EU CHMP Opinions Bolster KEYTRUDA's Market Position

Merck & Co. (NYSE: MRK), a prominent pharmaceutical company, has received two positive opinions from the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) concerning its flagship anti-PD-1 therapy, KEYTRUDA (pembrolizumab). These recommendations signify significant regulatory progress for the oncology blockbuster, indicating a potentially expanded market presence and extended revenue longevity.

Detailing the Regulatory Advancements

The first opinion recommends the approval of a novel subcutaneous (SC) route of administration for KEYTRUDA. This innovative formulation, developed in collaboration with Alteogen Inc., is designed to reduce the administration time from an approximate 30-minute intravenous infusion to a 1-2 minute subcutaneous injection. This shift is poised to enhance patient convenience significantly and broaden access by enabling treatment in diverse healthcare settings. The recommendation is supported by data from the pivotal 3475A-D77 trial, which demonstrated comparable pharmacokinetic exposure levels between the SC and intravenous versions.

Concurrently, the CHMP also issued a positive opinion for KEYTRUDA as a perioperative regimen for certain adult patients with resectable locally advanced head and neck squamous cell carcinoma (LA-HNSCC) whose tumors express PD-L1. This recommendation is based on findings from the Phase 3 KEYNOTE-689 trial, which reported a statistically significant improvement in event-free survival with the KEYTRUDA-based regimen compared to adjuvant radiotherapy alone. Both recommendations are now awaiting final decisions from the European Commission, which are expected in the fourth quarter of 2025. Separately, the U.S. Food and Drug Administration (FDA) has set a PDUFA date of September 23, 2025, for the subcutaneous pembrolizumab Biologics License Application, with Merck planning a U.S. launch on October 1, 2025, pending approval.

Market Dynamics and Financial Implications

The market sentiment surrounding these developments is largely bullish. Analysts view the positive regulatory opinions as a clearance of significant hurdles, potentially increasing future sales projections for Merck. KEYTRUDA currently stands as the top-selling oncology drug globally, underpinning Merck's robust financial performance. In the first half of 2025, KEYTRUDA generated $15.16 billion in sales, accounting for over half of Merck's pharmaceutical revenue, with full-year 2025 sales projected at $32.2 billion. Merck's overall financial health remains strong, with annual revenue of $63.62 billion, a gross profit margin of 77.41%, and a P/E ratio of 12.55, coupled with a reliable 3.97% dividend yield. Its balance sheet shows a current ratio of 1.42 and a debt-to-equity ratio of 0.72, indicating sound financial management.

Broader Context and Future Outlook

The introduction of the subcutaneous formulation is a strategic maneuver by Merck to mitigate the impact of the impending loss of patent exclusivity for the intravenous version of KEYTRUDA around 2028, which could lead to a 30-60% erosion of sales from biosimilar competition. Analysts anticipate a 30-40% conversion rate from the intravenous to the subcutaneous version within two years of its launch, offering a pathway to extend the drug's lifecycle and maintain revenue streams. However, this strategy is not without challenges. Merck is currently embroiled in a patent dispute with Halozyme Therapeutics, which alleges infringement related to its hyaluronidase enzymes. The outcome of this litigation could significantly influence the commercialization timeline and profitability of KEYTRUDA SC.

Despite the positive regulatory news, some analysts have expressed caution. Berenberg, for instance, recently downgraded Merck's stock rating from Buy to Hold, adjusting its price target to $90.00 from $100.00, citing concerns over KEYTRUDA patent issues. This underscores the significant revenue concentration risk, as KEYTRUDA accounted for 46% of Merck's 2024 revenue. In parallel, Merck is actively pursuing its acquisition strategy, recently tapping the bond market to fund a $10 billion purchase of Verona Pharma Plc.

Moving forward, investors will closely monitor the final decisions from the European Commission in Q4 2025 and the U.S. FDA's September 23, 2025, PDUFA date for the subcutaneous formulation. The resolution of the patent dispute with Halozyme and the actual rate of patient conversion to the SC version will be critical determinants of Merck's future market performance. These factors, alongside broader industry trends and Merck's ongoing research and development initiatives, will shape the company's trajectory in the highly competitive pharmaceutical landscape.