Merck(US:MRK)2025-08-05 20:13Acquisition and Agreements - Merck entered into a definitive agreement to acquire Verona Pharma plc for approximately $10 billion, expected to close in Q4 2025[157]. - Merck completed a technology transfer for MK-2010, resulting in a $300 million charge to R&D expenses in Q3 2025, approximately $0.09 per share[158]. - Merck recorded a $200 million pretax charge for the exclusive license agreement with Hengrui Pharma for MK-7262, approximately $0.07 per share[159]. Sales Performance - Merck's worldwide sales were $15.8 billion in Q2 2025, a 2% decline compared to Q2 2024, with U.S. sales increasing by 12%[168]. - Keytruda sales grew 9% in Q2 2025, driven by increased demand across multiple approved indications, despite a $200 million negative impact from wholesaler purchase timing[173]. - The U.S. government tariffs are expected to result in approximately $200 million of additional expenses in 2025, primarily reflected within Cost of sales[165]. - Merck's oncology segment saw Keytruda sales of $7.956 billion in Q2 2025, a 9% increase from Q2 2024[171]. - The decline in vaccine revenue was primarily due to lower sales of Gardasil, partially offset by the launch of Capvaxive[169]. - Lynparza alliance revenue increased by 17% in Q2 2025 and 12% in the first six months of 2025, driven by higher demand in international markets and the U.S.[176]. - Lenvima alliance revenue rose by 6% in Q2 2025 and 4% in the first half of 2025, primarily due to increased U.S. sales, despite lower pricing[177]. - Welireg sales grew by 29% in Q2 2025 and 42% in the first six months of 2025, mainly due to higher demand in the U.S. and early uptake in certain EU markets[178]. - Reblozyl alliance revenue increased by 19% in Q2 2025 and 40% in the first half of 2025, attributed to strong underlying sales performance[182]. - Gardasil/Gardasil 9 sales declined by 55% in Q2 2025 and 48% in the first six months of 2025, primarily due to lower demand in China and Japan[183]. - ProQuad sales increased by 15% in Q2 2025 but declined by 11% in the first half of 2025, impacted by manufacturing delays and borrowing from the CDC stockpile[186][187]. - Vaxneuvance sales grew by 21% in Q2 2025 and 13% in the first half of 2025, driven by favorable CDC stockpile activity and higher demand in international markets[188]. - Capvaxive generated sales of $129 million in Q2 2025 and $236 million in the first half of 2025, following its U.S. launch in Q3 2024[189]. - Bridion sales grew by 1% in both Q2 2025 and the first half of 2025, with higher U.S. demand offset by lower international demand due to generic competition[191]. - Worldwide sales of Prevymis grew 21% in Q2 2025 and 20% in the first six months of 2025, driven by higher demand in the U.S. and EU, partially offset by lower demand in China due to generic competition[192]. - Sales of Dificid increased by 5% in Q2 2025 and 8% in the first six months of 2025, primarily due to higher sales in the U.S., but a significant decline in U.S. sales is anticipated for the remainder of 2025 following the loss of market exclusivity[193]. - Winrevair sales reached $336 million in Q2 2025 and $615 million in the first six months of 2025, reflecting continued uptake in the U.S. since its launch[194]. - Alliance revenue from Adempas and Verquvo grew 16% in Q2 2025 and 12% in the first six months of 2025, primarily due to higher demand in Bayer's marketing territories[195]. - Lagevrio sales decreased by 25% in Q2 2025 and 60% in the first six months of 2025, primarily due to lower demand in the Asia Pacific region[196]. - Sales of livestock products grew 15% in Q2 2025 and 12% in the first six months of 2025, driven by higher demand and the inclusion of sales from a recent acquisition[201]. - Sales of Januvia and Janumet were comparable in Q2 2025 compared to the same period in 2024, but increased by 9% in the first six months of 2025 due to higher net pricing in the U.S.