Merck(MRK) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights Merck's Q1 2025 saw mixed sales with strong pipeline progress, while full-year outlook was maintained for sales but revised for EPS due to one-time charges First Quarter 2025 Performance Overview Merck's Q1 2025 worldwide sales decreased 2% to $15.5 billion, with KEYTRUDA growth offsetting a significant GARDASIL/GARDASIL 9 decline, alongside strong pipeline advancements First Quarter 2025 Key Financial Highlights | Metric | Q1 2025 Value | Change YoY | Change Ex-FX | | :----- | :------------ | :--------- | :----------- | | Total Worldwide Sales | $15.5 Billion | -2% | 1% | | KEYTRUDA Sales | $7.2 Billion | 4% | 6% | | WINREVAIR Sales | $280 Million | - | - | | Animal Health Sales | $1.6 Billion | 5% | 10% | | GARDASIL/GARDASIL 9 Sales | $1.3 Billion | -41% | -40% | | GAAP EPS | $2.01 | - | - | | Non-GAAP EPS | $2.22 | - | - | - Merck made strong progress to start the year, with increasing contributions from newer commercialized medicines and vaccines and continued advancement of its pipeline[4] - Expanded pipeline through an exclusive license agreement with Hengrui Pharma for an investigational oral small molecule Lp(a) inhibitor, expected to close in Q2 2025[5] Full-Year 2025 Financial Outlook Summary Merck maintained its full-year 2025 worldwide sales outlook but revised its non-GAAP EPS downward to reflect a one-time charge related to the Hengrui Pharma license agreement and absorbed additional costs from tariffs Full-Year 2025 Financial Outlook | Metric | Outlook Range | | :----- | :------------ | | Worldwide Sales | $64.1 Billion to $65.6 Billion | | Non-GAAP EPS | $8.82 to $8.97 | - Non-GAAP EPS outlook 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[5] - Outlook absorbs an estimated $200 million of additional costs for tariffs implemented to date[5] First-Quarter 2025 Financial Results Analysis Merck's Q1 2025 financial results show mixed sales performance, with growth in oncology and animal health offset by declines in vaccines, while profitability improved due to product mix and lower R&D expenses Financial Summary (GAAP & Non-GAAP) Merck's first-quarter 2025 financial summary shows a slight decline in sales but growth in both GAAP and non-GAAP net income and EPS, with non-GAAP measures excluding specific acquisition, restructuring, and investment-related costs to provide a clearer view of underlying business performance First Quarter Financial Summary (GAAP vs. Non-GAAP) | Metric ($ in millions, except EPS) | 2025 | 2024 | Change | Change Ex-Exchange | | :-------------------------------- | :--- | :--- | :----- | :----------------- | | Sales | $15,529 | $15,775 | -2% | 1% | | GAAP net income | $5,079 | $4,762 | 7% | 12% | | Non-GAAP net income | $5,611 | $5,279 | 6% | 11% | | GAAP EPS | $2.01 | $1.87 | 7% | 13% | | Non-GAAP EPS | $2.22 | $2.07 | 7% | 12% | - Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, and income and losses from investments in equity securities, which management believes enhances investors' understanding of the company's underlying business performance[7][9] Sales Performance by Product Merck's Q1 2025 sales were mixed, showing strong growth in oncology and Animal Health, significant declines in vaccines and virology, and contributions from new product launches like WINREVAIR and CAPVAXIVE Pharmaceutical Sales Pharmaceutical sales declined 3% (1% ex-exchange) to $13.6 billion due to lower vaccine and virology sales, despite strong KEYTRUDA performance and growth in oncology, cardiology, and diabetes First Quarter 2025 Key Pharmaceutical Product Sales | Product | 2025 Sales ($M) | 2024 Sales ($M) | Change (%) | Change Ex-Exchange (%) | Commentary | | :------ | :-------------- | :-------------- | :--------- | :--------------------- | :--------- | | KEYTRUDA | 7,205 | 6,947 | 4% | 6% | Growth from increased global uptake in earlier-stage indications and continued strong demand from metastatic indications | | GARDASIL/GARDASIL 9 | 1,327 | 2,249 | -41% | -40% | Decline primarily due to lower demand in China, partially offset by higher demand in most international regions | | JANUVIA/JANUMET | 796 | 670 | 19% | 21% | Increase primarily due to higher net pricing in the U.S., partially offset by lower demand in international markets | | WINREVAIR | 280 | - | - | - | Represents continued uptake since its Q2 2024 launch in the U.S. | | WELIREG | 137 | 85 | 62% | 63% | Growth