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    MRK
    Earnings call· Jun 2026(Q2 FY26)

    Merck & Co. Q2 FY26 earnings call MRK

    Aug 4, 2026 Source

    Executive summary

    Merck Q2 FY26 — Strong Oncology and New Launch Performance, Accelerated Pipeline Derisking

    Merck delivered a strong second quarter, driven by robust performance in Oncology and Animal Health, alongside increasing contributions from recent product launches. The company highlighted accelerated clinical derisking across its pipeline, with several key readouts occurring faster than anticipated, reinforcing confidence in its long-term growth strategy. Despite significant one-time acquisition charges impacting profitability and anticipated moderation in U.S. KEYTRUDA growth, management remains bullish on its diversified portfolio and future commercial opportunities.

    Highlights

    6

    • Total company revenues were $16.6 billion, an increase of 5% (4% excluding FX).

    • KEYTRUDA family sales increased 4% to $8.4 billion, driven by earlier-stage cancers and metastatic indications.

    • WELIREG sales increased 67% to $271 million, with continued uptake from international launches and new approvals.

    • WINREVAIR global sales increased 75% to $588 million, reflecting strong demand in pulmonary arterial hypertension.

    • FDA approved LIPFENDRA, the first oral PCSK9 inhibitor, with up to 60% LDL reduction.

    • Positive Phase III top-line results for sac-TMT in advanced or recurrent endometrial cancer, and for tulisokibart in ulcerative colitis.

    Concerns

    6

    • Gross margin decreased 1.1 percentage points to 81.1%, primarily due to higher inventory reserves.

    • Operating expenses included a $5.7 billion charge for the acquisition of Terns Pharmaceuticals.

    • Tax rate was 160.3% due to the non-tax deductible one-time charge for Terns.

    • Q3 OHTUVAYRE sales are expected to be impacted by the unwind of specialty pharmacy purchases in Q2.

    • Total U.S. KEYTRUDA year-over-year growth is anticipated to moderate due to increasing peak penetration in several key indications.

    • A $250 million benefit from Q3 2025 wholesaler purchases will not repeat this year.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year revenue
    $66.3 billion to $67.3 billion
    high materiality
    High
    Full-year gross margin
    approximately 81%
    medium materiality
    High
    Full-year operating expenses
    $42 billion and $42.7 billion
    medium materiality
    High
    Full-year other expense
    approximately $1.4 billion
    medium materiality
    High
    Full-year tax rate
    between 35% and 36%
    medium materiality
    High
    Full-year EPS
    $2.66 to $2.76
    high materiality
    High
    Share repurchases
    approximately $3 billion
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Oncology
    Global growth driven by strong uptake in earlier-stage cancers and continued robust demand from metastatic indications. Strong utilization in tumors affecting women and increased use of KEYTRUDA in combination with Padcev were key contributors. WELIREG growth driven by international launches and increased U.S. use in advanced renal cell carcinoma, with recent FDA approval for adjuvant RCC.
    KEYTRUDA family sales: $8.4 billionKEYTRUDA family sales growth (ex-FX): 4%KEYTRUDA QLEX sales: $463 millionWELIREG sales: $271 millionWELIREG sales growth: 67%
    		$8.4 billion4%——
    Vaccines and Infectious Diseases
    GARDASIL international sales grew 6%, while U.S. sales were roughly flat due to lower demand and timing of CDC purchases largely offset by price. CPVAXIVE growth was primarily driven by uptake from ongoing international launches and higher demand in the U.S. IDVYNSO launched with encouraging early progress on access and reimbursement.
    GARDASIL sales: $1.2 billionGARDASIL sales growth: 3%GARDASIL international sales growth: 6%GARDASIL U.S. sales growth: roughly flatCPVAXIVE sales: $184 millionCPVAXIVE sales growth: 40%
    		$1.2 billion3%——
    Cardiometabolic and Respiratory
    WINREVAIR sales reflect continued strong demand from adults with pulmonary arterial hypertension, with over 1,800 new U.S. patients and ongoing international launches. OHTUVAYRE sales reflect continued prescription demand from patients with COPD and benefit from timing of specialty pharmacy purchases.
    WINREVAIR global sales: $588 millionWINREVAIR sales growth: 75%WINREVAIR new U.S. patients: >1,800OHTUVAYRE sales: $204 million
    		$588 million75%——
    Animal Health
    Solid growth driven by higher demand for ruminants and poultry products in Livestock, and new product launches in Companion Animal.
    Livestock sales growth: 6%Companion animal sales growth: 5%
    		—5%——

    Operational metrics

    15
    Total company revenues
    $16.6 billionincreased 5%
    Q2 FY26

    Total company revenues increased 5% or 4% excluding the impact of foreign exchange.

