Executive Summary

Q3 2025 delivered modest top-line growth with clear margin improvement: revenue $17.28B (+4% YoY), GAAP EPS $2.32 and non-GAAP EPS $2.58; mix was supported by KEYTRUDA (+10% YoY to $8.14B) and WINREVAIR, offset by a 24% decline in GARDASIL from China weakness .
Management raised and narrowed FY25 EPS guidance to $8.93–$8.98 and narrowed sales to $64.5–$65.0B; tax outlook improved to 14–15% non-GAAP (from 15–16%) and other expense increased to $400–$500M, net .
Strategic catalysts advanced: FDA approval of subcutaneous KEYTRUDA QLEX; positive ESMO data across oncology programs; positive Phase 3 oral PCSK9 “CORALreef Lipids” topline; and completion of Verona Pharma acquisition, adding OHTUVAYRE (COPD) .
On the call, management targeted 30–40% KEYTRUDA QLEX adoption over 18–24 months and flagged a Q4 U.S. KEYTRUDA shipment timing headwind (~$200M), while reaffirming commitment to BD focused on science-driven assets (typically $1–$15B range) .

What Went Well and What Went Wrong

What Went Well
- Oncology durability and breadth: KEYTRUDA sales rose 10% YoY to $8.14B on strength in metastatic indications and continued uptake in earlier-stage settings; WELIREG grew 42% YoY to $196M . CEO: “We continued to execute on our strategy with important pipeline advancements, significant approvals and successful new product launches.”
- WINREVAIR traction: Sales reached $360M (U.S. new patient starts ~1,500; >24,000 prescriptions), with timing-related -$40M that reversed in October; label update expanding indication based on ZENITH and strong HYPERION data (76% clinical worsening risk reduction) .
- Guidance raise and tax improvement: Non-GAAP EPS range raised to $8.93–$8.98 and tax lowered to 14–15%, reflecting operational improvements and collaboration amendment benefits (Koselugo), partly offset by Verona impact and FX .
What Went Wrong
- GARDASIL pressure in China: Global GARDASIL/GARDASIL 9 fell 24% YoY to $1.75B, driven by significantly lower China demand; ex-China, sales declined 2% (or -3% ex-FX), also reflecting Japan catch-up program normalization .
- U.S. KEYTRUDA Q4 shipment timing: Management flagged ~-$200M U.S. headwind in Q4 due to wholesaler purchase timing, despite a $100M Q3 benefit from an extra Tuesday of shipments .
- FX and tariff friction: Management cited FX (~$0.15/share headwind in FY25) and maintained tariff-related cost considerations within the outlook; non-GAAP other expense increased to $400–$500M .

Financial Results

Headline results vs prior periods and estimates

Metric	Q3 2024	Q2 2025	Q3 2025	Vs. Consensus
Revenue ($USD Billions)	$16.66	$15.81	$17.28	N/A – S&P Global consensus unavailable
GAAP EPS ($)	$1.24	$1.76	$2.32	N/A – S&P Global consensus unavailable
Non-GAAP EPS ($)	$1.57	$2.13	$2.58	N/A – S&P Global consensus unavailable
GAAP Gross Margin (%)	75.5%	77.5%	77.7%	N/A
Non-GAAP Gross Margin (%)	80.5%	82.2%	81.9%	N/A
GAAP Effective Tax Rate (%)	22.7%	11.4%	14.2%	N/A
Non-GAAP Effective Tax Rate (%)	21.9%	15.0%	13.4%	N/A

Segment breakdown

Segment ($USD Billions)	Q3 2024	Q2 2025	Q3 2025
Pharmaceutical	$14.94	$14.05	$15.61
Animal Health	$1.49	$1.65	$1.62
Other Revenues	$0.23	$0.11	$0.05

Selected product KPIs

Product ($USD Billions unless noted)	Q3 2024	Q2 2025	Q3 2025
KEYTRUDA	$7.43	$7.96	$8.14
GARDASIL/GARDASIL 9	$2.31	$1.13	$1.75
WINREVAIR ($ Millions)	$149	$336	$360
CAPVAXIVE ($ Millions)	$47	$129	$244
WELIREG ($ Millions)	$139	$162	$196

