--- title: Merck 2024: how Keytruda became the world's best-selling drug at $25 billion annually and how Merck is preparing for the patent cliff that arrives in 2028 | RGM® url: https://realgrowthmatters.com/learn/case-studies/merck-brand-repositioning-campaign/ updated: 2026-06-10 source_html: https://realgrowthmatters.com/learn/case-studies/merck-brand-repositioning-campaign/ --- - **Story:** Merck's Keytruda (pembrolizumab, FDA-approved September 2014) generated ~$25B in 2023 revenue and is on trajectory toward $28-30B in 2024 — the world's best-selling drug by annual revenue. Treats 30+ cancer indications. Represents ~40% of Merck total revenue, creating substantial 2028 US patent-cliff exposure. CEO Robert Davis (since July 2021) executes multi-year cliff preparation: Acceleron $11.5B 2021, Prometheus $10.8B 2023, Daiichi Sankyo ADC up to $22B 2023, subcutaneous Keytruda formulation, pipeline diversification. Q3 2024 Keytruda revenue $7.4B (+17% YoY). Structural challenge: replacing $25B+ annual revenue post-cliff requires both successful pipeline and effective biosimilar-defense. - **Why it matters:** Merck Keytruda concentration is the worked example of single-asset dependency in pharma: dominant current revenue + inevitable cliff exposure. Best-case patent-cliff management requires preparation 5-10 years before cliff. - **Takeaway:** Single-asset concentration produces enormous current revenue but inevitable structural challenge at patent cliff. - **Takeaway:** Patent-cliff preparation must begin 5-10 years before; M&A + pipeline diversification + formulation extensions + biosimilar-defense all required. - **Takeaway:** Even best-case patent-cliff navigation typically produces 30-50% revenue decline in 4-5 years post-cliff. ## Merck Keytruda + 2028 cliff — the four-step story S Situation Keytruda's dominance produced enormous revenue concentration with inevitable 2028 patent cliff Keytruda's revenue grew from $0.6B (2015) to $25B (2023) through label expansion across 30+ cancer indications. The growth produced Merck's exceptional financial performance but also concentration risk: ~40% of total revenue from single asset facing 2028 US patent expiration. T Task Execute multi-year patent-cliff preparation through M&A, pipeline diversification, formulation extensions, biosimilar-defense legal strategy Recruit Robert Davis as CEO (July 2021) with pipeline-building mandate. Execute strategic acquisitions: Acceleron $11.5B, Prometheus $10.8B, Daiichi Sankyo ADC up to $22B. Develop subcutaneous Keytruda formulation for patent extension. File biosimilar-defense patent applications. Maintain operational discipline while funding pipeline investment. A Action 2021-2024 multi-front cliff preparation; Keytruda continued growth; pipeline acquisitions integrated; subcutaneous formulation in development Multi-year strategic execution. Keytruda revenue continued growing through 2024. Pipeline acquisitions integrated with various clinical-trial readouts expected 2025-2028. Subcutaneous formulation development progressed. Biosimilar-defense litigation ongoing. Operating margins maintained. R Result Keytruda growth continues toward $30B; pipeline diversification underway; 2028-2032 patent-cliff outcome uncertain; structural challenge persists Merck has executed reasonable patent-cliff preparation but the structural challenge remains. Even with successful pipeline diversification, 2028-2032 will likely see substantial revenue decline. Merck's 2030 position is likely to be smaller and lower-margin than 2024. The case shows that even dominant single-asset success creates inevitable structural challenge at eventual patent cliff. ## Merck Keytruda + 2028 cliff at a glance ~$0B Keytruda 2023 revenue World's best-selling drug by annual revenue Source: Merck 10-K 2023 ~0% Keytruda share of Merck revenue Single-asset concentration Source: Merck segment disclosures 0 Keytruda US patent expiration Biosimilar entry expected Source: Merck patent disclosures 0+ Cancer