cancer, renal cancer) to secure labels. Early signals positive.
โ๏ธ FDA Evidence Standards
FDA oncology reviewers prefer overall survival endpoints. Merck's discipline shown by terminating TIGIT/LAG-3 Phase 3 trials after futility analyses โ stops investments unlikely to meet FDA's bar.
๐ Supply Chain Focus
FDA/EMA emphasizing supply chain robustness. Merck must ensure Keytruda production network and high-volume products (Winrevair, COPD drug) can meet demand without compliance stumbles.
โ๏ธ Competitive Landscape Analysis (2026)
Merck's competitive position in 2026 is anchored by its leadership in immuno-oncology (IO), even as the field grows increasingly crowded with formidable rivals and next-generation therapies. Oncology remains Merck's stronghold: Keytruda has set the standard of care across dozens of cancer types, outpacing all competitors in both sales and breadth of use.
๐ฏ Immuno-Oncology (PD-1/L1 & Next-Gen IO)
Keytruda will continue to face off with Bristol Myers Squibb's Opdivo ($9.0B in 2023), Roche's Tecentriq, and AstraZeneca's Imfinzi through 2026.
Bristol Myers Squibb
Opdivo+Yervoy combinations plus novel Opdualag (Opdivo + LAG-3) โ first next-gen checkpoint combo approved for melanoma. Merck ended its own LAG-3 Phase 3 studies after futility analysis.
Roche
Pushing TIGIT (tiragolumab) in lung cancer despite mixed interim results. If TIGIT eventually proves out, Merck would need to license/partner โ having scrapped its in-house vibostolimab program.
Regeneron/Sanofi
Libtayo (cemiplimab) carved out cutaneous squamous cell carcinoma market and challenging in lung cancer with chemo combinations similar to Keytruda's.
Next-Gen IO Targets
Anti-TIM-3, anti-TGF-ฮฒ, IL-2 variants, cell-based immunotherapies advancing from biotechs and Novartis. Merck playing catch-up in "IO 2.0" areas relative to its PD-1 leadership.
PD-1/L1 Market Leadership (2024 Sales)
๐งฌ Antibody-Drug Conjugates (ADCs) โ The New Battleground
Perhaps the most significant competitive shifts by 2026 will come from ADCs. Merck lost out to Pfizer in the bid to acquire Seagen (the ADC leader) and responded with aggressive licensing deals.
Merck's ADC Strategy
2023: $4+ billion Daiichi Sankyo deal for patritumab deruxtecan (HER3-DXd) and ifinatamab deruxtecan (I-DXd). However, patritumab hit manufacturing snag and I-DXd saw safety hold.
Key ADC Competitors
๐ก Strategic Implication: 2026's oncology market will see intensifying competition from ADC combos. Whoever can combine immune checkpoint blockade with targeted cytotoxic delivery most effectively may set new standards. Merck aims to be on the winning side but faces heavyweight opponents.
๐ Vaccines Competitive Landscape
Gardasil/Gardasil 9 โ HPV ($8.6B in 2024)
Merck created the market but faces emerging threats: China approved first homegrown 9-valent HPV vaccine (Xiamen Innovax's Cecolin 9) in 2025. Potential CDC policy shift to one-dose regimen could flatten U.S. volume. Merck expanding capacity.
Pneumococcal โ Vaxneuvance vs Prevnar
Merck's 15-valent competing against Pfizer's dominant 20-valent Prevnar-20. CDC guidelines favor either single PCV20 or sequential PCV15+PPSV23 โ awkward position. Pfizer's Prevnar-20 will be firmly entrenched in pediatrics by 2026.
Market Gaps
Merck missed RSV vaccines (GSK's Arexvy, Pfizer's Abrysvo launched 2023). Merck's Zostavax rendered obsolete by GSK's Shingrix. Shingles market belongs to GSK by 2026.
