Written by Jane Aubrey
Merck & Co. (MRK) reported its second-quarter 2026 financial results, delivering a performance that simultaneously showcased the unmatched commercial power of its oncology portfolio and highlighted the existential challenge the company faces as it approaches the end of the decade.
For the second quarter, Merck reported total worldwide sales of $16.6 billion, representing a 5% year-over-year increase. However, the company reported a GAAP loss per share of $0.54, driven entirely by a massive $5.7 billion charge related to its recent $6.8 billion acquisition of Terns Pharmaceuticals. Excluding this and other items, non-GAAP EPS would have been $2.13.
The undisputed engine of Merck’s revenue remains its blockbuster PD-1 inhibitor, Keytruda. Combined sales of Keytruda and its newly launched subcutaneous formulation, Keytruda QLEX, reached $8.4 billion for the quarter, a 5% increase. This single franchise now accounts for more than half of Merck’s total pharmaceutical revenue. The growth was driven by strong global uptake in earlier-stage indications, including triple-negative breast cancer and cervical cancer, as well as higher demand in metastatic indications.
The quarter was marked by a flurry of regulatory victories that further entrenched Keytruda’s market dominance. The FDA approved Keytruda (and Keytruda QLEX) in combination with Welireg for the adjuvant treatment of clear cell renal cell carcinoma. The agency also expanded the drug’s use, in combination with Padcev, as a treatment before and after surgery for muscle-invasive bladder cancer. Furthermore, Keytruda secured approval alongside Trodelvy for the first-line treatment of PD-L1 positive advanced triple-negative breast cancer.
Beyond Keytruda, Merck saw strong performance from Winrevair, its newly launched treatment for pulmonary arterial hypertension, which generated $588 million in sales, a 75% increase year-over-year. The Animal Health division also contributed a solid $1.8 billion, up 8%.
Despite the robust top-line numbers and the steady drumbeat of FDA approvals, the shadow of Keytruda’s impending patent cliff—expected to begin impacting the drug in 2028—looms large over the company’s valuation. Merck is currently the most patent-exposed company in the pharmaceutical industry.
The $6.8 billion acquisition of Terns Pharmaceuticals, which drove the Q2 GAAP loss, is a direct response to this challenge. The deal brings MK-4208, an investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor for chronic myeloid leukemia, into Merck’s pipeline. This aggressive business development strategy is essential as the company races to build a diversified portfolio capable of offsetting the inevitable revenue erosion when Keytruda faces biosimilar competition.
Merck narrowed and raised its full-year 2026 worldwide sales guidance to a range of $66.3 billion to $67.3 billion. However, the company lowered its non-GAAP EPS outlook to between $2.66 and $2.76, explicitly to absorb the $2.43 per share impact of the Terns acquisition and the costs to advance MK-4208.
Merck’s Q2 results present a company at the absolute peak of its commercial powers, driven by a generational oncology asset. Yet, the aggressive M&A activity and the resulting earnings hit underscore a stark reality: the clock is ticking, and Merck must buy its way out of the most significant patent cliff in pharmaceutical history.
