Merck maintains 2025 guidance amid macro uncertainty

Overview

Merck reported a mixed start to 2025, with strong execution in oncology and animal health partially offset by significant declines in vaccine sales, especially GARDASIL in China. Overall results were impacted by foreign exchange headwinds and ongoing macroeconomic pressures.

Chairman and CEO Robert M. Davis emphasized: “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. 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.”

Q1 2025 vs. Q1 2024:

Total worldwide sales were $15.5bn (-2% YoY), with resilience in Oncology (KEYTRUDA) and Animal Health offset by GARDASIL vaccine declines in China and FX impacts.
- Pharmaceutical sales declined slightly to $13.6bn (-3% YoY), driven by vaccines, virology and immunology, partially offset by growth in oncology, cardiology and diabetes.
- KEYTRUDA sales rose to $7.2bn (+4% YoY), driven by earlier-stage treatment expansion and strong metastatic uptake globally.
- GARDASIL sales fell to $1.3bn (-41% YoY), due to lower demand in China, though Japan and U.S. demand remained robust.
- Animal Health sales grew to $1.6bn (+5% YoY), reflecting strong demand for livestock products and the contribution from the Elanco aqua acquisition.
- Cardiovascular (WINREVAIR) had a solid launch traction with $280m in quarterly sales, driven by early uptake in pulmonary arterial hypertension (PAH) treatment.
- Other products had a steady performance across diabetes (JANUVIA), hospital care (BRIDION, PREVYMIS), and neuroscience (WELIREG) segments.
GAAP net income recorded a value of $5.08bn (+7% YoY), boosted by lower restructuring costs and favorable product mix, while non-GAAP net income also increased to $5.61bn (+6% YoY), driven by operational strength in key franchises and expense management.
GAAP EPS was $2.01 (vs. $1.87 in Q1 2024), reflecting improved operational efficiency and lower extraordinary charges, while non-GAAP EPS was $2.22 (vs. $2.07 in Q1 2024), supported by underlying business performance and lower-than-expected R&D charges.
SG&A expenses were $2.6bn (+3% YoY), primarily due to higher administrative and promotional costs, partially offset by the favorable impact of foreign exchange.
R&D expenses were $3.6bn (-9% YoY), primarily due to a $656m charge for the acquisition of Harpoon in the Q1 2024 and the favorable impact of foreign exchange.
Gross margin was 78.0% (compared with 77.6% for the Q1 2024), primarily due to the favorable impacts of product mix and lower restructuring costs, partially offset by higher amortization of intangible assets and the unfavorable impact of foreign exchange.
The company opened a new $1bn vaccine manufacturing facility in North Carolina.
Merck maintained strong free cash flow generation in Q1 2025, supporting continued investments in R&D, business development, and shareholder returns. The company preserved its investment-grade credit rating and financial flexibility, while also reducing its diluted share count to 2.51bn, positioning itself to capitalize on future growth opportunities through both organic initiatives and strategic acquisitions.

Merck reaffirmed its full-year 2025 sales guidance between $64.1bn and $65.6bn, while updating its non-GAAP EPS forecast to $8.82-$8.97 (from $8.88-$9.03 previously), reflecting a newly anticipated ~$0.06 per share negative impact related to the Hengrui licensing deal. The company continues to expect low-single-digit FX headwinds, an effective non-GAAP tax rate between 15.5% and 16.5%, and plans for incremental costs related to global tariffs. Core operational growth is expected to be driven by KEYTRUDA, Animal Health, pipeline advancement, and disciplined cost management.

Following the publication of the quarterly results, MRK shares saw a stock price appreciation of approximately +3.6% on the last trading day of last week, thus ending the entire week with a price appreciation of approximately +6.5%. However, since the beginning of the year, MRK’s stock price has depreciated quite seriously, by approximately -16.5%, mainly due to global uncertainties caused by the imposition of reciprocal trade tariffs. In addition, the stock price continues to remain below the 50-day moving average, which has persisted, with very few exceptions, since the end of July 2024.