[198]. Financial Performance - Cost of sales declined by 5% in Q2 2025 and 4% in the first six months of 2025, with restructuring costs significantly impacting the financials[204]. - Gross margin improved to 77.5% in Q2 2025 from 76.8% in Q2 2024, primarily due to a favorable product mix[206]. - The company expects higher U.S. net sales of Januvia products for the full year 2025 compared to 2024, following a reduction in list prices[199]. - Selling, general and administrative (SG&A) expenses declined by 3% in Q2 2025, primarily due to lower administrative, restructuring, and promotional costs[207]. - Research and development (R&D) expenses increased by 16% in Q2 2025, driven by a $200 million charge related to a license agreement with Hengrui Pharma and increased clinical development spending[208]. - R&D expenses for the first six months of 2025 rose by 2%, with total R&D costs amounting to $5.3 billion compared to $4.9 billion in the same period of 2024[209]. - The cumulative pretax costs for the 2025 Restructuring Program are estimated at approximately $3.0 billion, with expected annual cost savings of about $1.7 billion by the end of 2027[212]. - Pharmaceutical segment profits decreased by 2% in Q2 2025, totaling $11,014 million, while Animal Health segment profits increased by 17% to $593 million[220]. - The effective income tax rate for Q2 2025 was 11.4%, reflecting a favorable impact of $146 million from tax benefits[221]. - Non-GAAP income and non-GAAP EPS are used by the company for internal performance assessment, excluding certain significant items[225]. - Restructuring costs for Q2 2025 were $560 million, compared to $80 million in Q2 2024, indicating a significant increase due to headcount reductions and related expenses[214]. - The company expects the global minimum tax to impact its effective income tax rate by approximately 2% for the full year 2025[223]. - Other (income) expense, net was $7 million in Q2 2025, a favorable change from $42 million of expense in Q2 2024, primarily due to higher income from investments[216]. - Non-GAAP income before taxes for Q2 2025 was $6,767 million, an increase from $6,311 million in Q2 2024, representing a 7.2% growth[227]. - Non-GAAP net income for the first six months of 2025 was $10,985 million, compared to $11,098 million in the same period of 2024, reflecting a decrease of 1.0%[227]. - The company reported a GAAP EPS of $2.14 for Q2 2025, which is a 7.0% increase from $1.76 in Q2 2024[227]. Regulatory and Clinical Developments - The FDA accepted the BLA for MK-3475A with a PDUFA date of September 23, 2025, for subcutaneous pembrolizumab, supported by pivotal trial data[233]. - MK-8591A, an investigational HIV treatment, has a PDUFA date set for April 28, 2026, based on Phase 3 trial findings[234]. - The ZENITH trial for Winrevair showed a 76% reduction in the risk of composite outcomes compared to placebo, with a PDUFA date of October 25, 2025[239]. - The company announced positive topline results from two Phase 3 trials for MK-0616, demonstrating significant LDL-C reductions compared to placebo[240]. - The BLA for MK-1022 was voluntarily withdrawn due to overall survival results not meeting statistical significance in the confirmatory trial[241]. - Keytruda is under review for expanded indications across more than 30 cancer types, with several studies in Phase 3 clinical development[237]. - The company is evaluating several candidates under regulatory review, including V116, a pneumococcal conjugate vaccine, in Japan[235]. Cash Flow and Capital Management - Cash provided by operating activities was $5.8 billion in the first six months of 2025, down from $8.7 billion in the same period of 2024, reflecting a decrease of $1.7 billion due to upfront and milestone payments[247]. - Cash used in investing activities was $2.3 billion in the first six months of 2025, slightly lower than $2.4 billion in the first six months of 2024, primarily due to reduced cash for acquisitions[248]. - Cash used in financing activities increased significantly to $9.3 billion in the first six months of 2025 from $1.6 billion in the same period of 2024, driven by higher treasury stock purchases and increased dividends paid[249]. - Dividends paid to stockholders were $4.1 billion in the first six months of 2025, compared to $3.9 billion in the same period of 2024[252]. - The company purchased $2.5 billion (29 million shares) of its common stock for treasury in the first six months of 2025, with a remaining share repurchase authorization of $9.9 billion as of June 30, 2025[253]. - The company has a $6.0 billion credit facility maturing in May 2030, which has not been drawn upon[254]. - Total debt to total liabilities and equity ratio improved to 30.1% as of June 30, 2025, down from 31.7% in the previous year[247]. - The company factored $1.6 billion of accounts receivable as of June 30, 2025, compared to $2.1 billion at December 31, 2024, reducing outstanding accounts receivable[250]. - Cash and investments totaled $9.4 billion as of June 30, 2025, down from $14.2 billion at the end of 2024[247]. - Working capital increased to $11.0 billion as of June 30, 2025, compared to $10.4 billion at the end of 2024[247].