ABBV vs. MRK: Evaluating the Best Investment Opportunity Among Drug Titans

Evaluating Merck and AbbVie: A Comparison of Investment Potential

Merck (MRK) and AbbVie (ABBV) stand out as prominent players in the pharmaceutical sector, each boasting robust portfolios in oncology and immunology fields. AbbVie also markets drugs in aesthetics, neuroscience, and eye care, while Merck expands its offerings into vaccines, neuroscience, diabetes, virology, and animal health.

Merck’s oncology division contributes significantly to its financial success, accounting for approximately 50% of total revenues. The company’s leading PD-L1 inhibitor, Keytruda, which has gained approval for numerous cancer types, generates around half of Merck’s pharmaceutical sales.

In contrast, AbbVie’s primary revenue source lies within immunology. Key products such as Humira, Skyrizi, and Rinvoq make up around 50% of AbbVie’s total revenues. Both companies are experiencing steady growth in sales and earnings, supported by strong pipelines featuring promising late-stage candidates. Investors may wonder which company represents the better investment opportunity today. A closer examination of their fundamentals, growth outlook, and potential challenges is warranted.

Investing in AbbVie

AbbVie managed to overcome the loss of exclusivity for its blockbuster drug, Humira, which previously accounted for more than 50% of its revenue. This transition was supported by the successful launches of newer immunology medications, Skyrizi and Rinvoq, both of which have shown promising performance following approvals for new indications. This trend is expected to bolster AbbVie’s revenue growth in the coming years.

Looking ahead, AbbVie has a diverse portfolio of early to mid-stage pipeline candidates with the potential for blockbuster status. Over the next 12 months, the company anticipates multiple regulatory submissions, approvals, and critical data readouts. In recent years, AbbVie has pursued acquisitions to enhance its pipeline, focusing on immunology while also exploring opportunities in oncology and neuroscience.

Nevertheless, AbbVie faces short-term challenges, including the impact of biosimilars on Humira sales, intensified competition for its cancer drug Imbruvica, and sluggish growth in the market for Juvederm fillers in the U.S. and China.

As of December 31, 2024, AbbVie reported long-term debt of $60.3 billion alongside short-term obligations of $6.8 billion. Cash and cash equivalents stood at approximately $5.6 billion, resulting in a debt-to-capital ratio of 0.95, significantly above the industry average of 0.41.

Assessing Merck (MRK)

Merck’s portfolio features more than six blockbuster medications, propelled primarily by Keytruda. The drug has significantly influenced Merck’s revenue growth over recent years, benefiting from the rapid adoption across initial indications, particularly for early-stage non-small cell lung cancer. Expectations remain high for Keytruda, fueled by anticipated growth in early lung cancer treatments. Merck is also developing a subcutaneous formulation of Keytruda to extend its patent life and is pursuing various strategies for sustained growth.

In 2024, Merck achieved notable regulatory and clinical advancements in oncology (led by Keytruda), vaccines, and infectious diseases, while executing strategic transactions such as the acquisitions of Eyebiotech Limited and Harpoon Therapeutics.

However, Merck faced declines in sales of Gardasil—its second-largest product—due to poor performance in China, stemming from weaker demand amidst economic challenges. Additionally, the company is experiencing pressures within its diabetes product line and the generic erosion of several products.

Although Keytruda represents a significant asset, it creates concerns regarding Merck’s reliance on a single drug, prompting calls for broader diversification within its product offerings. The anticipated loss of exclusivity for Keytruda in 2028 raises further questions about the firm’s capacity for growth beyond oncology.

Merck kicked off the year with a disappointing fourth-quarter earnings report in February and underwhelming guidance for 2025. As it concluded 2024, the company reported cash and cash equivalents of $13.7 billion against long-term debt of $34.5 billion, giving it a debt-to-capital ratio of 0.42, slightly higher than the industry average of 0.41.

Comparative Estimates for ABBV and MRK

The Zacks Consensus Estimate forecasts a 5.7% year-over-year increase in AbbVie’s 2025 sales and a 21.4% increase in earnings per share (EPS). Notably, EPS estimates for 2025 and 2026 have increased over the past two months.