primarily driven by higher demand in the U.S. | | CAPVAXIVE | 107 | - | - | - | Represents continued uptake since its Q3 2024 launch in the U.S. | | LAGEVRIO | 102 | 350 | -71% | -69% | Decline largely driven by lower demand in the Asia Pacific region, particularly Japan | | SIMPONI | - | 184 | -100% | -100% | Marketing rights reverted to Johnson & Johnson on Oct. 1, 2024 | - Pharmaceutical sales decline driven by vaccines, virology and immunology, partially offset by growth in oncology, cardiology and diabetes[11] Animal Health Sales Animal Health sales grew 5% (10% ex-exchange) to $1.6 billion, primarily driven by increased Livestock product demand and the inclusion of the Elanco aqua business, while Companion Animal sales remained flat First Quarter 2025 Animal Health Sales | Segment | 2025 Sales ($M) | 2024 Sales ($M) | Change (%) | Change Ex-Exchange (%) | | :------ | :-------------- | :-------------- | :--------- | :--------------------- | | Animal Health Total | 1,588 | 1,511 | 5% | 10% | | Livestock | 924 | 850 | 9% | 16% | | Companion Animal | 664 | 661 | - | 3% | - Growth in Animal Health primarily due to higher demand for Livestock products and the inclusion of sales from the Elanco aqua business acquired in July 2024[12] Other Revenues Other revenues increased 17% (16% ex-exchange) to $303 million, primarily due to higher payments received for out-licensing arrangements and royalties, partially offset by lower revenue from third-party manufacturing First Quarter 2025 Other Revenues | Metric | 2025 Sales ($M) | 2024 Sales ($M) | Change (%) | Change Ex-Exchange (%) | | :----- | :-------------- | :-------------- | :--------- | :--------------------- | | Other Revenues | 303 | 258 | 17% | 16% | - Increase primarily due to higher payments received for out-licensing arrangements and higher royalties, partially offset by lower revenue from third-party manufacturing arrangements[12][13] Expense and Profitability Analysis Merck's Q1 2025 saw GAAP gross margin improve due to product mix, R&D expenses decrease significantly from a prior-year acquisition charge absence, and SG&A expenses experience a modest increase GAAP Expense and Gross Margin GAAP gross margin improved to 78.0% in Q1 2025, while R&D expenses decreased 9% due to a prior-year acquisition charge, and SG&A expenses increased 3% from higher administrative and promotional costs First Quarter GAAP Expenses | Expense Category ($M) | 2025 | 2024 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Cost of sales | $3,419 | $3,540 | -3% | | Selling, general and administrative | $2,552 | $2,483 | 3% | | Research and development | $3,621 | $3,992 | -9% | | Restructuring costs | $69 | $123 | -44% | | Other (income) expense, net | $(35) | $(33) | 6% | | GAAP Gross Margin | 78.0% | 77.6% | +0.4 pp | | GAAP EPS | $2.01 | $1.87 | 7% | - The increase in GAAP gross margin was 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[16] - R&D expenses decreased primarily due to a $656 million charge for the acquisition of Harpoon in Q1 2024, partially offset by a $100 million charge in Q1 2025 related to the EyeBio acquisition milestone and increased clinical development costs[18] Non-GAAP Expense and Gross Margin Non-GAAP gross margin improved to 82.2% in Q1 2025 due to favorable product mix, with R&D expenses decreasing 9% from the absence of a prior-year acquisition charge, and SG&A expenses increasing 3% from higher administrative and promotional costs First Quarter Non-GAAP Expenses | Expense Category ($M) | 2025 | 2024 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Non-GAAP Cost of sales | $2,763 | $2,961 | -7% | | Non-GAAP Selling, general and administrative | $2,529 | $2,457 | 3% | | Non-GAAP Research and development | $3,614 | $3,974 | -9% | | Non-GAAP Other (income) expense, net | $75 | $87 | -14% | | Non-GAAP Gross Margin | 82.2% | 81.2% | +1.0 pp | | Non-GAAP EPS | $2.22 | $2.07 | 7% | - Non-GAAP gross margin increase was primarily due to the favorable impact of product mix, partially offset by the unfavorable impact of foreign exchange[22] - Non-GAAP R&D expenses decreased primarily due to a $656 million charge for the acquisition of Harpoon in Q1 2024, partially offset by a $100 million charge in Q1 2025 related to the EyeBio acquisition milestone[24] GAAP to Non-GAAP Reconciliation The reconciliation highlights that non-GAAP net income and EPS are higher than GAAP figures due to the exclusion of acquisition- and