Pharmaceutical giant Merck (NYSE: MRK) is growing its drug portfolio from its recent slate of deals that added several respiratory drugs.
Known for its drugs such as Keytruda that treat cancer, Merck has been diversifying its portfolio of treatments to include respiratory and lung diseases such as cystic fibrosis, chronic obstructive pulmonary disease (COPD), asthma, and influenza A and B viruses.
Merck reported sales of $16.4 billion for the fourth quarter, an increase of 5% from the same period a year earlier. The pharma company generated net income of $2.96 billion, compared to net income of $3.74 billion a year ago.
The company reported strong sales in its pharmaceutical division, which generated $14.84 billion, a rise of 6% from the same period a year ago.
Revenue fell in its vaccines, including HPV vaccine Gardasil, which dropped by 34% to $1 billion, but beat Wall Street estimates of $994 million. A decline in demand in both Japan and China was offset by an increase in the U.S., the company said.
Merck’s animal health division, which manufactures vaccines and medicine for cats, dogs, and cattle, generated $1.5 billion in sales, an 8% rise from last year.
“Momentum is building as we continue to execute on our strategy,” CEO Robert Davis said on a call with analysts.
Shares of Merck have skyrocketed in the past six months, rising 46%.
Mergers and acquisitions add respiratory drugs
Merck closed on its acquisition of Verona Pharma last October and Cidara Therapeutics in January. Verona’s drugs provide treatment for respiratory and lung diseases such as cystic fibrosis, chronic obstructive pulmonary disease (COPD), while Cidara’s drug treats patients with influenza A and B viruses.
Producing a new lineup of drugs is what ensures biopharmaceuticals the ability to continue generating healthy profit margins.
Merck’s “combination of a wide lineup of high-margin drugs and a pipeline of new drugs should ensure strong returns on invested capital over the long term,” wrote Karen Andersen, a director for Morningstar.
Large biopharmaceutical companies can not rely on the revenue of a handful of blockbuster drugs since their patents often expire within a decade because extensive research and development and clinical trials can take several years.
Merck also has several new drugs in its pipeline that will add to its profit margin “after several years of only moderate research and development productivity,” she said.
The company is estimated to produce “multibillion-dollar annual sales potential for several launched products, including pulmonary arterial hypertension drug Winrevair and pneumonia vaccine Capvaxive,” Andersen added.
Merck is also waiting on the results of several drugs that are still undergoing late-stage clinical trials, including its “oral cholesterol-lowering drug enlicitide (which had a positive phase 3 top-line announcement in June 2025) and immunology drug tulisokibart (a differentiated therapy in phase 3 testing), she said.
Similar to its competitors, Merck “relies on new products (internally developed or acquired) to mitigate generic competition from older drugs with expired patent protection,” Andersen said.
Merck’s main oncology drug, Keytruda, is facing lower sales within the next few years since its U.S. patent expires in 2028. The pharmaceutical giant relies heavily on Keytruda’s revenue since it generated 47% of 2024 sales due to “strong clinical data across cancer indications, including a first-mover advantage in one of the largest cancer indications of non-small cell lung cancer,” Andersen wrote.
One advantage that Merck holds is that its international patents for Keytruda run until 2031-33, and a subcutaneous version has patents extending until 2039.
Additional revenue will also be boosted by new cancer drug launches, including combinations with Keytruda, she said. Merck recently received approval from regulators for Keytruda and Keytruda QLEX in combination with Padcev to treat patients who have advanced bladder cancer.
But Merck faces competition from its rivals who are likely to “report important clinical data over the next couple of years, including Akeso/Summit Therapeutic’s bispecific ivonescimab,” she said.
Merck is poised for additional growth as the pharmaceutical company relies more on specialty-oriented drugs and its newer and late-stage pipeline of cardiology and immunology treatments to generate the lion’s share of revenue.
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