TLDR
- Q1 adjusted EPS of $2.22 beat the $2.15 estimate; revenue of $15.53B exceeded $15.39B forecast
- Keytruda sales rose 6% to $7.21B but missed expectations due to U.S. wholesaler timing
- Gardasil revenue dropped 40% amid weak China demand
- New drugs like Winrevair and Capvaxive posted strong growth
- Merck cut full-year EPS forecast slightly to $8.82–$8.97 from $8.88–$9.03
Merck (NYSE: MRK) reported first-quarter 2025 earnings of $2.22 per share on Thursday, beating the Zacks estimate of $2.15. Revenue for the quarter came in at $15.53 billion, also surpassing forecasts. The company’s adjusted net income was $5.08 billion, translating to $2.01 per share on a reported basis. Despite the strong quarter, MRK shares fell 1.10% to $78.96 by midday Friday.
Keytruda and Gardasil Drive Mixed Sentiment
Keytruda sales rose 6% year over year to $7.21 billion, missing expectations due to temporary wholesaler inventory shifts in the U.S. Though performance remained solid in metastatic and earlier-stage cancers, the figure lagged Zacks’ $7.55 billion estimate.
Gardasil and Gardasil 9 vaccine sales declined 40% to $1.33 billion due to weaker demand in China. While international markets showed strength, it wasn’t enough to offset the regional slump. The combined vaccine portfolio posted weaker year-over-year growth, with ProQuad and Varivax down 5%, and Pneumovax 23 dropping 30%.
New Launches Show Strong Momentum
Winrevair, Merck’s newly approved pulmonary arterial hypertension (PAH) treatment, generated $280 million in revenue, up from $200 million the previous quarter. Pneumococcal vaccine Capvaxive delivered $107 million in sales, continuing its positive trajectory.
Meanwhile, the diabetes franchise, led by Januvia/Janumet, posted a 21% increase to $796 million, helped by strong U.S. pricing. Oncology alliance revenues also contributed positively, with Lynparza and Lenvima growing 8% and 2% respectively.
Costs and Margins Stay Balanced
Merck reported an adjusted gross margin of 82.2%, up 100 basis points from the prior year, supported by a favorable product mix. R&D expenses dropped 9% to $3.61 billion, while SG&A expenses rose 3% due to marketing and promotional costs. The company noted a $200 million payment for in-licensing a new oral Lp(a) inhibitor from China-based Hengrui Pharma.
2025 Outlook Trimmed Slightly
Despite Q1’s beat, Merck revised its full-year adjusted EPS guidance down to $8.82–$8.97 from $8.88–$9.03, citing costs from licensing deals and anticipated tariffs. Revenue guidance remains unchanged at $64.1–$65.6 billion, though FX headwinds were revised down to a 1% negative impact.
The company also narrowed its gross margin forecast to 82% from 82.5%, reflecting an expected $200 million tariff-related cost. Adjusted operating expenses are now projected between $25.6–$26.6 billion.
Long-Term Pipeline Expansion Underway
While Keytruda remains Merck’s top-selling product, its upcoming patent expiration in 2028 raises concerns. The company is actively diversifying by expanding its late-stage pipeline, which has tripled over the last three years. Merck continues to strike licensing deals, particularly with Chinese biotechs, to access potential blockbusters at more favorable terms.
Conclusion
Merck’s Q1 2025 report reassured investors with strong earnings and revenue, but long-term challenges like Keytruda dependence and Gardasil’s underperformance in China weighed on sentiment. With shares down nearly 20% YTD and 37% over the past year, Merck’s future depends on pipeline execution and strategic diversification.
