Core Viewpoint - The article discusses the investment positions of Parkev Tatevosian, CFA, and mentions that The Motley Fool has positions in and recommends Merck, indicating a potential investment opportunity in the pharmaceutical sector [1]. Group 1 - Parkev Tatevosian has no position in any of the stocks mentioned, which suggests an impartial analysis of the stocks discussed [1]. - The Motley Fool has a disclosure policy, highlighting the importance of transparency in investment recommendations [1]. - The Motley Fool may compensate affiliates like Parkev Tatevosian for promoting its services, which could influence the opinions presented [1].

Core Viewpoint - Merck is investing $1 billion in a new plant in Delaware to expand domestic production in response to tariffs imposed by the Trump administration, particularly focusing on the production of biologic drugs and its cancer treatment Keytruda [1][4]. Investment and Production Plans - The new facility will be Merck's first in-house site in the US for producing Keytruda, with expectations for labs to be fully operational by 2028 and to produce experimental drugs by 2030 [4]. - The investment is expected to create at least 500 full-time jobs and approximately 4,000 construction jobs [4]. Tariff Impact - Merck has identified Keytruda as its biggest exposure to tariffs and has estimated an additional cost of $200 million due to the levies implemented to date [2][7]. - The company has sufficient US inventory of Keytruda for the current year [2][7]. Industry Context - The Trump administration has been pressuring US drugmakers to increase domestic production, leading to investigations into drug imports and the implementation of tariffs [5]. - Other US drugmakers, such as Eli Lilly and Johnson & Johnson, are also making additional investments to enhance domestic production in light of tariff threats [6].

Core Viewpoint - Merck reported strong first-quarter 2025 results, exceeding earnings and sales estimates, driven by Keytruda and new product launches, despite challenges in the HPV vaccine sales in China [1][2][28]. Financial Performance - Adjusted earnings were $2.22 per share, a 12% increase year over year, while revenues reached $15.53 billion, up 1% year over year [1]. - Keytruda generated $7.21 billion in sales, a 6% increase year over year, while Gardasil sales declined by 40% due to lower demand in China [2][14]. - Merck maintained its sales guidance for 2025 in the range of $64.1 billion to $65.6 billion, expecting sales to accelerate in the second half of the year [2][25]. Margin and Guidance Adjustments - Adjusted gross margin guidance was lowered by 50 basis points to 80% due to tariff impacts, with an expected cost of $200 million from tariffs [3]. - Adjusted EPS guidance was revised down from $8.88-$9.03 to $8.82-$8.97, including a one-time charge of 6 cents related to an M&A transaction [3]. Key Products and Pipeline - Keytruda remains a significant driver, accounting for approximately 50% of pharmaceutical sales, with ongoing growth expected from early-stage lung cancer indications [4][5]. - Merck's pipeline has expanded significantly, with plans to launch around 20 new vaccines and drugs, including Capvaxive and Winrevair, which have strong revenue potential [9][10][28]. Strategic Initiatives - Merck is pursuing innovative strategies for Keytruda's growth, including combinations with other therapies and developing a personalized mRNA cancer vaccine in partnership with Moderna [6][12]. - The company has invested $12 billion in U.S. manufacturing since 2018, with an additional $9 billion planned through 2028 to enhance supply chain resilience [26]. Market Position and Challenges - Merck's stock has underperformed compared to the industry and S&P 500, with a 16.1% decline year-to-date [16][19]. - Concerns exist regarding the reliance on Keytruda, especially with its patent expiration in 2028 and increasing competition from other therapies [12][13][28].

Group 1 - The article highlights that April has created numerous dividend bargains, allowing investors to select high-quality stocks with strong long-term return potential [2] - The focus is on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1] - The service offered by iREIT+HOYA Capital is aimed at investors looking for income-focused portfolios [1] Group 2 - The article emphasizes a defensive investment strategy with a medium- to long-term horizon [2] - It mentions the importance of performing due diligence and drawing personal conclusions before making investment decisions [4] - The article does not provide specific investment recommendations or advice, indicating a focus on informational content [5]