๐ Competitive Position by 2026
Clear Leader
- โข Immuno-oncology (Keytruda)
- โข HPV vaccines (Gardasil)
- โข IO + ADC combinations
Strong Contender
- โข HIF-2ฮฑ inhibition (Welireg)
- โข PAH (Winrevair)
- โข ADC pipeline
Defensive Position
- โข Pneumococcal vaccines
- โข HIV therapies
- โข Next-gen IO (TIGIT/LAG-3)
๐งช Pipeline Assessment: Late-Stage & Scientific Momentum
Merck's pipeline in 2025โ2026 reflects a deliberate pivot to fortify the post-Keytruda future, with a mix of late-stage assets nearing commercialization and earlier programs targeting diverse mechanisms. The overarching question is whether this pipeline can produce one or more "second engines" of growth.
๐ก "While no single drug will replace Keytruda's earnings, Merck's goal is for a portfolio of new launches to collectively bridge the gap. Management outlined that by mid-2030s, new oncology meds could contribute ~$25B, new cardiometabolic ~$15B, and new immunology/HIV ~$10B โ totaling $50 billion in annual revenue."
๐ฏ Oncology Beyond PD-1
Weliregยฎ (Belzutifan) โ HIF-2ฮฑ Inhibitor
Originally from Peloton acquisition. Approved 2021 for VHL disease-associated renal tumors. Achieved positive Phase 3 result (LITESPARK-022) in 2025 as adjuvant RCC therapy combined with Keytruda โ first combination to beat PD-1 monotherapy. Patent protection until 2035 in U.S.
mRNA Cancer Vaccine (mRNA-4157/V940)
With Moderna. Phase 2b in melanoma cut relapse risk in half when added to Keytruda for high-risk patients. FDA Breakthrough designation. Phase 3 launched 2023 โ if interim results positive in 2025, filing by late 2025/2026 possible. Would be first mRNA cancer vaccine approved.
ADC Pipeline (Daiichi, VelosBio, Kelun)
Zilovertamab vedotin (ROR1 ADC from VelosBio) in pivotal trials for hematological cancers โ could launch 2026โ27. MK-2870 (sacituzumab tirumotecan, TROP2 ADC from Kelun) in Phase 3 โ aims to improve on Gilead's Trodelvy. LM-299 (PD-1 x VEGF bispecific) in Phase 1.
Pipeline Revenue Potential by Segment
Projected mid-2030s annual revenue by segment ($B)
Key Late-Stage Assets
Development stage progress
โค๏ธ Cardiovascular & Metabolic
MK-0616 โ Oral PCSK9 Inhibitor
Banner cardiometabolic program. Promising Phase 2 results (over 65% LDL reduction at 6 weeks). Phase 3 entered 2023 โ readouts expected 2025. If confirmed, could file 2025/26 for potential 2026 approval. First effective oral pill for PCSK9 could unlock mass market โ analysts predict multi-billion peak sales.
Winrevairยฎ (Sotatercept) โ PAH
From Acceleron acquisition. FDA approved 2024 โ first-in-class activin signaling inhibitor significantly improving 6-minute walk distance and hemodynamics in PAH. Orphan drug exclusivity plus patents to ~2037. $419M in launch year sales (2024) โ poised for blockbuster status.
๐ก๏ธ Immunology โ New Frontier
MK-7240 (PRA023) โ TL1A Antibody for IBD
Acquired via $10.8B Prometheus acquisition (2023). Novel TL1A target in TNF-family pathway. Very encouraging Phase 2 results with high remission rates in biomarker-selected IBD patients. Phase 3 trials underway โ filing possible ~2026 (UC first). Could transform Merck into significant immunology player.
๐ฏ Competitive Advantage: TL1A may address both inflammation and fibrosis in IBD. Prometheus included precision medicine angle with companion diagnostic. Success here gives Merck new franchise in autoimmune diseases โ competing with AbbVie's Rinvoq & Skyrizi, Pfizer's etrasimod.
