Turning $10,000 into $50,000 in about five years would require a compound annual growth rate (CAGR) of almost 38%. That's an extremely tough task for any corporation, but can Merck (MRK -1.01%), a leading pharmaceutical company, pull it off?
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Merck is facing challenges
Merck's biggest growth drivers are cancer drug Keytruda and its HPV vaccine franchise, Gardasil and Gardasil 9. However, both are facing issues.
Keytruda will experience a patent cliff by 2028, inviting biosimilar competition that will likely erode its sales. And even beyond that, several medicines in development are looking to challenge Keytruda's dominance. Meanwhile, sales of Gardasil and Gardasil 9 have declined this year largely due to lower demand in China.
In the second quarter, Merck's revenue decreased by 2% year over year to $15.8 billion. These headwinds (and others) explain why Merck's shares have significantly lagged the market this year.
Don't bet on it
Merck can navigate these challenges. The company recently earned approval for a subcutaneous version of Keytruda. This newer formulation will benefit from patent protection beyond 2028 while taking on most of the older version's indications.
Subcutaneous Keytruda proved just as effective while reducing patient monitoring and prep time significantly for physicians, making it a better option in many cases. And regarding Gardasil and Gardasil 9's issues, Merck is working those out and expects the vaccines' sales to rebound and grow at a good clip through the next few years.
Further, the drugmaker has newer approvals, such as Winrevair for treating pulmonary arterial hypertension. Even so, Merck's challenges will weigh on the stock enough to make it hard for the company to beat the market through 2030 -- let alone deliver an outrageous CAGR of 38% it needs to turn $10,000 into $50,000 by then.
Is Merck stock a buy? For long-term, dividend-seeking investors, the drugmaker still looks attractive. For investors looking for a CAGR of 38% through 2030, it's not a good choice.