Financial Data and Key Metrics Changes - The company reported total revenues of $15.5 billion, reflecting a decrease of 2% year-over-year, or an increase of 1% when excluding foreign exchange impacts [23][12] - Earnings per share (EPS) were reported at $2.22, with a gross margin of 82.2%, an increase of one percentage point due to a favorable product mix [35][34] - The company maintained its full-year revenue guidance of between $64.1 billion and $65.6 billion, representing growth of 1% to 3% excluding foreign exchange impacts [35][36] Business Line Data and Key Metrics Changes - In oncology, sales of Keytruda grew 6% to $7.2 billion, driven by increased uptake in earlier-stage cancers and robust demand for metastatic indications [25] - GARDASIL sales decreased by 40% to $1.3 billion, primarily due to reduced demand in China, while global growth excluding China was strong at 16% [27] - The animal health business saw sales increase by 10%, reflecting higher demand across all species and contributions from the Aqua portfolio acquired from Elanco [32] Market Data and Key Metrics Changes - The decline in GARDASIL sales in China was approximately $1.1 billion, which reduced growth excluding foreign exchange by seven percentage points [24] - Outside of the US and China, GARDASIL experienced strong demand, particularly from a catch-up cohort in Japan [27] - The company noted that the ongoing launch of WinRevair generated global sales of $280 million, with significant uptake in both the US and international markets [30] Company Strategy and Development Direction - The company is focused on balancing its manufacturing footprint and has invested $12 billion in US manufacturing since 2018, with an additional commitment of over $9 billion through 2028 [11][10] - The strategic direction emphasizes the advancement of a robust pipeline, with over 20 promising new products expected to launch in the coming years, potentially generating over $50 billion in commercial opportunities by the mid-2030s [16][19] - The company is committed to maintaining its dividend and prioritizing investments in business development to drive growth and returns for shareholders [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current dynamic global environment and emphasized the importance of innovation in addressing health challenges [10][20] - The management team highlighted the ongoing efforts to mitigate potential impacts from tariffs and emphasized a strong inventory position to manage short-term challenges [13][75] - The company remains optimistic about its long-term growth prospects, particularly in light of its expanding late-phase pipeline and the potential for new product launches [18][19] Other Important Information - The company is actively evaluating opportunities for science-driven business development transactions, despite the complexities introduced by the current macroeconomic environment [92][94] - Management acknowledged the disconnect between market realities and seller expectations in the current business development landscape [94] - The company is open to working with the administration on pricing reforms to address the price differentials between the US and international markets [96][100] Q&A Session Summary Question: Can you discuss Merck's mitigating strategies regarding tariffs? - Management highlighted ongoing changes to the supply chain strategy and investments in US manufacturing to mitigate tariff impacts, with a focus on optimizing supply chain operations [70][72] Question: What is the long-term guidance for KEYTRUDA given patent expiry concerns? - Management emphasized confidence in the long-term pipeline, with over 20 new products expected to launch, which could offset concerns related to KEYTRUDA's patent expiry [78][80] Question: Can you comment on the FDA's recent changes and their impact on vaccines? - Management noted that while there are active dialogues with the FDA regarding imminent PDUFA dates, the long-term impact of personnel transitions remains uncertain [85][86] Question: What is the environment for business development given macro volatility? - Management confirmed that the focus on business development remains unchanged, although the current environment presents complexities in executing deals [92][94] Question: What are the prospects for GARDASIL growth and pricing adjustments? - Management indicated that while GARDASIL growth is expected to slow, particularly in China, they remain committed to ensuring the vaccine's value is understood in pricing discussions [132][130]

