Merck & Co. expects full-year 2025 revenue of $65 billion, a 1% increase. The 2026 revenue guidance is between $65.5 billion and $67 billion, below expectations | Earnings Report Insights

On February 3rd, Merck released its financial results for Q4 and the full year of 2025. Driven by continued growth of Keytruda, contributions from new products like Winrevair and Capvaxive, and steady performance in the animal health business, the company’s full-year sales reached $65 billion, a 1% increase year-over-year. Non-GAAP earnings per share were $8.98, up 17% year-over-year.

Merck’s 2025 performance remains solid, but profit forecasts for 2026 are below market consensus. The company expects full-year sales between $65.5 billion and $67 billion, and adjusted EPS between $5.00 and $5.15, both guidance levels falling short of Wall Street expectations.

Due to a one-time expense related to the acquisition of Cidara Therapeutics, the 2026 adjusted EPS includes approximately $3.65 per share in acquisition-related costs, significantly lowering it from the $8.98 in 2025. Excluding this short-term M&A impact, the company’s core business is still expected to maintain growth.

Gardasil Global Sales Under Pressure

Gardasil, once Merck’s second-largest core product, is currently facing growth challenges in multiple global markets. In Q4 2025, vaccine sales totaled $1.031 billion, down 35% year-over-year, slightly above analysts’ previously conservative estimates but still showing a clear downward trend; full-year sales were $5.233 billion, a sharp 39% decline year-over-year.

In some key international markets, demand for the vaccine has noticeably weakened. The previously strong growth in major Asian markets has significantly slowed, facing increasing price and market share competition from domestic manufacturers. Additionally, the Japanese market also saw demand decline after the nationwide booster immunization program ended.

Even in the U.S., Gardasil is encountering new policy changes. In January, U.S. health authorities updated vaccination guidelines, reducing the recommended dosage. CEO Robert Davis previously stated that while the financial impact of this adjustment is “generally manageable,” he is “more concerned about its potential impact on public health policy.” Meanwhile, senior officials at the U.S. Department of Health are also pushing for adjustments to vaccine policy frameworks, adding new uncertainties for Merck and other vaccine companies.

Keytruda Growth Slows as Patent Nears Expiry

Merck’s flagship product Keytruda achieved sales of $8.4 billion in Q4, up 7% year-over-year, exceeding market expectations. The full-year sales surpassed $30 billion for the first time, reaching $31.68 billion, a 7% increase, but the growth rate has slowed, indicating the product is approaching a plateau.

The growth of this drug is mainly driven by global demand for its early indications, including triple-negative breast cancer, non-small cell lung cancer, renal cell carcinoma, cervical cancer, and head and neck cancers, with additional steady demand from metastatic urothelial carcinoma, gastric cancer, and endometrial cancer. Notably, the newly launched subcutaneous formulation Keytruda Qlex generated $35 million in U.S. sales in Q4.

With key patents for Keytruda expected to gradually expire starting in 2028, management faces pressure to introduce new growth drivers through strategic acquisitions. In January, amid market rumors of Merck’s interest in acquiring Revolution Medicines Inc., CEO Robert Davis publicly stated that the company has identified acquisition opportunities worth hundreds of billions of dollars. The Keytruda Qlex subcutaneous formulation, approved last September, is a key strategic move to extend the product lifecycle.

Accelerating New Product Portfolio Transformation

Merck is actively transforming its product portfolio to address upcoming patent expirations and generic competition for core products including Keytruda. Besides this flagship cancer drug, its diabetes treatment Januvia and surgical medication Bridion are also entering competitive phases.

The company’s new product lines are performing well. Pulmonary hypertension treatment Winrevair achieved full-year sales of $1.443 billion, a significant jump from $419 million in 2024, quickly becoming a major product, driven by demand in the U.S. and early launches in some overseas markets. The 21-valent pneumococcal conjugate vaccine Capvaxive had full-year sales of $759 million, showing rapid market penetration.

Additionally, the COPD treatment Ohtuvayre, acquired through Verona Pharma, achieved $178 million in sales in Q4, surpassing market expectations. The company estimates this drug has “billion-dollar-level” commercial potential. The animal health business also maintained steady growth, with full-year sales of $6.354 billion, up 8%.

2026 Outlook Includes Major Acquisition Costs

Merck’s 2026 guidance projects adjusted EPS in the range of $5.00 to $5.15. This guidance already includes approximately $9 billion in one-time costs related to the acquisition of Cidara Therapeutics (about $3.65 per share), as well as associated financing and operational costs (about $0.30 per share). In comparison, the 2025 adjusted EPS was $8.98, including about $0.20 per share in one-time R&D expenses.

Jared Holz, a healthcare analyst at Mizuho, noted that although the market has expected Merck to provide conservative guidance, the actual gap “may be slightly larger than investors previously anticipated.”

The company expects an adjusted gross margin of around 82% in 2026, with adjusted operating expenses between $35.9 billion and $36.9 billion, including the aforementioned one-time acquisition costs. The adjusted effective tax rate is projected to be between 23.5% and 24.5%. Additionally, based on mid-January exchange rates, currency fluctuations are expected to positively impact full-year sales by about 1%, contributing approximately $0.10 per share.

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