divestiture-related costs, restructuring costs, and income from investments in equity securities, which collectively reduced GAAP net income by $532 million in Q1 2025 First Quarter GAAP to Non-GAAP Reconciliation | Metric ($ in millions, except EPS) | GAAP (2025) | Difference | Non-GAAP (2025) | GAAP (2024) | Difference | Non-GAAP (2024) | | :-------------------------------- | :---------- | :--------- | :-------------- | :---------- | :--------- | :-------------- | | EPS | $2.01 | $0.21 | $2.22 | $1.87 | $0.20 | $2.07 | | Net Income | $5,079 | $532 | $5,611 | $4,762 | $517 | $5,279 | | Excluded Items (2025): | | | | | | | | Acquisition- and divestiture-related costs | | $647 | | | | | | Restructuring costs | | $105 | | | | | | Income from investments in equity securities | | $(107) | | | | | | Estimated income tax (benefit) expense | | $(113) | | | | | Pipeline and Portfolio Updates Merck advanced its pipeline with key regulatory approvals and positive clinical trial results across oncology, vaccines, and cardiovascular areas, complemented by strategic licensing agreements Oncology Pipeline Developments Merck advanced its oncology pipeline with pivotal subcutaneous pembrolizumab data leading to U.S. and European regulatory applications, KEYTRUDA receiving Priority Review for LA-HNSCC and EC approval for mesothelioma, and WELIREG gaining conditional EC approval for two indications - Presented pivotal data from the Phase 3 trial of subcutaneous pembrolizumab with berahyaluronidase alfa; applications are under review in the U.S. (PDUFA date Sept. 23, 2025) and Europe[30] - U.S. FDA granted Priority Review for KEYTRUDA plus standard of care as perioperative treatment for resectable locally advanced head and neck squamous cell carcinoma (LA-HNSCC), with a PDUFA date of June 23, 2025[31] - Received conditional EC approval for two indications for WELIREG, making it the first and only oral hypoxia-inducible factor-2 alpha inhibitor approved in the European Union[31] Vaccines and Infectious Diseases Developments Merck secured EC approval for CAPVAXIVE and GARDASIL 9 for males in China, alongside positive Phase 3 results for the investigational oral two-drug regimen of doravirine/islatravir (DOR/ISL) for HIV-1 infection - Received EC approval for CAPVAXIVE for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in adults, marking its fourth approval globally[33] - 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[33] - Presented positive results from two pivotal Phase 3 trials of the investigational, once-daily, oral two-drug regimen of doravirine/islatravir (DOR/ISL) in adults with virologically suppressed HIV-1 infection[33] Cardiovascular Disease Developments Results from the Phase 3 ZENITH trial demonstrated that WINREVAIR significantly reduced the risk of a composite of all-cause death, lung transplantation, and hospitalization for PAH by 76% compared to placebo, leading to early trial termination due to overwhelming efficacy - Phase 3 ZENITH trial evaluating WINREVAIR demonstrated a 76% reduction in the risk of a composite of all-cause death, lung transplantation, and hospitalization for PAH compared to placebo, leading to early trial stoppage due to overwhelming efficacy[34] Business Development and Strategic Partnerships Merck expanded its pipeline through an exclusive license agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd. for HRS-5346, an investigational oral small molecule Lp(a) inhibitor currently in Phase 2 clinical trials - Entered into an exclusive license agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd. for HRS-5346, an investigational oral small molecule Lipoprotein(a) [Lp(a)] inhibitor, with the transaction expected to close in Q2 2025[35] Notable Recent News Releases Merck highlighted recent news releases covering key regulatory milestones and clinical trial results across oncology, vaccines, cardiovascular, and infectious diseases, reinforcing its broad pipeline advancements - FDA granted Priority Review for KEYTRUDA plus standard of care as perioperative treatment for resectable LA-HNSCC, with a PDUFA date of June 23, 2025[37] - EC approved CAPVAXIVE for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in adults[37] - WINREVAIR reduced the risk of a composite of all-cause death, lung transplantation, and hospitalization for PAH by 76% compared to placebo in the Phase 3 ZENITH trial[37] Strategic Investments Merck is making substantial long-term