Key Takeaways:
Merck & Co. saw sales of its human papillomavirus (HPV) vaccine Gardasil plunge 22 percent in the first quarter, clouding the company’s growth outlook for 2026 amid persistent weakness in China.
According to company reports, the decline stems from weak demand trends and a broader economic slowdown in China, which led to a temporary halt in shipments to manage high inventory levels held by its local partner, Zhifei.
First-quarter sales of the vaccine fell to $1.07 billion, down from the previous year. The company is also experiencing lower demand for Gardasil in Japan and has stated that it does not anticipate a recovery in sales for the remainder of 2026.
The slump in Gardasil, Merck’s second-largest product, intensifies pressure on the pharmaceutical giant, which is already preparing for the 2028 patent expiration of its top-selling cancer drug, Keytruda. The company's heavy reliance on Keytruda, accounting for about 55% of its pharmaceutical sales, makes diversifying its revenue streams a critical priority for investors.
The weakness extended to other parts of Merck's vaccine portfolio, with sales of Proquad, M-M-R II, and Varivax also declining in the first quarter. However, the company has seen promising results from new product launches.
Its new 21-valent pneumococcal conjugate vaccine, Capvaxive, and the pulmonary arterial hypertension drug, Winrevair, have both had strong initial launches. These products are central to Merck's strategy to offset future revenue loss from Keytruda and current headwinds from products like Gardasil. The company has accelerated its acquisition strategy, buying Cidara Therapeutics and Terns Pharmaceuticals in 2026 to bolster its pipeline.
The challenges for Merck come as competitor Eli Lilly & Co. experiences rapid growth, driven by its popular GLP-1 drugs Mounjaro and Zepbound. While Merck's long-term outlook is improving with its new pipeline, the near-term challenges for its established products remain a key concern.
The slowdown for Gardasil underscores the urgency for Merck's pipeline to deliver significant revenue before the Keytruda patent cliff in 2028. Investors will closely monitor the sales trajectory of new products like Capvaxive and Winrevair as a measure of the company's ability to navigate the transition.
This article is for informational purposes only and does not constitute investment advice.
