Merck’s Oncology Business Will Help It Crush the Bear Market
Cancer is one of the leading causes of death worldwide. That’s why it’s not surprising that the field of oncology is one of the largest — and one of the fastest-growing — in the pharmaceutical industry.
And while there are plenty of oncology-focused drugmakers out there, Merck (MRK 0.12%) is arguably one of the most prominent of the bunch. The pharma giant has also performed well in the stock market this year, and it could continue on its upward trajectory for many years.
Let’s consider why Merck is an excellent cancer-related stock to buy now.
Keytruda is leading the way
Merck’s most important product in its oncology lineup is Keytruda. This cancer medicine has earned more than 30 indications in the U.S. — the most of any cancer medicine — and many more abroad. In 2021, Keytruda was the best-selling cancer medicine worldwide with total sales of $17.2 billion, representing a 19.5% year-over-year increase. And the cancer therapy isn’t done growing its sales.
Keytruda’s total sales were $4.8 billion in the first quarter, 23% higher than the year-ago period. And there’s more good news for the future of Keytruda. The medicine has already reached the milestone of 1 million commercial patients, and Merck thinks it will double that total by 2024. According to some estimates, Keytruda will generate sales of about $26.9 billion by 2026, when it will become the world’s best-selling drug.
Further, Merck is working on a subcutaneous formulation of Keytruda that could help extend the medicine’s patent exclusivity. In short, Keytruda will continue contributing to Merck’s revenue growth for the foreseeable future — excellent news for the company and its shareholders.
Keytruda is still undergoing plenty of clinical trials and will continue to earn new indications. But Merck’s oncology lineup is also full of early-stage compounds in development. The company boasts more than 60 ongoing clinical trials in this area alone.
One of Merck’s most recent new approvals is Welireg, to which the U.S. Food and Drug Administration first granted the regulatory nod in August 2021. Welireg treats several forms of cancer associated with von Hippel-Lindau, a rare disorder that causes tumors.
Merck’s arsenal also includes cancer treatment Lynparza, the rights of which it shares with U.K.-based pharma giant AstraZeneca; and Lenvima, which it shares with Japan-based Eisai. Both are also undergoing various clinical trials.
Merck expects more than 80 new oncology approvals through 2028. Further, there are credible rumors that Merck is looking to acquire the cancer-focused biotech Seagen. Regardless of whether this acquisition happens, Merck will continue to solidify its already strong position in oncology.
More reasons to buy
Merck is active in other therapeutic areas as well. For instance, its HPV vaccines Gardasil and Gardasil 9 continue to perform well. Combined sales of these two products jumped by 59% year over year to $1.5 billion in the first quarter.
Merck is also still one of the leading animal health companies worldwide. First-quarter sales of the company’s animal health unit grew by 4% year over year to $1.5 billion. Animal health is on an upward trajectory. According to some estimates, the market will expand at a compound annual rate of 10% through 2030. Expect Merck to benefit from this trend.
Overall, the company’s total sales in the first quarter came in at $15.9 billion, 50% higher than the year-ago period. And despite its solid stock market performance this year, Merck remains reasonably valued with a forward price-to-earnings (P/E) ratio of 12.5. The pharmaceutical industry’s average is 12.7.
It isn’t too late to get it on this pharma giant that could continue crushing the market thanks to its large part to its oncology business.