capital investments exceeding $21 billion in its U.S. manufacturing and R&D capabilities, including a new $1 billion vaccine facility Manufacturing and R&D Investment Merck is making substantial long-term capital investments in its U.S. manufacturing and R&D capabilities, with over $12 billion allocated since 2018 and an additional $9 billion planned by the end of 2028, including a new $1 billion vaccine manufacturing facility - Merck has allocated more than $12 billion toward U.S. capital investment since 2018 and expects to invest over $9 billion more by the end of 2028[38] - Recently opened a new, $1 billion, 225,000-square-foot facility dedicated to vaccine manufacturing at Merck's Durham, North Carolina, site[38] Full-Year 2025 Financial Outlook Merck reaffirmed its full-year 2025 sales guidance but revised its non-GAAP EPS downward due to one-time charges and tariff impacts Sales Outlook Merck reaffirmed its full-year 2025 worldwide sales guidance of $64.1 billion to $65.6 billion, while noting an anticipated negative impact of approximately 1% from foreign exchange and an estimated $200 million in additional costs due to tariffs Full-Year 2025 Sales Outlook | Metric | Updated Outlook | | :----- | :-------------- | | Sales | $64.1 billion to $65.6 billion | - Continues to expect full-year 2025 sales to be between $64.1 billion and $65.6 billion, including a revised negative impact of foreign exchange of approximately 1% at mid-April 2025 exchange rates[41][43] - Outlook includes an estimated $200 million of additional costs for tariffs implemented to date, primarily impacting Cost of Sales and gross margin[44] Profitability and EPS Outlook Merck revised its full-year non-GAAP EPS outlook to $8.82 to $8.97, reflecting a new $0.06 per share charge for the Hengrui Pharma license agreement and a $0.09 per share charge for the LaNova payment. The non-GAAP effective tax rate was also adjusted Full-Year 2025 Profitability and EPS Outlook | Metric | Updated Outlook | Prior Outlook | | :----- | :-------------- | :------------ | | Non-GAAP Gross margin | Approximately 82% | Approximately 82.5% | | Non-GAAP Operating expenses | $25.6 billion to $26.6 billion | $25.4 billion to $26.4 billion | | Non-GAAP Effective tax rate | 15.5% to 16.5% | 16.0% to 17.0% | | Non-GAAP EPS | $8.82 to $8.97 | $8.88 to $9.03 | - Revised non-GAAP EPS range reflects an anticipated one-time charge of $200 million (approximately $0.06 per share) for an upfront payment to Hengrui Pharma[46] - Guidance continues to reflect an anticipated one-time charge of $300 million (approximately $0.09 per share) related to the payment to LaNova[46] - Non-GAAP EPS outlook includes a negative impact of foreign exchange of more than $0.20 per share[46] Additional Information This section provides background on Merck's mission, a disclaimer regarding forward-looking statements, and an appendix of generic product names About Merck Merck, known as MSD outside the U.S. and Canada, is a research-intensive biopharmaceutical company dedicated to using science to save and improve lives globally, with over 130 years of developing medicines and vaccines for people and animals - Merck's purpose is to use the power of leading-edge science to save and improve lives around the world, with over 130 years of developing important medicines and vaccines[49] Forward-Looking Statements This section serves as a disclaimer, highlighting that forward-looking statements are subject to significant risks and uncertainties, including industry competition, regulatory changes, global economic factors, challenges in product development, and potential litigation, which could cause actual results to differ materially - Forward-looking statements are subject to significant risks and uncertainties, including general industry conditions, competition, economic factors, pharmaceutical industry regulation, healthcare cost containment, technological advances, new product development challenges, manufacturing difficulties, and exposure to litigation[50][51] Appendix: Generic Product Names This appendix provides a list of generic product names for Merck's key pharmaceutical and animal health products mentioned in the report Unaudited Financial Statements This section presents Merck's unaudited GAAP consolidated statement of income, a detailed GAAP to non-GAAP reconciliation, and a comprehensive breakdown of franchise and key product sales for Q1 2025 Consolidated