Merck vs. AbbVie Investment Rating Analysis Report: A Comparison of Patent Cliff Response Strategies

Based on comprehensive data collection and analysis, I now present a professional investment research report:

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Wolfe Research recently adjusted the investment ratings of two major pharmaceutical companies:

, while [1][2]. This report provides an in-depth analysis of the investment value of these two companies, evaluating whether Merck’s growth strategy after Keytruda’s patent expiration can support its valuation, and whether AbbVie’s downgrade indicates that large-cap pharmaceutical stocks generally face growth bottlenecks.

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, with 2024 sales reaching $29.5 billion, accounting for approximately 46% of the company’s total revenue[3][4]. The drug faces the major risk of U.S. patent expiration in 2028, which will be one of the most significant patent expiration events in the history of the pharmaceutical industry.

Key data points:

• 2024 Keytruda Sales
  : $29.5 billion (≈18% YoY growth)
• Share of Total Company Revenue
  : ≈46%
• Patent Expiration Date
  : 2028
• Biosimilar Filing Timeline
  : Expected 2026-2027

Industry analysis indicates that Keytruda’s patent expiration could lead to

, facing competition from multiple biosimilar manufacturers[4][5].

Merck is executing

, targeting over [6][7].

Acquisition Target	Transaction Value	Strategic Value	Status
Verona Pharma	$10.8B	OHTUVAYRE - Cardiopulmonary Disease Space	Completed in 2025
Cidara Therapeutics	$9.2B	CD388 - Long-Acting Antiviral for Influenza	Completed in January 2026
Harpoon Therapeutics	-	T-cell Engager Technology Platform	Completed in 2024

Product	Indication	2025 Revenue Potential
WINREVAIR	Pulmonary Arterial Hypertension (PAH)	>$1.5B in First Year
CAPVAXIVE	Pneumococcal Vaccine	≈$2.0B
Keytruda QLEX	Subcutaneous Formulation	Extend Product Lifecycle

• WELIREG
  : Granted FDA Priority Review for rare tumor treatment
• KRAS G12C Inhibitor
  (MK-1084): Initiated Phase III clinical trials
• Collaboration with Eisai
  : Keytruda + Lenvima combination therapy demonstrated progression-free survival improvement in Phase III gastric cancer trials[8]

[0]:

Metric	MRK	Industry Average	Assessment
P/E (TTM)	14.25x	18.5x	Undervalued
P/B	5.23x	4.8x	Reasonable
ROE	38.95%	25%	Excellent
Net Profit Margin	29.63%	15%	Strong
Beta	0.3	0.65	Highly Defensive

[0]:

• Trend Judgment
  : Sideways Trading (Range: $103.28 - $109.77)
• MACD Signal
  : No Crossover (Bullish Bias)
• RSI Risk
  : Overbought Territory
• Recent Performance
  : +9.76% in 1 Month, +25.68% in 3 Months

:

1. Attractive Valuation
   : 14.25x P/E is well below historical averages and industry levels
2. Strong Financial Position
   : 38.95% ROE, $18.1B in free cash flow
3. Diversified Pipeline
   : Over 20 growth-driving projects, reducing reliance on Keytruda
4. Stable Dividends
   : 3.08% dividend yield, 24 consecutive years of growth
5. Acquisition Synergies
   : Verona and Cidara transactions provide significant growth momentum

:

1. Keytruda’s patent expiration remains a major risk
2. Recent adjustments to HPV vaccination recommendations
   may impact Gardasil revenue (CDC switched to a single-dose regimen)[9]
3. Substantial R&D investment
   may affect short-term profitability

[0]:

• Target Price
  : $120.00 (10.5% upside potential from current price)
• Rating Distribution
  : 72.2% Buy, 25.0% Hold, 2.8% Sell
• Target Price Range
  : $90.00 - $135.00

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AbbVie has successfully navigated the

(2023), but now faces questions about its . Wolfe Research’s downgrade is based on its view that [2][10].

