Merck & Co has issued a forecast for 2026 that has disappointed Wall Street, predicting sales and profits lower than analysts had anticipated. This outlook is largely attributed to the impending loss of patent exclusivity on key products, including the diabetes medication Januvia. Despite posting a robust fourth-quarter report that exceeded expectations, the company’s future projections have led to a 1.2 per cent drop in its share price during premarket trading.
Sales Forecast Below Expectations
The pharmaceutical giant anticipates revenues between US$65.5 billion and US$67.0 billion for 2026, with the upper limit falling short of the consensus estimate of US$67.6 billion, according to LSEG data. CEO Rob Davis acknowledged the disparity between the company’s projections and analyst expectations, attributing it to the impending patent expirations of several legacy products. “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 stated in a recent interview. Despite these challenges, he expressed confidence in Merck’s strategic direction.
Impact of Patent Expiry on Key Products
Among the drugs under scrutiny are Januvia and its associated medications, Janumet and Janumet XR, as well as Bridion, which reverses muscle-blocking agents after surgery. Analysts have already predicted significant declines in sales for these products. Furthermore, the new pricing structure for Januvia, established under the Inflation Reduction Act during former President Joe Biden’s administration, may adversely affect its sales more than previously anticipated.
Davis also noted that the sales of Merck’s COVID-19 treatment, Lagevrio, are likely to fall short of analyst forecasts. “With COVID fading… we’ve seen that slow quite a bit,” he remarked, highlighting the challenges posed by a declining market for COVID-related treatments.
Strong Q4 Performance Driven by Keytruda
Despite the less optimistic outlook for 2026, Merck reported an adjusted profit of US$2.04 per share for the last quarter, exceeding analysts’ predictions of US$2.01. The company’s fourth-quarter sales reached US$16.4 billion, surpassing expectations of US$16.2 billion, and marking a 5 per cent increase from the previous year. This growth was primarily driven by the performance of Keytruda, Merck’s leading cancer immunotherapy, which saw sales rise by 7 per cent to US$8.37 billion, exceeding analyst estimates of US$8.23 billion. For the full year, Keytruda generated sales of US$31.7 billion.
However, this impressive performance was somewhat overshadowed by a dramatic 34 per cent drop in sales for Gardasil, Merck’s human papillomavirus vaccine, which brought in US$1.03 billion for the quarter. The company has faced weak demand for Gardasil in China, prompting it to suspend shipments to that market.
Strategic Acquisitions to Mitigate Future Risks
In a bid to bolster its portfolio before Keytruda loses patent protection later this decade, Merck has executed two significant deals worth approximately US$10 billion, acquiring Cidara Therapeutics and Verona Pharma. Davis indicated that the company will continue to pursue acquisitions in areas such as 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 asserted.
Why it Matters
Merck’s forecast highlights the precarious balancing act pharmaceutical companies must navigate between current successes and future challenges. The expected decline in revenue from key products due to patent expirations underscores the necessity for strategic innovation and acquisition in order to sustain growth. As the industry evolves, Merck’s ability to adapt and capitalise on new opportunities will be crucial in maintaining its position as a leader in the pharmaceutical sector. The upcoming years will be pivotal in determining how effectively the company can transition away from its legacy products while fortifying its pipeline with new treatments.