Additional P&L context (non-GAAP, Q3 2025): SG&A $2.60B, R&D $4.00B; non-GAAP other (income) expense was $106M expense; GAAP gross margin improvement primarily mix; non-GAAP GM 81.9% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales	FY 2025	$64.3B–$65.3B	$64.5B–$65.0B	Narrowed, midpt +$0.05B
Non-GAAP Gross Margin	FY 2025	~82%	~82%	Maintained
Non-GAAP OpEx	FY 2025	$25.6B–$26.4B	$25.9B–$26.4B	Slightly raised lower bound
Non-GAAP Other (income) expense, net	FY 2025	$300M–$400M expense	$400M–$500M expense	Raised (more expense)
Non-GAAP Effective Tax Rate	FY 2025	15.0%–16.0%	14.0%–15.0%	Lowered
Non-GAAP EPS	FY 2025	$8.87–$8.97	$8.93–$8.98	Raised & narrowed
Diluted Share Count	FY 2025	~2.51B	~2.51B	Maintained

Management noted drivers include a Koselugo agreement amendment benefit, improved tax rate, and lower tariff impact, partly offset by Verona Pharma acquisition impact and FX; the new range embeds one-time charges related to LaNova and Hengrui .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2025)	Trend
Oncology franchise breadth	Q2: Continued growth in KEYTRUDA; approvals/updates incl. HNSCC; WELIREG approvals in Japan/EU; broad ADC pipeline . Q1: SC pembrolizumab PDUFA; multiple oncology milestones .	FDA approved SC KEYTRUDA QLEX; CHMP positive opinion; ESMO data across ADCs and KEYNOTE programs .	Strengthening breadth and earlier-stage penetration
New launches (WINREVAIR, CAPVAXIVE, ENFLONSIA)	Q2: WINREVAIR $336M; CAPVAXIVE uptake; ENFLONSIA FDA approved and ACIP recommended . Q1: CAPVAXIVE approvals; strong initial uptake .	WINREVAIR $360M; negative timing reversed in Oct.; CAPVAXIVE $244M; ENFLONSIA $79M initial stocking .	Building adoption across launches
GARDASIL dynamics	Q2: -55% YoY driven by China; U.S. up slightly; Japan timing . Q1: -41% YoY; China weakness; ex-China growth .	-24% YoY; China weakness persists; ex-China down 2% (or -3% ex-FX); U.S. +13% .	Headwinds moderating; watch China/Japan
U.S. policy (MFN/pricing)	Q2: Tariffs embedded in FY25 outlook ($200M) . Q1: Tariff cost embedded; tax range raised .	Active MFN discussions; CEO “optimistic” about constructive outcome; seek lower patient OOP and higher foreign pricing .	Constructive engagement; policy risk managed
Manufacturing & R&D investment	Q2: $1B DE biologics CoE; Animal Health expansion . Q1: >$9B through 2028; NC vaccine facility .	Broke ground on $3B VA manufacturing CoE; >$70B commitment to U.S. Mfg/R&D beginning 2025 .	Accelerating U.S. investment
Cardio-pulmonary pipeline	Q2: Positive topline for two CORALreef trials; WINREVAIR ZENITH priority review . Q1: ZENITH 76% risk reduction; headline data .	Positive CORALreef Lipids topline; AHA presentations; HYPERION (76% reduction) presented/NEJM; label update .	Strong momentum, multiple 2026 catalysts

Management Commentary

“We’re delivering value to patients and customers through our innovative portfolio… and we’re securing our future by making important investments in our pipeline… including… our completed acquisition of Verona Pharma and expanded U.S. manufacturing and R&D spending.” — Robert M. Davis, CEO .
“Total company revenues were $17.3B… growth driven by… oncology and animal health… KEYTRUDA increased 8% ex-FX to $8.1B… U.S. growth benefited by ~ $100M from an extra Tuesday of shipments.” — Caroline Litchfield, CFO .
“We continue to expect… 30%–40% [patient] adoption [for KEYTRUDA QLEX]… 18–24 months to achieve… permanent J code will take ~6 months.” — CEO .
“Our EPS guidance is $8.93 to $8.98… revenue $64.5–$65.0B… tax rate between 14–15%… other expense $400–$500M.” — CFO .

