In short: Also on Goldman's best-positioned list, and Belski's pipeline turnaround. "Of course, we like Merck because it's been up so much. But Merck has had the biggest turnaround because of their pipeline… of the drugs." Paired with J&J as the two names where "the fundamental growth is" — against Pfizer, which he treats as a bottomed-out value play rather than a growth story.
Merck is the second of Belski's two growth names in legacy pharma, and he is careful about why. It is not that the stock is cheap — he notes it "has been up so much." It is that the recovery is grounded in the pipeline: the set of drugs in development that will produce revenue in future years.
That distinction matters because a drug company's current earnings tell you about products already sold. The pipeline is the only thing that tells you whether those earnings survive the next patent expiry — which is exactly the pressure the day's Novartis news put on that company.
In short: The other half of the announcement that skewed the sector week, and treated the same way — as a number to back out rather than a position: "yes, you're right, Moderna and Merck skewed it this week," says Harrington, before pointing at Pfizer, Bristol-Myers and Thermo to show the strength runs wider than the vaccine headline. No fresh committee stance on Merck itself this episode (see 2026-aug-19 for the split view).
In short: Split — Simpson owns it, Terranova sold it. The news is unambiguously good: the Moderna-partnered personalized cancer vaccine met its phase-3 endpoint in combination with Keytruda. Simpson: "from a Merck holder's perspective, the Keytruda, which I think is coming off patent in 2028, could be extended now for these other uses. This is a huge day for society if it's even half close to what we're hoping." His broader stance: "my thesis on biotech and pharma is kind of holding my nose from a valuation standpoint — I've been looking at these as the next beneficiary of AI to actually come to fruition." Terranova explains why it left his ETF and won't be chased: "the revenue growth was the challenge — it wasn't the momentum score, which was very strong at the end of July. But over the last three years you're talking about low single-digit revenue growth. That's the reason it fell out." And on price: "from a valuation perspective it is rich on a historical basis — Merck trading at nearly 55 times. That's a hefty price to pay. That's for 3% growth." Simpson concedes: "that's totally fair."
Two committee members, two opposite conclusions from the same good news. Kevin Simpson owns Merck and points to the specific commercial prize: Keytruda, Merck's blockbuster cancer drug, loses patent protection around 2028 — but if it works in combination with the new personalized vaccine, that opens fresh approved uses and extends the franchise beyond the patent cliff.
Joe Terranova sold it and explains exactly why, in a way worth borrowing. The stock's momentum score was strong; what failed was the business: roughly low-single-digit revenue growth over three years. And the price does not forgive that — he puts Merck at nearly 55 times earnings, "a hefty price to pay… that's for 3% growth." (55× is unusually rich for a big pharmaceutical company; the multiple assumes growth the recent record hasn't produced.)
Simpson doesn't argue with the valuation — "that's totally fair." He is holding his nose on price because he believes drug companies are the next industry where AI actually produces results. Note that today's breakthrough was mRNA science, not AI, so that thesis is still unproven.
In short: Historical cautionary tale, not a current view: the late-'80s-to-late-'90s drug run where clients refused to trim for tax reasons — "you had to go another 23 or 24 years before you ever got back to those prices again," and worse after inflation.
34:35In other words, you need to take your cost out and take some profit out. But, I'll give an example. From the mid-80s till about from actually late '80s till about the late '90s, you had a 10-year run on all the drug companies. Merck, Pfizer, all of them went up huge numbers, okay? And we could not get people that had those positions to sell any, and the reason was every reason was this, I don't want to pay any tax.
In short: The bridge broadens. Q2 revenue +5% Y/Y to $16.6B ($240M beat) with adjusted EPS of −$0.13 ($0.13 beat) including a $2.31/share charge from the Terns acquisition. The key development is Keytruda Qlex, the subcutaneous version, at $463M versus $128M last quarter and well above expectations — combined Keytruda/Qlex sales of $8.4B (+5%) make Qlex "increasingly important ahead of Keytruda's 2028 patent cliff," because converting patients to a formulation with its own exclusivity is the cheapest defence available. The rest of the bridge improved too: Winrevair $588M (+75%), Capvaxive $184M (+42%), Ohtuvayre rebounding after Q1 reimbursement issues. Merck closed the $6.7B Terns acquisition on May 5 (adding MK-4208 to hematology) and won FDA approval for Lipfendra, its oral PCSK9 cholesterol drug. FY26 revenue guidance raised $0.4B to $66.3–$67.3B; adjusted EPS fell to $2.66–$2.76 "driven by Terns acquisition charges rather than weaker operations." "The post-Keytruda bridge is getting broader."
In short: Named twice, both times as Gilead's counterparty rather than as a call. As co-developer: "the ISLEND-1 and ISLEND-2 Phase 3 trials for its new, once-weekly oral HIV pill (developed jointly with Merck) read out positively at the AIDS 2026 conference in Rio. The data confirmed that the drug suppressed the virus, supporting regulatory filings for what would be the first-of-its-kind HIV therapy." And via its franchise drug: the FDA "approved Trodelvy in combination with Keytruda for first-line metastatic non-small cell lung cancer" — one of the two label expansions Haymaker calls "not incremental." No view is taken on Merck's shares; it is context for GILD's pipeline and oncology reach.
In short: His other healthcare 52-week-high name (with Lilly) — leadership confirmed by the price, part of the broadening into healthcare.
Merck is a large pharmaceutical company (cancer drugs, vaccines). It's Terranova's other healthcare 52-week-high name alongside Lilly — picked the same way: the sector is broadening back to life, so own the leaders the price action is rewarding rather than the laggards.
In short: Interesting large-cap low-vol watch: range-bound $100–120 at a 5% (7% fwd) FCF yield, fairly unlevered; de-risked ~$35B of pipeline and targets $70B of new commercial revenue by 2030. Likes it, but says CVS is cheaper with more upside.
Merck is a $300B pharma giant whose stock has gone sideways ($100–120) because investors worry about its aging drug pipeline. It's cheap for its quality (a 5% free-cash-flow yield, 7% next year) and carries little debt, and management is reshaping the portfolio — replacing ~$35B of expiring revenue with a $70B new-product target by 2030.
Singh likes it as a steady, low-drama large-cap to watch, but says CVS is cheaper with more upside — so it's a name on the radar rather than a top pick.
Full passage: premium transcript (PDF).
In short: Bill — owned, featured at $83 (now ~$110). Owns the immuno-oncology market; the most conservative income statement anywhere because it expenses 18–20% of revenue on research up front (funding institutions like Fred Hutch, then commercializing the discoveries). ~12x earnings; the whole healthcare space is cheap on policy fear.
Merck is a long-time holding Smead's team featured at $83 (now around $110). It dominates immuno-oncology (cancer drugs that harness the immune system), and it runs unusually conservative accounting: it expenses 18–20% of revenue on research every year, funding top institutions and then commercializing what they discover, rather than capitalizing those costs. That makes reported earnings look understated. At about 12x earnings in a healthcare sector beaten down on political fear, Smead sees a cheap, high-quality compounder.
36:57— But why did you pick Merc? cuz there's, you know, — well, first of all, we've owned it off and on for a long, long time. — It's been a long-term holding. — Now, now remember, uh, first of all, I've had a dear friend get healed by imuninooncology, and they completely own the market for imuninocology. The worry with them is what's your next act going to be that that in in the drug business, they always worry about, well, you're making great money and you have these wonderful products, but you you're you're big enough now. you're going to
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