Citigroup has downgraded Merck & Co. from “Buy” to “Neutral,” with a revised price target of \$84. This move centers on the looming 2028 loss of exclusivity for Merck’s cornerstone cancer drug, Keytruda. Though the market has partially accounted for this in its pricing, analysts flagged slow progress in the company’s pipeline. New therapies and product launches appear insufficient to replace the expected 10-20% revenue drop once Keytruda faces generic competition.
🧪 While Merck maintains strong financials and impressive cash flow, its conservative stance on acquisitions raises red flags. Citigroup believes the company could ease this looming pressure through sizable commercial-stage acquisitions—ideally over \$10 billion. Yet, management seems more focused on waiting out policy and regulatory clarity rather than aggressively expanding its portfolio.
💉 Another red flag: Gardasil sales were down 14% in Q1 2025 versus the previous quarter. While pipeline assets like Winrevair and enlicitide show promise, their timelines and market potential may not align fast enough to counterbalance the shortfall. The company’s current cadence suggests a risk of falling behind peers in capturing new growth avenues.
💵 Dividend Fundamentals
💠 Dividend Yield: 4.23%
💠 Annual Dividend: \$3.24 per share
💠 Payout Ratio: 45.54%
💠 Dividend Growth: 5.41% (1-year), 5.73% (3-year), 6.66% (5-year), 5.83% (10-year)
💠 Years of Consecutive Increases: 15
💠 Ex-Dividend Date: March 17, 2025
Merck’s dividend remains a stronghold, but long-term investor confidence hinges on the company’s ability to effectively transition beyond Keytruda.