Merck CEO Sees Pipeline Upside as Launches, Animal Health Drive Transformation

Key Points

• Merck’s transformation is gaining momentum through positive pipeline readouts, new product launches, business development and strong Animal Health performance, which management believes could more than double over the next decade.
• CEO Rob Davis said the company’s goal of generating more than $70 billion in revenue from recent launches and pipeline products by the mid-2030s may have upside, citing opportunities such as individualized neoantigen therapy, Terns and the MK-2010 bispecific.
• Merck is expanding its commercial growth prospects with LIPFENDRA, its oral cholesterol treatment, while advancing major oncology and immunology programs including sacituzumab tirumotecan and tulisokibart; coverage for most insured patients is expected by the end of 2027.

Merck & Co., Inc. NYSE: MRK Chairman and CEO Rob Davis said the company’s “transformation is underway,” citing progress across product launches, clinical data readouts, business development and its Animal Health segment during a Morgan Stanley discussion.

Davis said recent pipeline readouts have been positive and, in several cases, arrived faster than expected. He added that Merck expects additional clinical catalysts and potential regulatory filings during the year. The company also sees its Animal Health business continuing to perform at what Davis called “best in industry levels,” with confidence that the unit can more than double over the next decade.

Policy Focuses on PBMs, 340B and Patient Access

On health policy, Davis said Merck remains focused on drug affordability at the pharmacy counter, patient access to medicines and preserving incentives for innovation. He argued that manufacturers receive only about half of each healthcare dollar and said reforms should address the intermediaries in the system.

“That really is about PBM reform. That is about 340B reform,” Davis said, referring to pharmacy benefit managers and the federal drug-pricing program. He said there has been growing legislative momentum around both issues.

Davis also highlighted the use of utilization-management tools by insurers and PBMs, including formularies, step edits and prior authorizations, which he said can delay or deny access to new medicines.

Regarding the 340B program, Davis said Merck supports its original purpose of helping vulnerable patients access care through hospitals and clinics, but believes the program has expanded beyond that intent. He pointed to bipartisan legislation, including a House bill called the ACCESS Act, as well as a Health Resources and Services Administration demonstration project involving a rebate model. While potential reforms could provide tailwinds, Davis said they would not be material to Merck’s business.

Pipeline Strategy and Oncology Opportunities

Davis attributed Merck’s business-development performance to an approach that evaluates internal and external opportunities as a single pipeline, beginning with scientific merit rather than a mandate to acquire an asset in a particular therapeutic area. Merck moved corporate development under Merck Research Laboratories President Dean Li after Davis became CEO, and the company embeds business-development personnel alongside its discovery teams, Davis said.

Li discussed Merck’s individualized neoantigen therapy program with Moderna in melanoma. He said five-year Phase 2 data presented at ASCO showed that patients who were cancer-free after one year generally remained so at three and five years. He said the durability data could be important as investors assess later-stage results.

Merck is initially prioritizing tumor types with high tumor mutation burden, sensitivity to immuno-oncology treatments or an established early-stage role for KEYTRUDA. Li said positive results in additional settings, including muscle-invasive bladder cancer and renal cell carcinoma, could inform whether the company expands the development program more broadly.

Davis said Merck’s previously outlined goal of more than $70 billion in revenue from recent launches and pipeline products by the mid-2030s could have upside. The figure included 20 assets, but individualized neoantigen therapy was not among the 10 products Merck expected to have near-term readouts when it first set the target. Davis also cited the Terns acquisition and MK-2010, Merck’s PD-1-by-VEGF bispecific candidate, as opportunities not included in the $70 billion estimate.

For sacituzumab tirumotecan, an antibody-drug conjugate targeting Trop-2, Davis said Merck is running 17 Phase 3 studies, including 13 in tumor types where it believes the product could be first in class. Li said the company is pursuing indications outside lung and breast cancer while maintaining confidence in the asset’s potential in more competitive settings. Merck is also studying the therapy in combinations with KEYTRUDA and MK-2010 in Phase 2 trials.

LIPFENDRA Launch and Direct-to-Patient Plans

Davis said Merck’s recently approved oral lipid-lowering treatment, LIPFENDRA, is designed to broaden access among patients whose cholesterol remains above goal despite existing therapy. He said about 30 million people in the United States are taking lipid-lowering therapies but are not at goal.

Rather than primarily seeking share from injectable PCSK9 therapies, Davis said Merck aims to increase the overall proportion of eligible patients receiving add-on treatment. He said the company has priced LIPFENDRA competitively and has encountered what he characterized as ordinary restrictions for a newly launched medicine.

• Merck expects full commercial coverage for a majority of insured lives by the end of 2027.
• The company expects Medicare coverage by 2028, though Davis said it is working to potentially accelerate that timing.
• Li said LIPFENDRA’s label notes that it is used with statins, which have cardiovascular-outcomes evidence, while also referencing outcomes evidence for PCSK9 antibodies. Merck’s own cardiovascular outcomes trial is ongoing.

Davis said Merck is also evaluating direct-to-patient channels for suitable medicines. He cited plans involving Leqembi and TrumpRx.gov, while noting that the channel would not fit every product and would not be material to 2026 results.

Immunology, China and Artificial Intelligence

Li said Merck views tulisokibart, its TL1A antibody, as a potential cytokine-focused platform across gastrointestinal, dermatology and rheumatology indications rather than solely as an inflammatory bowel disease treatment. He said Merck expects to receive some Phase 3 data in the fall, though complete data are more likely at the beginning of next year.

Davis said Merck remains interested in sourcing innovation from China but also evaluates opportunities globally. He said the company supports safeguards around national-security concerns while encouraging policies that allow innovative medicines to reach patients. Davis also called for modernization of early-stage U.S. clinical trials, where he said China has advantages in time and cost.

On artificial intelligence, Davis said Merck is using the technology in molecular design and optimization. He said those efforts can help identify safety issues earlier, improve the likelihood of advancing optimized molecules and reduce development costs.

About Merck & Co., Inc. (NYSE:MRK)

Merck & Co, Inc is a global healthcare company that develops, manufactures, and markets prescription medicines, vaccines, and animal-health products. The company serves patients, healthcare providers, and customers in markets worldwide through its Human Health and Animal Health businesses.

Merck's pharmaceutical portfolio includes oncology, infectious disease, cardiology, immunology, and other therapeutic areas. Its products include Keytruda, an immunotherapy used to treat various cancers; Gardasil, a vaccine that helps protect against human papillomavirus (HPV); and Januvia, a treatment for type 2 diabetes.

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