Wall Street rarely pays for the same drug twice. Once a big trial succeeds, the stock jumps and investors start asking what comes next.
That question gets louder when a company’s biggest product is heading toward a patent cliff. One hit can’t fill a revenue gap measured in tens of billions of dollars, so the pipeline has to keep producing.
Investors usually get their answers on earnings calls or at medical meetings. Sometimes a smaller room tells them more. Private meetings between analysts and senior executives rarely make headlines, but analysts often walk out with a clearer read on what management really believes.
One of the biggest names in pharma just spent a day answering Wall Street’s questions about exactly that. The conversation kept circling back to lung cancer, the deadliest cancer in the U.S., and to a drug class where a rival partnership already stumbled this year.
Now Bank of America has shared what it learned from Merck’s (MRK) chief medical officer, and its takeaways point to a crowded fourth quarter for the stock.
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Merck’s Keytruda patent cliff raises the pipeline stakes
Merck’s cancer immunotherapy Keytruda generated about $31.7 billion in sales in 2025, making it one of the best-selling drugs in the world. Its key U.S. patent protection starts running out in 2028.
The drug still carries the company. Keytruda and its newer under-the-skin version, Keytruda Qlex, brought in $8.4 billion of Merck’s $16.6 billion in second-quarter sales, according to a statement from Merck.
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Merck also raised its full-year 2026 revenue forecast to a range of $66.3 billion to $67.3 billion in that report.
Management says the post-Keytruda plan is on track. “Our belief in our ability to have substantial growth once we get closer to the LOE (loss of exclusivity) is as high as it’s ever been,” Merck CEO Robert Davis said in February, as reported by Fierce Pharma.
Merck has told investors its newer drugs carry more than $70 billion in annual revenue potential by the mid-2030s.
The market started buying that story in August. Shares jumped about 12.5% on Aug. 19 after Merck and Moderna (MRNA) reported that their personalized cancer vaccine, intismeran autogene, improved recurrence-free survival with Keytruda in a Phase 3 melanoma trial, according to Merck.
Bank of America keeps Merck Buy rating after top doctor meeting
Bank of America (BofA) hosted investor meetings with Merck Chief Medical Officer Eliav Barr on Sept. 22, and analyst Jason Gerberry’s team came away more convinced that the pipeline now drives the stock. “Overall, management conveyed a high degree of confidence across a catalyst-rich pipeline, with potential value-driving data expected over the next 12-18 months,” the analysts wrote in a Sept. 23 research note.
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The bank kept its Buy rating and $166 price objective, which sits about $15 above the $150.91 share price used in the note. That target is based on 16.5 times BofA’s 2027 earnings estimate, roughly in line with the large-cap pharma stocks it covers.
In my analysis, the modest upside is the most telling detail. Merck stock has traded between $77.58 and $156.92 over the past 52 weeks, according to BofA, so the shares have nearly doubled from the low.
BofA is arguing that pipeline data, not a cheap valuation, has to drive the next leg higher.
Merck’s lung cancer drug faces a big test in October
The drug at the center of the meeting was sacituzumab tirumotecan, or sac-TMT, an antibody-drug conjugate (ADC) that Merck licensed from China’s Kelun-Biotech. An ADC uses an antibody to find a protein on tumor cells, called TROP2 in this case, and delivers a chemotherapy payload straight to it.
Merck is testing sac-TMT in 17 Phase 3 trials, according to Fierce Pharma.
Here’s what Barr told investors about sac-TMT, according to the BofA note:
- Its linker chemistry creates a strong “bystander effect,” killing neighboring tumor cells without excessive toxicity
- It carries a lower risk of interstitial lung disease, a serious lung inflammation seen with some ADCs
- It combines well with Keytruda and other immunotherapies, while pairing ADCs with chemotherapy is harder
- He is concerned about the toxicity burden of a competing ADC regimen that adds carboplatin, a platinum chemotherapy drug
That competitor points to AstraZeneca (AZN) and Daiichi Sankyo (DSNKY), whose Phase 3 AVANZAR trial pairs their TROP2 ADC Datroway with an immunotherapy and carboplatin. BofA expects data from both AVANZAR and Merck’s OptiTROP-Lung06 study this quarter.
OptiTROP-Lung06 already met its main goal in July. The China-based study found sac-TMT plus Keytruda delayed disease progression compared with chemotherapy plus Keytruda in first-line patients whose non-small cell lung cancer tests negative for PD-L1, the protein that immunotherapy drugs like Keytruda target.
Leerink Partners analysts called it the first direct evidence that an ADC could replace platinum chemotherapy in a first-line lung cancer regimen, Fierce Pharma reported. Full results will be presented Oct. 25 at the European Society for Medical Oncology (ESMO) Congress in Madrid, according to Kelun-Biotech.
Why a failed rival lung cancer trial didn’t rattle Merck
In June, Merck and Gilead Sciences (GILD) stopped a Phase 3 trial called EVOKE-03 that paired Gilead’s TROP2 ADC Trodelvy with Keytruda in untreated lung cancer patients with high PD-L1 levels. The combination showed “a numerical improvement” in progression-free survival but missed statistical significance, according to a statement from Merck and Gilead.
That trial used the same tumor target and the same partner drug as Merck’s own program. Barr “was generally dismissive of its relevance to SAC-TMT,” the BofA analysts wrote.
EVOKE-03 and OptiTROP-Lung06 enrolled different patient groups, which is the core of Merck’s argument. In my view, the full October data will show how wide sac-TMT’s edge really is, and investors will still want to see it repeat in Merck’s global trials.
For patients, the stakes are practical. I trained as a pharmacist before I covered markets, and platinum drugs such as carboplatin are among the chemotherapies that demand the closest monitoring for blood-count drops and nausea.
About 229,410 Americans are expected to be diagnosed with lung cancer this year, according to the American Cancer Society. A first-line regimen that swaps out chemotherapy could change what treatment feels like for many of them.
Barr also stressed giving oncologists flexibility on how long patients stay on treatment, compared with standard regimens that stop chemotherapy after four cycles, the note said.
What else Bank of America is watching in Merck’s pipeline
The cancer vaccine is next in line. Detailed Phase 3 melanoma data arrives at ESMO in October, but BofA said the bigger 2027 tests are mid-stage readouts in kidney and bladder cancer, which management views as key gating events for expansion.
Merck is moving carefully on “cold” tumors, the types that respond poorly to immunotherapy. Barr “expressed interest but little urgency until the mechanisms of benefit are better understood,” the analysts wrote.
BofA also flagged two near-term catalysts outside oncology. Merck expects updated Phase 3 ATLAS-UC results for its TL1A drug in ulcerative colitis in the coming months, and Phase 3 BRUNELLO data for its eye drug MK-3000 in diabetic macular edema, a diabetes complication that causes vision loss.
Merck is already hiring commercial staff for an ophthalmology buildout, according to the note.
The risks Bank of America sees for Merck stock
BofA’s Buy call comes with three named risks. Keytruda faces competition and pricing pressure, including uncertainty over how Medicare drug price negotiation will treat the Keytruda Qlex follow-on product.
The pipeline could also deliver less than the bank models, and competition could hit Merck’s other growth brands.
For Merck shareholders, the next checkpoint is Oct. 25 in Madrid, when sac-TMT’s lung cancer data goes up against a rival that still leans on chemotherapy.
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