What changed
$MRK — Develops vaccines and prescription medicines for diseases.
🎯 Q1 FY26 | Rev $16B | EPS $-1.28 vs $-1.47 🟢
💡 Consensus expects MRK to benefit from Keytruda's patent cliff offset by pipeline deals, but the market is underestimating the magnitude of near-term earnings dilution from the TERN-701 acquisition and heavy R&D spend (77% of revenue). The EPS beat was driven by one-time items or cost shifts, not sustainable operational improvement.
🏢 Business Quality: 7/10 | Valuation: fair
📉 Reward/Risk: upside 10% to $132 vs downside 15% to $102; ratio 0.67:1, unfavorable.
🔮 Catalyst: TERN-701 deal close in May; watch for Phase 2 data readouts and any Keytruda biosimilar erosion updates. Failure signal: if Keytruda sales decline >5% QoQ or TERN-701 trial enrollment disappoints.
Also in play: $PFE $JNJ $ABBV $NVS $LLY $DHR