Merck delivered a stronger-than-expected third quarter, powered by its blockbuster cancer drug Keytruda and its HPV vaccine Gardasil, and the company raised its full-year outlook. The results underscore the drugmaker's ability to keep growing even as investors watch for new products to eventually replace Keytruda's revenue.
What the numbers show
Revenue came in at $18.1 billion for the quarter, ahead of the $17.3 billion analysts had expected, according to LSEG data cited by Reuters. Adjusted earnings were $2.49 per share, beating the $2.08 consensus estimate.
Keytruda, which treats several types of cancer, saw sales rise 6% to $8.6 billion. That growth was helped by $830 million from Keytruda QLEX, a newer under-the-skin version that was approved late last year. The subcutaneous formulation offers patients a faster injection compared with the traditional intravenous infusion, which could help extend the drug's commercial life.
Gardasil, the vaccine that protects against human papillomavirus, brought in just under $2 billion, up 14% from a year earlier. The increase was driven by early orders from the US Centers for Disease Control and Prevention, which offset softer demand in China, Reuters reported.
Merck also highlighted Winrevair, a treatment for a rare lung condition called pulmonary arterial hypertension. Sales reached $694 million, up 94% from last year and above expectations. That performance supported a higher low end of the company's revenue outlook, now $66.8 billion, up from $66.3 billion, and a higher adjusted profit range of $2.77 to $2.82 per share, up from $2.66 to $2.76.
The bigger picture: Keytruda's patent cliff
While the quarter was strong, the long-term challenge for Merck remains unchanged. Keytruda's patent protection begins to expire in 2028, and when that happens, cheaper biosimilar competitors will likely enter the market and eat into sales. That's why investors are closely tracking the company's pipeline, including an mRNA cancer vaccine being developed with Moderna and the timeline for its sac-TMT program, an antibody-drug conjugate for certain solid tumors.
Merck is not alone in facing a patent cliff. Many large pharmaceutical companies are dealing with similar pressures as their top-selling drugs lose exclusivity. The ability to launch new products before that happens is critical to maintaining revenue growth.
What it means for investors
For everyday investors, the key takeaway is that Merck beat expectations and raised guidance, which is generally a positive sign. But there's a nuance worth paying attention to: the company said about $550 million of the quarter's growth came from customers buying earlier than expected.
That's mostly an inventory timing issue. Hospitals, pharmacies, or government buyers may have stocked up on products like Gardasil ahead of their usual schedule. That flatters today's sales, but it can create a "payback" effect in the next quarter, because those same buyers won't need to reorder as much. So even with a higher full-year outlook, Merck's quarterly revenue could swing more than usual versus consensus—especially in the next earnings report—if ordering normalizes.
Investors should also keep an eye on the China situation for Gardasil. Demand there has been soft, and while US orders helped this quarter, a sustained slowdown in China could weigh on future vaccine sales. Merck's ability to diversify its growth engines beyond Keytruda will be a central theme for the stock over the next few years.
For context, other companies have recently shown how strong quarters can be followed by softer ones due to timing. For instance, STMicroelectronics reaffirmed its revenue goal despite a mixed quarter, and MTU raised its outlook on strong demand—both examples of how guidance and timing can shape investor expectations.
Overall, Merck's quarter shows a company that is still growing its core products while trying to build the next generation of treatments. The raised outlook is encouraging, but the pull-forward effect is a reminder that quarterly numbers can be noisy. Long-term investors will likely focus more on pipeline progress and how the company manages the transition away from Keytruda's dominance.