indications FDA-approved Including melanoma, NSCLC, HNSCC, lymphoma, others Source: FDA / Merck label history $0B Prometheus acquisition (2023) Immunology pipeline addition Source: Merck announcement $0B Daiichi Sankyo ADC partnership (Oct 2023) Three ADC drugs for oncology Source: Merck announcement #### Quick facts CompanyMerck & Co., Inc. (NYSE: MRK) CEORobert M. Davis (since July 1, 2021) Keytruda 2023 revenue~$25B Keytruda 2024 trajectory~$28-30B Keytruda share of Merck total revenue~40% Keytruda US patent expiration2028 (biosimilar entry expected) Prometheus acquisition (2023)$10.8B (immunology) Daiichi Sankyo ADC partnershipUp to $22B (October 2023) **Honest note** Merck's Keytruda dependency is the most-concentrated single-asset exposure in major pharma. The 2028 patent cliff will produce dramatic revenue impact even with successful preparation. Merck's pipeline diversification has been substantial but full replacement of $25B+ in annual revenue requires either single mega-blockbuster (unlikely) or substantial portfolio diversification. The case here describes 2014-2024 trajectory and 2028 preparation; specific post-cliff outcome will be determined 2028-2032. ## The Keytruda development and the immunotherapy revolution Keytruda (pembrolizumab) was developed by Schering-Plough (subsequently acquired by Merck in 2009). Initial FDA approval came September 4, 2014 for advanced melanoma. The immunotherapy mechanism — blocking the PD-1 checkpoint protein that some cancer cells use to evade immune attack — was novel at the time: - **2014 melanoma approval**: initial Keytruda label. Limited initial commercial scale. - **Label expansion 2015-2024**: Keytruda received FDA approval for over 30 cancer indications including non-small cell lung cancer, head and neck cancer, classical Hodgkin lymphoma, urothelial carcinoma, microsatellite instability-high cancers (any tumor type), gastric cancer, cervical cancer, hepatocellular carcinoma, renal cell carcinoma, endometrial carcinoma, triple-negative breast cancer, esophageal cancer, biliary tract cancer, and many others. - **Revenue growth trajectory**: 2015 revenue ~$0.6B; 2018 ~$7B; 2021 ~$17B; 2023 ~$25B; 2024 trajectory $28-30B. - **Largest oncology franchise globally**: Keytruda has been the foundation of modern immunotherapy and is the world's best-selling drug by annual revenue. - **Combination-therapy expansion**: Keytruda used in combination with chemotherapy, targeted therapies, and other immunotherapies extending therapeutic utility. - **Real-world evidence**: Keytruda extended overall survival in multiple cancer types, fundamentally changing oncology treatment standards. - **Competitive context**: Bristol-Myers Squibb's Opdivo (nivolumab) is the other major PD-1 inhibitor. Roche's Tecentriq, AstraZeneca's Imfinzi compete in selected indications. Keytruda has maintained ~50%+ of PD-1 inhibitor market share. ## The Robert Davis CEO tenure and the patent-cliff preparation Robert Davis became Merck CEO on July 1, 2021, succeeding Kenneth Frazier. Davis had been Merck CFO 2014-2021. His tenure has focused substantially on patent-cliff preparation: - **Acquisition strategy for pipeline diversification**: Acceleron Pharma $11.5B (closed November 2021) added Reblozyl for blood disorders. Prometheus Biosciences $10.8B (closed June 2023) added MK-7240 for ulcerative colitis (formerly PRA023). - **Daiichi Sankyo antibody-drug-conjugate (ADC) partnership October 2023**: up to $22B commitment for three ADC drugs (HER3-DXd, MK-6070 / DS-7300, MK-3475 ifinatamab deruxtecan). The deal substantially boosted Merck's ADC pipeline alongside Keytruda combinations. - **Internal pipeline acceleration**: vaccine candidates (V940 individualized neoantigen mRNA, with Moderna), HIV treatments, oncology beyond Keytruda. - **Subcutaneous Keytruda formulation**: subcutaneous version of pembrolizumab being developed. If approved (expected 2025+), could extend Keytruda patent life by years through formulation-based patent