We recently published a list of 10 Best Pharma Stocks to Buy for Long Term Growth. In this article, we are going to take a look at where Merck & Co., Inc. (NYSE:MRK) stands against other best pharma stocks to buy for long term growth.

U.S. Pharma Turns to China for Drug Deals

With big American pharmaceutical corporations always searching for medications in China, the US pharmaceutical industry is going through a unique trend never seen before. About 30% of Big Pharma acquisitions involving at least $50 million upfront in 2024 involved Chinese corporations, according to DealForma statistics, as reported by CNBC. This was an increase from 20% the previous year and nearly 0% just five years before.

Experts cite several causes for this tendency. Some people think that Chinese pharmaceutical firms are drawing notice due to their sophisticated development skills, which enable them to produce potent compounds in large quantities. In addition to being able to start testing on human subjects more quickly, these Chinese companies can charge a lower price for these medications than the US. Buyers have developed a business strategy that enables them to import medicines through licensing agreements, according to CNBC. The dearth of venture capital in China is additional pressure on biotech companies to enter these agreements.

Experts think this situation is here to stay, even though there are several possible causes for this tendency. Although the US pharmaceutical industry is expected to be impacted, it is uncertain how these effects would manifest. If big pharmaceutical companies find a good Chinese drug at a low price, some experts think it may destroy American startups; others think the competition would benefit the sector. Tim Opler, a managing director in Stifel’s global healthcare group, stated the following regarding the circumstances:

“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”

Emily Field, Head of European Pharma Research at Barclays, spoke to CNBC on February 20 about the performance of obesity medications, the effects of US tariffs, and the dynamics of the pharmaceutical industry. According to her, at least in the first half of this year, the industry might not perform poorly. The effectiveness of obesity medications is still up for debate, though, as leading companies in the field have shown inconsistent results in the past.

Speaking about the tariffs, she stated that since some businesses assemble their products in the US after producing them overseas, their implementation raises several unanswered questions for the pharmaceutical industry. These businesses, therefore, have relatively low manufacturing costs, which is an important factor to take into account when assessing the effects of tariffs. She thought that these businesses could easily absorb the higher expense of the tariffs. The topic hasn’t come up much on earnings calls this quarter, and the market is nearing the end of the reporting season.

Our Methodology

For this article, we screened for companies that operate in the pharmaceutical industry. From that list, we identified stocks that have achieved positive revenue growth over the past five years. Then, we picked companies with a 5-year revenue growth of 10% and ranked the top 10 based on hedge fund sentiment as of Q4 2024, as per Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A close-up of a person's hand holding a bottle of pharmaceuticals.

Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 91 

Merck & Co., Inc. (NYSE:MRK) is a biopharmaceutical company that delivers health solutions to advance the treatment and prevention of diseases in animals and people. Vaccines and pharmaceutical goods for human health, which usually include therapeutic and preventive substances, are available through its pharmaceutical section. Its Animal Health division creates, finds, produces, and sells a variety of vaccinations and veterinary medications.

Merck & Co., Inc. (NYSE:MRK)’s sales outlook is being adversely affected by certain factors. For example, because of low discretionary spending, it has temporarily halted the distribution of its HPV vaccine Gardasil to China until the middle of 2025. The company maintains excellent operations despite these short-term difficulties, which are bolstered by high demand for its inventive and varied portfolio. The corporation’s Keytruda cancer treatment medication is doing well, and the introduction of Winrevair, a medication for pulmonary arterial hypertension (PAH), is also helping to increase revenue growth.

Asad Haider, a Goldman Sachs analyst, remained optimistic about the stock and rated it as a Buy on April 8. The analyst feels that Merck & Co., Inc. (NYSE:MRK)’s Animal Health division, which makes a substantial amount of money and is expected to expand in the future, is being undervalued by the present market valuation, which is unduly gloomy. As one of the best pharmaceutical stocks, the analyst believes that this offers investors a mispricing opportunity.

GreensKeeper Asset Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:

“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”

Overall, MRK ranks 2nd on our list of best pharma stocks to buy for long term growth. While we acknowledge the potential of pharmaceutical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.