Over the past 18 months, Merck (MRK +0.20%) shares have been mostly southbound as the drugmaker encountered several headwinds. Its vaccine business isn't performing as well as expected, resulting in lower revenue growth than anticipated. Furthermore, there are a growing number of mid- or late-stage clinical candidates that could challenge the dominance of Keytruda, its blockbuster cancer drug.
However, Merck has been working hard to navigate these headwinds. Recent developments have given the company's prospects -- and share price -- a boost. Let's find out what those are, and what they could mean for investors.
Merck records an important mid-stage win
In 2021, Merck acquired Acceleron Pharma, a smaller drugmaker, for $11.5 billion. The key asset from the transaction was sotatercept, which was, at the time, an investigational medicine for pulmonary hypertension (PH, a type of high blood pressure in the lungs).
Sotatercept has since earned approval, is marketed under the brand name Winrevair, and is indicated to treat a specific type of PH called pulmonary arterial hypertension (PAH), which happens when blood flow in the lungs is disrupted due to the narrowing of blood vessels. Winrevair is performing pretty well so far. The medicine was approved just last year and has generated $976 million through the first nine months of 2025.
Image source: Getty Images.
However, there could be even more in store for this compound. Merck recently announced that sotatercept successfully completed a phase 2 study in patients with combined post- and precapillary pulmonary hypertension (CpcPH) due to heart failure with preserved ejection fraction (HFpEF). In simpler terms, that's when a patient develops two causes of PH at the same time (a subset of Group 2 PH, one of the more common forms of the disease).
This mid-stage win is a big deal for Merck. CpcPH due to HFpEF is classified as rare, but as the company pointed out, it's believed to be underdiagnosed. And right now, there are no treatments approved specifically for CpcPH. So Merck is targeting a specialist market, where it may not face much direct competition if sotatercept passes phase 3 studies and earns this label expansion.
Even with only around 100,000 patients -- which is well in the ballpark of "rare" -- the medicine could achieve significant success in this indication. It could add over $1 billion to the annual sales potential of sotatercept. That's why Merck's shares jumped on the news. The company might soon encounter competition, whether from biosimilars or otherwise, for Keytruda. But sotatercept's progress is giving the market confidence that it will be a key asset in helping Merck move beyond its current crown jewel.
There's even more good news
Several other developments bode well for Merck's prospects. Let's consider two.
First, the company recently announced that it would acquire Cidara Therapeutics (CDTX +0.06%) , a mid-cap biotech company, for approximately $9.2 billion in cash. Merck will get access to CD388, a potential therapy that could disrupt the influenza market. Current flu vaccines have significant drawbacks, including low or waning efficacy as the season progresses. They can also be less effective in some of the people who need them the most: the elderly and the immunocompromised.
CD388 seeks to address all these shortcomings. The medicine has performed well in phase 2 studies, and it could become an important addition to Merck's portfolio.
NYSE: MRK
Key Data Points
Second, Merck is inching closer to another brand-new launch. The company's combination of doravirine and islatravir is being studied for treating HIV and is awaiting approval from the U.S. Food and Drug Administration, which could come down sometime early next year. It could be yet another product that will help Merck's post-Keytruda plans.
It's also worth pointing out that Merck has received approval for a subcutaneous version of Keytruda. Though lacking all the original version's indications, this new formulation won't face a patent cliff anytime soon. As Merck combines subcutaneous Keytruda with newer products like Winrevair, its potential HIV treatment, and Capvaxive -- a pneumonia vaccine that earned approval last year and generated $244 million in sales in the third quarter -- it should be able to get past the challenges to its core franchise.
Is the stock a buy?
The drugmaker may face more challenging days ahead as it navigates current issues with its vaccine business. However, it's showing why it has performed well for a very long time. Merck's deep pipeline and ability to identify attractive opportunities should allow it to perform well over the long run, despite the obstacles it faces.
Finally, Merck is a terrific dividend stock that has increased its payouts by 84.7% over the past decade and currently offers a forward yield of 3.5%. It may not be a stock to buy for explosive growth, but it is an excellent, reliable blue chip income stock to add to your portfolio.
