The healthcare sector lagged broader equities last year. Novo Nordisk (NVO 1.50%) and Merck (MRK +0.31%), two pharmaceutical leaders, were among the underperformers. But here's the good news: There are solid reasons to think the two leading drugmakers will do much better this year. Here is why Novo Nordisk and Merck could rebound in 2026.
1. Novo Nordisk
Last year, Novo Nordisk lost market share to its biggest competitor in the all-important weight management drug market. The company also experienced some clinical setbacks. However, the Denmark-based drugmaker could perform much better in 2026. First, Novo Nordisk has earned important label expansions for some of its products. Wegovy is now approved for patients with metabolic dysfunction-associated steatohepatitis.
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An oral version of Wegovy became the first of its kind to receive approval for weight management. This product could help Novo Nordisk gain back some momentum in its main therapeutic area.
Second, the healthcare leader could see some brand-new approvals hit the market. Novo Nordisk is awaiting regulatory approval for CagriSema, its next-gen anti-obesity drug that performed even better than semaglutide (the active ingredient in Wegovy) in late-stage clinical trials. Third, Novo Nordisk could also experience important clinical progress. For instance, the company's Amycretin is undergoing phase 3 studies in obesity.
NYSE: NVO
Key Data Points
It has both oral and subcutaneous formulations in late-stage trials. Amid all that, Novo Nordisk should report stronger financial results. That's why the company's outlook looks much better this year, and the stock could rebound.
2. Merck
Merck's rebound has already started. The pharmaceutical giant performed well toward the end of 2025. But there could be even more upside left this year. One important factor to monitor for Merck will be clinical progress with several programs. For instance, the company's Winrevair, already approved for pulmonary arterial hypertension, is targeting a narrow indication with currently limited treatment options. A recent phase 2 win put Merck on the right path here.
Then there is CD388, a potentially transformative long-acting antiviral drug for influenza. Current flu vaccines are not very effective and often fail to provide protection, especially for some of the most at-risk populations. CD388 could address these challenges.
NYSE: MRK
Key Data Points
Further, Merck's subcutaneous formulation of its best-selling medicine, Keytruda, earned approval in September. As this version makes commercial progress in 2026 and attracts some of the old formulation's patients -- because the newer one is easier and faster to administer -- it will help show that, once Keytruda's patent cliff comes in 2028, Merck will be prepared.
Now, Merck's financial results shouldn't be exceptional this year. The company still faces slow sales from its HPV vaccines, Gardasil and Gardasil 9, due to weak demand in China. However, Merck's clinical progress and sales from the new Keytruda could help move the stock in the right direction through 2026.
