tapebrief
MRK · Q4 2025

MRK · Q1 2026 Earnings

Cautious

Merck & Co.

Reported April 30, 2026

30-second summary

Q1 FY2026 revenue rose 5% YoY to $16.29B with Keytruda/QLEX +12% to $8.03B and Animal Health +13% offsetting Gardasil -19% and a -11% vaccines quarter ($2.31B vs $2.61B); non-GAAP EPS printed -$1.28 after a one-time $9.0B/$3.62-per-share Cidara acquisition charge ran through R&D. Management narrowed and raised FY2026 guidance to $65.8–67.0B revenue (midpoint $66.4B vs prior $66.25B) and $5.04–5.16 non-GAAP EPS (midpoint $5.10 vs prior $5.08), with FY non-GAAP gross margin ~82% reaffirmed. Importantly, the updated guide does not reflect the proposed Terns acquisition, which is expected to close in May and will result in a ~$5.8B / ~$2.35-per-share one-time non-cash charge at close, plus ~$0.12 of incremental EPS drag over the balance of 2026 from financing and TERN-701 investment — two distinct items that the next guidance revision will need to absorb separately. Litchfield walked the guide line-by-line on the call and Davis reiterated a >$70B mid-2030s opportunity from the 20+ new launches.

Headline numbers

EPS

Q1 FY2026

$-1.28

Revenue

Q1 FY2026

$16.29B

+5.0% YoY

Gross margin

Q1 FY2026

74.2%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$16.29B+5.0%$16.40B-0.7%
EPS$-1.28—$1.72-174.4%
Gross margin74.2%———

Guidance

Merck raises and narrows FY2026 revenue and non-GAAP EPS guidance midpoints on strong Q1 operational momentum, including Cidara acquisition integration.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

MetricPeriodGuideYoY
RevenueFY2026$65.8 billion to $67.0 billion—
Non-GAAP EPSFY2026$5.04 to $5.16—
Non-GAAP Gross MarginFY2026Approximately 82%—
Non-GAAP Operating ExpensesFY2026$36.0 billion to $36.8 billion—
Non-GAAP Effective Income Tax RateFY202623.5% to 24.5%—

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
KEYTRUDA/KEYTRUDA QLEX$8.034B+12.0%
Pharmaceutical$14.349B+5.0%
Animal Health$1.791B+13.0%
Livestock$1.064B+15.0%
Companion Animal$0.727B+9.0%
WINREVAIR$0.525B+88.0%
Vaccines$2.314B-10.0%
GARDASIL/GARDASIL 9$1.069B-19.0%
Oncology Revenue Growth12% (KEYTRUDA/KEYTRUDA QLEX)—
Animal Health Revenue Growth13%—
WINREVAIR Sales Growth88%—

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Non-GAAP Gross Margin81.9%
KEYTRUDA QLEX Sales (New Formulation)$128 million
FY2026 Non-GAAP EPS Guidance (Midpoint)$5.10 (range $5.04-$5.16)
FY2026 Sales Guidance (Midpoint)$66.4 billion (range $65.8-$67.0 billion)
R&D Spending$12.6 billion (includes $9.0B Cidara charge)

Management tone

Davis framed Q1 as evidence that "the transformation of our portfolio to a far more diversified set of commercial drivers is now well underway," anchoring the multi-year setup to a ">$70 billion by the mid 2030s" opportunity from "20 plus anticipated new growth drivers alone." The Terns deal was positioned as another data point in a "science-led business development strategy," with TERN-701 described as having "multibillion-dollar commercial potential" in CML. The tone on BD remained leaned-forward: Davis said the $1B–$15B range is the "sweet spot" but reiterated capacity to go larger, and explicitly declined to signal any diminishing role for BD even as the organic pipeline matures — "we can always do better… that mix of internal plus external will be an ongoing part of our strategy."

Operationally, Davis announced a reorganization of the commercial group into product/TA-aligned business units — Brian Ford to lead Specialty, Pharma & Infectious Diseases; Yanni Oosthuizen to lead Global Oncology and MSD International; Sherpa Gindo to lead a new Strategic Access, Policy and Communications unit. He flagged retirements from Sanat Chattopadhyay and Jill Romanelli. Litchfield's posture on capital allocation was unchanged: ~$3B of share repurchases this year as previously communicated, dividend prioritized, BD-capable within investment-grade rating.

