Merck recently announced promising results from its Phase 3 KEYNOTE-689 trial of KEYTRUDA, presented at the AACR Annual Meeting, which seems likely to have bolstered investor confidence, contributing to a 6% price increase over the past week. The supplemental Biologics License Application under FDA review further highlights KEYTRUDA's significance in Merck's portfolio. This comes amid a broader market upswing, as the S&P 500 and Nasdaq climbed overall. While Merck's earnings were steady, the lawsuit from Halozyme presents a potential challenge ahead. Overall, Merck seems to align positively with broader market trends.

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The recent success of Merck's KEYNOTE-689 trial and its potential to enhance investor confidence could further strengthen the company's narrative around robust pipeline growth. This aligns well with Merck's strategy of driving future success in its oncology and cardiometabolic sectors through innovative launches like WINREVAIR. Despite short-term setbacks, such as the paused shipments of GARDASIL in China, Merck's long-term growth outlook remains positive, as these developments may bolster revenue and earnings forecasts significantly.

Over the past five years, Merck's total shareholder return, inclusive of share price appreciation and dividends, was 31.62%. In the recent year, however, Merck underperformed, with the US Pharmaceuticals industry seeing a 1.3% increase in returns, while Merck struggled to keep pace amidst market challenges. Despite these near-term hurdles, the market response to the positive trial results has been promising, pushing Merck's current share price toward the consensus analyst price target of US$108.98, suggesting potential upside.

Insights from our recent valuation report point to the potential undervaluation of Merck shares in the market.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NYSE:MRK.

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