Goldman Sachs maintains a positive view on MRK: The event path through year-end 2026 is more complex, but the overall setup remains positive

Overview

This is a Goldman Sachs company research report on Merck & Co. (MRK.N), focusing on the key event path from the second half of 2026 through year-end and its illustrative impact on the stock price. The report believes that MRK's stock performance this year has been driven mainly by events involving enlicitide, sac-TMT, HIV, and Winrevair, as well as approximately $25 billion in business development transactions. Management expects to reduce uncertainty around approximately $35 billion of commercial opportunities by year-end 2026, with a long-term goal of achieving approximately $70 billion in potential commercial opportunities by the mid-2030s.

Core views

The core view is that although MRK's share price has risen year to date and undergone an approximately threefold P/E re-rating, with the market becoming more valuation-sensitive ahead of the Keytruda patent cliff, Goldman Sachs still believes the future event mix has a net-positive impact on MRK. The most important upside catalyst is the MRNA-partnered intismeran autogene (INT) program; successful Phase 3 adjuvant melanoma data could validate the personalized neoantigen therapy platform and expand it into additional oncology indications. sac-TMT-related readouts provide additional upside convexity, while Winrevair, tulisokibart, and MK-3000 affect new product cycles in cardiopulmonary, immunology, and ophthalmology, respectively.

Analysis framework

The report uses an event-driven framework to analyze MRK's internal pipeline readouts, regulatory developments, and external competitor/partner clinical events one by one, while using theoretical DCF, probability-of-success adjustments, and P/E multiple sensitivity to estimate potential stock-price impacts. It also incorporates investor discussions, KOL feedback, cross-trial comparisons, Visible Alpha consensus expectations, and Goldman Sachs' proprietary model to assess commercial feasibility, expectation gaps, and risk/reward asymmetry for each event.

Methodology notes

• Valuation methodsTheoretical DCF sensitivity analysis

  Estimate the impact of individual pipeline events on MRK's theoretical DCF by adjusting peak sales, profit sharing, or probability of success.

  For example, Winrevair and tulisokibart are each modeled with a 60% PoS; a 10-15 percentage-point change in the probability of success would affect DCF by approximately 0.5%-0.75% and 0.6%-1%, respectively.

• Valuation methodsP/E multiple sensitivity

  Use changes in the P/E multiple to estimate the impact of events on market sentiment and relative upside to the target price.

  The report states that each 0.25x change in MRK's P/E corresponds to approximately a 2% change in the target-price implied stock value; a 1.0x P/E change from INT could have a potential impact of approximately 7%.

• Clinical event assessmentCross-trial comparison and KOL due diligence

  Compare candidate-drug data with existing therapies, competing pipelines, and key clinical endpoints in the same indications.

  The report compares clinical response rates, BCVA, PFS, HR, and other metrics in indications including UC, DME, and NSCLC, while noting the limitations of cross-trial comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MRK.N / US.MRK

  Research subject

  Strengths

  A strong Keytruda base business, multiple post-Keytruda LOE pipeline programs, strong BD capabilities, and several potential new product cycles including Winrevair, sac-TMT, tulisokibart, and INT.

  Weaknesses

  The stock has significantly outperformed and been re-rated, the Keytruda LOE remains a core long-term pressure, and some pipeline assets are not included or are only partially reflected in the model.

  Comparison

  2027E P/E is approximately 13.3x, below the peer average of approximately 14.5x and median of approximately 14x; the report believes valuation has risen but still leaves room for event-driven upside.

  Risks

  Poor clinical readouts, regulatory delays, superior competitor efficacy, weaker-than-expected pipeline commercialization, and lower-than-expected contribution from acquisitions.

• INT / intismeran autogene

  Personalized neoantigen therapy program partnered by MRK and MRNA

  Strengths

  Successful Phase 3 adjuvant melanoma data could validate the platform and expand it into other solid tumors; the report considers it to have the strongest upside asymmetry for MRK.

  Weaknesses

  MRK's model does not yet include this asset, and the disclosure may only indicate whether statistical significance was achieved rather than provide a complete HR value.

  Comparison

  Five-year data from the Phase 2 KEYNOTE-942 study were strong; Phase 3 must replicate the RFS and distant-metastasis-related benefits.

  Risks

  Uncertainty around event timing, failure to achieve statistical significance in Phase 3, or efficacy below the high Phase 2 benchmark.

