TLDR
- Merck reported Q4 adjusted earnings of $2.04 per share and revenue of $16.4 billion, beating analyst expectations of $2.01 and $16.2 billion
- Keytruda cancer drug sales grew 7% to $8.4 billion, while Gardasil vaccine sales dropped 34% to $1 billion due to lower China demand
- Full-year 2026 guidance disappoints with adjusted earnings forecast of $5 to $5.15 per share versus analyst estimates of $5.27
- The outlook includes a $3.65 per share one-time charge related to the Cidara Therapeutics acquisition
- Merck struck a deal with the U.S. government to provide affordable drugs in exchange for a three-year pause on Section 232 tariffs
Merck shares climbed 2.1% Tuesday after the pharmaceutical company delivered quarterly results that topped Wall Street forecasts. The gains came even as investors digested a softer-than-expected outlook for the year ahead.
The drugmaker posted adjusted earnings of $2.04 per share on revenue of $16.4 billion for the fourth quarter. Analysts surveyed by FactSet had projected earnings of $2.01 per share and sales of $16.2 billion.
CEO Robert Davis told analysts on the earnings call that “momentum is building” as the company executes its strategic plan. The phar
maceutical segment generated $14.8 billion in sales, surpassing the $14.6 billion consensus estimate.
Keytruda, Merck’s blockbuster cancer immunotherapy, continues to carry the company. Sales of the drug increased 7% to $8.4 billion in the quarter, driven by uptake in earlier-stage cancer treatments.
The drug’s patent protection expires in 2028, setting up what analysts call a “patent cliff.” That’s when copycat biosimilar drugs can enter the market and compete with Keytruda.
Merck has been building what it calls a “patent wall” around Keytruda. Peter Dannenbaum, senior vice president of investor relations, said certain patents have been extended to 2029. The company’s confidence in defending these additional patents has grown, potentially pushing protection into late 2029.
Vaccine Sales Decline While Animal Health Misses
Gardasil vaccine sales tell a different story. The HPV vaccine family saw sales plunge 34% to $1 billion in the quarter. The drop came from lower demand in China and weak sales in Japan, though U.S. sales provided some offset.
Even with the decline, Gardasil sales beat analyst estimates of $994 million. The animal health division brought in just over $1.5 billion, narrowly missing Wall Street expectations.
2026 Guidance Falls Short of Expectations
The company’s full-year forecast disappointed investors. Merck expects adjusted earnings between $5 and $5.15 per share for 2026. Wall Street had been looking for $5.27 per share.
Revenue guidance came in at $65.5 billion to $67 billion. Analysts expected $67.4 billion at the midpoint. The outlook includes a one-time charge of $3.65 per share tied to the Cidara Therapeutics takeover.
That acquisition is part of Merck’s strategy to offset the coming Keytruda patent expiration. The company also closed its $10 billion purchase of Verona Pharma last October.
Davis highlighted regulatory wins during the quarter. The FDA approved Keytruda and Keytruda QLEX combined with Padcev for advanced bladder cancer patients. A Phase 3 study showed the combination improved overall survival rates.
Tariff Deal Provides Cost Relief
Merck announced a separate agreement with the U.S. government on Tuesday. The deal provides a three-year pause on Section 232 tariffs in exchange for affordable drug pricing.
Under the arrangement, Merck will offer products through a direct-to-patient program at lower prices. The company has committed over $70 billion in capital and R&D spending to strengthen U.S. manufacturing and development.
Citi Research noted that investors remain focused on Merck’s pipeline and new launches. The oncology portfolio is becoming a core piece of the business as the company prepares for life after Keytruda’s exclusivity period ends.
The stock pared earlier gains but still finished the session up 2.1%. The S&P 500 declined 0.4% on the day.
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