Core Insights - Merck reported Q1 2025 adjusted EPS of $2.22, exceeding the Zacks Consensus Estimate of $2.15, with a year-over-year earnings increase of 7% on a reported basis and 12% excluding foreign exchange impacts [1][2] - Revenues declined 2% year-over-year to $15.53 billion, but still surpassed the Zacks Consensus Estimate of $15.39 billion [2] Sales Performance - Keytruda, Merck's flagship product, generated sales of $7.21 billion, a 6% increase, but missed the Zacks Consensus Estimate of $7.55 billion due to timing issues in wholesaler purchases [3] - Alliance revenues from Lynparza and Lenvima contributed positively, with Lynparza sales increasing 8% to $312 million and Lenvima revenues totaling $258 million, up 2% [4] - Welireg sales surged 63% to $137 million, driven by higher demand in the U.S. [5] Vaccine Sales - Sales of HPV vaccines Gardasil and Gardasil 9 fell 40% to $1.33 billion, primarily due to lower demand in China [6] - Combined sales of Proquad, M-M-R II, and Varivax vaccines decreased 5% to $539 million, while sales of the pneumococcal 15-valent conjugate vaccine Vaxneuvance rose 7% to $230 million [7][8] Diabetes and Other Products - Sales of the Januvia/Janumet franchise rose 21% year-over-year to $796 million, benefiting from higher net pricing in the U.S. [9] - New PAH drug Winrevair generated $280 million in sales, up from $200 million in the previous quarter [9] Animal Health Segment - The Animal Health segment generated revenues of $1.59 billion, up 5% year-over-year, driven by higher demand for livestock products [11] Cost and Margin Analysis - Adjusted gross margin was 82.2%, up 100 basis points year-over-year, while adjusted selling, general and administrative expenses rose 3% to $2.53 billion [12] - Adjusted R&D spending decreased 9% to $3.61 billion, attributed to lower business development charges [13] 2025 Guidance - Merck maintained its sales guidance for 2025, expecting revenues between $64.1 billion and $65.6 billion, with a revised negative impact from foreign exchange of around 1% [14] - Adjusted EPS guidance was revised to a range of $8.82 to $8.97, accounting for a one-time charge related to a licensing agreement [16] Market Reaction and Future Outlook - Shares of Merck traded higher in pre-market following the earnings report, despite a 21% year-to-date decline compared to a 3% fall in the industry [19] - The company is aware of its reliance on Keytruda and is taking steps to diversify its portfolio, with a late-stage pipeline that has nearly tripled over the past three years [21]

Financial Performance - First-quarter worldwide sales reached $15.5 billion, a 2% decrease compared to the previous year, but increased 1% excluding exchange rate fluctuations[1,19] - Human Health sales were $13.6 billion, a 3% decrease, but increased 5% excluding GARDASIL sales in China[19] - Animal Health sales grew by 10% to $1.6 billion[20,36] - KEYTRUDA sales increased by 6% to $7.2 billion, driven by increased uptake in earlier-stage cancers and metastatic indications[21,22] - Non-GAAP EPS increased by 7% to $2.22[39] Product Performance - GARDASIL sales decreased by 40% to $1.3 billion, due to soft demand in China[27,28] - WINREVAIR global Q1 sales reached $280 million[33] - CAPVAXIVE sales were $107 million, driven by retail pharmacy demand[27] Pipeline and Regulatory Updates - The FDA accepted the BLA for subcutaneous pembrolizumab with berahyaluronidase alfa[10,76] - The FDA accepted the sBLA for KEYTRUDA in earlier-stage HNSCC[10,76] - The European Commission granted conditional approval for WELIREG for certain RCC and other tumors[52,76] - GARDASIL 9 was approved in China for males aged 16-26[49,73] Financial Outlook - The company maintained its revenue guidance of $64.1 billion to $65.6 billion for 2025[40] - Non-GAAP EPS guidance was updated to $8.82 to $8.97, including a ~$0.06 charge related to a license agreement with Hengrui Pharma[40]