• sac-TMT

  MRK/Kelun partnered ADC pipeline and an important asset for addressing the Keytruda LOE

  Strengths

  Goldman Sachs estimates approximately $13.8bn in unadjusted global sales in 2035; external Phase 3 data from China and global competitor events could further de-risk the program.

  Weaknesses

  The global strategy in 1L mNSCLC and its head-to-head advantage versus Keytruda+chemo still require validation.

  Comparison

  Kelun OptiTROP-Lung06, SMMT/Akeso ivonescimab, and AZN/Daiichi Datroway are all key reference points.

  Risks

  Stronger competitor PD1xVEGF or TROP2 ADC data, insufficient survival benefit in global Phase 3 trials, and excessive market reaction to a single event.

Key data

• MRK year-to-date performance+21%The report states that MRK has outperformed DRG by approximately 9% and SPX by approximately 10% year to date.
• Disclosed upside7.5%Upside shown on the report cover.
• Market capitalization$314.3bnDisclosed in the cover data table.
• Enterprise value$349.1bnDisclosed in the cover data table.
• 2027E P/E13.3xThe report states that MRK trades at approximately 13.3x 2027E P/E after the re-rating, below the peer average/median of approximately 14.5x/14x.
• Winrevair Cpc-PH/HFpEF peak-sales assumptionApproximately $6bn unadjusted peak sales, 60% PoSPAH also has approximately $8bn in unadjusted peak sales.
• tulisokibart 2035 sales assumptionApproximately $5.8bn unadjusted, approximately $3.5bn risk-adjusted, 60% PoSGoldman Sachs' model is above Visible Alpha's approximately $4.8bn unadjusted and approximately $3.2bn risk-adjusted estimates.
• sac-TMT 2035 sales assumptionApproximately $13.8bn unadjusted, approximately $7.1bn risk-adjustedVisible Alpha consensus is approximately $9.2bn unadjusted and approximately $6.4bn risk-adjusted.
• Potential DCF impact of INTApproximately 4% DCF upside, with event-driven stock upside of up to approximately 7%Based on an estimate of approximately $6.7bn in unadjusted 2035 melanoma and NSCLC sales for intismeran and approximately 50% profit sharing.

Impact & implications

The investment implication is that valuation debate around MRK is intensifying, but the event path in the second half of 2026 could still help the market reassess its growth capabilities after the Keytruda LOE. Positive INT Phase 3 data, external validation of sac-TMT, or positive key data for tulisokibart/MK-3000 could lead to a re-rating of MRK's pipeline value; data lacking differentiation or regulatory delays could instead reinforce market concerns about valuation and commercialization feasibility.

Risks

• Before the Keytruda LOE, the market is raising its demands for alternative sources of MRK's long-term growth.
• The stock has already risen year to date and its P/E has been re-rated; if catalysts are not sufficiently strong, the risk of valuation retracement increases.
• If communication with the FDA regarding endpoints such as TTCW for Winrevair in Cpc-PH/HFpEF is delayed, it could result in a low-single-digit downside.
• If tulisokibart's UC data lack differentiation, confidence in its commercialization as an immunology platform asset could weaken.
• If MK-3000 only demonstrates non-inferiority rather than clear superiority, the market reaction may be limited.
• If INT Phase 3 data fail to achieve significance, although the report believes MRK's downside would be limited, the platform-validation narrative would be affected.
• External readouts related to sac-TMT and NSCLC face risks from rapidly changing competitive dynamics and misinterpretation of cross-trial comparisons.

What to watch

• Initiation of Winrevair Phase 3 trials in Cpc-PH/HFpEF and confirmation with the FDA of the primary endpoint, including TTCW.
• 52-week maintenance data from tulisokibart ATLAS-UC Study 1, as well as Phase 2 readouts in SSc-ILD, RA, and HS.
• Primary completion of the MK-3000 BRUNELLO DME Phase 3 trial and potential topline data in October 2026.
• Interim data from the INTerpath-001 Phase 3 adjuvant melanoma trial, with particular focus on whether RFS achieves statistical significance.
• Potential detailed data from Kelun OptiTROP-Lung06 at ESMO, particularly PFS and OS trends.
• Final PFS and interim OS readouts from the squamous-cell carcinoma cohort of SMMT HARMONi-3, as well as 2027 data from the nonsquamous-cell carcinoma cohort.
• Read-across from AZN/Daiichi AVANZAR and other TROP2 ADC/PD1xVEGF combinations for MRK's sac-TMT strategy.
• Whether MRK continues to use BD leverage to strengthen its post-Keytruda LOE growth trajectory.