Merck & Co. (NYSE: MRK) held its Q2 2026 earnings call on August 4, 2026, during which executives highlighted the first positive Phase III readout for sacituzumab tirumotecan (sac-TMT) and revealed they are rethinking a broad first-line non-small cell lung cancer (NSCLC) development strategy that could eventually replace chemotherapy with an antibody-drug conjugate backbone.

Merck reported total revenues of USD 16.6 billion for the quarter, up 5% year-on-year, and raised full-year 2026 revenue guidance to USD 66.3–67.3 billion, representing 2–4% growth.

Key Strategic Signals

  • Sac-TMT Phase III endometrial cancer win, rejig to first-line NSCLC strategy: The TROP2-directed antibody-drug conjugate sac-TMT (sacituzumab tirumotecan) met both OS and PFS endpoints in the Phase III TroFuse-005 trial, the first positive readout from the program's 17-study Phase III development plan. More strategically, Dean Li said Merck is reconsidering a KEYNOTE-189-style first-line NSCLC trial that could pair sac-TMT with either pembrolizumab or the company's PD-1/VEGF bispecific MK-2010, indicating the company is already evaluating future immunotherapy backbones beyond pembrolizumab as it designs the next generation of lung cancer combinations. The competitive reference point is AstraZeneca's datopotamab deruxtecan (Dato-DXd) AVANZAR readout, which Li said will inform whether a biomarker-selected or all-comer design is preferable.
  • Tulisokibart UC Phase III positive, but SSc-ILD fails and Crohn's data still pending: The anti-TL1A monoclonal antibody tulisokibart met the primary endpoint of clinical remission in the induction-only ATLAS-UC study in moderately to severely active ulcerative colitis, with no new safety signals. Those positive data in UC were partially offset by failure in systemic sclerosis-associated interstitial lung disease (SSc-ILD), leaving Crohn's disease as the next major test of Merck's broader immunofibrosis hypothesis. Li noted the SSc-ILD failure was likely linked to placebo-arm non-progression rather than a failure of the immunofibrosis hypothesis. Meanwhile, a Phase II hidradenitis suppurativa (HS) study met its primary and key secondary endpoints, expanding the indication breadth beyond gastrointestinal disease.
  • HIV pipeline advances to once-weekly and once-monthly oral options: The Phase III ISLEND-1 and ISLEND-2 trials of islatravir in combination with Gilead Sciences' lenacapavir both demonstrated maintenance of virologic suppression in adults who switched from daily standard-of-care regimens, supporting a potential filing for the first oral once-weekly HIV treatment. Separately, a Phase IIb study of islatravir combined with the internally developed non-nucleoside reverse transcriptase inhibitor ulonivirine produced results sufficient to advance the combination into Phase III for both treatment-naive and treatment-experienced patients. Alimatravir, a once-monthly oral pre-exposure prophylaxis (PrEP) candidate, remains in two Phase III studies with readouts expected in 2027; Merck separately announced early generic licensing for alimatravir covering 129 low- and middle-income countries ahead of any approval.

Analyst Pressure Points

  • Sac-TMT in first-line NSCLC — biomarker strategy questioned: Jefferies analyst Akash Tewari asked directly whether Merck could now pursue a broad, all-comer first-line NSCLC trial with sac-TMT plus pembrolizumab against KEYNOTE-189, given that Kelun's data showed activity regardless of PD-L1 expression. Li confirmed this is under active consideration and said the company is advancing signal-finding and dose-optimization trials designed to transition seamlessly from Phase II to Phase III, with MK-2010 as a potential alternative IO backbone. He stopped short of committing to a specific design ahead of the AVANZAR readout.
  • Tulisokibart — SSc-ILD failure and competitive positioning in IBD: UBS analyst Michael Yee challenged whether the SSc-ILD miss undermines the fibrosis rationale for Crohn's disease and raised the question of how tulisokibart competes as a single agent against combination approaches being pursued by Johnson & Johnson and AbbVie. Li said the SSc-ILD placebo arm likely showed minimal disease progression, limiting the ability to detect treatment benefit, and maintained that the immunofibrosis hypothesis remains valid. On combinations, Li said tulisokibart's clean safety profile makes it well suited as a combination partner, with indication-specific combination strategies under evaluation for inflammatory bowel disease, HS, and rheumatoid arthritis.

Forward-Looking Catalysts

  • ATLAS-UC induction-and-maintenance readout (imminent): The second, larger ATLAS-UC study will determine whether tulisokibart can support a regulatory filing for ulcerative colitis. Together with the positive induction-only data, this readout will define the filing package and represent the first major test of whether the TL1A mechanism can achieve Phase III success across a full induction-and-maintenance program.
  • Welireg plus Lenvima in advanced renal cell carcinoma and I-DXd in extensive-stage small cell lung cancer: Potential approvals for belzutifan (Welireg) combined with lenvatinib (Lenvima) in advanced renal cell carcinoma and for I-DXd in extensive-stage small cell lung cancer are both expected in the second half of 2026. Li plans to present detailed oncology data at an investor event at the European Society for Medical Oncology in Madrid on October 26.
  • Winrevair label update PDUFA date September 21: The FDA has set a September 21 PDUFA date for a label update to sotatercept (Winrevair) based on the Phase III HYPERION study in pulmonary arterial hypertension. Winrevair generated USD 588 million in Q2 sales, up 75% year-on-year, and a label update could broaden its eligible patient population.

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