Merck reported fourth-quarter profit and sales on Tuesday that beat expectations due to strong demand for its cancer immunotherapy drug Keytruda and certain new products.
But the company issued a more modest outlook for 2026, lower than Wall Street expectations, as it prepares for some of its drugs to lose patent protection and face generic competition later this year. These include the type 2 diabetes drugs Januvia and Janumet, and Bridion, a treatment that helps restore muscle function that was cut off during surgery.
Although these drugs are not the best-selling products like Keytruda, their combined decline in sales is likely to weigh on the company.
The pharmaceutical giant expects 2026 sales to be between $65.5 billion and $67 billion. Analysts had expected sales of $67.6 billion, according to LSEG.
Merck also expects adjusted earnings to be between $5 and $5.15 per share. This compares to analysts’ expectations of $5.36 per share, according to LSEG.
The range includes one-time costs of approximately $9 billion, or approximately $3.65 per share, related to Merck’s acquisition of Sidara, a biotechnology company developing influenza prevention drugs.
A company spokesperson said the guidance includes “manageable impacts” from Merck’s drug pricing agreement with President Donald Trump in December and his administration’s recent moves to reduce the U.S. pediatric vaccine schedule.
Under the “most-favored-nation” arrangement, Merck will voluntarily sell existing treatments to Medicaid patients at the lowest prices offered in other developed countries, guaranteeing pricing for new drugs, and other initiatives. In return, Merck will receive a three-year moratorium on tariffs.
Here’s how Merck reported in the fourth quarter compared to Wall Street’s expectations, based on a survey of analysts by LSEG.
Earnings per share: Adjusted $2.09 vs. $2.01 expected Revenue: $16.4 billion vs. $16.19 billion expected
Net income for the quarter was $2.96 billion, or $1.19 per share. This compares to net income of $3.74 billion, or $1.48 per share, in the same period last year.
Excluding acquisition and restructuring costs, Merck’s fourth-quarter earnings were $2.04 per share.
Merck had revenue of $16.4 billion in the quarter, an increase of 5% from the same period last year.
The results come as Merck prepares to cut costs by $3 billion by the end of 2027 and offset revenue losses from Keytruda’s looming patent expiration in 2028.
Keytruda drives growth amid Gardasil issues
Merck’s pharmaceutical division, which develops a wide range of drugs, posted revenue of $14.84 billion in the fourth quarter. This was an increase of 6% compared to the same period last year.
Keytruda’s sales for the quarter were more than $8.37 billion, an increase of 7% from the same period last year. Analysts had expected sales of $8.35 billion, according to estimates from Street Accounts.
The company said the increase in sales of Keytruda was driven by increased 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.
Keytruda, the more convenient subcutaneous version that won approval last year, had sales of $35 million in the fourth quarter.
This version of Keytruda is key to Merck’s efforts to offset expected revenue losses as the drug’s original formulation, administered intravenously, goes off-patent.
Meanwhile, Merck’s new drug Winreair, used to treat a rare and fatal lung disease, posted sales of $467 million in the quarter, up 133% from a year earlier.
Analysts had expected the drug to generate $459 million in profits, according to estimates from Street Accounts.
First entering the market in mid-2024, Winrevair’s growth primarily reflects high penetration in the U.S. and early launch in some international markets.
Merck continues to have problems selling Gardasil, a vaccine that prevents cancer caused by HPV, the most common sexually transmitted disease in the United States, in China.
Last February, Merck announced that it would stop shipping Gardasil to China starting that month. Chief Financial Officer Caroline Litchfield said in July that the company would not resume shipping to China until at least the end of 2025, noting that inventories remained high and demand remained weak.
Gardasil’s sales for the quarter were $1.03 billion, down 34% year over year due to lower demand in China. Still, this was in line with analyst expectations, according to Street accounts.
Gardasil’s earnings could face further pressure in 2026. As part of the Centers for Disease Control and Prevention’s pediatric vaccine schedule changes, the agency said children should receive one dose of the HPV vaccine instead of the two or three doses recommended on the label.
Sales at Merck’s animal health division, which develops vaccines and medicines for dogs, cats and cattle, rose 8% from a year earlier to nearly $1.51 billion. The company said this reflects growing demand across all species.