Dr. Dean Lee's R&D walk-through emphasized "a particularly robust period of phase three data readouts… over the next 18 months," with specific calendar items called out (WELIREG PDUFAs June 19 and Oct 4; Keytruda+Padcev MIBC PDUFA Aug 17; I-DXd PDUFA Oct 10; Winrevair Hyperion PDUFA Sept 21; ASCO investor event June 1).

Q&A highlights

Carter Gould · Cantor

How is Merck thinking about dosing frequency for MK3000 in diabetic macular edema? Given that 40% of patients have suboptimal VEGF responses, can the drug reach commercial targets if it requires every 4-week dosing, or does management have conviction about less frequent dosing (every 8-12 weeks)?

Dean Lee stated that trials begin with Q4W dosing but emphasized they are actively considering other frequencies. The initial focus is on achieving Q4W dosing for label inclusion, but the company is explicitly considering alternative dosing intervals. He highlighted MK8748 as an additional pipeline asset also advancing in retinal disease.

MK3000 is a potential first-in-class Wnt pathway targeting agent for retinal disease40% of patients have suboptimal VEGF responseInitial development focus is Q4W (every 4 weeks) dosingCompany is actively exploring additional dosing frequencies beyond Q4W

Jason Gerberry · Bank of America

Given the LightSpark 012 trial failure (did not meet dual primary endpoints of PFS and OS in RCC first-line treatment), what are the read-throughs to other ongoing LightSpark studies, particularly LightSpark 022 and 011 which are expected to show OS benefit?

Dean Lee expressed confidence in LightSpark 022 and 011 outcomes and cautioned against over-interpreting LightSpark 012. He noted that LightSpark 012 involved three agents (PD-1, VEGF-TKI, and HIF-2-alpha), while 022 and 011 involve different combinations (HIF-2-alpha with VEGF-TKI or PD-1), which are different biological questions and should not be assumed to have negative implications.

LightSpark 012 did not meet dual primary endpoints of PFS and OSLightSpark 022 has PDUFA date of June 19th (HIF-2-alpha + Keytruda or Keytruda-Qlex)LightSpark 011 has PDUFA date of October 4th (HIF-2-alpha + Lenvima)Management expresses bullishness on 022 and 011 outcomes

Asad Haider · Goldman Sachs

Where does Merck see the biggest gaps in its portfolio for BD? What is the optimal deal size, and at what point does BD become less important given the strong organic pipeline transformation expected through the mid-2030s?

Rob Davis stated that Merck maintains a science-first approach to BD, asking first where significant unmet medical needs exist with compelling science, then assessing strategic fit and value. Primary therapeutic areas of interest are oncology, immunology, and cardiometabolic. Deal size sweet spot is $1-15 billion, but Merck retains capacity for larger strategic transactions. Management indicated BD will remain a cornerstone strategy regardless of pipeline maturity because 'we can always do better, we can always grow stronger.'

Deal size sweet spot: $1-15 billion, but capacity exists for larger dealsPrimary therapeutic focus areas: oncology, immunology, cardiometabolicScience-first approach: compelling science and value alignment drive BD decisionsBD remains strategic priority even as organic pipeline strengthens

Vamil Zavan · Guggenheim Securities

What are the updated thoughts on WinRever Phase 3 program timing? Can time to clinical worsening be the primary endpoint in Phase 3? What is the timeline for Phase 3 execution in post-capillary pulmonary hypertension with heart failure?

Dean Lee emphasized that WinRever is reshaping PAH standard of care and the Phase 2 CADENCE study provides proof of concept for expansion to pulmonary hypertension with heart disease—described as a different, more complicated, older patient population with significant unmet need. Management indicated that FDA discussions will focus on time to clinical worsening as an important endpoint alongside PVR reduction, and that operationalization and inclusion criteria definition remain under discussion.

