Merck Stock Slides Despite Key FDA Win for Keytruda
Shares fall over 3% as investors weigh the long-term impact of a new subcutaneous Keytruda formulation against looming patent expirations.
Merck & Co. shares fell more than 3.6% in recent trading, a surprising downturn that came just after the company announced a significant regulatory victory. The U.S. Food and Drug Administration (FDA) has approved a new, under-the-skin formulation of its blockbuster cancer drug, Keytruda, a move designed to extend the life of its most profitable franchise. However, the market's reaction suggests investors are looking past the immediate good news and focusing on the longer-term challenges facing the pharmaceutical giant.
The approval of the subcutaneous version of Keytruda is a critical strategic development for Merck. The original intravenous version of the drug, which accounts for a substantial portion of the company's revenue, faces the loss of its market exclusivity in 2028. This new formulation, administered via a simple injection, is that is expected once the original patents expire.
According to the company's announcement, the offers a more convenient option for patients, reducing administration time from a 30-minute infusion to a matter of minutes. Despite this clear benefit for patients and a potential moat against competitors, investors reacted by selling off the stock. Trading volume surged to more than double its daily average, indicating a strong conviction behind the move.
The negative price action reflects underlying investor anxiety about the so-called 'patent cliff.' While the subcutaneous version has its own patent protection, some that it will be enough to fully offset the revenue erosion from cheaper biosimilar versions of the original intravenous Keytruda. The key question is how many patients will switch to the new formulation before the competition arrives.
The stock's performance places it below its 50-day and 200-day moving averages, a technical indicator that suggests a bearish trend. While Merck has secured a vital tool in its long-term commercial strategy, the market's immediate verdict is one of caution. The battle to protect the Keytruda empire has just entered a new phase, and investors are signaling they need more convincing that this latest approval will be enough to win the war.