Core Insights - Merck & Co., Inc. reported strong third-quarter earnings, with adjusted earnings per share of $2.58, exceeding consensus estimates of $2.35 and significantly up from $1.57 a year ago [1] - The company achieved sales of $17.28 billion, a 4% year-over-year increase, surpassing analysts' projections of $16.96 billion [1] Financial Performance - The pharmaceutical segment generated $15.61 billion in sales, also up 4% year-over-year, driven by growth in oncology, cardiovascular, and diabetes, while vaccines, virology, and immunology saw declines [2] - The Animal Health segment reported revenue of $1.62 billion, a 9% increase year-over-year, primarily due to strong performance in livestock products [2] Product Performance - Keytruda, an immunotherapy for cancer, generated $8.14 billion in global sales, reflecting a 10% year-over-year increase due to strong demand from metastatic indications [3] - Sales from GARDASIL and GARDASIL 9 vaccines totaled $1.75 billion, down 24% compared to last year, attributed to lower demand in China [3] - The diabetes franchise, led by JANUVIA and JANUMET, saw a 29% increase in sales to $624 million [3] - Newer products, including Winrevair for pulmonary arterial hypertension, experienced a significant sales increase of 141% to $360 million [4] Guidance - Merck raised its fiscal 2025 adjusted earnings guidance to a range of $8.93-$8.98 per share, compared to the previous range of $8.87-$8.97 and the Wall Street estimate of $8.91 [5] - The company narrowed its fiscal 2025 sales outlook to a range of $64.5 billion to $65 billion, compared to the consensus estimate of $64.66 billion [5] M&A Strategy - A Merck executive indicated that the company is focused on potential acquisition deals in the range of $1 billion to $15 billion, with a willingness to consider larger deals [6]

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Core Insights - Merck reported revenue of $17.28 billion for the quarter ended September 2025, reflecting a 3.7% increase year-over-year and a surprise of +1.24% over the Zacks Consensus Estimate of $17.06 billion [1] - Earnings per share (EPS) for the quarter was $2.58, compared to $1.57 in the same quarter last year, resulting in a surprise of +9.32% over the consensus estimate of $2.36 [1] Financial Performance - Hospital Acute Care sales for Bridion in the U.S. reached $392 million, exceeding the estimated $379.07 million, marking a +15.6% change year-over-year [4] - Oncology sales for Keytruda internationally were $3.26 billion, slightly below the estimated $3.33 billion, with a year-over-year increase of +11.4% [4] - Sales for Diabetes drug Janumet in the U.S. were $78 million, significantly surpassing the estimated $42.82 million, representing a +420% change year-over-year [4] - Alliance revenue for Lynparza in the U.S. was $184 million, exceeding the estimated $156.52 million, with a +14.3% year-over-year change [4] - Animal health sales totaled $1.62 billion, above the estimated $1.56 billion, reflecting an +8.6% change year-over-year [4] - Cardiovascular sales for Winrevair were $360 million, below the estimated $426.29 million [4] - Oncology sales for Keytruda were $8.14 billion, slightly below the estimated $8.4 billion, with a +9.6% year-over-year change [4] - Sales for Virology drug Lagevrio were $138 million, below the estimated $144.08 million, representing a -64% year-over-year change [4] - Sales for Gardasil vaccines were $1.75 billion, matching the average estimate, but reflecting a -24.2% year-over-year change [4] - Alliance revenue for Lenvima was $258 million, exceeding the estimated $242.44 million, with a +2.8% year-over-year change [4] Stock Performance - Merck's shares have returned -3.9% over the past month, contrasting with the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

