Merck's subcutaneous Keytruda approved in Japan across all indications, reinforcing franchise defense

What happened

Merck's KEYTRUDA QLEX (pembrolizumab plus berahyaluronidase alfa-pmph) received Japanese MHLW approval for subcutaneous administration across all Keytruda indications already approved in Japan, with planned brand name KEYJECT. This follows earlier EU approval and reported FDA approval for the injectable version, extending Merck's convenience-based defense of the Keytruda franchise into a third major market. The approval strengthens the company's ability to retain patients and reduce infusion burden ahead of the 2028–2029 biosimilar and IRA pricing step-downs, but it does not change the fundamental concentration risk: Keytruda still represents 49% of total sales. Gardasil shipments to China remain paused with no predicted restart, and the company continues to face an approximately $2.5 billion FY2026 headwind from generics, IRA pricing, and a restructured Koselugo agreement. Consequently, this regulatory milestone is incremental and does not address the core transition challenges that underpin the current WAIT rating.

Implication

For investors, the approval reaffirms Merck's strategy to protect Keytruda economics through formulation improvements, but it is unlikely to change near-term revenue or earnings guidance. The core overhangs remain: unresolved Gardasil China shipment pause, the ~$2.5B 2026 erosion bridge, and the visible 2028–2029 Keytruda decline. We maintain a WAIT rating with an attractive entry near $105 and trim above $135, pending clearer signals on China restart and non-Keytruda growth pillars.

Thesis delta

The Japan approval strengthens the Keytruda franchise defense narrative but does not alter the thesis's quantitative drivers. The concentration risk, Gardasil uncertainty, and 2026 headwind remain unchanged, so the WAIT rating and valuation framework stay intact.