Target population: pulmonary hypertension with heart disease (small but high unmet need population)CADENCE Phase 2 primary endpoint: reduction in pulmonary vascular resistance vs placebo—metCADENCE exploratory secondary: time to clinical worsening at 0.3 mg/kg dose showed hazard ratio of 0.18Patient population characterized as orphan patient population

Steve Scala · TD Cowan

What are the gating factors for FDA acceptance of the Enlicitide CNPV application? What changes are being pursued on titration and shorter administration durations?

Dean Lee explained that the CNPV process involves rolling submission, with the FDA providing a formal acceptance letter and PDUFA date at the end of the submission process. Management emphasized that FDA discussions focus on demonstrating importance of addressing a U.S. public health crisis, delivering innovative cures, and increasing domestic drug manufacturing resilience. Management expects potential approval in H2 2026. Specific label details regarding how to take the drug and titration remain under active FDA discussion and will not be disclosed ahead of FDA conversations.

CNPV process is rolling submission formatManagement in 'really good conversations' with FDAExpected approval timing: H2 2026Key FDA discussion points: public health impact, innovation, domestic supply chain

Answers to last quarter's watch list

Cidara charge reconciliation. The new $5.04–$5.16 EPS range explicitly includes the $9.0B / $3.62-per-share Cidara charge. Backing it out arithmetically yields a ~$8.72 ex-Cidara midpoint. Status: Resolved
Islatravir/doravirine PDUFA. FDA approved IDVYNSO (DOR/ISL) in April; Japan approved in March.
Resolved positively
QLEX J-code implementation. Permanent J-code effective April 1; QLEX contributed $128M in Q1 and the combined Keytruda/QLEX franchise grew 12% YoY.
Resolved positively
Winrevair launch trajectory. Q1 revenue $525M with 1,600+ new U.S. patient starts and ongoing ex-U.S. reimbursement progress. Sequential add slowed vs. Q4 FY2025 ($467M), but absolute pace remains strong.
Continue monitoring
MFN pricing framework. No update on the print.
Not resolved
Cadence/enlicitide ACC presentations and Cadence Phase 3 design. Positive CORALreef AddOn Phase 3 enlicitide data and definitive Phase 2 CADENCE proof-of-concept for Winrevair in CpcPH-HFpEF presented at ACC.26; Lee confirmed Merck will pursue time-to-clinical-worsening as the Phase 3 endpoint in the CpcPH-HFpEF indication.
Resolved positively

What to watch into next quarter

Terns close and the next guidance revision. With Terns expected to close in May, the next guidance update should formally absorb the ~$2.35/share one-time non-cash charge at close and, separately, the ~$0.12 of incremental EPS drag over the balance of 2026. Watch whether management resets the range mechanically or uses the moment to lift the underlying business assumptions.

Keytruda Q3 wholesaler reversal. Litchfield flagged a corresponding Q3 headwind tied to the ~$250M Q1 timing benefit; watch the Q3 YoY optic and whether sell-side normalizes correctly.

WELIREG PDUFAs (June 19 and Oct 4). Both 022 (adjuvant RCC with Keytruda) and 011 (advanced RCC with Lenvima) outcomes will define the franchise's near-term expansion trajectory.

Keytruda+Padcev MIBC PDUFA Aug 17. Sixth Keytruda-based OS readout in earlier-stage cancer; a 12th earlier-stage indication if approved.

ASCO investor event June 1 and SAC-TMT data. OptiTROP-Lung-05 (Kelun, first-line NSCLC) at ASCO is the most-watched external read-through into Merck's 17-Phase 3 SAC-TMT program.

Enflonsia Q2. Litchfield set expectations for minimal Q2 sales given seasonality and competitive monoclonal inventory; watch for the H2 ramp.

Winrevair Hyperion PDUFA Sept 21 and progress toward a Phase 3 design lock in CpcPH-HFpEF.

Sources

  1. Merck Q1 FY2026 earnings press release (SEC EDGAR Ex. 99.1): https://www.sec.gov/Archives/edgar/data/310158/000110465926052081/tm2612241d1_ex99-1.htm
  2. Merck Q1 FY2026 earnings conference call (April 30, 2026) — prepared remarks by Davis, Litchfield, Lee; Q&A with Cantor, BofA, UBS, Goldman, Guggenheim, Lyric.

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