Merck (MRK-US) Reports Q4 2025 Earnings, Considers Conservative Guidance Amid Pressures - 02/03/2026

[Para 1: The Lead] Merck (MRK-US), the American pharmaceutical giant, reported its Q4 2025 earnings on Tuesday, February 3, 2026. Despite strong sales of its cancer drug Keytruda and several new drugs exceeding market expectations, Merck issued a cautious outlook for 2026, projecting lower revenues and adjusted earnings per share than market consensus. The company cited ongoing pressure from the Gardasil vaccine in China and patent expirations on several old drugs as key factors. [Para 2-3: Supporting details & Context] Merck forecasted 2026 revenues between $65.5 billion and $67 billion, below the market average of $67.6 billion. Adjusted earnings per share were expected to range from $5 to $5.15, short of market estimates. This guidance impacted Merck's pre-market stock performance, with the stock down 0.77% to $112.50. Merck's cautious guidance is primarily due to two major factors. Firstly, the Gardasil vaccine's sales in China are weaker than expected, with Merck ceasing shipments to China and not including any assumptions for Chinese sales in its 2026 forecast. The vaccine's sales in Q4 2025 were $1.03 billion, down over 30% year-over-year, affected by economic weakness in China, anti-corruption measures impacting the market, and the emergence of low-cost generic vaccines. Additionally, several old drugs are facing patent expirations and increased competition from generic drugs, which is expected to impact long-term growth. Merck's Q4 2025 performance was bolstered by Keytruda and new drugs. Keytruda sales reached $8.37 billion, up 7% year-over-year, driven by expanded indications for early-stage cancers and growing demand for metastatic cancer treatments. The company's new drug Winrevair saw sales of $467 million in Q4 2025, exceeding market expectations, reflecting increased usage in the U.S. and early market launches in certain overseas markets. Ohtuvayre also performed better than expected, indicating that recent acquisitions are contributing to operational success. Merck is restructuring to adapt to these changes, pursuing acquisitions and cost control simultaneously. The company has initiated a $3 billion cost reduction plan through 2027 and is preparing for the potential revenue gap after Keytruda's patent expiration in 2028. Merck has spent approximately $10 billion on acquisitions of Verona Pharma and Cidara Therapeutics to strengthen its respiratory disease and infectious disease product lines. The company plans to focus on oncology, cardiovascular metabolism, and immunology, continuously evaluating potential acquisition opportunities. Merck's agreement with the Trump administration on drug pricing, which resulted in a three-year tariff exemption, has been factored into its 2026 guidance, with the company stating the impact is within a 'manageable range.' In summary, Merck faces short-term pressures from vaccine sales and patent expirations but remains supported by Keytruda and new drugs. The market will closely watch how Merck's product transition and acquisition strategy will smoothly transition to long-term growth.