:

Metric	2022	2023	2024	Change
Humira Sales	$212.4B	$140.4B	$89.9B	-57.7%
Skyrizi	-	-	$117.2B	New Growth Driver
Rinvoq	-	-	$59.7B	New Growth Driver

[0][11]:

Product	Q3 FY2025 Sales	YoY Growth	Patent Expiration
SKYRIZI	$4.71B	Strong	2033
RINVOQ	$2.18B	Strong	2032-2033
HUMIRA	$993M	Declining	Expired
Botox Therapeutic	$985M	Stable	-
Vraylar	$934M	Strong	-

:

1. Leadership in Immunology
   : Skyrizi and Rinvoq are filling the market gap left by Humira
2. Neuroscience Expansion
   : New drugs from the Cerevel Therapeutics acquisition
3. Aesthetics Business
   : Stable demand for products like Botox

[0]:

Metric	ABBV	MRK	Assessment
P/E (TTM)	172.78x	14.25x	Overvalued
P/S	6.92x	4.25x	Relatively High
ROE	4.99%	38.95%	Relatively Low
Net Profit Margin	4.01%	29.63%	Impacted by IPR&D
Current Ratio	0.72	1.66	Liquidity Pressure
Dividend Yield	3.02%	3.08%	Similar

:

• Q4 FY2025 is expected to include a
  $1.3 billion IPR&D charge
  [12], which will impact EPS performance
• Current ratio below 1 indicates short-term debt repayment pressure
• 172x P/E valuation implies extremely high growth expectations

[0]:

• Trend Judgment
  : Uptrend (Pending Confirmation)
• Key Resistance Level
  : $237.04
• Key Support Level
  : $228.46
• MACD Signal
  : Golden Cross (Bullish Bias)

[0]:

• Target Price
  : $256.00 (9.7% upside potential from current price)
• Rating Distribution
  : 66.7% Buy, 30.8% Hold, 2.6% Sell

[11]:

• Fair Value
  : $184.00
• Current Rating
  : ★★★ (Three Stars)
• Economic Moat
  : Wide Moat
• Uncertainty Rating
  : High

This suggests

, as the market has fully priced in its growth expectations.

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Comparison Dimension	Merck (MRK)	AbbVie (ABBV)	Advantageous Party
Valuation Level	14.25x P/E	172.78x P/E	MRK
Profitability	38.95% ROE	4.99% ROE	MRK
Cash Flow	$18.1B FCF	$17.8B FCF	Comparable
Dividend Growth	3.08%	3.02%	MRK
Liquidity	1.66 Current Ratio	0.72 Current Ratio	MRK
Risk-Adjusted Return	Beta 0.3	Beta 0.35	MRK
Pipeline Diversification	20+ Projects	Skyrizi/Rinvoq	MRK
Growth Stage	Transformation Phase	Mature Phase	MRK

:

1. Valuation Re-rating Opportunity
   : 14x P/E provides ample margin of safety
2. Initial Success of Pipeline Transformation
   : Commercialization of WINREVAIR and CAPVAXIVE is successful
3. Sound Acquisition Strategy
   : Verona and Cidara transactions enhance product portfolio
4. Keytruda Lifecycle Management
   : Subcutaneous formulation QLEX extends patent protection

:

1. Valuation Fully Reflects Growth
   : 172x P/E implies zero room for error
2. Growth Trajectory is Flattening
   : Skyrizi/Rinvoq growth rates are stabilizing
3. Next Wave of Patent Cliff Approaching
   : Skyrizi/Rinvoq patent expiration in 2032-2033
4. Q4 Cost Pressure
   : $1.3 billion IPR&D charge impacts short-term performance

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:

1. Normalization of Patent Cliffs
   :
   • Between 2025-2029, drugs with over $200 billion in sales face patent expiration[5]
   • Major blockbuster drugs including Keytruda (2028), Opdivo (2028), and Trulicity (2027) have concentrated expirations

2. Intensified Biosimilar Competition
   :
   • Accelerated biosimilar approval process, fierce price competition
   • Humira faced competition from over 10 biosimilars in its first post-patent year

3. Pricing Pressure
   :
   • Impact of Medicare price negotiation policies
   • Insurance company resistance to high drug prices

4. Declining R&D Efficiency
   :
   • Rising new drug R&D costs
   • Declining clinical trial success rates

Company	Response Strategy	Effectiveness
Merck	Aggressive Acquisitions + Pipeline Diversification	Mid-term (To Be Observed)
AbbVie	Transition Relying on Existing Blockbusters	Successfully Transformed
BMS	Diversified M&A	Facing Integration Challenges
Pfizer	Streamline Operations + Focus on Core	Recovering

; the key factors are:

1. Depth of Pipeline Reserves
   : Companies with 20+ project reserves are more likely to successfully transform
2. Valuation Margin of Safety
   : Merck at 14x P/E is more attractive than AbbVie at 172x P/E
3. Management Execution
   : Verona and Cidara acquisitions demonstrate Merck’s strategic vision
4. Business Diversification
   : Animal health business provides stable cash flow for Merck