๐ฌ Additional Pipeline Highlights
๐ซ Ohtuvayre (Ensifentrine) โ COPD
Acquired via $10B Verona Pharma deal (2025). First novel COPD therapy in decades. Analysts project $3โ4B/year potential. Merck must protect patents to mid-2030s.
๐ฆ Islatravir โ HIV PrEP
Novel NRTTI. After dose-related lymphopenia halted trials in 2021, resumed at lower doses for HIV PrEP. Phase 3 data expected late 2025 โ could file 2026 for long-acting oral PrEP.
๐งฌ SpringWorks Assets
$3.9B acquisition (April 2025). Brings nirogacestat (gamma-secretase inhibitor) for desmoid tumors and MEK inhibitor for potential myeloma combo with BCMA agents.
๐๏ธ Ophthalmology & Neurology
EyeBio stake (2023) โ ocular gene therapy exploration. Cerevance partnership for Alzheimer's targets. Longer-shot programs for beyond 2026.
๐ฏ Strategic Positioning & Leadership Signals
Merck's top leadership โ CEO Robert Davis, President of Merck Research Labs Dr. Dean Li, and other executives โ have been actively communicating the company's strategy to navigate this pivotal era. Their public statements reveal key themes and priorities.
๐ CEO Robert Davis: Strategic Priorities
"Oncology First, But Not Oncology Only"
Davis noted Merck is "not looking to pull back on spending in oncology... [but] focusing resources so it's not just about Keytruda." Sustain Keytruda dominance while ramping investment in newer oncology products and diversifying into cardiometabolic, immunology, HIV, and ophthalmology.
Business Development as Central Pillar
M&A to "augment internal innovation" โ over $25B on deals 2021โ2025. Disciplined approach: seeking right science and value, not just scale. Examples: Prometheus ($10.8B for immunology), Verona ($10B for COPD), SpringWorks ($3.9B for oncology).
$3B Cost-Cutting Initiative
Announced mid-2025 to "redirect from older, slow-growth businesses to newly launched drugs and R&D" by 2027. Davis stated Merck will reinvest savings, not just boost profits โ supporting new products like Welireg, LaNova bispecific, and data science capabilities.
AI & Digital Transformation
Davis champions "meaningful investments in artificial intelligence, machine learning in our labs." Early partner with Variational AI's molecule generator. Aiming to shorten discovery timelines and improve customer engagement through data analytics.
๐ค M&A and Licensing Track Record
๐ 2026 Scenario Forecasts
๐ฏ Upside Case
Pipeline delivers on all cylinders. Oral PCSK9 approved, cancer vaccine succeeds, Prometheus IBD drug advances. New products ramping strongly pre-cliff.
Strong 2026-27 positions Merck for softer LOE landing
โ๏ธ Base Case
Keytruda peaks 2027-28 as expected. New products growing but may not fully offset LOE. 2026 is buildup year โ execution matters.
Revenue dip 2029-30, recovery by 2031
โ ๏ธ Downside Case
Major pipeline setbacks โ PCSK9 safety issue, cancer vaccine fails Phase 3, ADC programs stall. Biosimilar erosion sharper than modeled.
Emergency cost cuts and opportunistic M&A needed
๐ก Key Signals to Monitor (2025โ2026)
Clinical Trial Readouts
MK-0616 Phase 3 (2025) โ biggest swing factor. LITESPARK studies for Welireg. Cancer vaccine Phase 3 interim. Prometheus IBD Phase 3.
Regulatory Decisions
FDA Advisory Committees for novel products. EMA/CHMP opinions on Winrevair, Welireg combos. IRA drug selection announcements (Sept annually).
Biosimilar Developments
Keytruda patent litigation settlements. Competitor biosimilar progress (Celltrion, Samsung, Amgen). Oncologist/payer sentiment on PD-1 biosim adoption.
New Launch Uptake
Winrevair quarterly sales trajectory. Ohtuvayre launch metrics. Welireg combo adoption. Early indicators of blockbuster potential.
