8-K: Merck Announces First-Quarter 2025 Financial Results: Sales Decline Slightly, but Key Products Show Growth

Merck reports a slight decrease in overall sales for Q1 2025, but highlights growth in KEYTRUDA, WINREVAIR, and Animal Health, alongside pipeline advancements and revised full-year EPS guidance.

Summary

• Merck's total worldwide sales for the first quarter of 2025 were $15.5 billion, a 2% decrease compared to the first quarter of 2024, but grew 1% excluding foreign exchange impacts.
• KEYTRUDA sales increased by 4% to $7.2 billion, or 6% excluding foreign exchange.
• WINREVAIR sales reached $280 million.
• Animal Health sales grew by 5% to $1.6 billion, or 10% excluding foreign exchange.
• GARDASIL/GARDASIL 9 sales declined by 41% to $1.3 billion, or 40% excluding foreign exchange, primarily due to lower demand in China.
• GAAP EPS was $2.01, while non-GAAP EPS was $2.22.
• The company continues to expect full-year 2025 worldwide sales to be between $64.1 billion and $65.6 billion.
• Non-GAAP EPS is now expected to be between $8.82 and $8.97, revised to reflect a negative impact from an anticipated one-time charge of approximately $0.06 per share related to the license agreement with Hengrui Pharma.
• The outlook absorbs an estimated $200 million of additional costs for tariffs implemented to date.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While sales declined slightly, there's growth in key products and pipeline advancements. The revised EPS guidance and tariff impacts are negative factors, but the overall outlook remains relatively stable.

Positives

• KEYTRUDA sales showed strong growth, increasing 4% to $7.2 billion.
• WINREVAIR achieved sales of $280 million, indicating successful market uptake.
• Animal Health sales increased by 5% to $1.6 billion, driven by higher demand for livestock products and the acquisition of Elanco's aqua business.
• The company presented compelling data from a diverse range of programs, including Phase 3 trials for subcutaneous Pembrolizumab and WINREVAIR.
• Merck expanded its pipeline through an exclusive license agreement with Hengrui Pharma for an investigational oral small molecule Lp(a) inhibitor.
• The company received EC approval for CAPVAXIVE for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in adults.
• Merck received approval for GARDASIL 9 for males in China, making it the first 9-valent HPV vaccine approved for the prevention of certain HPV-related cancers and diseases in Chinese males 16-26 years of age.
• Merck is making long-term investments in its U.S. manufacturing and R&D capabilities, allocating more than $12 billion since 2018 and expecting to invest over $9 billion more by the end of 2028.

Negatives

• Total worldwide sales decreased by 2% compared to the first quarter of 2024.
• GARDASIL/GARDASIL 9 sales declined significantly by 41% due to lower demand in China.
• The full-year 2025 non-GAAP EPS outlook was revised to reflect a negative impact from an anticipated one-time charge of approximately $0.06 per share related to the license agreement with Hengrui Pharma.
• The company faces an estimated $200 million of additional costs for tariffs implemented to date.

Risks

• The company faces risks related to general industry conditions and competition.
• General economic factors, including interest rate and currency exchange rate fluctuations, could impact results.
• Pharmaceutical industry regulation and health care legislation in the United States and internationally pose risks.
• Global trends toward health care cost containment could affect revenue.
• The company faces challenges inherent in new product development, including obtaining regulatory approval.
• Manufacturing difficulties or delays could impact product supply.
• The company is dependent on the effectiveness of its patents and other protections for innovative products.
• Exposure to litigation, including patent litigation, and/or regulatory actions could have a negative impact.

Future Outlook

Merck continues to expect full-year 2025 sales to be between $64.1 billion and $65.6 billion and now expects non-GAAP EPS to be between $8.82 and $8.97, reflecting the impact of tariffs and the Hengrui Pharma agreement.

Management Comments

• Our company made strong progress to start the year, with increasing contributions from our newer commercialized medicines and vaccines and continued advancement of our pipeline, said Robert M. Davis, chairman and chief executive officer, Merck.
• We are working with focus and urgency to both realize the full potential of our near-term opportunities and to rapidly progress the next wave of innovation that will positively impact the lives of patients and drive future value creation for all of our stakeholders.

Industry Context

Merck's focus on oncology, vaccines, and animal health aligns with key growth areas in the pharmaceutical industry. The company's strategic collaborations and acquisitions, such as the Hengrui Pharma agreement, reflect a broader trend of companies seeking to expand their pipelines and market reach.

Comparison to Industry Standards

• Merck's Keytruda continues to be a major growth driver, similar to how other major oncology drugs like Bristol Myers Squibb's Opdivo and Roche's Tecentriq perform for their respective companies.
• The decline in Gardasil sales due to lower demand in China mirrors challenges faced by other vaccine manufacturers in navigating the Chinese market.
• Merck's investment in U.S. manufacturing and R&D is comparable to similar investments made by companies like Pfizer and Johnson & Johnson to strengthen their domestic operations.
• The company's non-GAAP gross margin of 82.2% is competitive with other large pharmaceutical companies.

Stakeholder Impact

• Shareholders may be concerned about the slight decrease in sales and the revised EPS guidance.
• Patients could benefit from the continued development and approval of new medicines and vaccines.
• Employees may be affected by restructuring activities and changes in business strategy.
• The company's investments in manufacturing and R&D could create jobs and stimulate economic growth.

Next Steps

• Merck plans to begin submitting applications for marketing authorization of DOR/ISL by mid-2025.
• The company will host an Oncology Investor Event on June 2, 2025.
• The transaction with Hengrui Pharma is expected to close in the second quarter of 2025.

Key Dates

Keywords

Merck, Financial Results, KEYTRUDA, WINREVAIR, Animal Health, GARDASIL, Sales, EPS, Pipeline, Pharmaceuticals