Merck warns 2026 revenue and profit could fall amid Januvia cliff

Merck warned investors that sales and profits in 2026 will likely come in below expectations as imminent loss of patent exclusivity for its diabetes drug Januvia and other legacy medicines exerts a larger hit than analysts anticipate. The company set 2026 revenue guidance at $65.5 billion to $67.0 billion, with the top end below the market consensus, and said the pressure from generics, Medicare pricing and fading demand for its COVID pill will be material.

Management signaled an approximate $2.5 billion headwind this year from generic competition, Medicare price negotiations and weaker sales of Lagevrio, its oral antiviral. The company also outlined plans to trim costs, with management-wide savings expected to help offset revenue declines; the company intends to cut about $3.0 billion by the end of 2027.

The recent quarter offered a more positive picture: fourth-quarter revenue rose 5 percent to $16.4 billion and adjusted earnings per share were $2.04. Keytruda, Merck’s blockbuster cancer immunotherapy, generated $8.37 billion in the quarter, up 7 percent year over year and providing the primary lift to results. Still, executives cautioned that the business will lean more heavily on Keytruda as several other franchises face near-term pressure.

Chief executive Rob Davis framed the mismatch with Wall Street around aging franchises. “Where the disconnect is coming with the Street, frankly, is in a lot of our legacy products, and these are products that are all largely going off patent,” he said. Davis also told analysts the company “expects to give investors greater visibility into nearly all of its growth opportunities for the next decade by the end of 2027.”

The Januvia family of drugs - including Januvia, Janumet and Janumet XR, which treat type 2 diabetes - was singled out as the largest loss-of-exclusivity risk for 2026. An AI research note tracking the franchise says the core compound patent expired in 2023 and that Merck settled earlier litigation to allow generic entrants to launch in mid-2026, with five-month timing reported for May 2026 for core sitagliptin tablets and July 2026 for Janumet XR. The note names likely generic entrants such as Teva and Mylan/Viatris, and also includes conflicting 2023 sales figures for the franchise, underscoring the need for company-level confirmation of product-level revenue.

Other legacy products named by management as vulnerable include Bridion, an injection used to reverse muscle relaxants. Vaccines and other therapies also showed strain: Gardasil sales fell roughly 34 percent to about $1.03 billion in the quarter, a decline the company attributed in part to weak demand in China and a pause in shipments there.

Analysts responded with guarded appraisal. BMO Capital's Evan Seigerman said the quarter “builds a reasonable foundation for Merck heading into 2026,” while warning that the revenue outlook could temper investor expectations for the year.

Beyond short-term earnings, the outlook raises broader public health and policy questions. Generics entering the market and lower Medicare prices under the Inflation Reduction Act could expand patient access to diabetes treatment and lower out-of-pocket costs, advancing equity in care. At the same time, a contraction in branded revenue may pressure R&D investment and corporate staffing decisions, with implications for future drug development and global supply continuity.

Merck projects that, after adjusting for recent loss-of-exclusivity impacts, it can return to midsingle-digit growth, targeting roughly 5 percent to 8 percent revenue growth over time and earlier forecasting about $70 billion in revenue from new growth drivers by the mid-2030s. For now, investors and health systems will watch how swiftly generics arrive and how pricing and cost actions reshape both company finances and patient access.