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Merck (MRK) boasts more than six blockbuster drugs in its portfolio with PD-L1 inhibitor, Keytruda, approved for several types of cancer, alone accounting for around 40% of its pharmaceutical sales. Keytruda has been instrumental in driving Merck’s steady revenue growth in the past few years.

Its stock has risen 1.6% this year compared with a decrease of 3.1% for the industry.

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Merck’s fourth-quarter results were strong as it beat estimates for both earnings and sales, unlike several other pharma companies. Its revenues rose 24% year over year in the fourth quarter, driven by additional sales from its oral COVID drug, molnupiravir, increased demand for its cancer drugs and HPV vaccines, and higher sales of Animal Health products. The company anticipates robust growth in revenues and profits to continue in 2022.

Merck’s key drugs like Keytruda, Lynparza and Bridion have been driving sales. Keytruda sales are gaining from the continued uptake in lung cancer and increasing usage in other cancer indications. In fact, in 2022, Keytruda sales growth is expected to be driven by increased expansion in the ex-U.S. market and the continued ramp-up of launches globally. Alliance revenues from Lynparza and Lenvima are also boosting Merck’s oncology sales.

Please note that Merck markets Lynparza in partnership with AstraZeneca (AZN Quick QuoteAZN - Free Report) . AstraZeneca and Merck had formed the profit-sharing deal to co-market Lynparza and Koselugo in July 2017.

AstraZeneca and Merck’s Lynparza is approved for four cancer types, namely, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications.

Beyond oncology, which is expected to drive durable growth into the next decade, Merck has important products in its portfolio, including the Gardasil vaccine to prevent HPV-related cancers. Sales of the Gardasil vaccine grew 40% in 2021. Merck expects Gardasil sales to double by 2030.

In addition, Merck’s Animal Health business is a key contributor to its top-line growth as the company is recording above-market growth and the trend is expected to continue in 2022.

Merck and partner Ridgeback Biotherapeutics’ oral antiviral pill, molnupiravir oral will be a key top-line driver in 2022. It was authorized for treating high-risk adults with mild-to-moderate COVID-19 in several countries worldwide in 2021. Merck has a number of supply and purchase agreements in place for providing approximately 10 million courses of the COVID therapy, expected to generate $5 billion to $6 billion in revenues in 2022. Molnupiravir is in late-stage development for post-exposure prophylaxis of COVID.

Merck boasts a strong cancer pipeline, including Keytruda, which should help drive long-term growth. Numerous recent approvals and the expected launch of many additional indications, including in earlier lines of therapy, can further boost sales.

In November 2021, Merck completed the acquisition of Acceleron Pharma for approximately $11.5 billion. The acquisition added Acceleron’s promising phase III pipeline candidate, sotatercept, which is being evaluated for the treatment of pulmonary arterial hypertension, thereby strengthening Merck’s cardiovascular portfolio.

Merck does have its share of problems in the form of generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise. There are concerns about Merck’s ability to grow its non-oncology business ahead of Keytruda's loss of exclusivity later in the decade.

Nonetheless, strong sales of key products like Keytruda and Gardasil, significant contribution frommolnupiravir and positive pipeline/regulatory developments can keep the stock afloat in 2022.

Zacks Rank & Stocks to Consider

Merck currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the drug/biotech sector include Vertex Pharmaceuticals (VRTX) and Gamida Cell (GMDA) , each carrying a Zacks Rank #2 (Buy).

Vertex Pharmaceuticals’ stock has risen 8.7% this year. Estimates for Vertex Pharmaceuticals’ 2022 earnings have gone up from $13.32 to $14.52 per share, while those for 2023 have increased from $14.10 to $15.31 per share over the past 60 days.

Vertex Pharmaceuticals’ earnings performance has been strong, with the company beating earnings expectations in each of the last four quarters. Vertex Pharmaceuticals has a four-quarter earnings surprise of 10.01%, on average.

Estimates for Gamida Cell’s 2022 bottom line have narrowed from a loss of $1.83 to $1.35 per share in the past 60 days. Gamida Cell’s stock is up 32.3% this year so far.

Gamida Cell beat estimates in two of the last four quarters while missing in the other two, with the average negative surprise being 22.6%.