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Financial Data and Key Metrics Changes - Total company revenues for the third quarter were $17.3 billion, an increase of 4% or 3% excluding foreign exchange impact [18] - Earnings per share were reported at $2.58, with a gross margin of 81.9%, an increase of 1.4 percentage points [24][25] - The company expects full-year revenue to be between $64.5 billion and $65 billion, representing growth of 1% to 2% [26] Business Line Data and Key Metrics Changes - Oncology sales, particularly from Keytruda, increased by 8% to $8.1 billion, driven by strong demand in metastatic indications and earlier stage cancers [18] - Sales of Wellerig increased by 41% to $196 million, primarily due to increased use in advanced renal cell carcinoma [19] - Animal Health business grew by 7%, with livestock sales up 14% [23] Market Data and Key Metrics Changes - GARDASIL sales decreased by 25% to $1.7 billion, primarily due to lower sales in Japan and the expiration of reimbursement for the catch-up cohort [20] - Inflonsia sales were $79 million, reflecting initial stocking ahead of expected demand for RSV season [22] - WinRevare achieved global sales of $360 million, with approximately 1,500 new patients receiving prescriptions in the U.S. [22] Company Strategy and Development Direction - The company is focused on expanding its pipeline with approximately 80 Phase III trials underway across various therapeutic areas [6][45] - A strategic acquisition of Verona Pharma was completed, which is expected to provide significant growth potential [7] - The company aims to invest over $70 billion in expanded domestic manufacturing and R&D to strengthen its position in biopharmaceutical innovation [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to balance decreasing patient out-of-pocket costs while achieving fair pricing for medicines in the U.S. and abroad [9][10] - The company remains committed to disciplined investments in science and business development to drive long-term value [17] - Management highlighted the importance of maintaining a robust pipeline and the potential for significant revenue opportunities by the mid-2030s [7][30] Other Important Information - The company is actively engaged in discussions with the administration regarding healthcare policy and pricing strategies [82][84] - The company plans to maintain an increased pace of share repurchases, expecting approximately $5 billion for the full year [31] Q&A Session Questions and Answers Question: Update on business development and potential larger transactions - Management is excited about the Verona deal and continues to assess potential targets across therapeutic areas, focusing on science-driven opportunities [51][52] - They do not see a need for transformative acquisitions that could disrupt their current pipeline [54] Question: Expansion of TL-1 in immunology - The focus is on being first and best in class for TL-1a, with ongoing Phase 2b studies in rheumatology and dermatology [59][60] Question: Initial feedback on Inflonsia launch - The launch has progressed well, with positive feedback and initial stocking ahead of RSV season [71][74] Question: Update on KEYTRUDA sales from early-stage settings - Over half of the growth for KEYTRUDA is coming from earlier stage indications, with significant contributions from cervical and renal cancers [78] Question: Insights on GARDASIL's future growth - GARDASIL remains important, with growth seen in younger age groups, though facing challenges in the adolescent segment [110]

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Third-Quarter 2025 Sales and Earnings Merck & Co., Inc., Rahway, N.J., USA October 30, 2025 Strategy and Business Update Robert M. Davis Chairman and Chief Executive Officer Financial Results and Outlook Caroline Litchfield Executive Vice President and Chief Financial Officer Research Update Dr. Dean Y. Li Executive Vice President and President, Research Laboratories Question & Answer Session 2 Agenda Agenda Forward-looking statement of Merck & Co., Inc., Rahway, N.J., USA This presentation of Merck & Co., ...

Core Insights - Merck reported quarterly earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.36 per share, and showing a significant increase from $1.57 per share a year ago, resulting in an earnings surprise of +9.32% [1] - The company achieved revenues of $17.28 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.24% and up from $16.66 billion year-over-year [2] - Merck has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] Earnings Outlook - The sustainability of Merck's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $2.18 on revenues of $16.35 billion, and for the current fiscal year, it is $8.92 on revenues of $64.76 billion [7] Industry Context - The Large Cap Pharmaceuticals industry, to which Merck belongs, is currently ranked in the bottom 25% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Merck's stock performance [5] Stock Performance - Merck shares have underperformed the market, losing about 13% since the beginning of the year, while the S&P 500 has gained 17.2% [3] - The estimate revisions trend for Merck was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expectations of underperformance in the near future [6]

Core Insights - Merck reported an increase in third-quarter profit and raised its full-year outlook due to the growing demand for its Keytruda cancer drug [1] Financial Performance - The company experienced higher profits in the third quarter, indicating strong financial health and operational efficiency [1] - The full-year outlook has been boosted, reflecting confidence in continued revenue growth driven by Keytruda [1] Product Demand - Demand for Keytruda, Merck's flagship cancer drug, continues to rise, contributing significantly to the company's revenue growth [1]