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:

1. Attractive Valuation
   : 14.25x P/E, approximately 23% discount to industry average
2. Clear Growth Strategy Post-Keytruda
   : $50 billion new revenue target is achievable
3. Strong Financial Position
   : 38.95% ROE, $18.1 billion in free cash flow
4. Stable Dividend Growth
   : 24 consecutive years of dividend increases, 3.08% yield

: $120.00 - $130.00
: $108.59
: 10.5% - 19.7%

:

• Timing and impact of Keytruda’s patent expiration
• Execution risks from acquisition integration
• Uncertainties in biosimilar competition

:

1. Overvalued
   : 172x P/E implies extremely high growth expectations
2. Flattening Growth Trajectory
   : Skyrizi/Rinvoq growth rates are stabilizing
3. Short-Term Profit Pressure
   : $1.3 billion IPR&D charge to be recorded in Q4
4. Next Round of Patent Cliff
   : Facing new challenges in 2032-2033

: $230.00 - $250.00
: $233.43
: Unattractive

Merck’s growth strategy is

:

• $50 billion new revenue target is supported by over 20 projects
• Verona ($10.8B) and Cidara ($9.2B) acquisitions provide significant synergies
• WINREVAIR and CAPVAXIVE have already demonstrated commercial success
• 14x P/E valuation provides ample margin of safety for investors

: Sales performance of new products in 2026-2027 will determine the success of the strategy.

:

• AbbVie
  : It is not facing growth bottlenecks, but rather
  growth expectations have been fully priced in
  . A 172x P/E implies perfect execution is expected by the market.
• Merck
  : Despite facing Keytruda’s patent cliff, its
  aggressive transformation strategy and reasonable valuation
  make its growth prospects clearer.
• Entire Industry
  : The pharmaceutical industry does face patent cliff challenges, but
  companies with deep pipeline reserves and strong execution capabilities can still achieve growth
  .

: Wolfe Research’s rating changes reflect judgments on , rather than a bearish view on the entire industry. Merck’s combination of “low valuation + transformation strategy” is superior to AbbVie’s combination of “high valuation + mature phase”.

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[1] Wolfe Research. “Merck Rating Upgrade Analysis.” Seeking Alpha, 2025-2026.

[2] Wolfe Research. “AbbVie Rating Downgrade Report.” Bloomberg, January 2026.

[3] Merck & Co., Inc. “2024 Form 10-K.” SEC Filing, February 2025. https://www.sec.gov/Archives/edgar/data/310158/000162828025007732/mrk-20241231.htm

[4] Clival. “Top 10 Blockbuster Drugs Facing U.S. Patent Expirations (2025–2029).” September 2025.

[5] Pharmacy Times. “Soaring off the Patent Cliff: Preparing for the Next Wave of Oncology Biosimilars.” 2025.

[6] BeyondSPX. “Merck’s $50 Billion Pipeline Gambit: Transforming the Keytruda Cliff into a Growth Hill.” January 2026.

[7] DelveInsight. “The End of Exclusivity: Opportunity or Crisis for Big Players?” 2025.

[8] Pharmaceutical Executive. “JP Morgan 2026 Preview: Merck Prepares for the Patent Cliff.” January 2026.

[9] MarketWatch. “Merck could lose up to $630 million in revenue after CDC changes HPV vaccine recommendation.” January 2026.

[10] TIKR. “AbbVie Stock Forecast: Where Analysts See the Stock Going by 2027.” 2025.

[11] Morningstar. “AbbVie Earnings: Continued Impressive Demand for Skyrizi, Neuroscience Portfolio Support Growth.” 2025.

[12] GuruFocus. “AbbVie (ABBV) Projects Q4 Earnings Impact from $1.3 Billion Charge.” January 2026.

[13] AbbVie Inc. “2024 Form 10-K.” SEC Filing, February 2025. https://www.sec.gov/Archives/edgar/data/1551152/000155115225000020/abbv-20241231.htm

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: January 8, 2026
: Gilin AI Financial Database, SEC filings, Yahoo Finance, Seeking Alpha, Morningstar

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Figure 1: Comparison of Key Valuation Metrics for Merck and AbbVie. Merck holds advantages in P/E, profitability, and liquidity.

Figure 2: Forecasted Impact of Keytruda’s Patent Expiration on Merck’s Revenue and the Company’s Growth Strategy Layout