Merck & Co
MRK · NYSEHealthcare · Pharmaceuticals
Since the Report + 17.7%
Close on Report DayAug 4
$128.37▲ 0.2%Report-Day Move
- Market Cap(Today)
- ≈ $373 B
- 1Y Return(At Report)
- + 59%
- P/E($3.21 · Trailing 12M)
- 47.0
- Net Margin(Trailing 12M)
- 4.8%
Merck beat on sales and raised its full-year revenue outlook, but one-time charges from two acquisitions nearly halved the profit forecast, and the stock closed earnings day flat.
Revenue (Q2)
$16.6B
▲ 5% · Above Expectation
Keytruda Franchise
$8.37B
▲ 5% · Half of Revenue
Keytruda Qlex (Subcutaneous)
$463M
First Read on the Switch
Winrevair
$588M
▲ 75%
Adjusted EPS
-$0.13
Terns Charge: -$2.31
Full-Year Revenue Guidance
$66.3-$67.3B
Raised
Quarterly Revenue ($ Billion)
15.81
17.28
16.40
16.29
16.61
- Q2 2025
- Q3 2025
- Q4 2025
- Q1 2026
- Q2 2026
- Year-over-Year Growth
- 5%4% Excluding FX
- Keytruda Franchise Share
- 50%$8.37B · ▲ 5%
- Januvia / Janumet
- ▼ 31%Generic Pressure
Q3 2026 Company Guidance
- Full-Year Revenue66.3 – 67.3 billion
Revised Up ▲
- Full-Year Adjusted EPS2.66 – 2.76 $
Cut by Acquisition Charges ▼
The blue band is the company's low–high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. Axis is ±2.1% around the midpoint.
- R&D Expense (Q2)
- $9.7BQ2 2025: $4.0B
- Dividend (Annual)
- $3.40Yield ~2.7%
- Keytruda Patent Timeline
- 2028-2030LOE Window
“We see that as the LOE period is more of a hill than a cliff... I do think you're going to see a shallow dip with a fast return back to growth.”
- Faster-than-expected clinical de-risking
- LOE a hill, not a cliff
- 20+ new products, $70B opportunity
Summary
Merck's second-quarter 2026 sales reached $16.6 billion, up 5% from a year earlier (4% excluding currency) and ahead of the market expectation of $16.41 billion. The Keytruda franchise, which alone carries half of company revenue, sold $8.37 billion and grew 5%. The real movement came from newer products: Winrevair, for pulmonary arterial hypertension, hit $588 million and grew 75%; the kidney cancer drug Welireg reached $271 million, up 67%; and the pneumococcal vaccine Capvaxive posted $184 million, up 42%. Animal Health rose 8% to $1.78 billion. On the bottom line, however, the company booked an adjusted loss of $0.13 per share, because the Terns acquisition alone flowed through as a $5.7 billion research and development charge worth $2.31 per share.
The stock closed earnings day essentially flat, up 0.18% at $128.00 on August 4. It had been up about 1.4% premarket, but that faded during the session. The reason is the two-sided nature of the report. On one side, revenue guidance moved up to $66.3-$67.3 billion from $65.8-$67.0 billion, meaning the company sees the rest of the year more favorably. On the other, adjusted earnings per share guidance was cut to $2.66-$2.76 from $5.04-$5.16. All of that cut comes from acquisition accounting: $2.31 per share for Terns and $3.62 per share for Cidara. The cash-generating business is not deteriorating, but the company is taking money out of today's profit and putting it into tomorrow's pipeline, and the market is neither celebrating nor punishing that choice.
The real subject of this quarter is neither Keytruda's 5% nor the one-time charges; it is 2028. Keytruda's U.S. composition-of-matter patent protection expires that year, and roughly half of company revenue depends on that single drug. Merck's answer has three legs: move patients onto the subcutaneous formulation Keytruda Qlex before biosimilar competition arrives, extend oncology beyond Keytruda, and scale newer engines such as Winrevair, Welireg and Capvaxive. Qlex selling $463 million in its first full quarter is the first concrete evidence the plan is working, but it is not enough on its own. The quarter itself was good; the reservations are the direction of profitability (gross margin down 1.1 points, tax rate rising to 35-36%) and the fact that the 2028 question remains open.
Full Review
ClaudeKeytruda is still growing, but the pace has settled.
Keytruda and its subcutaneous sibling Qlex together sold $8.37 billion, up 5% year over year (4% excluding currency). Merck points to earlier-stage indications as the driver: global uptake is rising in settings such as triple-negative breast cancer and cervical cancer, while metastatic demand is climbing in urothelial cancer. The message here is not the growth rate but what that rate is applied to. A product that once grew 15-20% a year is now growing in the single digits because it is approaching saturation in the United States. Having half of total company revenue ride on one molecule is a concentration risk analysts notice even in good quarters. The question for Merck is no longer how fast Keytruda grows, but how much of it survives after 2028.
The patent cliff is what this report is really about.
Keytruda's U.S. composition-of-matter patent expires in 2028. Merck models that date as a prudent baseline while continuing to defend method-of-use and manufacturing patents that extend into 2029. The commercial leg of the defense is Keytruda Qlex, the subcutaneous formulation that converts an intravenous infusion into an injection and aims to move patients onto a new product before biosimilars arrive. The company is targeting roughly 30-40% of eligible patient volume on the subcutaneous formulation by 2028. Qlex sold $463 million in its first full quarter, and management says physician and patient adoption has increased since the permanent J-code reimbursement designation was established in April, adding that early use has been predominantly in patients on monotherapy or in combination with an oral agent. In other words, the conversion has started, but the larger mass of combination-therapy patients has not moved yet.