Q&A Highlights

Business development posture: Focus on science/value-driven deals across core TAs; typical size $1–$15B, willing to go larger if warranted; Verona cited as multibillion-dollar opportunity .
KEYTRUDA QLEX conversion: Targeting 30–40% adoption over 18–24 months; near-term reimbursement friction until permanent J-code; expect slower initial uptake .
GARDASIL trajectory: U.S. growth in ages 9–10 and mid-adult segments; ex-U.S. lapping China/Japan headwinds through 2026; ACIP dosing could influence U.S. growth .
2026 outlook framework: Expect solid top-line growth led by new launches (WINREVAIR, OHTUVAYRE, CAPVAXIVE, ENFLONSIA) with accelerating OpEx to fuel launches/pipeline; KEYTRUDA growth to moderate; LOEs and IRA headwinds acknowledged .
Policy (MFN): Ongoing discussions; aligned with lowering patient OOP and raising foreign pricing; CEO optimistic on constructive outcome .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2025 revenue and EPS was not retrievable via our tool at this time; therefore, explicit “vs. consensus” comparisons are not shown. Values would normally be sourced from S&P Global consensus; unavailability noted per request.
Modeling considerations: Management raised FY25 EPS and narrowed sales, cited a Q4 U.S. KEYTRUDA timing headwind (~$200M), stronger tax rate, increased other expense, and benefits from the Koselugo amendment; expect steady WINREVAIR adoption and early ENFLONSIA stocking transitioning to use in Q4 .

Key Takeaways for Investors

Oncology remains the anchor: KEYTRUDA growth (especially earlier-stage) and label/route expansion (QLEX) support durability; watch for adoption cadence and J-code timing .
New growth vectors maturing: WINREVAIR, CAPVAXIVE, and ENFLONSIA are scaling; HYPERION and ZENITH strengthen WINREVAIR’s profile; Verona’s OHTUVAYRE adds a COPD pillar .
Guidance upgraded: FY25 EPS lifted and tax rate reduced; consensus adjustments likely skew upward for EPS/tax and downward for other expense .
GARDASIL near-term caution: China/Japan normalization remains a headwind through 2025; management points to U.S. segment growth and private markets as offsetting levers .
Q4 setup: Expect U.S. KEYTRUDA shipment headwind (~$200M) and ENFLONSIA stocking converting to usage; traders should watch QLEX adoption signals and AHA readouts for enlicitide .
Policy backdrop: MFN dialogues ongoing; company stance suggests balanced outcome (lower patient OOP, higher ex-U.S. prices) with manageable impact .
Medium-term thesis: Broader, more diversified growth drivers emerging (oncology, cardio-pulmonary, vaccines, animal health), supported by stepped-up U.S. manufacturing/R&D investment and an active, disciplined BD agenda .

Additional Detail

Geographic/Regional trends

U.S. total sales +15% YoY in Q3; International -8% YoY; China pharmaceutical sales were down sharply YoY (China impact tied to GARDASIL normalization) .

Expense mix and non-GAAP adjustments

Q3 non-GAAP SG&A $2.60B and R&D $4.00B; includes $300M LaNova milestone in GAAP with non-GAAP adjustment; non-GAAP other (income) expense of $106M vs. $193M income in Q3’24 reflecting prior-year Daiichi payment .

Pipeline and catalysts

Oncology: Multiple ESMO presentations and FDA actions; pending PDUFAs (KEYNOTE-B96 Feb 20, 2026; KEYNOTE-905 Apr 7, 2026) .
Cardio-pulmonary: CORALreef Lipids detailed data at AHA; investor event Nov 9; WINREVAIR HYPERION NEJM .

All data are sourced from company filings and the Q3 2025 earnings call transcript as cited above.

Merck & Co., Inc. (MRK)·Q3 2025 Earnings Summary