Financial Data and Key Metrics Changes - The company reported total revenues of $15.5 billion, reflecting a decrease of 2% year-over-year, or an increase of 1% when excluding foreign exchange impacts [23][12] - Earnings per share (EPS) were reported at $2.22, with a gross margin of 82.2%, an increase of one percentage point due to a favorable product mix [35][34] - The company maintained its full-year revenue guidance of between $64.1 billion and $65.6 billion, representing growth of 1% to 3% excluding foreign exchange impacts [36][35] Business Line Data and Key Metrics Changes - In oncology, sales of Keytruda grew 6% to $7.2 billion, driven by increased uptake in earlier-stage cancers and robust demand for metastatic indications [25] - GARDASIL sales decreased by 40% to $1.3 billion, primarily due to reduced demand in China, while global growth excluding China was strong at 16% [27][24] - The animal health business saw sales increase by 10%, reflecting higher demand across all species and contributions from the Aqua portfolio acquired from Elanco [32] Market Data and Key Metrics Changes - The decline in GARDASIL sales in China was approximately $1.1 billion, which reduced growth excluding foreign exchange by seven percentage points [24] - Outside of the US and China, GARDASIL experienced strong demand, particularly from a catch-up cohort in Japan [27] - The company noted that the ongoing launch of WinRevair generated global sales of $280 million, with significant uptake in both the US and international markets [30] Company Strategy and Development Direction - The company is focused on balancing its manufacturing footprint and has invested $12 billion in US manufacturing since 2018, with an additional commitment of over $9 billion through 2028 [11][10] - The strategic direction emphasizes the advancement of a robust pipeline, with over 20 promising new products expected to launch in the coming years, potentially generating over $50 billion in commercial opportunities by the mid-2030s [16][19] - The company is committed to maintaining its dividend and prioritizing investments in business development to drive growth and returns for shareholders [42][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for improved growth in the second half of the year, despite challenges from tariffs and foreign exchange impacts [12][13] - The company is well-positioned to navigate the potential impacts of tariffs due to its global supply chain and inventory management strategies [13][70] - Management highlighted the importance of scientific leadership and innovation as key drivers for long-term value creation [20][19] Other Important Information - The company has nearly tripled its late-phase pipeline since 2021, with significant advancements in oncology, cardiometabolic diseases, and HIV treatments [16][14] - The FDA has set PDUFA dates for several key products, including subcutaneous pembrolizumab and doravirine-based regimens, indicating a strong pipeline of upcoming approvals [60][56] Q&A Session Summary Question: Can you discuss Merck's strategies to mitigate tariffs? - Management highlighted ongoing efforts to rebalance the supply chain and invest in US manufacturing to mitigate the impact of existing tariffs, with a focus on optimizing supply chain strategies [70][72] Question: What is the long-term guidance for KEYTRUDA? - Management emphasized confidence in the long-term potential of the pipeline, with over 20 new products expected to drive significant revenue growth, but did not provide specific line-by-line guidance [78][79] Question: Can you comment on the FDA's recent changes and their impact on vaccines? - Management noted that while there are active dialogues with the FDA regarding imminent PDUFA dates, the long-term impact of personnel transitions remains uncertain [85][86] Question: What is the environment for business development given current macroeconomic conditions? - Management acknowledged the complexities in the current environment but reaffirmed their commitment to pursuing science-driven business development opportunities [92][94] Question: What are the expectations for GARDASIL growth moving forward? - Management indicated that while GARDASIL growth is expected to slow, strong growth is anticipated outside of China, and they are focused on maximizing opportunities in the market [132][131]

Core Insights - Merck reported revenue of $15.53 billion for Q1 2025, a decrease of 1.6% year-over-year, with an EPS of $2.22, up from $2.07 in the same quarter last year, exceeding both revenue and EPS consensus estimates [1][2] Financial Performance - Revenue of $15.53 billion compared to Zacks Consensus Estimate of $15.39 billion, resulting in a surprise of +0.93% [1] - EPS of $2.22 compared to consensus estimate of $2.15, leading to an EPS surprise of +3.26% [1] Key Metrics - Merck's stock has returned -10.6% over the past month, underperforming the Zacks S&P 500 composite's -5.1% change [3] - Current Zacks Rank for Merck is 3 (Hold), indicating potential performance in line with the broader market [3] Oncology Sales - Keytruda U.S. sales were $4.31 billion, below the average estimate of $4.47 billion, but up 4.6% year-over-year [4] - Keytruda International sales were $2.90 billion, compared to the $3.08 billion estimate, reflecting a 2.4% year-over-year increase [4] - Lynparza U.S. sales reached $145 million, exceeding the $121.96 million estimate, with a year-over-year increase of 7.4% [4] - Lynparza International sales were $168 million, below the $178.66 million estimate, but up 7% year-over-year [4] - Total Keytruda sales amounted to $7.21 billion, compared to the $7.55 billion estimate, marking a 3.7% year-over-year increase [4] Other Product Sales - Zerbaxa sales in Hospital Acute Care were $70 million, surpassing the $63.07 million estimate, with a 25% year-over-year increase [4] - Animal health sales were $1.59 billion, slightly below the $1.61 billion estimate, but up 5.1% year-over-year [4] - Prevymis sales were $208 million, exceeding the $190.69 million estimate, with a significant year-over-year increase of 19.5% [4] - Reblozyl sales reached $119 million, above the $101.77 million estimate, reflecting a substantial year-over-year increase of 67.6% [4]

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, The ...