Can Merck’s strategy around Keytruda formulations delay the biggest patent cliff in pharma history?

Merck & Co. (NYSE: MRK) is preparing for one of the largest patent expirations in pharmaceutical history. Its blockbuster immuno-oncology therapy Keytruda, which generated USD 29.5 billion in 2024, faces a 2028 loss of exclusivity in the United States. That milestone could open the door to biosimilar competition against a product that currently represents nearly half of the company’s annual revenue. The American pharmaceutical company is pursuing an aggressive life-cycle strategy to extend the value of the Keytruda franchise, including the launch of a subcutaneous formulation, investments in oncology adjacencies, and diversification into respiratory and other therapeutic areas.

The stakes are immense. Analysts estimate that the revenue erosion from Keytruda could rival any single-drug cliff in history, surpassing past examples such as Lipitor or Humira. The question is whether Merck’s strategy can soften the blow and buy enough time for new assets to scale.

How much revenue risk does Merck face from Keytruda’s 2028 loss of exclusivity, and why is the subcutaneous formulation central to its defense strategy?

Keytruda has become the backbone of Merck’s oncology business and a defining growth engine across tumor types. Its broad label spans melanoma, lung, bladder, kidney, and multiple other cancers. In 2024, Keytruda delivered USD 29.48 billion in revenue, accounting for 46 percent of Merck’s global sales. The scale of this reliance means that the 2028 loss of exclusivity poses an unprecedented challenge.

The subcutaneous formulation, expected to launch in the U.S. in late 2025, is designed to defend market share as exclusivity expires. Unlike the intravenous version, which requires lengthy infusion sessions, the subcutaneous presentation can be administered in just minutes, improving convenience for patients and healthcare providers. This efficiency also reduces resource burdens for clinics and hospitals. Strategically, Merck is aiming to migrate a significant portion of its patient base to the subcutaneous version, which is supported by patents extending beyond 2028. By shifting usage to a newer formulation, the company hopes to blunt the immediate impact of biosimilar entrants.

To what extent could U.S. drug price reforms and Medicare negotiation timelines alter the patent cliff’s impact window?

The regulatory environment is another crucial variable. Recent legislative adjustments suggest that negotiated Medicare prices for Keytruda may not take effect until 2029, potentially delaying one year of revenue pressure. This timing shift offers Merck a small reprieve, but it does not eliminate the fundamental exclusivity risk.

At the same time, new guidance from the Centers for Medicare and Medicaid Services has created uncertainty over whether different formulations—such as subcutaneous versus intravenous versions—will be grouped together in negotiation processes. If regulators decide that the subcutaneous formulation is not distinct enough, Merck’s ability to sustain premium pricing on the newer version could be curtailed. Thus, while policy timelines may buy time, they do not fundamentally change the long-term revenue challenge.

How are institutional investors viewing Merck’s reliance on Keytruda, and what signals can be drawn from recent stock performance?

Investors remain cautiously optimistic but acutely aware of the risks. On one hand, Merck’s execution in growing Keytruda, investing in pipeline adjacencies, and maintaining operational discipline has been well received. On the other hand, the company’s reliance on a single product has kept its valuation tethered.

Episodes of stock volatility have reflected this tension. When Medicare pricing discussions suggested earlier or broader impacts, shares dipped sharply. Conversely, positive clinical updates or acquisition news that hinted at diversification potential helped lift sentiment. At present, institutional investors generally assign Merck a “neutral-to-positive” outlook, but most acknowledge that the 2028–2029 period represents an unavoidable test of the company’s resilience.

What are the mechanics behind the subcutaneous launch, and why do analysts describe it as a life-cycle management move rather than a permanent solution?

The subcutaneous launch rests on clinical trial data showing non-inferiority to intravenous Keytruda in terms of pharmacokinetics and efficacy. With dosing intervals stretching up to six weeks, the subcutaneous version offers both clinical and operational advantages. Analysts highlight that these attributes could accelerate adoption in oncology practices focused on efficiency and patient experience.

However, life-cycle management has limits. If regulators decide that both intravenous and subcutaneous formulations should be treated as the same product for pricing purposes, Merck’s strategy could lose some of its potency. Moreover, biosimilar developers are expected to eventually produce their own subcutaneous versions, eroding the differentiation advantage. For these reasons, the subcutaneous formulation is best seen as a strategic bridge to new pipeline revenue rather than a permanent moat.