    Gross margin
    81.1%decrease of 1.1 percentage points
    Q2 FY26

    Gross margin decreased 1.1 percentage points, primarily due to higher inventory reserves.

    Operating expenses
    $12.6 billion
    Q2 FY26

    Operating expenses increased to $12.6 billion, including a $5.7 billion charge for the acquisition of Terns Pharmaceuticals. Excluding these charges, operating expenses grew 7%.

    Other expense
    $290 million
    Q2 FY26

    Other expense increased to $290 million, primarily reflecting financing costs related to recent business development transactions.

    Tax rate
    160.3%
    Q2 FY26

    As a result of the nontax deductible one-time charge for Terns, our tax rate was 160.3%.

    Loss per share
    $0.13
    Q2 FY26

    Reported a loss of $0.13 per share, which includes a one-time charge of $2.31 per share from the acquisition of Terns.

    Terns acquisition charge
    $5.7 billion
    Q2 FY26

    There was a $5.7 billion charge for the acquisition of Terns Pharmaceuticals in the quarter, resulting in a $2.31 per share impact.

    MK-4208 ongoing costs and financing
    $0.12
    FY26

    Approximately $0.12 per share of ongoing costs to advance MK-4208 and finance the transaction are included in the full-year EPS guidance.

    GARDASIL US sales drivers
    lower demand and timing of CDC purchases largely offset by priceflat
    Q2 FY26

    GARDASIL sales in the U.S. were roughly flat as lower demand and timing of CDC purchases was largely offset by price.

    KEYTRUDA US growth moderation
    moderate
    H2 FY26

    Total U.S. KEYTRUDA year-over-year growth will moderate as we increasingly reach peak penetration across several key indications.

    BRIDION US sales decline
    slower pace than previously expected
    H2 FY26

    BRIDION, U.S. sales are anticipated to decline at a slower pace than previously expected due to lower-than-anticipated generic competition.

    Other revenue
    significantly higherthan H2 FY25
    H2 FY26

    Other revenue in the second half of 2026 is expected to be significantly higher than the second half of 2025.

    Wholesaler purchase timing benefit
    $250 millionnot repeat this year
    Q3 FY25

    We benefited by approximately $250 million due to the timing of wholesaler purchases in the third quarter of 2025, which will not repeat this year.

    Commercial opportunity from new products
    >$70 billion
    future

    Greater than $70 billion of commercial opportunity from over 20 new products that we expect will transform our portfolio and fuel growth well into the next decade.

    Business development capacity
    —
    current

    We maintain the ability within a strong investment-grade credit rating to pursue additional science-driven value-creating transactions.

    Industry KPIs

    3
    MetricValueDetails
    EPS revenue guidanceRevenue: $66.3 billion to $67.3 billion; EPS: $2.66 to $2.76USD
    Product franchise net sales$8.4 billionUSD
    Geographic regional revenue growth6%%

    Deals & partnerships

    1
    Terns PharmaceuticalsAcquisition of Terns Pharmaceuticals, adding MK-4208 to the hematology pipeline.$5.7 billion

    MK-4208 is a novel, potentially best-in-class therapy for certain patients with chronic myeloid leukemia. Reflects continued focus on science-driven business development.

    Risks & headwinds

    6
    Higher inventory reservesQ2 FY26

    Gross margin decreased 1.1 percentage points to 81.1%

    Terns Pharmaceuticals acquisition chargeQ2 FY26

    $5.7 billion charge; $2.31 per share impact; 160.3% tax rate due to non-tax deductible nature

    OHTUVAYRE sales impact from specialty pharmacy unwindQ3 FY26

    Q3 sales will be impacted

    Mitigation: Investing behind sales force and promotion; working with specialty pharmacies to improve patient experience; expect accelerated growth in 2027.

    KEYTRUDA U.S. growth moderationH2 FY26

    Total U.S. KEYTRUDA year-over-year growth will moderate

    Mitigation: Due to increasingly reaching peak penetration across several key indications.

    Non-repeat of prior year wholesaler purchase timing benefitQ3 FY26

    $250 million benefit in Q3 2025 will not repeat

    Inertia in PCSK9 adoptionOngoing

    30 million people not at recommended LDL levels; injectables reach <5% of market

    Mitigation: Market expansion strategy, educating physicians and patients, working with guidelines, focusing on primary care.

