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Merck & Co., Inc. (Merck) is a global healthcare company that operates through two main segments: Pharmaceutical and Animal Health. The company develops and sells human health pharmaceutical and vaccine products, primarily by prescription, for the treatment of human disorders, as well as veterinary pharmaceutical and vaccine products for livestock and companion animals . Merck's revenue growth is driven by strong performance in oncology, vaccines, and animal health, with significant contributions from products like Keytruda and Gardasil/Gardasil 9 .
- Pharmaceutical - Develops and sells human health pharmaceutical and vaccine products, primarily by prescription, for the treatment of human disorders. Key products include Keytruda and Gardasil/Gardasil 9, which are major contributors to revenue growth.
- Animal Health - Focuses on veterinary pharmaceutical and vaccine products, as well as health management solutions for livestock and companion animals. Includes digitally connected identification, traceability, and monitoring products.
- Livestock Products - Provides pharmaceutical and vaccine products for livestock health management.
- Companion Animal Products - Offers pharmaceutical and vaccine products for the health of companion animals.
What went well
- Merck's Phase III pipeline has nearly tripled over the past 3-plus years to more than 20 unique assets, fueling substantial new medicine and vaccine launches over the next 5 years, with the majority having blockbuster plus potential.
- KEYTRUDA sales grew 21% to $7.4 billion, driven by increased uptake from earlier-stage cancers and continued robust global demand.
- Strategic business development acquisitions, including a novel investigational bispecific T cell engager from Curon, and the acquisitions of EyeBio and the Elanco aqua business, are broadening and fortifying Merck's pipeline.
What went wrong
- Merck expects continued decline in GARDASIL shipments to China into 2025, occurring earlier than originally anticipated, which may impact overall revenue growth.
- Inventory levels of GARDASIL at their Chinese partner Zhifei remain above historical levels, indicating that recovery in demand may take longer than expected and may require increased promotional efforts.
- Management did not provide specific guidance for 2025 GARDASIL sales, reflecting uncertainty in the company's outlook in China, a critical market for GARDASIL.
Q&A Summary
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GARDASIL China Sales Outlook
Q: How will GARDASIL perform in China in 2025?
A: Merck expects GARDASIL sales in China to decline in 2025, projecting an opportunity of $2 billion to $3 billion annually for the next several years, including the potential male approval anticipated next year. Despite this decline, Merck remains confident in achieving its $11 billion long-term target for GARDASIL by 2030. -
2025 Growth Outlook
Q: What are the main growth drivers and headwinds for 2025?
A: Merck anticipates solid growth in 2025, driven by KEYTRUDA's expansion into earlier-stage cancers, recent and upcoming launches like WINREVAIR, CAPVAXIVE, and the anticipated launch of clesrovimab in RSV. Growth areas include early-stage non-small cell lung cancer, women's cancers (including early-stage HER2-negative breast, endometrial, and cervical cancers), and bladder cancer. Headwinds include the expiration of agreements for REMICADE and SIMPONI and expected declines in GARDASIL sales in China. Merck will provide official guidance with its fourth-quarter earnings. -
Capital Allocation and Obesity Strategy
Q: How is Merck approaching capital allocation and opportunities in obesity?
A: Merck is focused on business development across all therapeutic areas, seeking scientific opportunities that align with strategic value. In obesity, the company is targeting second and third-generation oral therapies that offer medical outcomes beyond weight loss. Merck maintains capacity for acquisitions up to $15 billion, emphasizing discipline to ensure alignment with value and strategy. -
WINREVAIR Launch and Safety
Q: What are early observations from the WINREVAIR launch regarding safety and patient uptake?
A: Since its commercial rollout, WINREVAIR has shown no significant safety issues, with strong adherence and fewer discontinuations than expected. Approximately 80% of patients are the sickest, on triple therapy. Most patients start with single vials, transitioning to double vials based on weight, with expectations aligning with the STELLAR trial where about two-thirds remain on single vials. -
CAPVAXIVE Pneumococcal Vaccine Opportunity
Q: What is the market opportunity for CAPVAXIVE with the age expansion to 50+?
A: The recent ACIP recommendation lowering vaccination age to 50 opens a significant market for CAPVAXIVE. There are approximately 120 million people over age 50 in the U.S., including 60 million aged 50-64. Merck anticipates that CAPVAXIVE's strong data, showing 85% adult protection compared to a competitor's 54% protection, will drive a majority market share over time. -
V940 in Lung Cancer Phase III Trials
Q: Why is V940 advancing to Phase III trials in lung cancer?
A: Merck is initiating a Phase III trial of V940 in lung cancer, built around the KEYNOTE-671 study, which has demonstrated overall survival benefits and received approval. The trial targets patients who do not achieve a pathological complete response after neoadjuvant or perioperative treatment, aiming to improve outcomes with V940.
