Merck topped analysts' second-quarter targets across its top and bottom lines even as dealmaking costs from a recent acquisition weighed on results.

Total sales grew 4% on a constant-currency basis to $16.6 billion, narrowly beating the $16.4 billion consensus estimate among analysts polled by FactSet. Merck posted an adjusted loss of 13 cents a share, narrower than the 27-cent loss Wall Street had projected. The period included a $2.31 per-share drag from the acquisition of Terns Pharmaceuticals, which closed in the quarter.

Merck's quarterly beat was driven by the continued adoption of Keytruda, the company's blockbuster cancer treatment. Frequently referred to as a modern-day "wonder drug," Keytruda is most often used to treat melanoma but has proven effective in treating a range of cancers.

Following up on its success, Merck launched a subcutaneous injection, Keytruda QLex, in late 2025. Sales have accelerated since its launch, generally tracking ahead of analysts' projections. Both products logged a combined $8.3 billion sales in the second quarter, up 4% from last year excluding foreign exchange.

On the back of its latest quarter, Merck raised its full-year sales guidance. The pharma giant sees worldwide sales between $66.3 billion to $67.3 billion, up from a previous range of $65.8 billion to $67 billion. That's in line with Wall Street's call for $66.8 billion at the midpoint of the range.

Adjusted earnings are now forecast between $2.66 and $2.76 a share, down from $5.04 to $5.16 in the previous quarter. The updated outlook includes a charge of $2.43 a share for acquiring Terns and a smaller charge for a leukemia drug in development, Merck said. Analysts were looking for $2.79.

Although it continues to account for a significant chunk of sales each quarter, Keytruda faces a major patent cliff starting in 2028, when key protections guarding the drug from generic and biosimilar competition are set to expire. Merck, like other drugmakers, is well aware of the challenge and has been stocking up its arsenal with a plethora of new products.

However, the effect of generic competition is visible in other parts of Merck's portfolio following the expiry of major patents. Sales of Januvia and Janumet, two former diabetes drugs, fell 31% to $429 million in the quarter, driven lower by heightened competition in the U.S. and the continued erosion of market share in China and other international markets.

Pharmaceuticals drove the vast majority of Merck's total sales as the segment grew 4% to shy of $14.8 billion. The drugmaker attributed the strength to growth in oncology as well as its cardiometabolic and respiratory businesses, partially offset by a decline in its diabetes portfolio.

Merck has even more in the chamber. While pipeline updates were far and few between in the second quarter, management is looking ahead to a key regulatory approval for Winrevair before the end of the current quarter.

Regulators accepted a supplemental application earlier this year, with a target decision date slated for late September, as Merck seeks to expand its label to include adults recently diagnosed with pulmonay arterial hypertension. Sales have accelerated sharply since Winrevair's launch, surging 75% in the latest quarter to $588 million.

Also on the horizon are several trial readouts as the company shifts focus to next-generation treatments, aiming to preserve its leadership in oncology ahead of Keytruda's upcoming patent expiration. Sac-TMT, an antibody drug conjugate developed alongside Kelun-Biotech, is one of Merck's flagship post-Keytruda assets. Critical data are expected in October.