Merck on Tuesday reported fourth-quarter earnings and revenue that beat estimates on strong demand for its cancer immunotherapy Keytruda and some new products.
But the company posted a modest forecast for 2026, falling short of Wall Street’s expectations, as it prepares for several drugs that will lose patent protection later this year and face generic competition. It includes type 2 diabetes drugs, Januvia and Janumet, and Bridion, a treatment to help restore muscle function that is blocked during surgery.
Although these drugs are not top-selling products like Keytruda, their combined sales could put pressure on the company.
The pharmaceutical giant predicts revenue will reach $65.5 billion to $67 billion by 2026. Analysts had expected $67.6 billion in revenue, according to LSEG.
Merck also expects adjusted earnings to be between $5 and $5.15 per share. That compares with analysts’ estimates of $5.36 per share, according to LSEG.
That range includes a one-time payment of about $9 billion, or about $3.65 per share, related to Merck’s acquisition of Cidara, a biotech company developing a flu drug.
The guidance includes the “controlled effects” of Merck’s drug pricing agreement with the president Donald Trump in December, and his administration is moving closer to resuming the U.S. pediatric vaccine schedule, a company spokeswoman said.
Underneath that “most favored nation” agreementMerck voluntarily sells its existing treatments to Medicaid patients at the lowest prices offered in other developed countries and guarantees the price of new drugs, among other efforts. In return, Merck will receive a three-year exemption from tariffs.
Here’s what Merck reported for the fourth quarter, compared to Wall Street’s expectations, based on a survey of LSEG analysts:
- Earnings per share: $2.04 vs. $2.01 expected
- Input: $16.4 billion vs. $16.19 billion expected
For the quarter, the company posted net income of $2.96 billion, or $1.19 per share. That compares with net income of $3.74 billion, or $1.48 per share, in the year-ago period.
Excluding acquisition and restructuring costs, Merck earned $2.04 per share in the fourth quarter.
Merck reported revenue of $16.4 billion in the quarter, up 5% from the same period last year.
The results come as Merck cuts costs by $3 billion by the end of 2027 and prepares to offset revenue losses due to Keytruda’s patent expiration in 2028.
Keytruda provides growth during Gardasil challenges
Merck’s pharmaceutical division, which develops a wide range of drugs, posted fourth-quarter revenue of $14.84 billion. This is 6 percent more than in the same period last year.
Keytruda sales exceeded $8.37 billion in the quarter, up 7% from the year-ago period. Analysts had expected $8.35 billion in revenue, according to StreetAccount estimates.
Keytruda’s revenue increase was driven by higher uptake of the drug for early-stage cancers and strong demand for the treatment of metastatic cancers that have spread to other parts of the body, the company said.
Sales of the convenient subcutaneous version of Keytruda, approved last year, were $35 million in the fourth quarter.
This version of Keytruda is key to Merck’s attempt to offset a potential drop in revenue after the original formulation of the intravenous drug went off patent.
Meanwhile, Merck’s new drug Winrevair, used to treat a rare, fatal lung condition, had sales of $467 million in the quarter, up 133% from the year-ago period.
Analysts expected the drug to bring in $459 million, according to StreetAccount estimates.
The growth of Winrevair, which will first hit the market in mid-2024, mainly reflects the strong momentum in the US and its early launch in some international markets.
Merck continued to face challenges in China sales of its Gardasil vaccine, which protects against HPV cancer, the most common sexually transmitted infection in the US.
In February, Merck announced that it would stop supplying Gardasil to China starting that month. In July, CFO Caroline Litchfield said the company would not resume shipments to China until at least the end of 2025, noting that inventories were high and demand was still soft.
Gardasil generated $1.03 billion in the quarter, down 34% year-over-year due to lower demand in China. However, this was in line with analysts’ expectations, according to StreetAccount.
Gardasil revenue may come under more pressure in 2026. As part of the Centers for Disease Control and Prevention’s changes to the pediatric vaccine schedule, the agency said children should receive one dose of the HPV vaccine instead of the two or three doses recommended on the label.
Merck’s animal health division, which develops vaccines and medicines for dogs, cats and cattle, had sales of about $1.51 billion, up 8% from the same period last year. The company said this reflects high demand across all types.