Merck's (MRK) human papillomavirus or HPV vaccine Gardasil remains a key driver for the drugmaker, yet investors are showing "limited near-term appetite" for the stock ahead of any potential key inflection points, including Gardasil shipments in China, which are likely to return to growth in 2026, UBS said in a Wednesday note.

Referring to Gardasil, UBS said it believes the vaccine's inventory levels in China will remain elevated based on an expansion of a "buy two get one free" promotional campaign and limited batch approvals so far in 2025.

UBS said that Gardasil shipments to China totaled $200 million in January, but said it does not expect any additional shipments for the year, especially with the approval of domestic competitor Wantai's 9-valent HPV vaccine Cecolin 9 in China.

UBS analysts also said they expect Q2 sales of cancer drug Keytruda "to rebound" sequentially with total sales of $7.9 billion.

For Q2, UBS is estimating earnings per share of $2.05 on revenue of $15.8 billion with Gardasil revenue expected at $1.25 billion.

UBS maintained its buy rating on the stock along with a $105 price target.

Price: 82.24, Change: +0.42, Percent Change: +0.52