Merck(US:MRK)2025-11-05 21:08Financial Performance - Merck's worldwide sales reached $17.3 billion in Q3 2025, a 4% increase compared to Q3 2024, with total sales for the first nine months of 2025 at $48.6 billion, showing slight growth from the same period in 2024[188][189]. - The oncology franchise drove growth, particularly from Keytruda, which generated $8.1 billion in Q3 2025, a 10% increase year-over-year, and $23.3 billion for the first nine months, an 8% increase[192]. - Merck's sales performance in the first nine months of 2025 was negatively affected by pricing pressures and cost-reduction measures from governments[184][185]. - The company anticipates ongoing negative impacts on sales and profits due to healthcare cost containment efforts and government pricing policies[185]. - Combined worldwide sales of Gardasil and Gardasil 9 declined 24% in Q3 2025 and 40% in the first nine months of 2025, primarily due to lower demand in China and Japan[205]. - Global sales of Keytruda grew 10% in Q3 2025 and 8% in the first nine months of 2025, driven by higher demand and net pricing in the U.S.[193]. - Alliance revenue related to Lynparza increased 12% in both Q3 and the first nine months of 2025, primarily due to higher demand in the U.S. and certain international markets[198]. - Sales of Welireg rose 42% in both Q3 and the first nine months of 2025, primarily due to higher demand in the U.S. and continued launch uptake in international markets[200]. - Total income before taxes for Q3 2025 was $6,745 million, up from $4,090 million in Q3 2024[250]. Acquisitions and Collaborations - Merck acquired Verona Pharma for approximately $10.5 billion, gaining rights to Ohtuvayre, a treatment for chronic obstructive pulmonary disease (COPD)[177]. - Merck entered a funding arrangement with Blackstone Life Sciences for $700 million to support development costs for MK-2870, which will reduce R&D expenses as costs are incurred[178]. - The company recorded a $150 million upfront payment to Dr. Falk Pharma for the global rights to MK-8690, impacting Q4 2025 R&D expenses by approximately $0.05 per share[176]. - Merck's exclusive license agreement with Jiangsu Hengrui Pharmaceuticals for MK-7262 included a $200 million upfront payment, recorded as R&D expense[180]. - Merck acquired Verona Pharma in October 2025, gaining Ohtuvayre, a treatment for COPD, which is currently under clinical evaluation[265]. Research and Development - Research and development (R&D) expenses decreased by 28% in Q3 2025 and 11% for the first nine months, largely due to lower business development charges compared to the previous year[232]. - Keytruda is in clinical development for over 30 cancer types, with several currently in Phase 3 trials[259]. - MK-3475A, a new subcutaneous formulation of Keytruda, is under review in the EU, with a decision expected in Q4 2025[256]. - MK-8591A, an investigational HIV treatment, has a target action date set by the FDA for April 28, 2026[257]. - Enflonsia, a monoclonal antibody for RSV prevention, received a positive recommendation from the CHMP but faces a delay in final decision due to data entry issues[258]. - Merck announced positive topline results from three Phase 3 trials for MK-0616, demonstrating significant reductions in LDL-C compared to placebo and other therapies[263][264]. Sales and Market Trends - The decline in vaccine sales was primarily due to lower sales of Gardasil products, offset by new product launches like Capvaxive[190]. - U.S. Keytruda sales in Q3 2025 benefited by approximately $100 million due to the timing of wholesaler purchases[193]. - Sales of Capvaxive reached $244 million in Q3 2025 and $480 million in the first nine months of 2025, following its U.S. launch in Q3 2024[212]. - Enflonsia sales in the U.S. were $79 million in Q3 2025, driven by inventory stocking after FDA approval[213]. - Bridion sales grew 5% in Q3 2025 and 2% in the first nine months, but are expected to decline significantly after losing U.S. market exclusivity in July 2026[214]. - Prevymis sales increased 28% in Q3 2025 and 23% in the first nine months, primarily due to higher demand in the U.S.[215]. - Dificid sales declined 55% in Q3 2025 and 15% in the first nine months due to generic competition in the U.S.[216]. - Winrevair sales were $360 million in Q3 2025 and $976 million in the first nine months, reflecting higher demand in the U.S. and international markets[218]. - Combined sales of Januvia and Janumet grew 29% in Q3 2025 and 15% in the first nine months, driven by higher net pricing in the U.S.[222]. Financial Position and Cash Flow - Cash provided by operating activities was $13.6 billion in the first nine months of 2025, down from $18.0 billion in the same period of 2024[270]. - Cash used in investing activities decreased to $2.5 billion in the first nine months of 2025 from $6.3 billion in 2024, primarily due to lower acquisition costs[271]. - Cash used in financing activities increased to $6.7 billion in the first nine months of 2025, compared to $4.0 billion in 2024, driven by higher treasury stock purchases and dividends[272][273]. - The company has $19.3 billion in cash and investments as of September 30, 2025, up from $14.2 billion at the end of 2024[270]. - The total debt to total liabilities and equity ratio was 31.9% as of September 30, 2025, slightly up from 31.7% at the end of 2024[270]. - The company factored $1.7 billion of accounts receivable as of September 30, 2025, compared to $2.1 billion at the end of 2024[274]. Shareholder Returns and Stock Activity - Dividends paid to stockholders increased to $6.2 billion for the first nine months of 2025, compared to $5.9 billion in the same period of 2024[277]. - The Company repurchased $3.8 billion (46 million shares) of its common stock during the first nine months of 2025, with a remaining share repurchase authorization of $8.6 billion as of September 30, 2025[278]. - The Company has a $6.0 billion credit facility maturing in May 2030, which has not been drawn upon[279]. - In January 2025, the Board of Directors authorized an additional $10 billion for stock repurchases, with no time limit on the purchases[278]. - The Company expects the pace of share repurchases to continue at the current level for the remainder of 2025[278]. Tax and Regulatory Matters - The effective income tax rate for Q3 2025 was 14.2%, influenced by geographical income mix and discrete items[244]. - Merck expects the global minimum tax to impact its effective income tax rate by approximately 2% for the full year 2025[246]. Cost Management - Cost of sales decreased by 6% in Q3 2025 and 5% for the first nine months, reflecting lower amortization of intangible assets and restructuring costs[228]. - Selling, general and administrative expenses declined by 4% in Q3 2025, driven by lower administrative and restructuring costs[231]. - Pharmaceutical segment profits increased by 9% in Q3 2025, reaching $12,538 million, driven by higher sales and lower costs[243]. - Animal Health segment profits were flat in Q3 2025 at $511 million, with a 10% increase in the first nine months of 2025 to $1,737 million[243]. - Other (income) expense, net was $238 million in Q3 2025, an increase from $162 million in Q3 2024, primarily due to income from investments in equity securities[240]. - The 2025 Restructuring Program is expected to incur approximately $3.0 billion in costs, with annual savings of about $1.7 billion anticipated by the end of 2027[236]. Market Risks and Accounting Policies - The Company’s significant accounting policies have not changed since December 31, 2024, indicating stability in financial reporting[280]. - There have been no material changes in market risk exposures affecting disclosures since the 2024 Form 10-K[282].