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M&

Merck & Co., Inc. (MRK)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $15.5B declined 2% YoY (+1% ex-FX) as a sharp GARDASIL/GARDASIL 9 drop in China offset solid Oncology, Animal Health and new launch contributions; GAAP EPS $2.01; non-GAAP EPS $2.22 .
  • KEYTRUDA grew 4% YoY to $7.21B on earlier-stage adoption and continued metastatic demand; WINREVAIR delivered $280M as momentum builds; CAPVAXIVE reached $107M in the early U.S. launch .
  • Management maintained FY25 sales ($64.1–$65.6B) but trimmed non-GAAP EPS to $8.82–$8.97 (from $8.88–$9.03) to include an added $0.06/share one-time Hengrui charge; non-GAAP GM guided to ~82% (from ~82.5%); tax rate lowered to 15.5–16.5% (from 16.0–17.0%) .
  • Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable via our tool at the time of analysis; estimate comparisons are therefore not shown (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Oncology resilience: KEYTRUDA +4% YoY to $7.21B on uptake in earlier-stage TNBC, RCC, NSCLC; continued strength in metastatic settings (e.g., bladder, endometrial, MSI-H) .
    • “Our company made strong progress to start the year, with increasing contributions from our newer commercialized medicines and vaccines and continued advancement of our pipeline.” — CEO Rob Davis .
  • New launches scaling: WINREVAIR $280M with strong U.S. uptake and improving access; CAPVAXIVE $107M in early U.S. retail pharmacy-driven launch .
    • CFO: “We have made great progress in the early stages of this [CAPVAXIVE] launch” and remain “very pleased with the uptake of WINREVAIR” .
  • Animal Health solid: +5% YoY to $1.59B (+10% ex-FX), aided by Livestock demand and Elanco aqua portfolio contribution .

What Went Wrong

  • China HPV headwind: GARDASIL/GARDASIL 9 fell 41% YoY to $1.33B, primarily on lower China demand; excluding China, GARDASIL grew 14% (16% ex-FX) .
  • U.S. KEYTRUDA timing: ~-$250M negative impact in the quarter from wholesaler purchase timing, expected to reverse in Q3 2025 .
  • Guidance EPS trimmed: FY25 non-GAAP EPS range reduced to $8.82–$8.97 driven by a newly anticipated $200M upfront to Hengrui ($0.06/share) and tariffs ($200M cost in COGS) .

Financial Results

Headline results vs prior periods and estimates

MetricQ1 2024 (oldest)Q4 2024Q1 2025 (newest)Q1 2025 Consensus (S&P Global)
Revenue ($B)$15.78 $15.62 $15.53 N/A (unavailable)
GAAP EPS ($)$1.87 $1.48 $2.01 N/A (unavailable)
Non-GAAP EPS ($)$2.07 $1.72 $2.22 N/A (unavailable)

Note: S&P Global consensus was not available via our tool at the time of analysis; comparisons to estimates are therefore not shown.

Margins and tax rate (non-GAAP focus)

MetricQ1 2024 (oldest)Q4 2024Q1 2025 (newest)
Gross Margin (GAAP)77.6% 75.5% 78.0%
Gross Margin (non-GAAP)81.2% 80.8% 82.2%
Effective Tax Rate (non-GAAP)16.1% 16.2% 14.2%

Segment and key product sales ($USD Millions)

ItemQ3 2024 (oldest)Q4 2024Q1 2025 (newest)
Total Sales16,657 15,624 15,529
Pharmaceutical14,943 14,042 13,638
Animal Health1,487 1,397 1,588
KEYTRUDA7,429 7,836 7,205
GARDASIL/GARDASIL 92,306 1,550 1,327
WINREVAIR149 200 280
CAPVAXIVE47 50 107
WELIREG139 160 137

KPIs and operating notes

KPIQ3 2024Q4 2024Q1 2025
Non-GAAP Gross Margin (%)80.5 80.8 82.2
WINREVAIR prescriptions (U.S. new patients in quarter)~1,700 ~1,500 >1,400
KEYTRUDA U.S. wholesaler timing impact—~$+200M buy-in in Q4; reversal expected Q1 ~-$250M headwind; expected positive in Q3
JANUVIA/JANUMET U.S. list price action——Lower list prices; >$100M favorable one-time true-ups in Q1

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024 PR Feb 4)Current Guidance (Q1 2025 Apr 24)Change
SalesFY 2025$64.1–$65.6B $64.1–$65.6B Maintained
Non-GAAP Gross MarginFY 2025~82.5% ~82% Lowered
Non-GAAP OpExFY 2025$25.4–$26.4B $25.6–$26.6B Raised (Hengrui $200M)
Non-GAAP Other (income) expense, netFY 2025$300–$400M expense $300–$400M expense Maintained
Non-GAAP Effective Tax RateFY 202516.0–17.0% 15.5–16.5% Lowered
Non-GAAP EPSFY 2025$8.88–$9.03 $8.82–$8.97 Lowered (~$0.06 for Hengrui)
Diluted SharesFY 2025~2.53B ~2.51B Lower

