Merck Forecasts 2026 Revenue Below Wall Street Estimates as Patent Cliff Looms
Key Insights
Merck projects 2026 revenue of $65.5-67.0 billion, falling short of analyst estimates of $67.6 billion due to patent losses on key drugs including diabetes (search) treatment Januvia.
The company reported strong Q4 2025 results with Keytruda cancer (search) immunotherapy driving $8.37 billion in quarterly sales, beating expectations despite a 34% decline in Gardasil vaccine revenue.
CEO Rob Davis acknowledged that legacy products losing patent protection will impact sales more than analysts projected, while expressing confidence in the company's strategic pipeline drivers.
Merck & Co (search) on Tuesday projected 2026 sales and profits below Wall Street expectations, citing the imminent loss of patent exclusivity on diabetes (search) drug Januvia and other key medicines that will impact revenue more severely than analysts anticipated. The pharmaceutical giant expects 2026 revenue between $65.5 billion and $67.0 billion, with even the upper end falling short of the average analyst estimate of $67.6 billion.
The cautious outlook overshadowed otherwise strong fourth-quarter 2025 results that exceeded both profit and sales expectations, driven primarily by robust demand for the company's blockbuster cancer (search) immunotherapy Keytruda.
Patent Cliff Challenges Exceed Analyst Projections
CEO Rob Davis acknowledged that the disconnect with Wall Street centers on legacy products approaching patent expiration. "Where the disconnect is coming with the Street, frankly, is in a lot of our legacy products, and these are products that are all largely going off patent," Davis said in an interview. "As I look at the strategic drivers of this company, I'm actually very confident."
The drugs expected to underperform analyst expectations include Januvia and related diabetes (search) medicines Janumet and Janumet XR (search), as well as Bridion, an injection used to reverse muscle-blocking drugs at the end of surgery. Merck anticipates a $2.5 billion impact in 2026 from generic competition, Medicare price negotiations, and weaker sales of COVID-19 (search) treatment Lagevrio.
The new Medicare price for Januvia, negotiated under the Inflation Reduction Act, could further depress sales beyond analyst estimates. Davis noted that COVID-19 (search) treatment Lagevrio would also likely fall below expectations as "with COVID fading... we've seen that slow quite a bit."
Strong Q4 Performance Led by Keytruda
Despite the challenging 2026 outlook, Merck delivered solid fourth-quarter results with adjusted earnings of $2.04 per share, surpassing analyst estimates of $2.01. Fourth-quarter sales reached $16.4 billion, exceeding Wall Street projections of $16.2 billion and representing a 5% increase year-over-year.
Keytruda drove the sales growth with quarterly revenue of $8.37 billion, up 7% and beating analyst expectations of $8.23 billion. For the full year 2025, Keytruda generated $31.7 billion in sales, cementing its position as the world's top-selling prescription medicine.
This strong performance helped offset a steep 34% year-over-year decline in sales of the human papillomavirus (search) vaccine Gardasil, which brought in $1.03 billion for the quarter. The company has faced weak demand for Gardasil in China, leading to a halt in shipments to that market.
Strategic Acquisitions Bolster Pipeline
Anticipating Keytruda's patent expiration later this decade, Merck completed two major acquisitions in 2025, each valued in the $10 billion range. The company acquired Cidara Therapeutics and Verona Pharma to strengthen its pipeline with new drug candidates.
Davis indicated the company will continue pursuing strategic deals across oncology, cardiometabolic, and immunology treatments. "We continue to be in that $1 billion to $15 billion sweet spot, but as we've always said, we're willing to go bigger if we see a scientific opportunity that brings value," he said.
The acquisitions represent Merck's proactive approach to addressing the upcoming patent cliff, particularly as Keytruda faces generic competition in the coming years. While legacy products face headwinds, the company's strategic focus on high-value therapeutic areas positions it for long-term growth beyond the current patent challenges.