Merck tops quarterly estimates, posts modest 2026 guidance as generic competition looms

Core Viewpoint - Merck reported strong fourth-quarter earnings driven by demand for its cancer immunotherapy Keytruda, but provided a modest 2026 outlook that fell short of Wall Street expectations due to upcoming patent expirations and generic competition [1][2]. Financial Performance - For the fourth quarter, Merck posted net income of $2.96 billion, or $1.19 per share, compared to $3.74 billion, or $1.48 per share, in the same period last year [4]. - Adjusted earnings for the fourth quarter were $2.04 per share, slightly above the expected $2.01 per share [6]. - Revenue for the quarter was $16.4 billion, a 5% increase from the previous year, and exceeded expectations of $16.19 billion [5][6]. 2026 Outlook - Merck anticipates 2026 revenue between $65.5 billion and $67 billion, lower than analysts' expectations of $67.6 billion [2]. - The company expects adjusted earnings per share to be between $5 and $5.15, compared to the analyst estimate of $5.36 [2]. Acquisition and Charges - The 2026 guidance includes a one-time charge of approximately $9 billion, or around $3.65 per share, related to the acquisition of Cidara, which is developing a flu prevention drug [3]. Cost Management - Merck is implementing a cost-cutting plan aimed at reducing expenses by $3 billion by the end of 2027 to offset revenue losses from the upcoming patent expiration of Keytruda in 2028 [5]. Drug Pricing Deal - Under a "most favored nation" deal, Merck will sell existing treatments to Medicaid patients at the lowest price offered in other developed nations and will receive a three-year reprieve from tariffs [4].