Key Points

• Merck is seeking ways to prepare for a significant upcoming patent cliff.

• The company has just announced another acquisition that will help it achieve that goal.

• With its newer products, strong dividend, and reasonable valuation, Merck still looks attractive.

• 10 stocks we like better than Merck ›

Merck (NYSE: MRK), a leading pharmaceutical company, generates consistent revenue and profits. However, the stock has been under pressure over the past year due to its reliance on Keytruda, its famous cancer medicine. It might be the best-selling drug in the world, but Keytruda will experience a patent cliff by the end of the decade -- a significant risk investors have to take into consideration.

Merck has been looking for ways to mitigate the risk of competition, and the drugmaker just made a move that could help along those lines. Should investors consider buying the stock?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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Merck dishes $10 billion to expand its lineup

On July 9, Merck announced that it would acquire Verona Pharma, a U.K.-based biotechnology company specializing in the development of medicines for respiratory diseases. Merck will pay $10 billion in cash for this transaction, allowing it to add Ohtuvayre -- which treats chronic obstructive pulmonary disease (COPD) -- to its portfolio.

First approved by the U.S. Food and Drug Administration (FDA) last year, Ohtuvayre is a treatment for COPD that looks highly promising. It has so far had a successful launch, and it is still being investigated across other conditions, which could later lead to label expansions.

Though estimates vary (as always), some analysts think Ohtuvayre sales could peak at around $4 billion. So, it seems the company has yet another blockbuster on its hands. But will that be enough to replace Keytruda?

Merck's multipronged approach

Merck has entered into several such agreements in recent years. In 2021, it acquired Acceleron Pharma for $11.5 billion. This deal eventually allowed it to launch Winrevair, a medicine for pulmonary arterial tension. Winrevair is yet another promising therapy, with projected peak sales at around $3 billion.

Between Ohtuvayre and Winrevair, that's at most $7 billion in peak annual revenue, though, much lower than the $29.5 billion in sales Keytruda generated last year. Merck will need far more than that, but the company does have a plan.

Some of its acquisitions have yet to yield approved products with blockbuster potential. In 2023, the company paid $10.8 billion for Prometheus Biosciences and its promising candidate for ulcerative colitis, MK-7240. That could be another great addition to the company's portfolio, provided it aces enough clinical trials to land regulatory approval from the FDA.

Merck isn't just relying on buyouts to plan for its post-Keytruda life, though. One of the company's most important internally developed projects is a subcutaneous (SC) version of its crown jewel. SC Keytruda recently aced a phase 3 clinical trial in which it proved noninferiority compared to the original, intravenous version of the medicine in treating patients with non-small cell lung cancer, one of Keytruda's most important markets.

The newer version of the cancer therapy does have some advantages over the old, though, including significantly cutting the time patients spend in the treatment room and the time physicians spend preparing the therapy, administering it, and monitoring patients afterward.

SC Keytruda should attract plenty of business across many of the original's indications once all is said and done. And, together with the newer therapies Merck now has under its banner, should allow the company to smooth out the losses once biosimilar competition for Keytruda enters the market.

The stock could perform well post-Keytruda

Merck currently has more than 80 programs across its phase 2 and phase 3 pipeline. So, even beyond the candidates mentioned, the company should be able to find new gems.

Putting aside label expansions for existing medicines, even a 25% success rate on brand-new clinical compounds should translate to several novel launches over the next five years. Not all will be blockbusters, but Merck's deep pipeline and recent moves show that it is capable of moving beyond Keytruda.

Additionally, there are other reasons to consider buying the stock. First, Merck's shares look incredibly cheap right now. The company is trading at 9.3 times forward earnings estimates. The average for the healthcare sector is 16.2.

Second, Merck is a solid dividend stock. The company's forward yield sits around 4%, and it has increased its payouts by 88.8% in the past decade.

Merck's shares have lagged the market over the past year, but the company's prospects are still strong, at least for those willing to hold onto the stock for a while.

Should you invest $1,000 in Merck right now?

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool has a disclosure policy.

If you want to achieve significant gains in the stock market, you'll probably want to plan to hold on and remain invested for many years, or even decades. But in some cases, big payoffs can come much faster than that. The benefit of investing in growth stocks is that they have the potential to deliver some terrific returns.

For example, growth stocks Strategy (NASDAQ: MSTR), Mara Holdings (NASDAQ: MARA), and Verona Pharma (NASDAQ: VRNA) have yielded fantastic gains for investors over the past five years. If you had invested $15,000 into each one of these stocks just five years ago and held on, you would have a portfolio worth more than $1 million today. The question is, do they still have the potential for further significant gains for investors who buy them right now?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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Strategy

A $15,000 investment made five years ago into the company that at that time called itself MicroStrategy would now be worth around $458,000. That's a staggering return when you consider that its core technology business hasn't been taking off. The company, which earlier this year shortened its name to Strategy, has actually experienced a decline in revenue in recent years. While it's nominally involved in providing business intelligence solutions, the reason its stock skyrocketed was tied to its aggressive moves in the cryptocurrency space.

Strategy is the largest corporate holder of Bitcoin (CRYPTO: BTC), with a stash that now totals more than 500,000 coins. The company routinely updates investors on its position and Bitcoin holdings. Executive Chairman Michael Saylor is incredibly bullish on the popular digital currency's potential value, predicting that its token price will climb to well over $1 million in the future, and suggesting that it could potentially top $13 million by 2045.

Strategy stock could still rise higher if Bitcoin does well. But it's a highly speculative buy: Its valuation is not tied to its overall performance, but is instead contingent on how strong the crypto market is. If you're bullish about that, you may feel that the stock could be a good buy. But for the majority of investors, this investment is likely to be too risky and speculative to hold.

Mara Holdings

Bitcoin mining company Mara has also benefited from the cryptocurrency's rising value over the past five years. During that stretch, a $15,000 investment into the stock would have grown into a holding worth approximately $290,000. Remarkably, that result includes a steep drop that it hasn't fully recovered from yet: The crypto stock is down by more than 50% from where it began 2022.

In the past three years, the company's bottom line has fluctuated drastically, from a loss of more than $694 million in 2022 to a profit of $541 million in 2024, and the stock has been similarly volatile. Its performance inevitably hinges on the changes in the market value of the digital assets it mines and holds.

As with Strategy, this is a speculative buy, as Mara's valuation will ultimately depend on how well Bitcoin is doing. This isn't a stock I'd suggest owning unless you have an extremely high risk tolerance.

Verona Pharma

The only stock on this list that hasn't amassed its gains due to crypto is Verona Pharma. However, the biopharmaceutical company has still generated impressive returns for investors. A $15,000 investment in the business five years ago would now be worth $267,000. Add that to the gains from your hypothetical $15,000 investments in the other two companies mentioned, and you'd have around $1.02 million.

Shares of Verona started to take off in June 2024 after the company obtained Food and Drug Administration approval for Ohtuvayre as a maintenance treatment for chronic obstructive pulmonary disease. Analysts believe Ohtuvayre can become a blockbuster drug, generating more than $1 billion in annual revenue for Verona by 2029.

Verona incurred a loss of more than $173 million last year, but with Ohtuvayre already beginning to generate sales, the business is on a much more positive trajectory. The stock's valuation isn't cheap, as its market cap is hovering around $7 billion. But given its promising growth prospects and its possible path to profitability, it's the only stock on this list that I'd consider buying today.

Should you invest $1,000 in Strategy right now?

Before you buy stock in Strategy, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Strategy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $869,841!*

Now, it’s worth noting Stock Advisor’s total average return is 789% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.