Merck & Co., Inc. 2026 Q2 Earnings Call

Sir, you may begin. Thank you, Shirley, and good morning, everyone.

Welcome to the second quarter 2026 conference call for Merck & Co., Inc., Rahway, New Jersey, U.S. Speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Li, President of Research Labs. Before we get started, I'd like to point out that we have items in our GAAP results, such as acquisition-related charges, restructuring costs, and certain other items that we have excluded from our non-GAAP results. There is a reconciliation in our press release. I will also remind you that some of the statements that we make today may be considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Such statements are made based on the current beliefs of our company's management and are subject to significant risks and uncertainties. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Our SEC filings, including Item 1A in the 2025 10-K, identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected in any of our forward-looking statements made this morning. Merck & Co., Inc., Rahway, New Jersey, U.S., undertakes no obligation to publicly update any forward-looking statements. During today's call, a slide presentation will accompany our speakers' prepared remarks. These slides, along with the earnings release, today's prepared remarks, and our SEC filings, are all posted to the investor relations section of our company's website. With that, I'd like to turn the call over to Rob.

Thank you, Peter. Good morning and thank you for joining today's call. I remain very pleased with the substantial progress we're making across our business, driven by strong execution, growing contributions from new product launches, and the continued advancement of the next wave of innovation from our pipeline. Earlier this year, we provided insight into greater than $70 billion of commercial opportunity we have from over 20 new products that we expect will transform our portfolio and, in many cases, the practice of medicine, as well as fuel growth well into the next decade. We also outlined a series of clinical milestones that represent key events to substantially de-risk this opportunity. Since then, we've made meaningful advancements against that objective, including several important proof points that have occurred earlier than expected.

This progress further bolsters my high confidence in the future of our company and our ability to create long-term value for patients and shareholders. Turning to our second quarter results, we delivered revenue of $16.6 billion, reflecting continued strength across oncology and animal health, as well as increasing contributions from our recent launches. Importantly, while we're delivering for patients today, we're also making substantial investments in the next generation of innovative medicines and vaccines. We remain confident in our outlook for the remainder of the year, which Caroline will discuss in more detail in a moment. We also achieved several important clinical and regulatory milestones. In cardiometabolic, the FDA approved LIPFENDRA, the first and only oral PCSK9 inhibitor to help reduce LDL cholesterol in adults with hypercholesterolemia, along with diet and exercise.

We're pleased to have worked with the FDA through the Commissioner's National Priority Voucher process to bring this important new treatment option to patients on an accelerated basis. We look forward to providing broad access for patients to help address elevated LDL-C, a major modifiable risk factor for cardiovascular disease. In oncology, we received several approvals that underscore the ongoing impact of KEYTRUDA and the enduring strength of our oncology portfolio. At ASCO, we presented encouraging data that further demonstrate the durability of KEYTRUDA. At our Investor Event, we highlighted advances for a number of promising candidates across our pipeline. This included the first positive top-line results from our expansive phase III global clinical development program for sac-TMT, our Trop-2-directed antibody drug conjugate in certain patients with advanced or recurrent endometrial cancer.

In immunology, we announced positive phase III top-line induction results for tulisokibart for certain patients with ulcerative colitis and are starting to see the first of numerous additional trial readouts, reinforcing our confidence in the potential of this program. At the AIDS 2026 Congress last week, we shared compelling data from our broad HIV pipeline, including for islatravir in combination with lenacapavir, which has the potential to be the first oral once-weekly HIV treatment for virologically suppressed adults. We are excited to be returning to the HIV field with an array of important therapies, including the recent launch of Envizo. Ahead of the meeting, we also announced initial access plans for alimatravir, our investigational once-monthly oral HIV PrEP candidate, now in phase III studies, underscoring our commitment to help enable broad and sustainable access to this candidate upon its potential approval.

We also continue to augment our portfolio through disciplined business development. During the quarter, we completed the acquisition of Terns Pharmaceuticals, adding MK-4208, a novel potentially best-in-class therapy for certain patients with chronic myeloid leukemia. This transaction strengthens our hematology pipeline, adds another promising late-stage growth opportunity, and reflects our continued focus on pursuing science-driven business development that can benefit patients and enhance long-term shareholder value. This quarter marks my fifth year as CEO, and as I reflect on the commitments our leadership team made in 2021, our strategy was clear: maximize the transformative potential of KEYTRUDA, expand, deepen, and extend our leadership in oncology, bring forward new growth drivers across additional therapeutic areas, and advance Merck's mission of using the power of leading-edge science to save and improve lives around the world. Today, I'm proud that we are successfully executing on that strategy.

Each year, we're making important progress in building a stronger foundation for our future. We're broadening and diversifying our pipeline, advancing multiple potential blockbuster opportunities, and achieving clinical, regulatory, and commercial milestones that will benefit patients and enhance our long-term growth trajectory. I believe Merck is substantially stronger, more diversified, and better positioned for sustainable growth than it was just five years ago. While more work remains, I'm increasingly confident in Merck's future, particularly with the rapid pace of clinical and regulatory events now occurring. This confidence is grounded in the strength of our science, our disciplined approach to capital allocation, including business development, and the dedication of our colleagues around the world who work every day to deliver for patients.

I want to extend a special word of thanks to our global team for this substantial progress and for their commitment and execution on behalf of patients, shareholders, and all of our stakeholders. I'll turn the call over to Caroline.

Thank you, Rob. Good morning. We delivered growth in the quarter led by continued strength in oncology and animal health, along with increasing contributions from our diverse and compelling new products across an array of therapeutic areas. Our strong commercial and operational execution continues to drive near-term performance while we invest in our outstanding pipeline to create long-term value for patients, customers, and shareholders. Turning to our second quarter results. Total company revenues were $16.6 billion, an increase of 5%, or 4% excluding the impact of foreign exchange. The following revenue comments will be on an ex exchange basis. In oncology, sales of the KEYTRUDA family of products, which includes KEYTRUDA and KEYTRUDA QLEX, increased 4% to $8.4 billion, with global growth driven by strong uptake in earlier stage cancers and continued robust demand for metastatic indications.

Strong utilization in tumors that primarily affect women, including breast and cervical cancers, and increased use of KEYTRUDA in combination with PADCEV in locally advanced or metastatic urothelial cancer were key contributors to growth. Sales of KEYTRUDA QLEX were $463 million. We have seen physician and patient adoption increase since the permanent J-code was established in April. As expected, early use has been predominantly in patients who are either on monotherapy or in combination with an oral agent. We remain confident in the trajectory of KEYTRUDA QLEX adoption. Our broader oncology portfolio delivered another quarter of strong growth. WELIREG sales increased 67% to $271 million, driven by continued uptake from international launches and increased use in certain U.S. patients with previously treated advanced renal cell carcinoma.

We are excited that certain patients with earlier stage renal cell carcinoma may benefit from adjuvant treatment with WELIREG following the recent FDA approval of LITESPARK-022. In vaccines and infectious diseases, GARDASIL sales were $1.2 billion, an increase of 3%. Sales in international markets grew 6%, while the U.S. was roughly flat as lower demand and timing of CDC purchases was largely offset by price. In pneumococcal, CAPVAXIVE sales were $184 million, an increase of 40%. Growth was primarily driven by uptake from ongoing launches in certain international markets, as well as higher demand in the U.S. In HIV, we are pleased to have launched Edvinzo, our once-daily oral two-drug single-tablet regimen of doravirine and islatravir for certain virologically suppressed adults. We have seen encouraging early progress on access and reimbursement and look forward to broadening access over time.