Merck & Co., Inc.

What they do

Merck operates in two segments: Pharmaceutical, which sells human health prescription drugs and vaccines primarily to wholesalers, retailers, hospitals, government agencies, and managed care providers; and Animal Health, which sells veterinary pharmaceuticals, vaccines, and digitally connected health management products to veterinarians, distributors, animal producers, farmers, and pet owners.

Revenue drivers

• Keytruda/Keytruda Qlex — Anti-PD-1 oncology therapy; 2025 sales of $31.7 billion, approximately 49% of total company sales; Q2 2026 sales $8.4 billion, including $463 million from Keytruda Qlex.
• Gardasil/Gardasil 9 — HPV vaccine; 2025 sales of $5.2 billion, down from $8.6 billion in 2024; revenue decline is a notable headwind.
• Winrevair — Pulmonary arterial hypertension therapy; 2025 sales of $1.4 billion, up from $419 million in 2024; Q2 2026 sales $588 million, 75% growth year-over-year.
• Animal Health — Segment sales of $6.4 billion in 2025, split between Livestock ($3.9 billion) and Companion Animal ($2.5 billion); Q2 2026 sales $1.8 billion, up 8%.

Recent performance

In Q2 2026, Merck reported total worldwide sales of $16.6 billion, up 5% (4% ex-FX) from $15.8 billion in Q2 2025. GAAP EPS was a loss of $0.54, and non-GAAP EPS was a loss of $0.13, both driven by a $2.31 per share charge for the Terns acquisition. Full-year 2025 sales were $65.0 billion, up from $64.2 billion in 2024. Keytruda sales grew 5% in Q2 2026, and Winrevair grew 75%.

Strategy

Merck is expanding its pipeline through acquisitions and business development: it acquired Terns Pharmaceuticals for $6.8 billion in May 2026, Cidara Therapeutics for $9.2 billion in January 2026, and TARGAN for $650 million in July 2026. The company is also advancing new product launches, such as Lipfendra (enlicitide), an oral PCSK9 inhibitor approved by the FDA, and Keytruda Qlex, a subcutaneous formulation. Management emphasizes portfolio transformation and next-wave innovation across oncology, HIV, immunology, and cardiovascular disease.

Risks

• IRA drug price negotiation — U.S. government price-setting under the Inflation Reduction Act has already set a price for Januvia (effective Jan 1, 2026), will set prices for Janumet (2027) and Lenvima (2028), and Keytruda is expected to be selected.
• Gardasil sales decline — Gardasil sales fell from $8.6 billion in 2024 to $5.2 billion in 2025, a 39% drop, indicating significant demand or competitive pressures.
• Acquisition-related charges — Large one-time charges from acquisitions (Terns $5.7 billion, Cidara $9.0 billion) have caused GAAP and non-GAAP losses in 2026, and may signal integration or valuation risks.
• Pricing pressure and cost containment — Global health care cost containment, including Medicaid rebate changes and Medicare redesign, continues to pressure product pricing and market access.

Outlook

For full-year 2026, Merck narrowed and raised its worldwide sales outlook to between $66.3 billion and $67.3 billion. Non-GAAP EPS is expected to be between $2.66 and $2.76, including charges of $2.43 per share related to the Terns acquisition. Management expresses confidence in ongoing execution and long-term growth trajectory, citing recent regulatory approvals and pipeline milestones.