Background: Keytruda (Keytruda) Patent Expiration and the Introduction of AI

Merck & Co. (MRK) is facing a critical juncture as it prepares for the 2028 expiration of the U.S. patent for Keytruda (pembrolizumab), its blockbuster immunotherapy drug with over $25 billion in annual sales. To address this, Merck has entered into a strategic partnership with Google Cloud, involving up to $1 billion in Agentic AI collaboration, aiming to diversify its pipeline and overcome potential revenue declines. The partnership focuses on integrating Google's latest large language model (LLM), Gemini Enterprise, into Merck's R&D value chain. Google's engineers will work directly with Merck's research teams, fostering a close collaborative ecosystem that goes beyond a typical contractual relationship.

Accelerating R&D for M&A Pipeline Candidates

Merck plans to prioritize the deployment of AI platforms to accelerate the development of late-stage clinical candidates acquired through recent aggressive M&A activities. This includes expanding the indications for Ohtuvayre (ensifentrine), a COPD treatment from Verona Pharma, acquired for $10 billion in October 2025, and advancing the Phase 3 clinical trial (ANCHOR study) for CD388, a flu vaccine from Cidara Therapeutics, acquired for $9.2 billion in January 2026. Additionally, Agentic AI will be integrated into the design and optimization of the Phase 1 clinical trial for TERN-701, a chronic myeloid leukemia (CML) treatment from Terns Pharmaceuticals, acquired in May 2026. This demonstrates Merck's intention to rapidly validate its extensive portfolio and establish the next generation of blockbuster drugs.

The Trend of Big Tech Alliances in the Pharmaceutical Industry

Recently, major pharmaceutical companies (Big Pharma) have been implementing restructuring measures while simultaneously increasing their investments in AI, primarily to maximize productivity. Similar to Novo Nordisk's (NVO) collaboration with OpenAI to introduce GPT-Rosalind, a bio-specialized model designed to enhance clinical efficiency, Merck has announced its partnership with Google amidst plans to reduce its workforce by 6,000 and cut annual costs by $3 billion. Pfizer (PFE) and Moderna (MRNA) are also strengthening their independent AI platform development efforts to improve cost efficiency and accelerate the launch of new drugs. AI technology is proving to be a valuable asset, shortening the drug candidate discovery period and reducing R&D failure rates.

Creating Synergies in Manufacturing and Commercialization

This partnership is notable for its comprehensive scope, extending beyond drug discovery to encompass manufacturing and commercialization. Merck aims to enhance its smart factories and maximize the production yield of biologics by leveraging generative AI for predictive analytics and automation. This will serve as a powerful tool to mitigate potential production risks and reduce manufacturing costs following successful clinical trials. Furthermore, the partnership is expected to contribute to overall commercial efficiency, including the development of marketing strategies and the matching of clinical trial participants.

Regulatory and Technical Challenges to Overcome

However, Merck faces significant challenges. Given the handling of patient genetic and clinical data, it must comply with stringent security regulations, and ensuring the transparency (explainability) of AI models, as required by global regulatory agencies such as the FDA, is essential. For Merck to successfully overcome the patent expiration crisis and establish itself as an AI-driven pharmaceutical company, it must effectively manage these regulatory and technical hurdles.