Merck raised its adjusted earnings outlook for 2026 after third-quarter revenue and profit exceeded Wall Street expectations, supported by stronger-than-anticipated sales of its cancer immunotherapy Keytruda and growing demand for a newer injectable version of the blockbuster drug.
The pharmaceutical company now expects adjusted earnings of $2.77 to $2.82 per share, up from its previous forecast of $2.66 to $2.76. The revised outlook includes a one-time charge of $400 million, equivalent to 12 cents per share, related to a licensing agreement with Chinese cancer drugmaker SciBrunch.
Merck also narrowed the lower end of its full-year revenue guidance, projecting sales of $66.8 billion to $67.3 billion, compared with its previous range of $66.3 billion to $67.3 billion.
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The results highlight the strength of Merck’s established cancer franchise and its efforts to build new sources of growth before generic competition intensifies. Keytruda remains central to the company’s commercial performance, but the prospect of key patents expiring from 2028 has made the transition to newer formulations and the expansion of its broader drug portfolio increasingly important.
Merck’s challenge is not just to maintain strong sales today, but to preserve the revenue stream generated by Keytruda as its original intravenous formulation approaches the loss of market exclusivity.
Keytruda generated $8.60 billion in third-quarter sales, substantially exceeding analysts’ expectations of $7.73 billion, according to StreetAccount. The result reinforces the drug’s importance to Merck’s financial performance and gives the company a stronger starting point as it prepares for future competition.
The newer injectable formulation, Keytruda Qlex, contributed $830 million to quarterly sales, its highest quarterly total since launching in 2025. Analysts had expected sales of approximately $649 million.
The stronger performance suggests that patients and healthcare providers are adopting the formulation more quickly than anticipated. Unlike the original intravenous treatment, Qlex is administered through an injection under the skin, offering a more convenient alternative to infusion-based treatment.
Merck is seeking to transition eligible patients from the original formulation to Qlex as part of its strategy to defend Keytruda’s market position beyond the original product’s loss of exclusivity. The injection’s quarterly sales also bring it closer to the $1 billion annualized sales milestone commonly associated with blockbuster drugs, although sustaining that trajectory will depend on continued adoption and market access.
The formulation change is commercially important because pharmaceutical companies often face substantial revenue pressure when major drugs lose patent protection. Generic or biosimilar competitors can offer lower-priced alternatives, forcing the original manufacturer to defend market share while developing replacement products.
Moving patients to a newer formulation may help Merck retain customers and extend the commercial life of its Keytruda franchise. However, the degree of protection will depend on the relevant patent rights, competition, reimbursement arrangements and the pace at which healthcare providers adopt the new treatment.
The company has also been pursuing acquisitions and licensing agreements to diversify its pipeline and offset the anticipated impact of Keytruda’s future patent expirations. Its agreement with SciBrunch, which accounts for the $400 million charge included in the updated earnings outlook, illustrates the cost of securing additional opportunities for future growth.
The strategy carries financial trade-offs. Deals can provide access to promising medicines and technologies, but they also require upfront investment and may take years to generate meaningful revenue. Merck therefore needs its existing products to deliver strong cash flow while newer assets progress towards broader commercial adoption.
Newer Drugs and Gardasil Rebound Support Revenue Growth
Merck’s third-quarter results exceeded analyst expectations across its main financial measures. Adjusted earnings came in at $2.49 per share, compared with the $2.08 expected by analysts surveyed by LSEG. Revenue reached $18.09 billion, beating the $17.31 billion consensus estimate and increasing 5% from the same period a year earlier.
Reported net income declined to $5.07 billion, or $2.04 per share, from $5.79 billion, or $2.32 per share, in the year-earlier quarter. The difference between reported and adjusted earnings reflects the exclusion of acquisition and restructuring costs from the adjusted figure.
Beyond Keytruda, newer medicines delivered encouraging results. Winrevair, which treats pulmonary arterial hypertension, a rare and potentially life-threatening condition affecting the blood vessels in the lungs, generated $694 million in quarterly sales. That represented a 93% increase from a year earlier and exceeded analysts’ expectations of $645 million.
The growth indicates that Winrevair is becoming a more meaningful contributor to Merck’s revenue base. Strong demand for newer medicines is particularly valuable as the company prepares for future competition against Keytruda, although the long-term contribution of each product is tied to its addressable market, competitive position, and ability to maintain growth.
Gardasil, Merck’s vaccine against human papillomavirus (HPV), also performed better than expected, generating approximately $2 billion in quarterly sales against analyst estimates of $1.76 billion. Higher demand in the United States supported the result.
The improvement follows a difficult period in which Merck faced elevated Gardasil inventories and weaker demand in China. The latest figures suggest that US demand has helped offset some of those earlier pressures, although the sustainability of the recovery will be determined by conditions in individual markets.
Merck’s animal health business generated $1.68 billion in sales, slightly below analysts’ expectations, making it a less pronounced contributor to the positive earnings surprise.
Taken together, the results show that Merck’s growth is supported by more than one product. Keytruda remains the dominant revenue driver, while Winrevair, Gardasil and the expanding injectable formulation offer additional sources of sales growth.
The revised guidance nevertheless leaves the company with a significant task over the next several years. Analysts say Merck must continue investing in research, licensing and acquisitions while ensuring that newer medicines generate enough revenue to cushion the eventual impact of generic competition against Keytruda.