Merck raises 2026 earnings outlook to $2.77–$2.82 per share after 5% sales growth
Key Facts
Merck raised its 2026 adjusted earnings-per-share outlook to $2.77–$2.82 after reporting sales of $18.085 billion in the third quarter, up 5% from the same period last year, or 4% excluding foreign-exchange effects. The company said comparable sales were $17.276 billion. By contrast, GAAP net income fell to $5.065 billion from $5.785 billion, and earnings per share declined to $2.04 from $2.32, down 12% in both cases. Merck raised the lower end of its full-year revenue forecast to $66.8 billion from $66.3 billion, while keeping the upper end at $67.3 billion. The update came on October 29 alongside results that showed a divergence between sales growth and pressure on accounting earnings.
KEYTRUDA and its formulation KEYTRUDA QLEX led sales growth, with combined revenue of $8.601 billion, up 6% from $8.147 billion a year earlier; QLEX accounted for $830 million. Merck attributed the performance to broader global use in earlier indications, including triple-negative breast, cervical, head and neck, and bladder cancers, as well as higher demand in some metastatic indications, including urothelial carcinoma. Sales of GARDASIL and GARDASIL 9 also rose 14% to $1.995 billion, compared with $1.749 billion. The company said growth for the two vaccines reflected higher U.S. sales, favorable public-sector purchasing patterns and improved net pricing. The results combine continued demand for the company’s leading cancer treatment with a larger contribution from vaccines.
WINREVAIR recorded sales of $694 million, compared with $360 million a year earlier, representing reported growth of 93%, or 94% excluding foreign-exchange effects. Merck linked the increase to demand and favorable purchasing patterns among U.S. wholesalers and specialty pharmacies, as well as the product’s launch in international markets. Purchasing timing added about $550 million to pharmaceutical-sector sales growth during the quarter, according to the company. Reuters said the impact included purchasing and inventory timing in the United States for KEYTRUDA, GARDASIL and WINREVAIR, and was expected to largely reverse during the fourth quarter and 2027. As a result, quarterly growth alone does not reflect ongoing demand, as purchasing timing contributed to reported sales.
By contrast, sales of older drugs declined under pressure from generic competition and weaker demand. Sales of JANUVIA and JANUMET fell to $380 million from $624 million, a decline of 39%, after the loss of market exclusivity in the United States and the resulting weaker demand. BRIDION sales dropped 67% to $144 million from $439 million as U.S. demand fell because of generic competition. LAGEVRIO sales also declined to $17 million from $138 million, down 88%, which the company attributed to weaker demand in Japan. Merck recorded $13 million in revenue from its Koselugo alliance, compared with $214 million, after an amendment to the AstraZeneca agreement ended revenue and cost sharing; the prior-period comparison had included an upfront payment and a regulatory milestone.
On earnings, the GAAP gross margin fell to 72.9% from 77.7% a year earlier. Merck linked the decline mainly to higher amortization of intangible assets and restructuring and production costs. The company said the decline in earnings per share was also affected by higher operating expenses, including research and development investment and product launches, as well as interest and restructuring. Strong operations and a lower tax rate offset part of the impact, according to its statement. The full-year adjusted earnings-per-share outlook includes one-time research and development charges related to company deals: $3.62 per share for the Cidara acquisition, $2.31 for the Terns acquisition and $0.12 for the SciBrunch license; Merck said the SciBrunch charge was not included in its previous outlook.
The results coincided with progress in the drug pipeline. The Phase 3 INTerpath-001 trial showed that adding intismeran to KEYTRUDA reduced the risk of recurrence or death by 42% compared with KEYTRUDA alone in patients with completely resected stage IIB to IV melanoma. The U.S. Food and Drug Administration also accepted the sac-TMT application for priority review to treat adults with endometrial cancer previously treated with platinum-based chemotherapy and a PD-1 or PD-L1 inhibitor. The agency set June 15, 2027, as the target decision date. Merck is counting on newer drugs and its development pipeline to strengthen growth drivers as KEYTRUDA growth slows with some approved uses nearing peak revenue. Management had said its estimate of $70 billion in revenue from its emerging drug portfolio by the mid-2030s could rise, following positive trial results and the addition of new assets that were not included in the previous estimate.
Merck said it expects moderate revenue growth in 2027, with an impact of more than $2 billion from generic competition and the loss of exclusivity for older products, partly offset by gains from newer drugs and the animal health business. This comes ahead of the start of the erosion of key KEYTRUDA patent protection from 2028, making portfolio expansion central to the company’s plans. In midday trading on October 29, Merck shares rose more than 4%, Reuters reported. The company had closed at $140.93 on October 28. Trial results and the sac-TMT review, alongside the expected impact of generic competition, put the drug-growth outlook at the center of investor focus for the next phase.