Merck Surpasses Q1 Expectations Driven by Keytruda and Emerging Drugs, Tightens 2026 Forecast

Merck reported first-quarter results that exceeded Wall Street estimates, fueled by robust demand for its cancer immunotherapy Keytruda and promising sales from newer products. The pharmaceutical giant also narrowed its 2026 revenue guidance and raised its adjusted earnings forecast, signaling confidence in its core business and favorable currency impacts.

Despite posting a net loss for the quarter, Merck attributed this to a significant charge related to its acquisition of Cidara Therapeutics, a biotech firm developing a flu prevention drug. The company is actively acquiring assets to counteract upcoming generic competition for key drugs, including diabetes treatments and Keytruda.

Q1 Financial Highlights: Revenue Beats Expectations Amid Loss

Merck reported a net loss of $4.24 billion, or $1.72 per share, in the first quarter, a sharp contrast to the $5.08 billion net income from the same period last year. Excluding acquisition and restructuring costs, the adjusted loss per share was $1.28, better than the $1.51 expected by analysts. Revenue rose 5% year-over-year to $16.29 billion, surpassing the $15.82 billion forecast.

Keytruda and Winrevair Drive Growth

Merck's pharmaceutical segment generated $14.35 billion in revenue, a 5% increase from the previous year. Keytruda sales soared 12% to over $8 billion, outperforming analyst expectations. This growth was propelled by increased use in earlier-stage cancers and sustained demand for metastatic cancer treatments. The newly approved injectable form of Keytruda contributed $128 million in sales, supporting Merck's strategy to mitigate revenue declines post-patent expiration.

Another standout was Winrevair, a treatment for a rare and deadly lung condition, which saw sales jump 88% to $525 million, exceeding estimates. Its growth reflects expanded adoption in the U.S. and early international launches.

Challenges with Gardasil and Strategic Acquisitions

Merck faced headwinds with Gardasil, its HPV vaccine, which experienced a 19% sales decline to $1.07 billion due to sluggish demand in China, Japan, and the U.S., partly from unfavorable public-sector purchasing. The company halted Gardasil shipments to China last year amid these challenges.

To offset looming generic competition for drugs like Januvia, Janumet, and Keytruda, Merck has been aggressively acquiring companies, including Cidara Therapeutics, which contributed a $3.62 per share charge this quarter.

Animal Health Division Shows Solid Growth

Merck's animal health business, which produces vaccines and medicines for pets and livestock, posted $1.79 billion in sales, up 13% year-over-year. This growth was driven by increased demand for both companion animal and livestock products.

Looking Ahead: Optimistic 2026 Outlook

Merck narrowed its 2026 revenue guidance to a range of $65.8 billion to $67 billion, tightening the lower bound from $65.5 billion. The company also raised its adjusted earnings per share forecast to between $5.04 and $5.16, up from the previous $5.00 to $5.15 range. This reflects confidence in its underlying business performance and favorable foreign exchange trends.