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M&

Merck & Co., Inc. (MRK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $15.806B (-2% YoY) and GAAP EPS was $1.76; non-GAAP EPS was $2.13. Oncology (KEYTRUDA +9% YoY to $7.956B) and WINREVAIR ($336M) offset a sharp GARDASIL/GARDASIL 9 decline (-55% YoY to $1.126B), largely due to China weakness .
  • Management narrowed FY25 guidance: sales to $64.3–$65.3B and non-GAAP EPS to $8.87–$8.97; tax rate lowered to 15.0–16.0. Restructuring is expected to deliver ~$1.7B annual savings by 2027, fully reinvested in growth programs .
  • WINREVAIR continues strong launch momentum with >$1B cumulative sales in ~15 months; ~1,600 new U.S. patients in Q2 and ex-U.S. reimbursement/launches progressing (Japan approval, Europe reimbursement ramp) .
  • Merck announced the acquisition of Verona Pharma (Ohtuvayre for COPD) and positive Phase 3 topline results for oral PCSK9 (enlicitide); ENFLONSIA received FDA approval and ACIP recommendation for infant RSV prevention—collectively adding multi-asset pipeline and commercial catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • Oncology strength: KEYTRUDA +9% YoY to $7.956B on robust demand across metastatic and earlier-stage indications; WELIREG +29% YoY to $162M .
    • WINREVAIR ramp: $336M in Q2; cumulative net sales >$1B in ~15 months; 1,600 new U.S. patients; label-update sBLA granted priority review (PDUFA Oct 25, 2025) .
    • Strategic actions: Verona Pharma acquisition (Ohtuvayre), RS V monoclonal ENFLONSIA approval + ACIP vote, oral PCSK9 Phase 3 wins—CEO: “multi‑year optimization initiative…drive our next chapter of productive, innovation‑driven growth” .

  • What Went Wrong

    • GARDASIL/GARDASIL 9 collapse: -55% YoY to $1.126B driven by China demand softness; shipments to China paused through at least year-end 2025; ex-China down 3% (FX ex: -4%) .
    • Higher operating costs: R&D +16% YoY (GAAP) on $200M Hengrui license payment; restructuring cost recorded $560M (GAAP) in Q2; GAAP EPS down 18% YoY .
    • FX and other revenue headwinds: negative FX impact on EPS; “Other Revenues” down 50% YoY to $110M; management expects lower other revenues in 2H25 .

Financial Results

Sequential and YoY comparisons

MetricQ4 2024Q1 2025Q2 2025
Total Sales ($USD Billions)$15.624 $15.529 $15.806
GAAP EPS ($)$1.48 $2.01 $1.76
Non-GAAP EPS ($)N/A$2.22 $2.13
Gross Margin (GAAP, %)N/A78.0% 77.5%
Gross Margin (Non-GAAP, %)N/A82.2% 82.2%
MetricQ2 2024Q2 2025
Total Sales ($USD Billions)$16.112 $15.806
GAAP EPS ($)$2.14 $1.76
Non-GAAP EPS ($)$2.28 $2.13
Gross Margin (GAAP, %)76.8% 77.5%
Gross Margin (Non-GAAP, %)80.9% 82.2%

Segment and product detail (Q2 2025 vs Q2 2024)

Product/Segment ($USD Millions)Q2 2024Q2 2025YoY %
KEYTRUDA7,270 7,956 +9%
GARDASIL/GARDASIL 92,478 1,126 -55%
PROQUAD/M-M-R II/VARIVAX617 609 -1%
BRIDION455 461 +1%
Lynparza (Alliance Rev.)317 370 +17%
Lenvima (Alliance Rev.)249 265 +6%
WELIREG126 162 +29%
PREVYMIS188 228 +21%
VAXNEUVANCE189 229 +21%
CAPVAXIVE–129 N/A
WINREVAIR70 336 N/M
Animal Health (Total)1,482 1,646 +11%
Other Revenues222 110 -50%
Total Sales16,112 15,806 -2%

Geographic mix (Q2 2025)

RegionQ2 2024 Sales ($MM)Q2 2025 Sales ($MM)YoY %
U.S. Total Sales7,876 8,836 +12%
International Total Sales8,236 6,969 -15%
Pharmaceutical – China1,790 (Q2’24) 407 (Q2’25) -77%

KPIs (Q2 2025 highlights)

KPIQ2 2025
WINREVAIR new U.S. patients~1,600
U.S. KEYTRUDA sales$4,749MM
International KEYTRUDA sales$3,207MM

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SalesFY 2025$64.1B–$65.6B $64.3B–$65.3B Narrowed
Non-GAAP EPSFY 2025$8.82–$8.97 $8.87–$8.97 Raised low end
Non-GAAP Effective Tax RateFY 202515.5%–16.5% 15.0%–16.0% Lowered
Non-GAAP Operating ExpensesFY 2025$25.6B–$26.6B $25.6B–$26.4B Lowered upper end
Non-GAAP Gross MarginFY 2025~82% ~82% Maintained
Non-GAAP Other (income) expenseFY 2025$300–$400MM expense $300–$400MM expense Maintained
Share count (diluted)FY 2025~2.51B ~2.51B Maintained
Tariff impact in outlookFY 2025~$200MM costs ~$200MM costs Maintained
DividendQ4 2025N/A$0.81 per share (declared) Confirmed payout