๐ก Actionable Insights
Key takeaways for regulatory affairs teams, competitive intelligence professionals, and pharma executives seeking to learn from Merck's patent cliff navigation playbook.
โ๏ธ For Regulatory Affairs Professionals
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Lifecycle Management Excellence: Merck's Keytruda Qlex (SC formulation) demonstrates how new delivery formats can extend franchise value. Pursue formulation innovations that create patient/provider loyalty even post-biosimilar launch.
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CMC Robustness is Critical: The patritumab CRL shows manufacturing deficiencies at contract sites can derail timelines even with solid clinical data. Invest in rigorous pre-approval inspections, especially for complex biologics like ADCs.
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Evidence Standards Rising: FDA oncology reviewers prefer overall survival endpoints. Merck's discipline in terminating TIGIT/LAG-3 trials after futility shows value of rigorous go/no-go decisions. Plan confirmatory trials that meet the bar.
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IRA Scenario Planning: Track how IRA drug pricing negotiation impacts Merck (Keytruda selected for 2028). Scenario-plan how your own drugs would fare if selected โ both for commercial strategy and R&D investment decisions.
๐ For Competitive Intelligence Teams
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Build Biosimilar Intelligence: Track Keytruda biosimilar developers (Celltrion, Samsung Bioepis, Amgen), their progress, pricing approaches, and patent litigation. Understand hospital/payer sentiment on PD-1 biosimilar adoption โ will oncology follow rheumatology patterns or switch faster?
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Monitor ADC Race Closely: AstraZeneca/Daiichi, Pfizer/Seagen, Gilead all advancing competing ADCs. Track datopotamab, Padcev, Trodelvy expansion trials. Merck's ADC setbacks (CRL, partial hold) create windows for competitors.
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Benchmark Patent Cliff Strategies: Merck's "many smaller bets" approach (20 potential blockbusters for $50B collective revenue) vs potential mega-merger models. Compare with BMS post-Revlimid, Pfizer post-Lipitor/Viagra approaches.
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Next-Gen IO Tracking: Merck exited TIGIT/LAG-3 โ watch Roche, BMS for any breakthroughs that could challenge PD-1 backbone. New modalities (cell therapies, bispecifics) could shift competitive dynamics.
๐ For Pharma Executives
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Partnership Timing: Merck's need to offset LOEs means they may pay premium for assets contributing by ~2027-28. If you have promising late-stage assets in oncology, immunology, or cardio-renal, 2025-2026 is prime time to engage.
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Diversification Playbook: Merck expanding from "oncology only" to cardio-metabolic ($15B target), immunology ($10B target). Being best-in-class in niche may be more valuable than broad but shallow presence.
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BD Discipline Matters: Merck lost Seagen bid but didn't overpay โ instead executed targeted deals (Prometheus, Verona, SpringWorks). Shows disciplined M&A can build portfolio without betting the company on single mega-deal.
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Combination Strategies: Keytruda + Welireg beating PD-1 monotherapy shows value of proprietary combinations. Plan indication expansions that pair your lead asset with complementary mechanisms you control.
๐ฏ Conclusion
Merck's 2026 will be a pivotal year of transition, where the company is simultaneously managing the tail of its megablockbuster Keytruda and launching the next generation of products. Keytruda will still be growing or at peak in 2026, fueling resources for investments, but everyone will be looking at the 2028 horizon.
The narrative will revolve around how convincingly Merck can tell the story of "what comes next." Success will be defined by delivering major new approvals with smooth regulatory reviews, executing launches so uptake is strong, and avoiding any significant stumble.
If Merck can tick those boxes, it will enter 2027โ2028 in a position of relative strength โ perhaps facing a revenue dip when Keytruda LOE hits, but with a clear path to rebound thereafter. How effectively Merck navigates 2026 will not only determine its own trajectory beyond the "once-in-a-lifetime" Keytruda era, but also serve as a bellwether for Big Pharma's ability to innovate through the patent cliff gauntlet.