The Zhitong Finance App learned that MSD (MRK.US) announced results for the third quarter of 2026. Total Q3 revenue was US$18.085 billion, up 5% year over year (excluding exchange rate impact of 4%), higher than LSEG's average forecast of US$17.31 billion; adjusted earnings per share of US$2.49, far exceeding expectations of US$2.08; net profit of US$5,065 billion and earnings per share in accordance with GAAP were US$2.04, down 12% year over year, respectively. The company raised its full-year guidance on the same day: the low end of the 2026 revenue range was raised from US$66.3 billion to US$66.8 billion, and the adjusted earnings per share guide for the full year rose from US$2.66 to US$2.76 to US$2.77 to US$2.82.
But this “beyond expectations” contains the moisture of one company itself: Of the increase in drug sales during the quarter, about $550 million came from the point of purchase — that is, customers purchased early. According to official data, total revenue for the quarter increased by about 809 million US dollars year-on-year. Of this, about 70% were not new demand, but rather a shift in demand.
Incremental dismantling: about US$550 million was “bought in advance”
The official press release suggests a number of timing factors: the growth of the pharmaceutical business “benefited from a procurement point of about 550 million US dollars”; under Keytruda, the timing of wholesalers' purchases “had an adverse impact” on US sales, but was largely offset by the benefits of rising channel inventories; Gardasil's growth benefited from early procurement by the US Centers for Disease Control and Prevention (CDC); and Winrevair benefited from the procurement model of US wholesalers and specialty pharmacies.
This means a 5% increase in revenue this quarter, and its quality needs to be viewed at a discount — early purchases will overdraft subsequent quarters. This also explains why revenue significantly exceeded expectations ($18.085 billion vs. $17.31 billion), while adjusted earnings per share still fell 3% year over year, and GAAP earnings per share fell 12% year over year: part of the “volume” of growth was borrowed.
Profit margins are also under pressure: GAAP gross margin fell to 72.9% from 77.7% in the same period last year, but the non-GAAP gross margin after excluding one-time projects was 81.4%, which is basically the same as 81.9% in the same period last year. On the cost side, R&D expenditure was US$4,537 million, up 7% year on year (non-GAAP increase of 13%), and sales and management expenses were US$2,886 billion, an increase of 10%.
Keytruda: The intravenous version fell 5% year over year, and the subcutaneous version was supported by US$830 million to support overall growth
Keytruda and the subcutaneous preparation Keytruda QLEX sold a total of US$8.601 billion, up 6% year over year (excluding the exchange rate of 6%), higher than the $8 billion forecast quoted by Reuters. Taken apart, the structure is more remarkable than the total volume: the intravenous version of Keytruda sold 7.771 billion US dollars, down 5% year on year (8.142 billion US dollars in the same period last year); while the subcutaneous version of QLEX, which only went on sale at the end of 2025, contributed 830 million US dollars (only 5 million US dollars in the same period last year), the highest in a single quarter since the launch of this dosage form (market expectations for QLEX were 649 million US dollars, and the overall forecast for Keytruda was 7.73 billion US dollars, both exceeding expectations).
In other words, almost all of Keytruda's overall 6% increase came from the subcutaneous version, and the intravenous version has shrunk year over year. This is MSD's core strategy: before Keytruda successively lost key patent protection in 2028, it moved patients from intravenous infusion to more convenient subcutaneous injections, and used dosage form conversion to maintain market share and sales scale of this “blockbuster” product. The strategy also received a regulatory pivot this season: Japan's Ministry of Health, Labor, and Welfare approved subcutaneous formulations for all approved Keytruda indications in the country.
Gardasil: +14% to $1,995 million, pre-procured by the US CDC
The HPV vaccine Gardasil/Gardasil 9 sold USD 1,995 million, up 14% year on year (excluding exchange rate of 14%), higher than Wall Street's estimate of about 1.76 billion to 1.8 billion US dollars. Growth was mainly boosted by CDC's advance procurement — the vaccine had been hampered by weak demand in China for the previous few quarters.
