Why Merck Is Sinking This Week

The stock for pharmaceutical giant Merck (NYSE: MRK) was trading down more than 3% Monday morning. That's a big drop in just a few hours to start the week.

So, what's going on?

It might have to do with the fact that last week the New Jersey-based drugmaker released third-quarter results. Investors were largely unimpressed with what they saw.

Probably the most damaging part of the release was management's cut to full-year (2025) revenue guidance. Prior guidance put full-year revenue at $64.3 billion to $65.3 billion. But the company shaved that down in last week's announcement, and it now expects 2025 revenue to come in a range of $64.5 billion to $65 billion.

Needless to say, the market generally reacts negatively to a guidance cut, as it suggests lowered expectations by management and can even hint at something else going on at the company that could negatively impact the stock.

A major revenue miss

Another concerning item in the report was news that sales of Keytruda, Merck's blockbuster cancer immunotherapy drug, missed expectations. Sales came in at $8.1 billion, short of the $8.2 billion analysts expected. Worse, though a bit further in the future, is that Keytruda's patents are expected to start expiring in 2028.

Image source: Getty Images.

That said, Q3 overall revenue of $17.3 billion was $300 million higher than the consensus forecast, and earnings of $2.58 per share beat the consensus estimate of $2.35.

But those earnings and revenue beats didn't offset growing worries about Keytruda, which accounts for about half of Merck's revenue.

Merck shares declined last week after the earnings release, and they continued to fall in early trading on Monday.

Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool has a disclosure policy.