Merck & Co Inc (MRK) (Q2 2026) Earnings Call Highlights: Strong Revenue Growth and Strategic Pipeline Advances Amid One-Time Charges

• Total Revenue: $16.6 billion, an increase of 5% (4% excluding foreign exchange).
• KEYTRUDA Family Sales: Increased 4% to $8.4 billion, driven by uptake in earlier-stage cancers and robust demand from metastatic indications.
• KEYTRUDA QLEX Sales: $463 million, with adoption increasing since the permanent J-code was established in April.
• WELIREG Sales: Increased 67% to $271 million, driven by international launches and increased use in certain US patients.
• GARDASIL Sales: $1.2 billion, an increase of 3%, with international markets growing 6% while the US was roughly flat.
• CAPVAXIVE Sales: $184 million, an increase of 40%, driven by international launches and higher US demand.
• WINREVAIR Sales: $588 million, an increase of 75%, reflecting strong demand from adults with pulmonary arterial hypertension.
• OHTUVAYRE Sales: $204 million, reflecting continued prescription demand and the benefit from specialty pharmacy purchase timing.
• Animal Health Sales: Increased 5%, with livestock sales up 6% and companion animal sales up 5%.
• Gross Margin: 81.1%, a decrease of 1.1 percentage points primarily due to higher inventory reserves.
• Operating Expenses: $12.6 billion, including a $5.7 billion charge for the Terns Pharmaceuticals acquisition.
• Other Expense: $290 million, primarily reflecting financing costs related to recent business development transactions.
• Tax Provision: $882 million, resulting in a tax rate of 160.3% due to the non-tax deductible one-time charge for Terns.
• Earnings Per Share (EPS): Reported a loss of $0.13 per share, including a one-time charge of $2.31 per share from the Terns acquisition.
• Full-Year 2026 Revenue Guidance: Raised and narrowed to between $66.3 billion and $67.3 billion, representing growth of 2% to 4%.
• Full-Year 2026 EPS Guidance: Expected to be $2.66 to $2.76, with a midpoint of $2.71.

Release Date: August 04, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Merck & Co Inc MRK delivered strong Q2 2026 revenue of $16.6 billion, a 5% increase, driven by robust oncology and animal health performance.
• KEYTRUDA family sales grew 4% to $8.4 billion, with strong uptake in earlier-stage cancers and continued demand in metastatic indications.
• The FDA approved LIPFENDRA, the first oral PCSK9 inhibitor, which has the potential to expand the market and address significant unmet need in LDL cholesterol management.
• Positive Phase 3 results for sac-TMT in endometrial cancer (TroFuse-005) and tulisokibart in ulcerative colitis (ATLAS-UC) demonstrate pipeline progress and derisking.
• The company raised and narrowed its full-year 2026 revenue guidance to $66.3-$67.3 billion, reflecting confidence in continued growth.
• New product launches, including WINREVAIR (up 75%) and WELIREG (up 67%), are contributing to portfolio diversification and growth.
• The acquisition of Terns Pharmaceuticals adds MK-4208, a promising late-stage therapy for CML, strengthening the hematology pipeline.
• The company is advancing a broad HIV pipeline, including a potential first oral once-weekly treatment (islatravir/lenacapavir) and a monthly oral PrEP option.
• Management expressed high confidence in the company's future, citing faster-than-expected clinical milestones and a strong pipeline with over $70 billion in commercial opportunity.
• The company maintains a disciplined capital allocation strategy, including a commitment to dividends and share repurchases, while pursuing value-creating business development.

Negative Points

• Merck & Co Inc (MRK) reported a non-GAAP loss of $0.13 per share in Q2 2026, impacted by a one-time charge of $2.31 per share from the Terns acquisition.
• The full-year 2026 EPS guidance of $2.66-$2.76 includes significant one-time charges and ongoing costs related to the Terns acquisition, which may pressure near-term earnings.
• US KEYTRUDA growth is expected to moderate as the drug reaches peak penetration in several key indications, and a $250 million benefit from wholesaler timing in Q3 2025 will not repeat.
• The company faces potential challenges in the LIPFENDRA launch, including the need to establish reimbursement and access, which may slow initial uptake.
• The tulisokibart program had a setback with the SSc-ILD study failing to meet its primary endpoint, raising questions about the immunofibrosis hypothesis.
• OHTUVAYRE sales in Q3 2026 will be impacted by the unwind of specialty pharmacy purchases from Q2, potentially causing volatility in quarterly results.
• The company's tax rate is expected to be significantly higher (35-36%) due to the non-tax deductible Terns charge, impacting net income.
• Gross margin declined by 1.1 percentage points due to higher inventory reserves, which could pressure profitability.
• The company faces intense competition in the PCSK9 market, with injectable options already established, and the need to educate primary care physicians on the new oral option.
• The flu prevention program (MK-1406) has been delayed to a second northern hemisphere season, pushing potential approval to 2029, which may be later than some investors expected.