protection. - **Combinations with new agents**: ongoing Keytruda combination trials with own pipeline drugs and partnered drugs (Lynparza with AstraZeneca, etc.). - **Biosimilar-defense legal strategy**: Merck has filed numerous patent applications and infringement cases related to Keytruda. The strategy targets biosimilar entry delay but won't prevent eventual 2028 generic competition. - **Operating-margin discipline**: maintained while funding pipeline investment. ## The 2028 patent cliff and the structural revenue concern Keytruda's US patent expiration in 2028 creates structural revenue concern: - **Biosimilar entry expected 2028**: multiple biosimilar manufacturers (Amgen, Celltrion, Samsung Bioepis, others) have biosimilar Keytruda in development. - **Typical biosimilar economic impact**: in oncology specifically, biosimilars produce 30-70% price erosion within 2-3 years of launch (Avastin biosimilar, Herceptin biosimilar, Rituxan biosimilar all showed this pattern). - **Subcutaneous formulation potential extension**: if subcutaneous Keytruda is approved and meaningfully different from IV biosimilars, could extend patent-protected period for that formulation by years. Specific extension timeline depends on regulatory and legal outcomes. - **Revenue replacement requirement**: even with subcutaneous extension and pipeline diversification, replacing $25B+ in annual revenue is operationally difficult. Most pharma patent cliffs produce 50-70% peak-revenue decline within 5 years. - **Pipeline diversification timing**: replacement drugs from Prometheus, Acceleron, and Daiichi Sankyo partnerships should generate revenue contribution 2026-2032 timeframe, partially offsetting Keytruda decline. - **Strategic positioning for post-2028**: Merck likely to be smaller and lower-margin in 2030 than 2024, even with successful diversification execution. Stock-market implications depend on biosimilar timing and pipeline success. ## The 2024 financial performance and the strategic continuation Through 2024 Merck has continued strong financial execution while preparing for cliff: - **Q3 2024 revenue $16.7B (+4% YoY excluding LAGEVRIO)**: solid growth though LAGEVRIO COVID antiviral revenue declined sharply. - **Keytruda Q3 2024 revenue $7.4B (+17% YoY)**: continued strong growth. - **Animal Health and Vaccines segments contributing**: Merck's diversified portfolio includes substantial Animal Health (Bayer Animal Health acquired 2017 plus organic growth) and Vaccines businesses. - **Stock performance through 2024**: relatively stable; investors appear to be discounting 2028 cliff already. - **Capital-allocation discipline**: substantial dividend ($3.20+ annualized), continued buybacks, M&A investment. - **Acquisition appetite continuing**: Merck has signaled continued willingness to pursue $5-15B acquisitions for pipeline-building. - **Robert Davis continued tenure**: Davis's strategic-direction focus on patent-cliff preparation continues. ## How RGM thinks about single-asset concentration and patent-cliff preparation Merck's Keytruda 2014-2024 chapter and 2028 patent-cliff preparation is the worked example of single-asset concentration management in pharma. The structural challenge: dominant single drug produces enormous current revenue but creates inevitable cliff exposure. Best-case patent-cliff management requires beginning preparation 5-10 years before cliff with substantial pipeline investment, strategic acquisitions, formulation-based patent extensions, and operational discipline through transition. Our framework for clients with similar single-asset concentration situations: the AbbVie Humira-to-Skyrizi/Rinvoq transition is the best-case worked example of patent-cliff navigation; Pfizer's post-COVID decline shows what happens when single-asset windfall isn't sustainably replaced. Merck's Keytruda situation is between these — better-positioned than Pfizer's COVID concentration because Keytruda's underlying utility persists post-cliff (biosimilars will replace branded Keytruda, but immunotherapy demand continues) but less successful than AbbVie's because no single replacement franchise on Skyrizi/Rinvoq scale has emerged. Merck likely faces 30-50% revenue decline 2028-2032 even with successful diversification execution. The case is a sobering example of how dominant single-asset success creates inevitable structural challenge. ## Frequently asked questions Is Keytruda really the best-selling drug in the world? Yes, by annual revenue. 