Merck closed the fourth quarter with earnings and revenue ahead of Wall Street estimates, supported by strong demand for its blockbuster cancer drug Keytruda and accelerating sales from newer medicines.
The performance, however, was tempered by guidance for 2026 that landed below expectations, reflecting the growing impact of patent expirations and pricing pressures.
As several established drugs face generic competition and policy changes reshape parts of the US market, the company is leaning on its oncology portfolio, cost cuts, and acquisitions to steady revenue growth in the years ahead.
Modest guidance highlights transition phase
Merck forecast 2026 revenue of between $65.5 billion and $67 billion, below the $67.6 billion expected by analysts.
Adjusted earnings are projected at $5 to $5.15 per share, also short of the $5.36 per share consensus.
The earnings range factors in a one-time charge of about $9 billion, or roughly $3.65 per share, linked to the acquisition of Cidara, a biotech firm developing a flu prevention drug.
The guidance also assumes what the company described as manageable effects from the drug pricing agreement reached with President Donald Trump in December and changes to the US pediatric vaccine schedule.
Under the most favoured nation deal, Merck agreed to sell existing medicines to Medicaid patients at the lowest prices offered in other developed markets and to apply similar pricing guarantees to new drugs.
In return, the company secured a three-year exemption from tariffs.
The outlook also reflects the expected loss of patent protection later this year for several medicines, including diabetes treatments Januvia and Janumet and the surgical drug Bridion, which together represent a smaller but meaningful revenue stream.
Fourth-quarter results top estimates
For the December quarter, Merck reported adjusted earnings of $2.04 per share on revenue of $16.4 billion.
Experts had expected earnings of $2.01 per share and revenue of $16.19 billion.
Net income came in at $2.96 billion, or $1.19 per share, compared with $3.74 billion, or $1.48 per share, a year earlier.
Revenue rose 5% year on year, reflecting continued momentum in the company’s pharmaceutical unit and steady growth in animal health.
Excluding acquisition and restructuring costs, earnings came in at $2.04 per share, while management reiterated plans to cut $3 billion in costs by the end of 2027.
Those savings are intended to help offset revenue losses expected when Keytruda’s patent expires in 2028.
Oncology pipeline drives pharmaceutical sales
Merck’s pharmaceutical division generated $14.84 billion in quarterly revenue, up 6% from the same period last year.
Keytruda remained the primary growth driver, with sales of $8.37 billion, up 7% year on year and slightly above StreetAccount expectations.
Growth was supported by increased use of the drug in earlier-stage cancers and sustained demand for metastatic cancer treatments.
The subcutaneous version of Keytruda, approved last year, delivered $35 million in sales during the quarter.
Merck views this formulation as a key lever to cushion the impact of patent expiry for the intravenous version later in the decade.
Another contributor was Winrevair, a newer treatment for a rare and often fatal lung condition.
The drug generated $467 million in sales, a 133% increase from a year earlier, beating analyst expectations.
The rise reflected stronger uptake in the US and early launches in select international markets following its mid-2024 debut.
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