Merck on Tuesday reported fourth-quarter profits and revenue that beat estimates due to strong demand for its cancer immunotherapy Keytruda and some newer products.
But the company issued a modest outlook for 2026, below Wall Street expectations, as it prepares for a few drugs to lose patent protection later this year and face competition from generics. This includes the type 2 diabetes medications Januvia and Janumet, as well as Bridion, a treatment that helps restore muscle function blocked during surgery.
Although these drugs are not top-selling products like Keytruda, their lower combined sales will likely put pressure on the company.
The pharmaceutical giant expects its 2026 revenue to be between $65.5 billion and $67 billion. Analysts expected revenue of $67.6 billion, according to LSEG.
Merck also expects adjusted earnings to be between $5 and $5.15 per share. That compares to analysts’ estimate of $5.36 per share, according to LSEG.
That range includes a one-time charge of about $9 billion, or about $3.65 per share, related to Merck’s acquisition of Cidara, a biotechnology company that is developing a preventive drug for the flu.
The guidance includes “manageable impacts” of Merck’s drug pricing deal with President Donald Trump in December, as well as his administration’s recent decision to reduce the U.S. pediatric vaccination schedule, according to a company spokesperson.
Under this “most favored nation” agreement, Merck will voluntarily sell its existing treatments to Medicaid patients at the lowest price offered in other developed countries and guarantee that price for new drugs, among other efforts. In exchange, Merck will benefit from a three-year reprieve on tariffs.
Here’s what Merck reported for the fourth quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $2.09 adjusted vs. $2.01 expected
- Income: $16.4 billion versus $16.19 billion expected
The company reported net income of $2.96 billion, or $1.19 per share, for the quarter. That compares to net income of $3.74 billion, or $1.48 per share, for the year-ago period.
Excluding acquisition and restructuring costs, Merck earned $2.04 per share for the fourth quarter.
Merck generated $16.4 billion in revenue for the quarter, up 5% from the same period a year earlier.
These results come as Merck cuts costs by $3 billion by the end of 2027 and prepares to offset revenue losses due to the upcoming expiration of Keytruda’s patent in 2028.
Merck shares closed up more than 2% on Tuesday.
Keytruda drives growth despite Gardasil struggles
Merck’s pharmaceutical unit, which develops a wide range of drugs, reported fourth-quarter revenue of $14.84 billion. This represents an increase of 6% compared to the same period a year earlier.
Keytruda sales exceeded $8.37 billion for the quarter, up 7% from the same period last year. Analysts were expecting revenue of $8.35 billion, according to StreetAccount estimates.
Keytruda’s revenue increase was driven by increased use of the drug for early-stage cancers and strong demand for the treatment of metastatic cancers, which spread to other parts of the body, the company said.
Sales of the more convenient subcutaneous version of Keytruda, which was approved last year, were $35 million in the fourth quarter.
This version of Keytruda is key to Merck’s efforts to offset likely revenue declines after the patent on the original formulation of the drug, which is administered intravenously, expires.
Meanwhile, Winrevair, Merck’s new drug used to treat a rare and fatal lung disease, reported revenue of $467 million for the quarter, up 133% from the same period a year earlier.
Analysts expected the drug to gross $459 million, according to StreetAccount estimates.
The growth of Winrevair, which first entered the market in mid-2024, largely reflects higher adoption in the United States and its early launch in some international markets.
Merck continues to face problems with sales in China of Gardasil, a vaccine that prevents cancer caused by HPV, the most common sexually transmitted infection in the United States.
Last February, Merck announced that it would stop shipments of Gardasil to China starting that month. In July, Chief Financial Officer Caroline Litchfield said the company would not resume shipments to China until at least the end of 2025, noting that inventories remained high and demand remained weak.
Gardasil generated revenue of $1.03 billion for the quarter, down 34% from the same period last year due to lower demand in China. Still, that was what analysts expected, according to StreetAccount.
Gardasil revenues could see more pressure in 2026. As part of the Centers for Disease Control and Prevention’s changes to the pediatric immunization schedule, the agency said children should receive one dose of the HPV vaccine instead of the two to three doses recommended on the label.
Merck’s animal health division, which develops vaccines and drugs for dogs, cats and cattle, reported revenue of nearly $1.51 billion, up 8% from the same period a year earlier. The company said this reflects higher demand across all species.