The guidance cut is a bill, not a broken business.
Adjusted earnings per share guidance falling to $2.66-$2.76 from $5.04-$5.16 looks alarming at first glance. But the entire cut comes from the accounting treatment of two acquisitions: Terns flows through as a $5.7 billion research and development charge worth $2.31 per share, and Cidara as a $9.0 billion charge worth $3.62 per share. These are not recurring costs; they are the price of acquired drug candidates expensed in one go. The fact that the revenue band moved up in the same guidance confirms the distinction. The side effects are real, though: the non-deductible portion of these charges pushes the effective tax rate into the 35-36% range, and the operating expense outlook rises to $42.0-$42.7 billion from $36.0-$36.8 billion. Merck is spending today's profit on tomorrow's pipeline; whether that pays off will only be visible after 2028. For readers curious about where one-time items like these land in the financials, the guide to reading financial statements is a good starting point.
The growth engines are finally big enough to count.
The diversification story Merck has been telling for years can finally defend itself with numbers. Winrevair reached $588 million, up 75%, with more than eighteen hundred new patients prescribed in the United States. Welireg hit $271 million, up 67%, and Capvaxive $184 million, up 42%. The respiratory drug Ohtuvayre sold $204 million. Add it up and there is a new revenue layer running at more than $5 billion a year — not enough to replace Keytruda, but no longer a rounding error either. Animal Health, meanwhile, continues its quiet consistency: $1.78 billion, up 8%, split between $1.04 billion in livestock and $734 million in companion animal. Insulated from the pharmaceutical patent calendar, it is the least-discussed and most predictable piece of the portfolio.
Gardasil is off the bottom, but China is still out.
The HPV vaccine Gardasil sold $1.169 billion, up 4% (3% excluding currency). That is the first meaningful sign of recovery after a long decline: Gardasil sales fell 39% in 2025 to $5.2 billion. The center of that collapse was China, where demand fell unexpectedly, prompting Merck to halt shipments so partner Zhifei could work down existing inventory, and to withdraw its $11 billion sales target entirely. This quarter's growth is not China coming back; the company cites higher demand in Asia Pacific and Europe plus favorable European tender timing, partly offset by lower demand in certain other international markets. So Gardasil is now growing off a low base, and China stands less as a revenue source than as an option that has yet to be exercised.
Two wins and two delays in the pipeline.
The science side of the quarter was mixed. On the positive side, the oral PCSK9 inhibitor Lipfendra won FDA approval, sac-TMT produced positive Phase 3 data in endometrial cancer, and tulisokibart cleared Phase 3 in ulcerative colitis. On the negative side, that same tulisokibart missed its primary endpoint in a systemic sclerosis-associated interstitial lung disease study, and the timeline for the flu prevention candidate MK-1406 slipped to 2029. The Terns acquisition adds MK-4208, a chronic myeloid leukemia candidate. CEO Robert Davis said his confidence in de-risking the pipeline is higher than it was in January, driven by faster-than-expected clinical readouts. That means the layer meant to fund the post-2028 era is being built — but the construction still finishes after the patent date.
Strengths
5- Sales of $16.6 billion came in above the market expectation of $16.41 billion, and full-year revenue guidance was raised to $66.3-$67.3 billion.
- The newer product layer is now measurable: Winrevair grew 75%, Welireg 67% and Capvaxive 42%, while Ohtuvayre sold $204 million.
- Keytruda's subcutaneous formulation Qlex sold $463 million in its first full quarter, with adoption accelerating after April's permanent J-code.
- Gardasil grew 4%, the first recovery signal after a 39% collapse in 2025.
- Animal Health grew 8% to $1.78 billion, offering a predictable revenue layer insulated from the pharmaceutical patent calendar.
Risks
6- Keytruda's U.S. composition-of-matter protection expires in 2028, and roughly half of company revenue rides on that single product.
- If the subcutaneous conversion falls short of the targeted 30-40% of eligible volume, a gap opens in the post-2028 revenue defense; early use is still concentrated in monotherapy patients.
- Adjusted EPS guidance was cut to $2.66-$2.76 from $5.04-$5.16; the charges are one-time, but the cash genuinely leaves, and the operating expense band rose to $42.0-$42.7 billion.
- Profitability is drifting the wrong way: adjusted gross margin fell to 81.1% from 82.2%, and the effective tax rate outlook moved to 35-36%.
- The China leg of Gardasil remains closed, the $11 billion target has been withdrawn, and the recovery is coming off a low base.
- The pipeline had setbacks: tulisokibart missed its primary endpoint in the lung disease study, and flu candidate MK-1406 slipped to 2029.
What to Watch
4- September 21, 2026 — FDA decision date for the Winrevair label update based on the Phase 3 HYPERION study.
- ~October 2026 — Q3 results. Watch Keytruda Qlex's share of U.S. volume and whether the Gardasil recovery holds.
- Rest of 2026 — the $3.62 per share charge tied to the Cidara acquisition flows through results; it is already in full-year guidance, so it should not surprise.
- 2028 — expiry of Keytruda's U.S. composition-of-matter patent; the company continues to defend method-of-use and manufacturing patents extending into 2029.
Upcoming Earnings
To Understand This