The name Merck is synonymous with Keytruda, a blockbuster cancer treatment. But that isn't what has reinvigorated Merck stock in recent weeks.
Rather, investors are watching the company's burgeoning pipeline of heart drugs — an opportunity that Merck pegs at $10 billion annually by the mid-2030s. The timing couldn't be better. The key patent protecting Keytruda, Merck's biggest moneymaker today, is expiring in the U.S. in 2028.
Merck expects that by 2030 the Food and Drug Administration will approve five of its heart drugs for eight diseases. Chief Medical Officer Eliav Barr says the effort goes beyond just stanching the sales losses from Keytruda's patent expiration. Heart disease is the leading cause of death in the U.S.
"All of these people have some medicines they can take, but they still have huge unmet medical needs," he told Investor's Business Daily. "These drugs will address a tremendous amount of medical need, and that's what makes this area attractive to us."
It's attractive to Merck stock investors too. Shares are flirting with a buy zone of 89.58 to 94.06 after initially breaking out on April 29. Since then, Merck stock has twice retaken its buy point above a cup-with-handle base, according to MarketSmith.com.
Merck Stock: Moving Deeper Into Heart Disease
Merck's efforts in heart disease span six decades. But it's only in the last year that the company says its cardiovascular pipeline in late-stage testing has tripled. In April, the company noted that it had a group of six heart drugs in testing. That includes three internally developed medications, two in collaboration with Bayer and one acquired with Acceleron Pharma in November.
Merck stock edged higher on the heart drugs announcement.
Barr says Merck started off its "renaissance" in heart disease by looking at PAH, or pulmonary arterial hypertension. PAH is a form of high blood pressure in the lungs and heart that worsens over time. It has a five-year mortality rate of 43%. Existing therapies only treat the symptoms of the disease.
First, Merck partnered with Bayer on Adempas, an approved PAH medicine. It also partners with Bayer on a heart-failure treatment called Verquvo. Then, it bought Acceleron and its drug called sotatercept. Finally, Merck developed its own inhaled treatment for PAH.
PAH is caused by a faulty signal in the body that tells the blood vessels to thicken. Other treatments tell the blood vessels to dilate. But sotatercept sops up growth signals in the vessel walls, he said.
"We show patients have a rapid drop in their pulmonary arterial resistance — in other words, how hard it is for their blood to pump through the blood vessels — and their hearts go out of heart failure," Barr said. "That translates to better symptom control."
Now, Merck is moving sotatercept into a Phase 3 study in a larger set of patients. The study will look at the effect of sotatercept on top of standard drugs. The results should be available by the end of the year. SVB Leerink analyst Daina Graybosch sees that study as a key catalyst for Merck stock, which she rates with an outperform and 100 price target.
Heart Failure Has A 50% Mortality Rate
Outside of PAH, Merck and Bayer are testing Verquvo in patients with chronic heart failure. Verquvo is already approved to reduce the risk of heart failure and cardiovascular death for some patients.
Merck notes patients with chronic heart failure tend to deteriorate over time. Half of patients die within five years of diagnosis.
The company also has three drugs developed internally. This includes its potential inhaled PAH drug as well as treatments for blood clots and atherosclerosis. Atherosclerosis is a buildup of cholesterol in the walls of arteries, impacting blood flow.
All together, it adds up to a potential $10 billion opportunity by the mid-2030s. That could help slow the sales decline from Keytruda, which is going off patent in the U.S. in 2028. Last year, Merck's bread-and-butter cancer medicine brought in north of $17 billion in sales.
Graybosch, the SVB Leerink analyst, applauded Merck's efforts to diversify its strategy.
"In our view, pipeline diversity is the most important topic for Merck, as we saw last year where asset success and failures outside of oncology drove large stock shifts," she said. "We believe wins for CV (cardiovascular) programs in the next years could have outsized positive impact for the stock."
Preclinical Pipeline Is One To Watch
The company also has a large pipeline of earlier-stage cardio-metabolic drugs in laboratory testing, says Fiona Marshall, who leads Merck's preclinical efforts. Marshall declined to go too specifically into the company's preclinical efforts for competitive reasons.
But she called out some clinical-stage drugs from Merck's own laboratory, including an experimental oral PCSK9 inhibitor. These drugs work to lower "bad" LDL cholesterol. There are injected drugs on the market from Amgen and Regeneron Pharmaceuticals. But those must be given by a health care professional, so their uptake has been limited.
Merck stock investors should look for more coming out of the preclinical pipeline "in the near future," she told IBD. "There's a lot of things coming through that we feel confident can fill some of the gap left by Keytruda."
All of this could give Merck stock additional chances to shine. Today, shares have a nearly perfect Composite Rating of 98, putting them in the leading 2% of all stocks in terms of fundamental and technical measures.
Merck stock also has a strong Relative Strength Rating of 95, according to IBD Digital. This puts shares in the top 5% of all stocks in terms of 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
