From Merck's farewell to the era of "single Keytruda wonder drug" to the rise of innovative drugs in China, a new wave of pharmaceutical investment is sweeping the globe.

Merck & Co., Inc. (MRK.US) Chief Executive Officer Rob Davis stated in a media interview on Tuesday that the pharmaceutical giant's future growth prospects no longer depend solely on its blockbuster cancer therapy Keytruda. With the "King of Drugs" Keytruda's patent set to expire in 2028, the management of Merck & Co., Inc. expects to launch more than 20 new products over the next five years, aiming to offset the patent cliff of Keytruda with approximately $70 billion in new growth opportunities by the mid-2030s. The current wave of investment in innovative drugs sweeping global stock markets appears to be a global reassessment driven by industry fundamentals, product cycles, and capital rotation, rather than merely a defensive strategy. The global asset allocation has entered a new phase of seeking a second pole beyond the AI theme. This reassessment has crossed both the U.S. and Chinese markets, yielding significant relative returns. Since the low point on June 26, 2026, the Hong Kong H-share healthcare index has rebounded by 16%, outperforming the Hang Seng Index by 7 percentage points; the A-share healthcare index has risen by 11%, achieving 19 percentage points of excess returns compared to the CSI 300. The U.S. market has also seen a clear rotation in investment styles. As of July 29, within the rotation window following the short-term peak of the Nasdaq tech stocks on June 2, the S&P 500 healthcare sector has risen about 14%, while the S&P 500 index has dropped about 2.4%. Healthcare stocks led by Merck & Co., Inc., Pfizer Inc., and AbbVie have become one of the strongest performing sectors. Davis stated in the interview on Tuesday: We have indeed completed the transformation of the company, shifting from one that heavily relied on Keytruda and vaccines to a super pharma company that covers seven major therapeutic areas. Over the next five years, we will launch more than 20 new products, almost all of which have the potential to become blockbuster products. It is expected that by the mid-2030s, these products are likely to generate a potential revenue scale of $70 billion. Therefore, from our current position, we have a diversified product portfolio, a sustainable business model, and, more importantly, we have what I believe is a long-term growth business system that can truly stand the test of time. As the countdown to the patent cliff approaches, Merck & Co., Inc. is shifting gears ahead of time with $65 billion in acquisitions: more than 20 potential blockbuster drugs poised to succeed Keytruda. One of the biggest questions surrounding Merck & Co., Inc. in recent years has been how the company plans to offset the impact of Keytruda ultimately losing its market exclusivity. Keytruda has been one of the top-selling cancer drugs globally in recent years. Davis mentioned that in the past five years, Merck & Co., Inc. has invested heavily in both internal R&D and external acquisitions to build the next generation of growth-oriented drug portfolios. Keytruda (pembrolizumab), a PD-1 immune checkpoint inhibitor produced by Merck & Co., Inc., is a monoclonal antibody drug that helps T-cells more effectively identify and attack tumor cells by blocking the PD-1 pathway. The drug's indications are expansive, with official information showing that it is approved for 18 types of cancer and 42 indications, having a very large patient population, and being applicable in critical treatment lines across multiple cancer types with potential combinations (such as first-line, adjuvant/neoadjuvant, and combined with chemotherapy or targeted therapy), leading to its title as the global "King of Drugs." The patent for Keytruda is expected to expire starting in 2028. Davis noted in the interview: Looking back at where we were five years ago, I told our chief scientist at the time...we must find a way to invest in and accelerate our R&D pipeline. On one hand, we achieve this by accelerating the internal projects, while on the other, we have actually engaged in business expansion and acquisition deals totaling up to $65 billion, bringing in several important assets. Davis highlighted Winrevair, a drug for the treatment of a rare and life-threatening lung disease, which is expected to be approved by the U.S. Food and Drug Administration (FDA) in 2024. Merck & Co., Inc. acquired the drug years ago with a $11.5 billion purchase of Acceleron. Davis stated that Winrevair is helping patients manage this historically devastating condition. The CEO also mentioned the cholesterol-lowering pill Lipfendra, which received FDA approval last month; he simultaneously