Which diversification levers is Merck deploying to reduce reliance on Keytruda?

Merck has been actively pursuing mergers, acquisitions, and partnerships to broaden its portfolio. The acquisition of Harpoon Therapeutics brought promising T-cell engager assets that complement checkpoint inhibitors and expand Merck’s oncology toolkit. These assets could serve as combination therapies alongside Keytruda or form standalone growth drivers in the long term.

In 2025, Merck also announced the acquisition of Verona Pharma in a USD 10 billion deal, adding a late-stage respiratory asset with blockbuster potential. This move underscores Merck’s commitment to diversifying into chronic disease markets that offer durable, large-scale revenue streams. By pairing oncology leadership with respiratory and other adjacencies, Merck hopes to smooth its revenue curve through the patent cliff period.

How does Merck’s approach compare with peers confronting the 2027–2029 patent cliff cycle?

Merck’s strategy mirrors the defensive playbook unfolding across Big Pharma. Competitors such as Pfizer, Bristol Myers Squibb, and AstraZeneca are all navigating similar challenges. Pfizer is targeting biologics and antibody-drug conjugates through its Seagen acquisition. Bristol Myers Squibb is investing heavily in bispecific antibodies and next-generation oncology partnerships. AstraZeneca has set a goal of doubling revenue to USD 80 billion by 2030, supported by a broad pipeline across oncology, rare diseases, and cardiometabolic therapies.

In this landscape, Merck’s subcutaneous Keytruda is a textbook example of life-cycle management. However, its reliance on one mega-franchise magnifies the stakes. Other companies with more diversified revenue bases may face less abrupt cliffs, making Merck’s execution risk higher.

What variables will determine whether Merck can sustain oncology leadership beyond 2028?

Three factors stand out as decisive. First, the adoption curve for subcutaneous Keytruda will reveal whether Merck can successfully migrate patients to the newer formulation before biosimilars enter. Strong uptake would extend pricing power and contract leverage, while weak adoption would accelerate erosion.

Second, regulatory decisions on drug pricing reforms and formulation grouping will frame the economic advantage of the subcutaneous version. If grouped together, Merck may struggle to differentiate pricing.

Third, pipeline delivery must be visible by 2027. Approvals in oncology combinations, accelerated pathways for T-cell engagers, or blockbuster launches in respiratory medicine will be critical in convincing investors that Merck can offset Keytruda’s eventual decline.

How effective is Merck’s Keytruda strategy in buying time before the 2028 patent cliff takes full effect?

Merck’s strategy to prepare for the Keytruda patent cliff is widely seen as pragmatic and necessary. The launch of the subcutaneous formulation offers both clinical and operational advantages, improving patient experience and strengthening Merck’s position with providers and payers. The acquisition of Verona Pharma broadens the company’s footprint into chronic respiratory care with blockbuster potential, while oncology additions from Harpoon Therapeutics enhance the existing checkpoint inhibitor base with new modalities that could be deployed in combination regimens.

Nonetheless, the strategy is not without risk. The regulatory environment may compress the pricing runway if subcutaneous and intravenous formulations are grouped together for Medicare negotiations. Pipeline execution also remains a key variable, as trial outcomes will determine whether these new assets can meaningfully offset Keytruda’s eventual decline. In essence, Merck has created a credible two- to three-year window to stabilize its business, but the ultimate measure of success will be whether its diversification moves and late-stage pipeline can fill the revenue gap left by a USD 30 billion product.

How are investors reacting to Merck’s Keytruda strategy and what could drive its stock performance through 2028?

Merck’s stock is likely to remain sensitive to policy headlines, clinical trial data, and adoption metrics for subcutaneous Keytruda. Institutional investors are treating the company as a high-quality but concentrated play, rewarding operational execution while discounting long-term uncertainty.

If Merck demonstrates rapid uptake of subcutaneous Keytruda, secures favorable Medicare negotiation outcomes, and delivers visible late-stage pipeline wins, sentiment could shift toward the higher end of valuation ranges. Conversely, slow uptake or unfavorable regulatory decisions could reignite concerns about a steep step-down in earnings beyond 2028.