Merck (NYSE: MRK) lifts sales outlook midpoint but third-quarter GAAP EPS falls 12%

What happened

Merck & Co., Inc. (NYSE: MRK) raised its full-year sales and non-GAAP EPS guidance in a quarter of higher sales and lower earnings.

In its third-quarter report on Oct. 29, Merck said sales rose 5% to $18.09 billion from $17.28 billion a year earlier, a gain of $809 million. Excluding exchange rates, growth was 4%.

Earnings fell. GAAP EPS was $2.04 against $2.32 in the third quarter of 2025. Non-GAAP EPS was $2.49 against $2.58. Both figures include a one-time charge of $0.12 per share tied to a global license agreement with SciBrunch.

Merck now expects 2026 sales of $66.8 billion to $67.3 billion and non-GAAP EPS of $2.77 to $2.82. It narrowed both ranges and raised the sales midpoint. The EPS outlook also absorbs the SciBrunch charge.

Key numbers

Metric	Latest	Change	Source
Third-quarter total sales	$18.09 billion	from $17.28 billion, +5%	SEC 8-K, Exhibit 99.1
GAAP EPS	$2.04	from $2.32, -12%	SEC 8-K, Exhibit 99.1
Non-GAAP EPS	$2.49	from $2.58, -3%	SEC 8-K, Exhibit 99.1
Keytruda and Keytruda Qlex sales	$8.6 billion	from $8.15 billion, +6%	SEC 8-K, Exhibit 99.1
Winrevair sales	$694 million	from $360 million, +93%	SEC 8-K, Exhibit 99.1
2026 sales guidance	$66.8 billion to $67.3 billion		SEC 8-K, Exhibit 99.1

Read more: Merck & (MRK) company research

Where sales grew and shrank

Oncology led the quarter. Keytruda and Keytruda Qlex, the subcutaneous version, together sold $8.6 billion, up 6%, including $830 million of Qlex. Keytruda on its own fell 5% to $7.77 billion.

Winrevair sales rose 93% to $694 million from $360 million. Welireg climbed 56% to $307 million, and Gardasil and Gardasil 9 rose 14%. Ohtuvayre added $184 million. Merck obtained it in its October 2025 acquisition of Verona Pharma plc. Animal health sales were $1.68 billion, up 4%.

Merck said purchase timing boosted pharmaceutical growth by about $550 million. It also said Winrevair's growth reflects favorable wholesaler and specialty pharmacy purchasing patterns in the U.S.

Patent losses cut the other way. Januvia and Janumet fell 39% to $380 million. Bridion fell 67% to $144 million. Both drops came from lower U.S. demand after generic competition began.

Koselugo alliance revenue was $13 million against $214 million a year earlier. That quarter included a $150 million upfront payment and a $50 million regulatory milestone that Merck recognized after amending its AstraZeneca agreement.

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What cut into earnings

Costs rose faster than sales. GAAP gross margin was 72.9% versus 77.7% a year earlier. Merck blamed higher amortization of intangible assets, restructuring costs and production costs. Non-GAAP gross margin was 81.4% versus 81.9%.

Research and development expense was $4.5 billion, up 7%. It includes a $400 million charge for the SciBrunch license and higher clinical spending. A $200 million reduction under a funding agreement with Blackstone Life Sciences partly offset those. The year-earlier quarter carried a $300 million charge, or $0.10 per share, for a milestone payment to LaNova Medicines Ltd. Selling, general and administrative expense rose 10% to $2.9 billion.

Interest costs grew too. Other (income) expense, net swung to $27 million of expense from $238 million of income, mainly on higher net interest expense. Interest expense alone was $546 million versus $327 million. A lower effective tax rate of 8.9% partly offset the pressure.

GAAP net income attributable to Merck was $5.07 billion, down 12%. Non-GAAP net income was $6.16 billion, down 4%.

The nine-month GAAP picture is weaker. Merck posted a net loss attributable to the company of $510 million, or $0.21 per share, against net income of $15.29 billion, or $6.08 per share, a year earlier. Research and development expense for the nine months was $26.87 billion versus $11.90 billion. Nine-month sales were $50.98 billion, up 5%.

Why it matters

OptimistFi has argued that Merck turns its patent-protected portfolio into durable cash flow that funds R&D and selective deals. The quarter gives mixed evidence. The portfolio grew and guidance rose, but per-share earnings fell as spending, interest and amortization climbed.

OptimistFi calculates that Keytruda and Keytruda Qlex made up 47.6% of third-quarter sales. Growth in that franchise matters more to the case than any single launch.

The headline growth has limits. Part of it came from purchase timing, and Januvia, Janumet and Bridion are shrinking on generic competition. The SciBrunch charge is one-time, so part of the EPS drop should not recur. But Merck also blamed higher operating expenses, amortization, net interest expense and restructuring costs.

What's next

The next dated test is the FDA decision date of June 15, 2027 for sac-TMT in adults with previously treated endometrial cancer. Merck is in discussions with the FDA and hopes for an earlier approval. Approval would show whether the pipeline can broaden oncology sales beyond Keytruda.

Two other FDA dates come sooner. March 22, 2027 is the decision date for expanding Enflonsia to children under 2 at increased risk for severe RSV through their second season. April 22, 2027 is the date for two Idvynso applications in HIV-1 infection. Merck also voluntarily withdrew its application for ifinatamab deruxtecan in extensive-stage small cell lung cancer.

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