Statement of Income - GAAP The unaudited GAAP consolidated statement of income for Q1 2025 shows total sales of $15.5 billion, with net income attributable to Merck & Co., Inc. of $5.08 billion and diluted EPS of $2.01, reflecting a 7% increase in both compared to Q1 2024 Consolidated Statement of Income - GAAP (Q1 2025 vs. Q1 2024) | Metric ($ in millions, except EPS) | 1Q25 | 1Q24 | % Change | | :-------------------------------- | :--- | :--- | :------- | | Sales | $15,529 | $15,775 | -2% | | Cost of sales | $3,419 | $3,540 | -3% | | Selling, general and administrative | $2,552 | $2,483 | 3% | | Research and development | $3,621 | $3,992 | -9% | | Restructuring costs | $69 | $123 | -44% | | Other (income) expense, net | $(35) | $(33) | 6% | | Income Before Taxes | $5,903 | $5,670 | 4% | | Income Tax Provision | $818 | $903 | -9% | | Net Income | $5,085 | $4,767 | 7% | | Net Income Attributable to Merck & Co., Inc. | $5,079 | $4,762 | 7% | | Earnings per Common Share Assuming Dilution | $2.01 | $1.87 | 7% | | Tax Rate | 13.9% | 15.9% | -2.0 pp | GAAP to Non-GAAP Reconciliation (Detailed) This detailed reconciliation table outlines the specific adjustments made to GAAP figures to derive non-GAAP results for Q1 2025, primarily excluding acquisition- and divestiture-related costs ($647M), restructuring costs ($105M), and income from investments in equity securities ($(107)M), which collectively increased non-GAAP net income and EPS Detailed GAAP to Non-GAAP Reconciliation (Q1 2025) | Metric ($ in millions, except EPS) | GAAP | Acquisition and Divestiture Related Costs | Restructuring Costs | (Income) Loss from Investments in Equity Securities | Adjustment Subtotal | Non-GAAP | | :-------------------------------- | :--- | :-------------------------------------- | :------------------ | :------------------------------------------------ | :------------------ | :------- | | Cost of sales | $3,419 | $620 | $36 | - | $656 | $2,763 | | Selling, general and administrative | $2,552 | $23 | - | - | $23 | $2,529 | | Research and development | $3,621 | $7 | - | - | $7 | $3,614 | | Restructuring costs | $69 | - | $69 | - | $69 | - | | Other (income) expense, net | $(35) | $(3) | - | $(107) | $(110) | $75 | | Income Before Taxes | $5,903 | $(647) | $(105) | $107 | $(645) | $6,548 | | Income Tax Provision (Benefit) | $818 | $(117) | $(18) | $22 | $(113) | $931 | | Net Income Attributable to Merck & Co., Inc. | $5,079 | $(530) | $(87) | $85 | $(532) | $5,611 | | Earnings per Common Share Assuming Dilution | $2.01 | $(0.21) | $(0.03) | $0.03 | $(0.21) | $2.22 | | Tax Rate | 13.9% | - | - | - | - | 14.2% | - Non-GAAP adjustments primarily include expenses for the amortization of intangible assets in cost of sales and R&D, integration and transaction costs in SG&A, and employee separation costs and asset impairments in restructuring costs[61][62] Franchise / Key Product Sales (Detailed) This table provides a comprehensive breakdown of sales for individual products and franchises for Q1 2025 and Q1 2024, including quarterly and full-year 2024 figures, and nominal and ex-exchange percentage changes, offering granular insight into product-level performance drivers Franchise / Key Product Sales (Q1 2025 vs. Q1 2024) | Product/Franchise | 1Q 2025 ($M) | 1Q 2024 ($M) | Nom % Change | Ex-Exch % Change | | :---------------- | :----------- | :----------- | :----------- | :--------------- | | TOTAL SALES | $15,529 | $15,775 | -2 | 1 | | PHARMACEUTICAL | $13,638 | $14,006 | -3 | -1 | | Oncology | | | | | | Keytruda | $7,205 | $6,947 | 4 | 6 | | Lynparza (Alliance) | $312 | $292 | 7 | 8 | | Lenvima (Alliance) | $258 | $255 | 1 | 2 | | Welireg | $137 | $85 | 62 | 63 | | Reblozyl (Alliance) | $119 | $71 | 68 | 68 | | Vaccines | | | | | | Gardasil/Gardasil 9 | $1,327 | $2,249 | -41 | -40 | | ProQuad/M-M-R II/Varivax | $539 | $570 | -5 | -5 | | Vaxneuvance | $230 | $219 | 5 | 7 | | Capvaxive | $107 | - | - | - | | Hospital Acute Care | | | | | | Prevymis | $208 | $174 | 19 | 22 | | Cardiovascular | | | | | | Winrevair | $280 | - | - | - | | Virology | | | | | | Lagevrio | $102 | $350 | -71 | -69 | | Immunology | | | | | | Simponi | - | $184 | -100 | -100 | | Diabetes | | | | | | Januvia | $549 | $419 | 31 | 33 | | Janumet | $247 | $251 | -2 | 2 | | ANIMAL HEALTH | $1,588 | $1,511 | 5 | 10 | | Livestock | $924 | $850 | 9 | 16 | | Companion Animal | $664 | $661 | - | 3 | | Other Revenues | $303 | $258 | 17 | 16 |