Merck & Co., Inc.

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Merck & Co., Inc. stock analysis MRK overview
Somewhat Bullish +50

MRK Q1 Earnings & Sales Beat Estimates, 2026 Sales View Tightened

📉 Merck reported an adjusted quarterly loss of $1.28 per share in Q1 2026, which was narrower than the estimated loss of $1.51 but represents a decline from last year's adjusted earnings of $2.22.

💸 The wider loss compared to prior year earnings was primarily driven by a $3.62 per share charge related to the recent acquisition of biotech firm Cidara Therapeutics.

📈 Total revenue increased 5% year-over-year to $16.29 billion, beating the consensus estimate of $15.90 billion even after excluding foreign exchange impacts.

💉 Flagship cancer drug Keytruda drove significant growth with sales reaching $8.03 billion, an 8% increase fueled by uptake in earlier-stage indications and strong momentum in metastatic cases.

🤝 Alliances contributed positively to oncology sales, including a 6% rise in Lynparza revenue from partner AstraZeneca to $341 million, while Lenvima revenue with Eisai dipped slightly by 2%.

💊 Other key products showed mixed performance, with pneumonia vaccine Capvaxive surging 31% and PAH drug Winrevair jumping 87%, though Januvia diabetes franchise sales fell 29% due to demand and pricing pressures.

🦠 Gardasil and Gardasil 9 HPV vaccine sales plunged 22% to $1.07 billion primarily due to lower demand in China and Japan, missing the consensus estimate.

🔬 Adjusted gross margin decreased by 30 basis points to 81.9% year-over-year, largely impacted by unfavorable foreign exchange rates.

🧪 R&D spending for the quarter rose significantly to $2.56 billion due to costs associated with the Cidara acquisition, clinical development activities, and foreign exchange impacts.

🔭 Merck raised its full-year 2026 revenue guidance range slightly to $65.8–$67.0 billion from a previous expectation of $65.5–$67.0 billion.

💰 The company also increased its adjusted EPS guidance range to $5.04–$5.16 per share from the prior estimate of $5.00–$5.15.

⚠️ The updated financial guidance explicitly includes a one-time charge of $9 billion, or $3.65 per share, associated with the Cidara acquisition.

📅 Management's new outlook incorporates an expected 1% positive impact from foreign exchange on both sales and earnings per share.

🏥 Adjusted operating expense guidance for the year remains tight at $36.0–$36.8 billion, compared to the previous projection of $35.9–$36.9 billion.

🔬 Merck's forward-looking estimates do not yet include the impact of its proposed acquisition of cancer biotech Terns Pharmaceuticals for $6.7 billion.

🧬 The planned deal with Terns is expected to close in May and will add their lead candidate, TERN-701, an early-stage drug for treating chronic myeloid leukemia.

Bullish Signals
  • Merck reported an adjusted loss of $1.28 per share for Q1 2026, which was narrower than the consensus estimate of a $1.51 loss.
  • Revenues increased 5% year-over-year to $16.29 billion, exceeding analyst estimates by $390 million.
  • Flagship product Keytruda generated sales of $8.03 billion in the quarter, an 8% increase driven by rapid uptake across earlier-stage indications.
  • Welireg recorded strong sales growth of 43% to $199 million, benefiting from higher demand in the United States and continued launch uptake in European markets and Japan.
  • The newly launched pneumococcal vaccine Capvaxive achieved significant momentum with sales of $142 million, up 31% year-over-year.
  • New PAH drug Winrevair demonstrated robust performance with sales surging 87% to $525 million on strong uptake in the United States.
  • Animal health segment generated revenues of $1.79 billion, rising 13% year-over-year to beat consensus estimates of $1.67 billion.
  • Management raised full-year 2026 sales guidance slightly while expanding the adjusted EPS range from $5.00-$5.15 to $5.04-$5.16.
  • The company's positive view on foreign exchange is expected to contribute approximately 1% upside to sales and around 10 cents to EPS for the full year.
  • Merck has a definitive agreement to acquire California-based cancer biotech Terns Pharmaceuticals TERN for $6.7 billion, with closure likely in May.
Risk Factors
  • Merck reported an adjusted loss of $1.28 per share in Q1 2026, marking a stark reversal from adjusted earnings of $2.22 per share in the year-ago quarter.
  • A significant $3.62 per share charge related to the Cidara Therapeutics acquisition directly caused the reported earnings decline for the first quarter.
  • HPV vaccine sales (Gardasil and Gardasil 9) plunged 22% year-over-year to $1.07 billion due to lower demand in China and Japan, missing consensus estimates.
  • The flagship diabetes franchise Januvia/Janumet experienced a severe 29% year-over-year decline in sales to $574 million amid net pricing pressure, generic competition, and weak demand in China.
  • Adjusted gross margin contracted by 30 basis points year-over-year primarily due to unfavorable foreign exchange impacts.
  • Merck now faces additional downside risk from its proposed acquisition of Terns Pharmaceuticals for $6.7 billion, a deal not yet reflected in the current guidance.
  • The upcoming Cidara acquisition is likely to trigger another substantial one-time charge included in earnings guidance, potentially obscuring core operating performance.
Full Analysis
Merck & Co. (MRK) reported its first-quarter 2026 earnings, posting an adjusted loss of $1.28 per share, which was narrower than the analyst consensus estimate of a $1.51 loss. This improvement came primarily from a significant one-time charge of $3.62 per share associated with the acquisition of San Diego-based biotechnology firm Cidara Therapeutics, which had previously shown reported adjusted earnings of $2.22 per share in the same quarter a year ago. Despite the non-GAAP loss narrowing due to this specific charge, the company's total revenue increased 5% year-over-year on a reported basis and 3% excluding foreign exchange impacts to reach $16.29 billion, surpassing the Zacks Consensus Estimate of $15.90 billion. Growth was primarily driven by Merck’s oncology portfolio, with its flagship drug Keytruda generating $8.03 billion in sales, an 8% increase fueled by rapid uptake in earlier-stage indications and strong momentum in metastatic cases. Alliance revenues from the PARP inhibitor Lynparza partnered with AstraZeneca rose 6% to $341 million due to higher global demand, while sales of Eisai's Lenvima partnership dipped 2% to $256 million. Other notable performers included Welireg, which surged 43% to $199 million driven by US and international launch uptake, and the new pneumococcal vaccine Capvaxive, which saw a 31% sales jump to $142 million following its launch in the United States and Europe. However, performance varied across segments; HPV vaccines fell 22% to $1.07 billion due to demand softening in China and Japan, and the diabetes franchise Januvia/Janumet dropped 29% to $574 million amid pricing pressure and generic competition. Looking ahead, Merck adjusted its full-year 2026 outlook slightly upward. The company now projects total revenues between $65.8 billion and $67.0 billion, compared to a previous expectation of $65.5-$67.0 billion, with adjusted EPS guided in the range of $5.04 to $5.16 versus the prior estimate of $5.00-$5.15. This revised guidance includes the impact of the $3.65 per share one-time acquisition charge for Cidara and anticipates a positive foreign exchange effect of approximately 1% on sales and roughly 10 cents per dollar of EPS. Additionally, Merck reiterated that its current forward guidance does not include the financial impact of its pending acquisition of California-based cancer biotechnology firm Terns Pharmaceuticals (TERN), which is valued at $6.7 billion and is expected to close in May, thereby adding lead candidate TERN-701 focused on chronic myeloid leukemia treatment to the company's pipeline.