referenced the launch of Keytruda QLEX. This is the regular injectable form of Merck & Co., Inc.'s flagship cancer drug Keytruda, which can be administered in about one minute, as opposed to the proprietary 30-minute intravenous infusion. After Merck & Co., Inc. reported second-quarter results that exceeded market expectations and unexpectedly raised its annual revenue outlook, its stock price remained roughly stable on Tuesday. However, due to related accounting costs from the acquisition of the well-known biotech company Terns Pharmaceuticals, the pharmaceutical giant slightly lowered its profit guidance. In the past 12 months, Merck & Co., Inc.'s stock price has surged approximately 60%, outperforming the roughly 50% gain of the iShares U.S. Pharmaceutical and Healthcare ETF during the same period. The best non-AI investment theme is emerging the innovative drug sector. The current wave of investment in innovative drugs seems more like a global reassessment driven by the fundamentals of the global innovative drug industry, product cycles, and capital rotation, rather than purely a defensive strategy. This new reassessment trend has crossed the U.S. and China stock markets and formed significant relative returns. Merck & Co., Inc. posted a 5% year-over-year increase in second-quarter sales to $16.6 billion, with Keytruda and its injectable form QLEX sales rising 5% to $8.4 billion. The new generation pulmonary hypertension drug Winrevair saw a 75% increase to $588 million, and the company simultaneously raised its full-year revenue guidance to $66.3 billion to $67.3 billion; management projected the launch of more than 20 new products over the next five years, with an approximately $70 billion new growth opportunity by the mid-2030s to offset the Keytruda patent cliff. Another American pharmaceutical giant, Pfizer Inc., similarly demonstrated a structural improvement of old products declining and new products taking over: second-quarter revenue reached $15 billion, with a 5% increase in operating income after excluding COVID-19 products, and an 18% increase in revenue from newly launched and acquired product portfolios. Eliquis sales rose 21% to $2.43 billion, and the company adjusted its full-year revenue midpoint upward. In other words, the market is re-pricing not the low growth characteristics of traditional pharmaceutical companies, but rather the ramp-up of blockbuster innovative drug segments, the realization of acquisition pipelines, and the management capabilities concerning patent cliffs. The A-share medical index increased by 11%, achieving 19 percentage points of excess return relative to the CSI 300. Data from the Hang Seng Index Company also showed that the Hang Seng Biotechnology Index rebounded over 17% from its low in June, narrowing its decline to 2% as of July 3, significantly outperforming the 11% drop of the Hang Seng Composite Index during the same period. As of July 29, within the rotation window after the Nasdaq tech stocks peaked in the U.S. on June 2, the S&P 500 healthcare sector rose about 14%, while the S&P 500 Index dropped about 2.4%. Healthcare stocks became one of the strongest performing sectors, reflecting that the logic of capital has upgraded from a temporary hedging strategy during the deleveraging and heavy selling of AI to seeking a second growth stock investment boom characterized by lower valuations, verifiable profitability, and potential for global license transactions. However, a more accurate global investment sentiment regarding healthcare stocks is not that all pharmaceutical stocks will enter a bull market, but rather that innovative drug themes are entering a differentiated, catalyst-driven global asset reallocation cycle. Compared to AI infrastructure, which requires continuous investment of massive capital expenditures and relies on long-term returns, drug pipelines can achieve high gross margins, strong cash flows, and low sensitivity to macro cycles once they reach the commercialization stage. In contrast to the innovative drug sectors in U.S. and European markets, Chinese innovative drug themes are also enhanced by overseas licensing, international clinical data, and the correction of valuation discounts, making them one of the most attractive non-AI growth assets currently, particularly as China continues to see the emergence of companies with strong commercialization, clear Phase III pipelines, significant overseas business development capabilities, and balance sheets capable of supporting R&D investments. Nevertheless, issues such as patent expirations, clinical trial failures, healthcare insurance and centralized procurement policies, acquisition impairments, and the resurgence of the AI trend causing capital return may still lead to sharp divergences.