Notes:

  • Outlook excludes anticipated impact of Verona Pharma acquisition .
  • One-time charges: $0.16 per share (LaNova $300MM in Q3; Hengrui $200MM in Q2) reflected in EPS guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Oncology breadth and earlier-stage penetrationSubcutaneous pembrolizumab pivotal data and PDUFA 9/23/25; expanding ADC programs; EC approvals for WELIREG KEYTRUDA +9% YoY; HNSCC perioperative approval; ovarian (KEYNOTE-B96) positive PFS/OS; continued ADC progress Strengthening pipeline/regulatory wins
Cardiopulmonary portfolio (WINREVAIR, PCSK9)ZENITH trial reduced major outcomes by 76%; pipeline momentum WINREVAIR $336M; HYPERION positive topline; sBLA priority review; enlicitide Phase 3 positive topline Accelerating adoption/data readouts
Vaccines (RSV, HPV)CAPVAXIVE approvals; GARDASIL China male approval ENFLONSIA FDA approval + ACIP recommendation; GARDASIL China demand soft, shipments paused in 2025 Mixed: RSV launch positive; HPV China headwind
Tariffs/macroTariff costs incorporated (~$200MM) Tariff cost assumption unchanged; potential 15% pharma tariff viewed minimal impact in 2025 given U.S. manufacturing shifts Manageable near-term exposure
Cost optimization and reinvestmentN/ANew $3.0B restructuring program to fund growth drivers; $1.7B annual savings by 2027 Reallocate to growth assets
China dynamicsGardasil China sales tapered 2H24 (Q3 $517MM; Q4 $446MM) Demand remains soft; no shipments through at least year-end Continued weakness

Management Commentary

  • CEO Rob Davis: “a multiyear optimization initiative that will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers…drive our next chapter of productive, innovation-driven growth” .
  • CFO Caroline Litchfield: “Total company revenues were $15.8B…results impacted by decline in sales of Gardasil in China of approximately $1.3B…Excluding these sales, global growth was 7%” .
  • R&D Head Dean Li: “positive topline results…enlicitide, our investigational once daily oral PCSK9 inhibitor…statistically significant and clinically meaningful reductions in LDL cholesterol” .

Q&A Highlights

  • WINREVAIR adoption cadence: ~400–500 new patients/month sustained; increasing use in less severe/dual-therapy patients; ex-U.S. revenue to grow with reimbursements; ~90k PAH patients worldwide, ~half U.S. .
  • GARDASIL outlook: U.S. demand/price solid but CDC channel lumpy; ACIP single-dose discussion faces high FDA evidentiary bar; China shipments paused in 2025; growth expected ex-China in FY25 .
  • Restructuring/investment: $3B savings across R&D, SG&A, COGS, fully reinvested to fund >20 potential growth drivers; operating expenses to grow productively .
  • Tariffs: Potential 15% pharma tariff—implementation timing unclear; minimal impact to 2025 due to inventory and U.S. manufacturing shifts .
  • Policy/IRA orphan exclusion: Possible shift of KEYTRUDA negotiation selection to 2029 based on initial orphan status; focus remains on post-LOE growth drivers .

Estimates Context

  • S&P Global consensus estimates for Q2 2025 EPS and revenue were unavailable via our feed at the time of this analysis; management characterized results as “in line with our expectations” given known China headwinds and strength in oncology/animal health .
  • Target Price consensus and counts also unavailable; analysts may need to adjust models for: (1) deeper China HPV reset, (2) stronger WINREVAIR ramp, (3) lower FY25 tax rate and narrowed EPS band, and (4) lower “other revenue” in 2H25 (Values retrieved from S&P Global).*

Key Takeaways for Investors

  • Oncology durability: KEYTRUDA growth and earlier-stage approvals, plus ADC pipeline breadth, continue to underwrite near/mid-term top-line resilience despite eventual KEYTRUDA LOE .
  • WINREVAIR upside: Rapid adoption, expanding labels/geographies, and clinical readouts (HYPERION, ZENITH update) create a multi-year growth engine; watch October 25 sBLA PDUFA .
  • RSV launch optionality: ENFLONSIA adds a seasonal vaccine/antibody driver; operational simplicity and ACIP inclusion should support uptake into FY26 .
  • HPV reset likely extends: China weakness and paused shipments temper near-term vaccine growth; monitor ACIP single-dose deliberations and Japan headwinds in 2H25 .
  • Guidance quality improved: Narrower FY25 ranges and lower tax rate offer better visibility; expect lower “other revenue” and ongoing FX drag in 2H25 .
  • Capital allocation: Continued BD (Verona) plus robust repurchases (~$1.3B in Q2) and dividend ($0.81 in Q4) support shareholder returns while funding pipeline .
  • Trading setup: Near-term catalysts include WINREVAIR label update, subcutaneous pembrolizumab PDUFA (9/23/25), PCSK9 data rollouts, and Verona close in Q4—all with potential to re-rate growth trajectory .