2023 revenue ~$25B was the largest single-drug annual revenue in pharma history; 2024 trajectory toward $28-30B continues that record. Previous Humira peak was ~$21B. Keytruda's leadership reflects both immunotherapy mechanism utility and Merck's commercial execution across 30+ cancer indications. Will subcutaneous Keytruda actually extend the patent cliff? Partial extension likely but limited. If subcutaneous formulation is approved and clinically meaningful (vs IV biosimilars), it could capture 30-50% of post-2028 Keytruda volume at preserved pricing for several additional years. But biosimilar IV pembrolizumab will still capture significant volume; total Keytruda franchise revenue will substantially decline 2028-2032. Subcutaneous extension is meaningful but not patent-cliff-elimination. Is Merck's M&A strategy working? Mixed early results. Prometheus's MK-7240 has shown early ulcerative colitis efficacy but full Phase 3 results pending. Acceleron's Reblozyl is contributing revenue. Daiichi Sankyo ADC partnership has Phase 3 trials reading out 2025-2027. Specific commercial outcomes will be visible 2026-2030. The M&A strategy is appropriate scale; whether it produces sufficient replacement revenue is the open question. How will Merck stock perform through the cliff? Genuinely uncertain. Pharma analyst models typically discount near-term Keytruda cliff already; current stock price reflects expected revenue decline. Whether pipeline replacement exceeds analyst expectations or falls short will determine stock trajectory. Best-case scenario: replacement franchises develop on schedule and stock holds; worst-case: replacement franchises disappoint and stock declines significantly. The structural answer depends on factors largely outside Merck's current control. What about Bristol-Myers Squibb's Opdivo cliff? Similar situation. Opdivo also faces patent cliff (2028-2029 timeframe). Bristol-Myers Squibb has been pursuing similar pipeline-diversification strategies (Celgene acquisition 2019, MyoKardia, RayzeBio, others). The PD-1 inhibitor category broadly faces concurrent biosimilar pressure 2028-2030. Multiple major pharma companies will be navigating cliffs simultaneously. ### Sources & references - [Merck Q3 2024 earnings](https://www.merck.com/financial-information/quarterly-earnings/) — Merck SEC filings and quarterly earnings. - [Daiichi Sankyo ADC partnership announcement](https://www.merck.com/news/merck-and-daiichi-sankyo-establish-global-collaboration-for-three-investigational-dxd-adcs/) — Merck October 19 2023 announcement. - [Prometheus acquisition close](https://www.merck.com/news/merck-completes-acquisition-of-prometheus-biosciences/) — Merck June 16 2023 close announcement. - [Keytruda patent-cliff analyst coverage](https://www.bloomberg.com/news/articles/2024-04-25/merck-keytruda-patent-cliff-2028-pipeline-strategy) — Bloomberg coverage of patent-cliff strategy. - [Robert Davis succession](https://www.merck.com/news/merck-announces-robert-davis-named-ceo/) — Merck Robert Davis CEO appointment. ## Related [#### All case studies The full case-study library.](/learn/case-studies/)[#### AbbVie Humira transition Best-case patent-cliff navigation precedent.](/learn/case-studies/abbvie-brand-repositioning-campaign/)[#### Pfizer post-COVID decline Adjacent single-asset-concentration cautionary case.](/learn/case-studies/pfizer-brand-repositioning-campaign/)[#### Ozempic GLP-1 Adjacent pharma category-leadership case.](/learn/case-studies/ozempic-glp1-weight-loss-marketing/)