Merck & Co., Inc.

Total company revenue was $16.6 billion, up 5% reported and 4% excluding FX. KEYTRUDA family sales increased 4% to $8.4 billion, GARDASIL sales were $1.2 billion, CAPVAXIVE sales were $184 million, WINREVAIR global sales were $588 million, OHTUVAYRE sales were $204 million, WELIREG sales increased 67% to $271 million, and Animal Health sales increased 5%. Gross margin was 81.1%, down 1.1 percentage points, mainly due to higher inventory reserves. Operating expenses were $12.6 billion and included a $5.7 billion charge for the Terns acquisition; reported EPS was a loss of $0.13 per share, including a one-time charge of $2.31 per share. For 2026, Merck raised revenue guidance to $66.3 billion-$67.3 billion and EPS guidance to $2.66-$2.76, with gross margin expected around 81%, operating expenses $42 billion-$42.7 billion, other expense about $1.4 billion, and a tax rate of 35%-36%.

Rob Davis said Merck is making substantial progress across the business, driven by strong execution, new product launches and pipeline advancement. He highlighted more than $70 billion of commercial opportunity from over 20 new products and said recent clinical and regulatory milestones have increased his confidence in the company’s long-term future. His tone was notably upbeat, with repeated emphasis that the KEYTRUDA LOE period should look more like a “hill than a cliff” and that Merck expects a shallow dip followed by a fast return to growth.

Caroline Litchfield said the quarter’s growth was led by Oncology, Animal Health and newer products, and walked through the margin and expense impacts. She noted gross margin of 81.1%, down 1.1 points due to higher inventory reserves, and operating expenses of $12.6 billion, including the $5.7 billion Terns charge; excluding that, operating expenses grew 7% as Merck invested in launches and pipeline programs. She also outlined 2026 guidance: revenue of $66.3 billion-$67.3 billion, EPS of $2.66-$2.76, gross margin around 81%, about $42 billion-$42.7 billion of operating expenses, and roughly $3 billion of share repurchases for the year.

Analysts focused heavily on LIPFENDRA commercialization, sac-TMT development strategy, TL1A data interpretation, and the durability of Merck’s growth through the KEYTRUDA LOE. Management said LIPFENDRA is seeing strong physician interest but access will take time, and Merck is aiming to expand the market rather than simply take share from injectable PCSK9s. On sac-TMT, Dean Li said Merck is open to broad first-line lung combinations and is “rethink[ing] KEYNOTE-189,” while on TL1A he argued the SSc-ILD miss should not lead investors to dismiss the broader immunofibrosis thesis. On the LOE question, Rob Davis reiterated the company sees a shallow dip and a fast return to growth, backed by the >$70 billion opportunity and recent clinical de-risking.