Additional notes: Outlook absorbs $200M incremental tariff costs (COGS) and >$0.20/share FX headwind; Hengrui $200M ($0.06/share) now included; LaNova $300M (~$0.09/share) remains in outlook .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
GARDASIL China demand/inventoryQ3: Shipments reduced; inventories elevated at partner; rest of world strong; 2025 China $2–3B framework discussed Q1: YoY -41% driven by China; ex-China +16%; maintained FY25 rev view; paused China shipments through at least mid-year; male approval in China noted; China guidance embedded Stabilizing ex-China; China rebasing continues
WINREVAIR launchQ3: $149M; ~1,700 new U.S. patients; strong payer access ramp Q1: $280M; >1,400 new U.S. patients; strong trajectory; ZENITH outcomes data supportive Accelerating
Tariffs & supply chainQ4: Minimal footprint in China/Mexico/Canada; CapEx flexibility Q1: ~$200M tariff costs absorbed; diversified U.S./EU/Asia supply strategy; substantial U.S. CapEx highlighted Managed headwind
Subcutaneous KEYTRUDA & Oncology pipelineQ4: Positive topline SC pembrolizumab PK noninferiority; oncology BD and ADC suite emphasized Q1: SC pembrolizumab PDUFA Sept 23, 2025; periop HNSCC (KEYNOTE-689) PDUFA June 23, 2025; robust ADC/TCE updates Multiple mid-’25 catalysts
CAPVAXIVE (PCV21)Q3: ACIP expansion to 50–64; U.S. launch early stage Q1: $107M, primarily retail pharmacy; EC approval secured Building
RSV mAb (clesrovimab)Q4: BLA accepted; PDUFA June 10, 2025 Q1: On track; positioned for 2025–26 season if approved Imminent catalyst
R&D/BD cadenceQ4: Late-stage pipeline nearly tripled; $50B+ potential mid-2030s Q1: Continued licensing (Hengrui Lp(a)); pipeline breadth reinforced Sustained

Management Commentary

  • “Our performance was in line with our expectations with revenue of $15.5 billion... strength in Oncology, Animal Health and increasingly meaningful contributions from the continued strong launches of WINREVAIR and CAPVAXIVE.” — CEO Rob Davis .
  • “Gross margin was 82.2%... Operating expenses decreased to $6.1 billion... EPS of $2.22... We are maintaining our full year revenue guidance... EPS of $8.82 to $8.97” — CFO Caroline Litchfield .
  • On tariffs: “We are not using and do not really see price as a lever... it’s more about how do we optimize our supply chain... well positioned with inventory [for 2025] and steps for 2026–2027.” — CEO Rob Davis .
  • On GARDASIL dosing: “FDA... has a very high evidentiary standard... [current proposals] may be outside of the FDA label; we are hopeful for robust public discussion.” — President, Merck Research Labs, Dr. Dean Li .

Q&A Highlights

  • Tariff mitigation: Near-term inventory, mid/long-term U.S. manufacturing shift; ~$200M tariff cost in FY25 guidance; pricing not the lever .
  • Long-term guidance/KEYTRUDA LOE: Management reiterates confidence in $50B+ mid-2030s pipeline opportunity; evaluating but not committing to long-term quantitative guidance .
  • GARDASIL: ACIP wording expansion to ages 9–12 viewed as positive; one-dose considerations require high FDA evidentiary bar; China shipments paused to draw down inventory; ex-China demand strong .
  • Business development: Focus on science-led deals; willingness for a range of sizes; continuing to evaluate commercial assets if strategic fit .
  • WINREVAIR: ZENITH showed 76% risk reduction in composite of death, transplant, hospitalization; HYPERION stopped early; strong commercial trajectory .

Estimates Context

  • Attempts to retrieve S&P Global consensus for Q1 2025 revenue and EPS were unsuccessful via our tool; therefore, estimate comparisons are not shown. This may limit immediate beat/miss framing relative to Street expectations (S&P Global data unavailable) [GetEstimates attempted, no data].

Key Takeaways for Investors

  • Sequential setup improves: Q1 headwinds (GARDASIL China, KEYTRUDA timing) contrast with management’s view of stronger H2 growth; watch reversal of ~$250M KEYTRUDA timing in Q3 .
  • Pipeline catalysts near term: PDUFAs — clesrovimab (June 10), perioperative HNSCC with KEYTRUDA (June 23), SC pembrolizumab (Sept 23); substantive stock reaction potential around data/outcomes .
  • WINREVAIR momentum is real: $280M in Q1 with robust outcomes data; trajectory suggests rising contribution in 2025 as access and international launches expand .
  • Guidance prudent but intact sales: FY25 sales held; EPS trimmed for one-time Hengrui charge and lower GM; tax rate lowered; overall narrative remains operational resilience despite China HPV headwind and tariffs .
  • Ex-China GARDASIL strong: Double-digit growth outside China underscores durable HPV vaccine demand; China pause should accelerate inventory normalization and de-risk near-term variability .
  • Capex/supply-chain strategy reduces tariff risk: U.S.-for-U.S. approach and inventory positioning mitigate policy risk; gross margin still guided to ~82% despite $200M tariff headwind .
  • Medium-term thesis: Diversified late-stage portfolio (oncology ADCs/TCEs, cardiometabolic incl. oral PCSK9, vaccines) supports confidence through KEYTRUDA LOE period .

Sources

  • Q1 2025 earnings press release and product tables .
  • Q1 2025 8‑K (Item 2.02) and exhibits .
  • Q1 2025 earnings call transcript (prepared remarks and Q&A) .
  • Prior quarter references: Q4 2024 press release and tables ; Q3 2024 call transcript .