    What to watch in Q3 FY26

    5

    OHTUVAYRE Sales Trajectory

    next quarter / 2027
    CurrentQ3 sales impacted by unwind of Q2 specialty pharmacy purchases
    TargetAccelerated growth in 2027

    Why it matters

    Verifying if the Q3 sales impact is temporary and if investments lead to anticipated accelerated growth is crucial for the product's long-term commercial potential.

    Third quarter sales will be impacted by the unwind of specialty pharmacy purchases in the second quarter. We continue to invest behind our sales force and promotion to reach more physicians and patients in the U.S. We are also working with our specialty pharmacies to improve patient experience. We expect these actions to lead to accelerated growth in 2027.

    Q&A highlights

    6

    Given sac-TMT's signal regardless of PD-L1 expression, could Merck pursue a broad sac-TMT/pembro trial against KEYNOTE-189, and are sac-TMT combos with both pembro and PD-1 VEGF possible for first-line lung cancer?

    Dean Li confirmed that Merck is rethinking KEYNOTE-189 with sac-TMT as a next-gen chemo and is advancing trials to optimize combinations with IO agents like KEYTRUDA or MK-2010, moving quickly with signal-finding and dose-scheduling studies.

    “My simple answer is yes on all accounts, but I'll just step back a little bit, which is for a -- sac-TMT we've stated, we think it's a cornerstone ADC. I mean it's a TROP-2 ADC, but it has a novel linker and payload.”

    asked by Akash Tewari · answered by Dean Li

    2 min read6 chapters

    Detailed Narrative

    01

    Pipeline Derisking and Future Growth Confidence

    Merck highlighted significant progress in derisking its pipeline, with over 20 new products representing a commercial opportunity exceeding $70 billion. Management noted that clinical milestones, including positive Phase III readouts for sac-TMT and tulisokibart, are materializing faster than initially expected. This accelerated progress has increased confidence in the company's ability to drive long-term growth and navigate the KEYTRUDA loss of exclusivity period, which is now viewed as a shallow dip with a fast return to growth.

    02

    Strategic Execution and Portfolio Diversification

    The company emphasized its successful execution of a strategy initiated five years ago, focusing on maximizing KEYTRUDA's potential, expanding oncology leadership, and introducing new growth drivers across various therapeutic areas. This has led to a stronger, more diversified pipeline with multiple potential blockbuster opportunities, positioning Merck for sustainable growth well into the next decade through disciplined capital allocation and science-driven business development.

    03

    LIPFENDRA Launch and Market Expansion Strategy

    The FDA approval of LIPFENDRA, the first oral PCSK9 inhibitor, marks a major milestone. Merck aims to expand the market for LDL-C lowering therapies, targeting 30 million patients in the U.S. who are not at their recommended LDL levels. The strategy focuses on educating physicians and patients, particularly in primary care, about the importance of early intervention for cardiovascular disease, rather than competing for share with existing injectable PCSK9 inhibitors.

    04

    Oncology Portfolio Strength and Advancements

    Merck's oncology portfolio continues to demonstrate strong performance, with KEYTRUDA sales driven by uptake in earlier-stage cancers and new combinations. WELIREG sales saw significant growth, supported by international launches and new approvals. The positive Phase III results for sac-TMT in endometrial cancer, the first readout from its extensive TroFuse program, further bolster the company's oncology pipeline and its potential to establish early leadership in new indications.

    05

    Immunology and HIV Program Progress

    Significant advancements were reported in immunology and HIV. Tulisokibart, an anti-TL1a monoclonal antibody, showed positive Phase III induction results in ulcerative colitis and positive Phase II results in hidradenitis suppurativa. In HIV, the company launched IDVYNSO and is progressing with promising once-weekly oral regimens (islatravir/lenacapavir, islatravir/ulonivirine) and a monthly oral PrEP candidate (alematrivir), aiming to address unmet needs in treatment and prevention.

    06

    Capital Allocation and Business Development Focus

    Merck's capital allocation strategy prioritizes investments in new product launches and its robust pipeline, alongside a commitment to dividend growth. The acquisition of Terns Pharmaceuticals, adding MK-4208 to the hematology pipeline, exemplifies the company's focus on science-driven, value-creating business development. Management reiterated its ability to pursue additional strategic transactions while maintaining a strong investment-grade credit rating.

    AI-generated summary of the company’s earnings call. Not investment advice.