Merck Faces New Threat to Keytruda as Biosimilar Race Heats Up
A new partnership to develop a Keytruda copycat highlights the growing long-term challenge to Merck's blockbuster cancer drug, which accounts for nearly half its revenue.
Merck & Co. is facing a new competitive challenge to its flagship cancer immunotherapy, Keytruda, as German drug developer Formycon and India’s Zydus Lifesciences announced a partnership to market a biosimilar version in North America. The deal adds to a growing list of competitors aiming to launch copycat versions of the world's best-selling drug, signaling a significant long-term threat to Merck’s primary revenue engine.
The agreement, announced Tuesday via a press release, grants Zydus exclusive rights to commercialize FYB206, Formycon’s Keytruda biosimilar candidate, in the U.S. and Canada. While the immediate financial impact on Merck is negligible, the partnership underscores the mounting pressure on a drug that is critical to the pharmaceutical giant's financial health.
Keytruda has become a cornerstone of modern cancer treatment, approved for dozens of indications. Its commercial success is unparalleled, generating $29.5 billion in sales in 2024, which accounted for a staggering 46% of Merck's total revenue, according to the company's annual financial results. This dominance, however, makes it a prime target for biosimilar developers as its key patents approach expiration.
Shares of Merck were down less than 1% in Tuesday trading, closing at $98.93, as investors weigh the long-term implications. The stock has traded in a 52-week range of $71.87 to $105.84. While the threat from biosimilars is still years away, the market is closely watching the timeline for the so-called "patent cliff."
Keytruda’s main patent protection in the United States is expected to expire in 2028. After this date, the U.S. Food and Drug Administration (FDA) can approve biosimilar versions, which are nearly identical and significantly cheaper alternatives that can rapidly erode the sales of the original biologic drug. The path to market for these competitors is becoming clearer, with clinical data for the Formycon-Zydus candidate expected in the first quarter of 2026.
This latest alliance is not an isolated event. The race to develop a Keytruda biosimilar is well underway, with at least 14 candidates publicly in development. Earlier this year, Alvotech and Dr. Reddy's Laboratories announced a similar pact to develop their own version of the drug. This growing field of competitors increases the likelihood of significant price erosion and market share loss for Merck once the patent wall comes down.
Merck is not standing still. The company is actively working on a multi-pronged strategy to defend its oncology franchise. A key part of this plan is the development of a subcutaneous, or under-the-skin, injectable version of Keytruda, which would offer greater convenience than the current intravenous infusion. This new formulation could have patent protection extending to 2040, potentially allowing Merck to switch patients to the new version before the original's patent expires. However, this strategy already faces legal challenges over its own patent disputes.
In addition to product innovation, Merck initiated a $3 billion cost-cutting program in 2024, designed to streamline operations and free up capital for reinvestment into its drug pipeline ahead of the patent cliff. The company is also actively pursuing business development deals to acquire new assets and diversify its revenue streams away from its reliance on Keytruda.
While analysts remain broadly positive on Merck, with a consensus price target of around $106, the long-term outlook is increasingly focused on how the company navigates the end of Keytruda's exclusivity. The Formycon-Zydus partnership is another clear signal that the clock is ticking on one of the most profitable drugs in pharmaceutical history.