Merck & Co. - Q1 2026 Earnings Analysis

Performance HighlightsMerck reported Q1 2026 sales of $16.3 billion, a 5% nominal increase versus the prior-year period and ahead of consensus expectations, with Human Health growing 13% and Animal Health advancing 6% ex-exchange. Reported and non-GAAP EPS were both losses, at $(1.72) and $(1.28) respectively, driven entirely by a $9.0 billion in-process R&D charge from the January 2026 acquisition of Cidara Therapeutics, which obscured an 81.9% non-GAAP gross margin that held broadly stable year-over-year.The KEYTRUDA family remained the dominant growth engine, with sales rising 8% to $8.0 billion on strong metastatic and earlier-stage demand, including a $250 million wholesaler timing benefit and $128 million from newly launched KEYTRUDA QLEX. Supporting this were WINREVAIR at $525 million (+87%), WELIREG at $199 million (+43%), and Animal Health at $1.8 billion (+6%), while GARDASIL declined 22% to $1.1 billion on expected weakness in China and Japan.Management Outlook and Forward CatalystsManagement raised the low end of full-year revenue guidance to $65.8–$67.0 billion and narrowed non-GAAP EPS guidance to $5.04–$5.16, inclusive of the $3.62 per share Cidara charge, signalling confidence in the underlying commercial trajectory across oncology and cardiometabolic franchises. The company also flagged an additional pending ~$5.8 billion charge upon closing the $6.7 billion Terns Pharmaceuticals acquisition in May, adding TERN-701, a next-generation allosteric BCR::ABL TKI for CML, to a pipeline targeting more than $70 billion in non-risk-adjusted annual sales from new growth drivers by the mid-2030s.The central investor debate heading into Q2 centres on KEYTRUDA's durability post the anticipated U.S. wholesaler timing reversal in Q3, the pace of WINREVAIR and OHTUVAYRE uptake against Medicare reimbursement headwinds, and whether multiple PDUFA decisions — including I-DXd in SCLC on October 10 and WELIREG combinations in mid-2026 — can accelerate the next growth wave before KEYTRUDA's IRA negotiated pricing takes effect.