Financial Performance - Total sales for Q3 2025 reached $17,276 million, a 4% increase compared to Q3 2024[2] - Net income attributable to Merck for Q3 2025 was $5,785 million, reflecting an 83% increase year-over-year[2] - The earnings per share for Q3 2025 was $2.32, an increase of 87% from $1.24 in Q3 2024[2] - The income before taxes for Q3 2025 was $6,745 million, a 65% increase compared to $4,090 million in Q3 2024[2] - The tax rate for Q3 2025 was 14.2%, compared to 22.7% in Q3 2024[2] - The company reported a significant increase in net income for the year-to-date period, totaling $15,301 million, a 14% increase from $13,389 million in the same period last year[2] Sales Performance - Year-to-date sales for 2025 reached $48,611 million, showing no change from the same period in 2024[2] - Total sales for Q3 2025 reached $17,276 million, a 4% increase from $16,657 million in Q3 2024[10] - Pharmaceutical sales were $15,611 million, up 4% from $14,943 million in the same quarter last year[10] - Total sales for September YTD 2025 reached $48,611 million, a slight increase from $48,544 million in 2024[19] - Pharmaceutical sales were $43,299 million in September YTD 2025, remaining relatively stable compared to $43,358 million in 2024[19] Product Sales - Keytruda sales increased by 10% to $8,142 million compared to $7,429 million in Q3 2024[10] - Alliance revenue from Lynparza rose by 12% to $379 million, while Lenvima's revenue increased by 3% to $258 million[10] - Total vaccines sales decreased to $3,370 million from $3,675 million, a decline of 8% year-over-year[14] - Diabetes sales grew to $703 million, up from $592 million, reflecting a 19% increase[16] - Animal health segment reported sales of $1,615 million, a 9% increase from $1,487 million in the previous year[10] - Livestock sales increased by 16% to $1,023 million, while companion animal sales slightly decreased by 2% to $592 million[10] - Keytruda sales increased by 8% to $23,303 million in September YTD 2025, up from $21,646 million in 2024[19] - Gardasil/Gardasil 9 sales decreased significantly by 40% to $4,202 million in September YTD 2025, down from $7,032 million in 2024[19] - Total vaccines sales were $8,347 million in September YTD 2025, down from $10,755 million in 2024, reflecting a decline of 22.4%[23] - Total diabetes sales increased by 11.2% to $2,283 million in September YTD 2025, compared to $2,053 million in 2024[25] - Alliance revenue for Koselugo was $301 million in September YTD 2025, significantly higher than $114 million in 2024[25] Market Performance - The U.S. market contributed $27,371 million to total sales in September YTD 2025, a 14% increase from $24,089 million in 2024[19] - International sales decreased by 13% to $21,240 million in September YTD 2025, down from $24,455 million in 2024[19] - U.S. pharmaceutical sales increased by 15% year-over-year to $9.493 billion in Q3 2025, up from $8.227 billion in Q3 2024[28] - Japan's pharmaceutical sales decreased by 25% year-over-year to $693 million in Q3 2025, down from $919 million in Q3 2024[28] - Sales in China dropped significantly by 62% year-over-year to $377 million in Q3 2025, compared to $996 million in Q3 2024[28] Expenses and Income - Research and development expenses decreased by 28% in Q3 2025, totaling $4,234 million compared to $5,862 million in Q3 2024[2] - The cost of sales for Q3 2025 was $3,855 million, a decrease of 6% from $4,080 million in Q3 2024[2] - Selling, general and administrative expenses for Q3 2025 were $2,633 million, down 4% from $2,731 million in Q3 2024[2] - Interest income for Q3 2025 was $(96) million, compared to $(127) million in Q3 2024[31] - Total net other income/expense for Q3 2025 was $(238) million, an increase in loss compared to $(162) million in Q3 2024[31] - The company reported a total interest expense of $327 million in Q3 2025, slightly down from $330 million in Q3 2024[31] - Exchange losses increased to $56 million in Q3 2025 from $33 million in Q3 2024[31] Future Outlook - The company anticipates continued growth in key therapeutic areas and plans to expand its market presence through new product launches and strategic partnerships[10] - The full-year pharmaceutical sales guidance for 2025 is projected at $57.400 billion, reflecting a slight increase from $57.000 billion in 2024[28]