Merck & Co. Inc. exceeded market expectations with its second-quarter results, driven by robust growth in several new drugs, and raised its full-year revenue outlook. However, the pharmaceutical giant lowered its full-year profit guidance due to expenses related to its acquisition of biotechnology firm Terns Pharmaceuticals.
Several core drugs are facing imminent generic competition: the diabetes treatment Januvia/Janumet is set to lose patent protection later this year, while the blockbuster immunotherapy Keytruda will face patent expiry in 2028. Merck has been aggressively pursuing acquisitions to mitigate the risk of declining revenue. The company's second-quarter results, reported on Tuesday, showcased strong sales from new products, prompting an upward revision to its full-year revenue forecast. However, profit expectations were adjusted downward due to costs tied to the Terns Pharmaceuticals deal.
Merck now projects full-year 2026 revenue in the range of $66.3 billion to $67.3 billion, up from the prior guidance of $65.8 billion to $67.0 billion. The company's adjusted earnings per share (EPS) forecast stands at $2.66 to $2.76. This guidance incorporates two one-time charges: a $5.7 billion expense (or $2.31 per share) from the Terns acquisition and a $9.0 billion charge (or $3.62 per share) from the January acquisition of Cidara Therapeutics. The adjusted profit guidance marks a significant decline from the previous range of $5.04 to $5.16 per share.
With several key drugs approaching patent cliffs, Merck continues to pursue large-scale acquisitions. The diabetes drugs Januvia and Janumet are expected to face generic competition later this year, while the patent for the blockbuster cancer immunotherapy Keytruda expires in 2028. The company is counting on new drugs to fill the potential revenue gap, with a key focus on its first oral PCSK9 cholesterol-lowering drug, approved in July. Based on Refinitiv analyst consensus estimates, Merck's second-quarter performance compared to market expectations is as follows: Adjusted loss per share: $0.13 versus expected loss of $0.27; Revenue: $16.61 billion versus expected $16.36 billion. The company reported a net loss of $1.34 billion for the quarter, or a loss of $0.54 per share, compared to net income of $4.43 billion, or $1.76 per share, in the same period last year. Excluding acquisition and restructuring costs, the adjusted loss per share for the second quarter was $0.13. Total second-quarter revenue reached $16.61 billion, a 5% year-over-year increase.
Keytruda generated $8.37 billion in second-quarter sales, up 5% year-over-year and slightly above the StreetAccount analyst consensus of $8.27 billion. A more convenient injectable form of Keytruda contributed $463 million in sales. This formulation is part of Merck's strategy to offset potential revenue declines from the upcoming patent expiry of the original intravenous version. Other new products from Merck also showed strong growth. Winrevair, a treatment for a rare fatal lung disease, posted quarterly sales of $588 million, a 75% increase year-over-year and above the consensus estimate of $565 million. The pneumonia vaccine Capvaxive generated quarterly sales of $184 million, up 42% year-over-year. Additionally, Merck's animal health division reported second-quarter sales of $1.78 billion, which also exceeded analyst expectations.
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