This line in the Chinese market has not really been fixed: the company previously disclosed that it signed a revised supply contract with Chongqing Zhifei Biotech in April 2026 and resumed limited shipments in the second quarter, but the revenue associated with this contract is expected to be “not significant” in 2026. Therefore, Gardasil's rebound this season is due to the US government procurement rhythm rather than the return of Chinese demand.
The remaining vaccines are clearly differentiated: Capvaxive is $263 million, up 8%; Enflonsia is $187 million, up 138%; Proquad/M-M-R II/Varivax is $730 million, up 7%; RotateQ is $196 million, down 4%; Vaxneuvance $195 million, down 14% (partly affected by CDC's high reserve procurement base in the same period last year).
New engines are loaded, and old drugs collapse at an accelerated pace
New growth points continued to have a high slope: Winrevair, a drug for pulmonary hypertension, sold $694 million, up 93% year on year (excluding exchange rate of 94%), higher than the forecast of about US$645 million; Welireg US$307 million, up 56%; Prevymis US$347 million, up 30%; Lenvima Alliance from Eisai made revenue of US$287 million, up 11%; animal health business grew 4% (including livestock 10.48 billion and companion animals 6.28 billion 100 million, Bravecto $264 million, up 1%), slightly lower than analysts' expectations.
At the other end of the spectrum, the collapse of products with expired patents is accelerating: Bridion plummeted 67% to US$144 million due to competitive generic drug sales; Januvia/Janumet totaled US$380 million, down 39% (of which Januvia fell 51%); and the Lynparza Alliance revenue from AstraZeneca fell 7% to US$352 million. The gap between these two sets of numbers is the underlying motive for MSD's massive mergers, acquisitions and licensing in recent years.
Guidelines adjustment details
The company gave an adjusted earnings range of $2.77 to $2.82 per share (previously $2.66 to $2.76), but the footnote in the press release made it clear that the range included three one-time costs — the acquisition of Cidara for $9 billion ($3.62 per share), the acquisition of Terns for $5.7 billion ($2.31 per share), and $400 million ($0.12 per share) associated with the SciBrunch global licensing agreement, totaling approximately $6.05 per share.
In other words, after excluding these one-time projects, the annual earnings per share are approximately 8.82-8.87 US dollars (estimated by the official footnotes, calculated by the compiler, not disclosed by the company). In the first three quarters, Cidara and TERNS expenses have successively lowered non-GAAP profits, and the additional SciBrunch fee for this season (US$400 million, included in R&D expenses) was not previously in the guidelines.
In terms of revenue guidelines, the 66.8 billion to 67.3 billion US dollars range includes a positive exchange rate impact of about 1% based on the mid-October exchange rate, while the EPS guidelines include a favorable exchange rate of about 0.15 US dollars per share.
Pipeline: ESMO's “First Phase III Verification” and 2028 Cliff Last Weekend
Chairman and CEO Robert M. Davis (Robert M. Davis) said in a press release: “Our science-led strategy is transforming our business. Oncology advances announced at the ESMO conference last weekend that could change clinical practice — including new data on our antibody-conjugated drug Sac-TMT and the first phase III trial of a therapeutic cancer vaccine — further reduced the risk of huge long-term opportunities in our late-stage pipeline at a clinical level. The positive momentum in multiple treatment areas gives me growing confidence in our ability to create long-term value for patients and shareholders.”
The milestones of implementation this season include: FDA approval of Welireg combined with lenvima for some previously treated advanced renal cell carcinoma; acceptance of SAC-TMT's application for biological products to treat endometrial cancer, with PDUFA on June 15, 2027; EU approval of Keytruda and Padcev for resectable muscle-invasive bladder cancer; approval of subcutaneous formulations in Japan; acceptance of enflonsia's SBLA for children under 2 years of age (PDUFA March 22, 2027); iDVYNSO's SNDA accepted (PDUFA April 22, 2027); WinRevair label update incorporates Phase III Hyperion data. At the same time, there was a setback: i-DXD's listing application for extensive small-cell lung cancer in collaboration with Daiichi Sankyo was voluntarily withdrawn by the company. Additionally, the company obtained an exclusive global license for Scibrunch to administer the oral KRAS G12D inhibitor MK-2690 for US$400 million.