Guidance Changes
Annual guidance for FY 2024:
- Revenue: $63.6B to $64.1B (6% to 7% growth) (raised from $63.4B to $64.4B (5% to 7%) )
- Gross Margin: 81% (no change from prior guidance )
- Operating Expenses: $27.8B to $28.3B (raised from $26.8B to $27.6B )
- Other Expense: $100M (lowered from $350M )
- Tax Rate: 16% to 17% (raised from 15.5% to 16.5% )
- Shares Outstanding: 2.54B (no change from prior guidance )
- EPS: $7.72 to $7.77 (lowered from $7.94 to $8.04 )
- "You've mentioned that GARDASIL shipments to your partner in China have decreased and that inventory at Zhifei remains above historical levels ; what specific strategies are you implementing to address the demand challenges in China, and how confident are you in achieving your goal of over $11 billion in GARDASIL sales by 2030 ?"
- "Operating expenses have increased significantly due to strategic investments and charges related to acquisitions like EyeBio and Curon ; can you provide more detail on how these investments will contribute to your long-term growth and justify the increased expenditure ?"
- "Given the decline in GARDASIL sales in China and the anticipated similar level of shipments in the fourth quarter , how do you plan to mitigate the impact on your overall revenue growth and what other markets are you focusing on to offset this shortfall ?"
- "You have stated that your Phase III pipeline has nearly tripled over the past three years to more than 20 unique assets ; can you elaborate on the timing of these assets reaching the market and how they will contribute to revenue in the face of upcoming patent expirations, especially for KEYTRUDA ?"
- "In terms of capital allocation, you mentioned you have capacity to do 'pretty much anything of any size' but are focusing on deals in the $1 billion to $15 billion range ; with the increasing competition in the obesity market, why are you limiting your deal size, and how will this approach enable you to remain competitive in high-growth therapeutic areas ?"
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Revenue: $63.6 billion to $64.1 billion, with 6% to 7% growth, including a 3 percentage point negative impact from foreign exchange .
- Gross Margin: Approximately 81% .
- Operating Expenses: $27.8 billion to $28.3 billion, including a $750 million onetime charge related to the asset acquisition from Curon .
- Other Expense: Approximately $100 million, including a $170 million payment from Daiichi .
- Tax Rate: 16% to 17%, including an unfavorable impact related to the Curon transaction .
- Shares Outstanding: Approximately 2.54 billion shares .
- Earnings Per Share (EPS): $7.72 to $7.77, including a $0.30 negative impact from foreign exchange .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Revenue: $63.4 billion to $64.4 billion, with 5% to 7% growth, including a 3 percentage point negative impact from foreign exchange .
- Gross Margin: Approximately 81% .
- Operating Expenses: $26.8 billion to $27.6 billion, including $1.5 billion of charges related to the acquisition of EyeBio and other investments .
- Other Expense: Approximately $350 million, including financing costs for acquisitions .
- Tax Rate: 15.5% to 16.5%, including an unfavorable impact from the EyeBio acquisition .
- Shares Outstanding: Approximately 2.54 billion shares .
- Earnings Per Share (EPS): $7.94 to $8.04, including a negative impact from foreign exchange of more than $0.30 .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Revenue: $63.1 billion to $64.3 billion, with 5% to 7% growth, including a negative impact from foreign exchange .
- Gross Margin: Approximately 81% .
- Operating Expenses: $25.2 billion to $26.1 billion .
- Other Expense: Approximately $250 million .
- Tax Rate: 14.5% to 15.5% .
- Shares Outstanding: Approximately 2.55 billion shares .
- Earnings Per Share (EPS): $8.53 to $8.65, with a $0.07 increase at the midpoint despite a $0.30 negative impact from foreign exchange .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Revenue: $62.7 billion to $64.2 billion, with 4% to 7% growth, including a 2% negative impact from foreign exchange .
- Gross Margin: Approximately 80.5%, benefiting from reduced royalties .
- Operating Expenses: $25.1 billion to $26.1 billion, including a $650 million onetime charge related to the acquisition of Harpoon Therapeutics .
- Other Expense: Approximately $200 million .
- Tax Rate: 14.5% to 15.5% .
- Shares Outstanding: Approximately 2.54 billion shares .
- Earnings Per Share (EPS): $8.44 to $8.59, including a $0.26 per share charge related to the acquisition of Harpoon Therapeutics and a $0.25 negative impact from foreign exchange .
Competitors mentioned in the company's latest 10K filing.
- AbbVie Inc. - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Amgen Inc. - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- AstraZeneca plc - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Bristol-Myers Squibb Company - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Johnson & Johnson - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Eli Lilly and Company - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Gilead Sciences Inc. - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- GlaxoSmithKline plc - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Novartis AG - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Pfizer Inc. - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Roche Holding AG - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
- Sanofi SA - Part of the composite peer group of major U.S. and European-based pharmaceutical companies .
Recent developments and announcements about MRK.
Corporate Leadership
Board Change
Surendralal L. 'Lal' Karsanbhai has been elected to the Merck Board of Directors, effective January 1, 2025. He will also serve on the Audit and Governance Committees. Mr. Karsanbhai is currently the President and CEO of Emerson Electric Co. and will stand for election by Merck's shareholders in May 2025. With his addition, the board will consist of 13 members .