We add shares of Merck & Co. to the High-Quality Capital Appreciation portfolio, replacing shares of Amgen Inc. (AMGN 295 ****). Our Buy rating reflects our view that MRK is a leading global drug maker, producing a wide range of prescription drugs and vaccines in many therapeutic areas. MRK is best known for its biologic immuno-oncology therapy, Keytruda, which has quickly become a top treatment option for cancer. Until 2028, when Keytruda will hit its loss of exclusivity, we think the drug will continue to make around 50% of MRK's total revenue. We think MRK's top-line growth will also benefit from its recent M&A (Prometheus, SpringWorks) and collaboration activity. Notably, the collaboration agreement with Daiichi Sankyo to co-develop and market three first-in-class antibody drug conjugates has been quite promising. We think the Exposure to Animal Health offers good diversification vs. peers (roughly 10% of MRK's total sales). We expect Animal Health segment sales to grow faster during 2025 and 2026.

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