Q & A Highlights

Q: What is the biggest risk to achieving the $70 billion commercial opportunity, and which programs have increased your confidence in the past six months?
A: Robert Davis (Chairman & CEO) stated that confidence is higher than in January due to faster-than-expected clinical readouts. Key programs like sac-TMT, I-DXd, and tulisokibart have delivered positive data ahead of schedule, clinically de-risking the portfolio. He noted that the launches of products like LIPFENDRA are also progressing well, and he feels "quite bullish" across the board, with no specific major risks currently identified.

Q: Can you provide directional views on Merck's earnings profile as we move through the KEYTRUDA LOE period (2028-early 2030s)?
A: Robert Davis (Chairman & CEO) reaffirmed that the LOE period will be more of a "hill than a cliff," with a shallow dip and a fast return to growth. He stated that on a non-risk-adjusted basis, the company still aspires to grow through the LOE period, driven by the progress of its over 20 new products and the $70 billion commercial opportunity.

Q: What are the chances of a broad sac-TMT plus pembro trial in first-line lung cancer, and could we see sac-TMT combos with both pembro and a PD-1 VEGF?
A: Dean Li (President of Research Labs) answered "yes on all accounts." He explained that the positive OptiTROP-Lung06 data gives confidence to target the full spectrum of PD-L1 expression. Merck is rethinking the KEYNOTE-189 paradigm, using sac-TMT as a next-gen chemo backbone. They are being thoughtful about when to use KEYTRUDA versus other agents like MK-2010 (PD-1/VEGF) and are moving fast to initiate trials, including those that can seamlessly transition from Phase 2 to Phase 3.

Q: How should we think about the tulisokibart profile in ulcerative colitis, and how does the failed SSc-ILD study change your thinking on the fibrosis opportunity?
A: Dean Li (President of Research Labs) stated that the upcoming ATLAS-UC readout is eagerly awaited as it will form the basis of the regulatory filing. Regarding SSc-ILD, he noted that no anti-cytokine has worked in that refractory disease and that the placebo arm may have shown no progression, making it difficult to show a benefit. He cautioned against dismissing the immunofibrosis hypothesis based on this single study, as the positive HS data supports the derm possibilities.

Q: How do you view the initial pace of the LIPFENDRA launch, and what are the reimbursement expectations?
A: Robert Davis (Chairman & CEO) said the company is pleased with the clean label and high physician interest. While ordering has begun, they expect the pace to be slower out of the gate as access is established, but they continue to expect it to be a blockbuster opportunity long-term. Dean Li added that the FDA is using LIPFENDRA as a cornerstone to demonstrate its priority review process, focusing on public health crises, innovation, unmet need, onshoring, and accessibility.

Q: For LIPFENDRA, how are you thinking about the opportunity for injectable PCSK9 switch versus PCSK9-naive patients, and adoption in primary care?
A: Robert Davis (Chairman & CEO) clarified that Merck is not focused on taking share from injectable PCSK9s, which only reach about 5% of the market. The goal is market expansion, targeting the 30 million people in the US not at recommended LDL levels. Caroline Litchfield (CFO) added that while feedback from key scientific leaders is strong, the challenge is translating that to the primary care setting, which will take time and education.

Q: What were the reasons for adding another flu season to the MK-1406 study, and was it based on any data concerns?
A: Dean Li (President of Research Labs) stated there was no change in confidence or data concerns. The decision was made to strengthen the global regulatory submission and broaden the footprint for ex-US markets. The extra season allows for a more robust label, including a key secondary endpoint of all-cause hospitalization, while the rate-limiting step remains the CMC work to transition from three shots to two shots, keeping the launch on track for 2029.

Q: Can you provide an update on the PD-1/VEGF bispecific program and how you are thinking about combinations with your ADC assets?
A: Dean Li (President of Research Labs) explained the strategy is to focus on the "Venn diagram" where PD-1 is active, VEGF is active, and Merck has unique assets that are known to be active. They are closely following the Summit/Akeso data. For TL1A, he noted the field is moving toward combinations, and Merck is evaluating the ideal combination for each indication (IBD, HS, RA) given the drug's clean safety profile.

Q: Does the specific label wording for LIPFENDRA (reduction vs. outcomes) help or hinder payer discussions, and what is the timing of the CVOT?
A: Dean Li (President of Research Labs) believes the label wording is extremely helpful as it supports the add-on to statins strategy. He noted the FDA understood the design principles were informed by the two antibodies. Merck does not have a cardiovascular outcomes trial (CVT) yet, but an ongoing trial is expected to read out in 2029.

Q: How are you thinking about fixed-dose combinations for LIPFENDRA, particularly with rosuvastatin and your Lp(a) inhibitor, and are you considering GLP-1 combinations?
A: Dean Li (President of Research Labs) stated the rosuvastatin combination could achieve up to 80% LDL reduction, which would be a "good day for medicine." The Lp(a) combination aims to provide unprecedented CVOT outcomes. While GLP-1 combinations are possible, Merck has not announced active clinical trials for that combination yet, focusing on oral combinations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.