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    MRK
    Earnings call· Jun 2025(Q2 FY25)

    Merck & Co. Q2 FY25 earnings call MRK

    Jul 29, 2025 Source

    Executive summary

    Merck & Co., Inc. Q2 FY25 — Strong Pipeline Momentum and Strategic Reinvestment

    Merck delivered Q2 FY25 results in line with expectations, driven by robust performance in oncology and Animal Health, alongside significant contributions from new product launches like WINREVAIR and CAPVAXIVE. Despite headwinds from GARDASIL sales in China, the company is strategically reinvesting $3 billion in cost savings from mature areas into its burgeoning pipeline and growth drivers. Management expressed increasing confidence in navigating the KEYTRUDA LOE period, emphasizing a diversified future and a path to long-term growth.

    Highlights

    5

    • Total company revenue of $15.8 billion was in line with expectations.

    • WINREVAIR achieved over $1 billion in cumulative sales within 15 months of launch.

    • KEYTRUDA sales increased 9% to $8 billion, driven by metastatic and earlier-stage indications.

    • Animal Health business delivered very strong growth, with sales increasing 11%.

    • Multiyear optimization initiative announced to redirect $3 billion of cost savings to higher-potential growth drivers.

    Concerns

    5

    • Total company revenues decreased 2% both nominally and excluding foreign exchange.

    • GARDASIL sales decreased 55% to $1.1 billion, primarily due to a $1.3 billion decline in China.

    • GARDASIL shipments to China will not resume through at least the end of 2025 due to elevated inventory and soft demand.

    • Full-year 2025 revenue guidance includes a negative impact from foreign exchange of approximately 0.5%.

    • Full-year 2025 EPS guidance includes a negative impact from foreign exchange of approximately $0.15.

    Guidance & targets

    20
    CategoryTargetConfidence
    Full-year 2025 Revenue
    $64.3 billion to $65.3 billion
    high materiality
    High
    Full-year 2025 Gross Margin
    approximately 82%
    medium materiality
    High
    Full-year 2025 Tariff Costs
    $200 million
    low materiality
    High
    Full-year 2025 Operating Expenses
    $25.6 billion and $26.4 billion
    high materiality
    High
    Full-year 2025 Other Expense
    $300 million and $400 million
    medium materiality
    High
    Full-year 2025 Tax Rate
    15% to 16%
    medium materiality
    High
    Full-year 2025 EPS
    $8.87 to $8.97
    high materiality
    High
    WINREVAIR Japan Launch
    later in the third quarter
    medium materiality
    High
    Verona Pharma Acquisition Closing
    fourth quarter
    high materiality
    High
    MK-8527 Phase III Studies Initiation
    initiated
    medium materiality
    High
    Doravirine and Islatravir NDA Target Action Date
    April 28, 2026
    medium materiality
    High
    Subcutaneous Pembrolizumab PDUFA Date
    September 23
    high materiality
    High
    WINREVAIR Label Update PDUFA Date
    October 25
    medium materiality
    High
    WINREVAIR HYPERION Detailed Findings Presentation
    later this year
    medium materiality
    High
    Enlicitide Detailed Results Presentation
    future medical meetings
    medium materiality
    High
    GARDASIL China Shipments
    no resumption through at least the end of this year
    high materiality
    High
    GARDASIL Japan Headwind
    more significant headwind in the second half of the year
    medium materiality
    High
    Other Revenue
    significantly lower in the second half of the year
    medium materiality
    High
    Operating Expenses Split (ex-BD)
    roughly evenly split between the third and fourth quarters
    low materiality
    High
    Share Repurchases
    similar level of repurchases
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Oncology
    Growth driven by robust demand from metastatic indications and increased uptake in earlier-stage cancers, particularly in tumors predominantly affecting women and in combination with Padcev for urothelial cancer. WELIREG growth predominantly from increased use in previously treated advanced renal cell carcinoma in the U.S.
    KEYTRUDA Sales: $8 billionKEYTRUDA Growth: 9%WELIREG Sales: $162 millionWELIREG Growth: 29%
    		————
    Vaccines
    GARDASIL decline primarily driven by China ($1.3 billion impact). Ex-China, GARDASIL declined 4% due to lower sales in Japan and timing of public sector purchases. U.S. GARDASIL sales grew 2% from price and demand, offset by CDC purchasing. VAXNEUVANCE growth benefited from CDC stockpile activity, partially offset by competitive pressures and a competitor preferential recommendation in Japan.
    GARDASIL Sales: $1.1 billionGARDASIL Growth: -55%CAPVAXIVE Sales: $129 millionVAXNEUVANCE Growth: 20%
    		————
    Cardiovascular
    WINREVAIR continued strong momentum, exceeding $1 billion in cumulative sales. U.S. saw over 1,600 new patients, with increasing use in patients whose background therapies do not include a prostacyclin. Ex-U.S. launch progressing, with Japan launch expected in Q3.
    WINREVAIR Sales: $336 millionWINREVAIR Cumulative Net Sales: >$1 billion (in 15 months)WINREVAIR New Patients (U.S.): >1,600 in Q2WINREVAIR Use in Triple Therapy/Prostacyclin: 75%
    		————
    Animal Health
    Very strong growth, with livestock reflecting higher demand across all species and sales from the acquired Elanco aqua portfolio. Companion Animal sales growth reflects price and improved supply in both segments.
    		—11%——

    Operational metrics

    15
    Total Company Revenue
    $15.8 billion-2%
    Q2 FY25

    Nominal and excluding the impact of foreign exchange.

    Total Company Revenue Growth excluding GARDASIL China
    7%
    Q2 FY25

    Primarily driven by strength in oncology, Animal Health, and new products WINREVAIR and CAPVAXIVE.

    GARDASIL China Revenue Impact
    -$1.3 billion
    Q2 FY25

    Reduced total company growth by 9 percentage points.

    Gross Margin
    82.2%+1.3 percentage points
    Q2 FY25

    Increase driven by favorable product mix.

    Operating Expenses
    $6.6 billion+4%
    Q2 FY25

    Excluding a $200 million charge related to the Hengrui license agreement, operating expenses grew 4%.

    Hengrui License Agreement Charge
    $200 million
    Q2 FY25

    Included in operating expenses.

    Other Expense
    $54 million
    Q2 FY25

    Non-GAAP basis.

    Tax Rate
    15%
    Q2 FY25

    Non-GAAP basis.

    EPS
    $2.13
    Q2 FY25

    Non-GAAP basis.

    Multiyear Optimization Program Cost Savings
    $3 billion
    Multiyear

    Cost savings from lower-growth areas to be reinvested into higher-potential areas.

    Share Repurchases
    $1.3 billion
    Q2 FY25

    Pace of share repurchases in the quarter.

    WINREVAIR Prescribing Physicians
    >1,200
    Q2 FY25

    Number of physicians who have prescribed WINREVAIR.

    WINREVAIR Prescribing Physicians for Less Severe/Dual Therapy Patients
    >50%
    Q2 FY25

    Percentage of prescribing physicians who have prescribed WINREVAIR in patients that are less severe or on dual therapy.

    LAGEVRIO Revenue Impact
    negative
    FY25

    Impacted by low level of COVID cases during the summer season.

    Pembrolizumab Biosimilar Revenue Impact
    negative
    Q2 FY25

    Due to an early entrant of a biosimilar in Argentina.

    Industry KPIs

    7
    MetricValueDetails
    Prescription volume>1,600patients
    EPS revenue guidance$64.3B-$65.3B revenue; $8.87-$8.97 EPSUSD
    Pricing policy impact2029
    Price volume mix decomposition2%%
    Geographic regional revenue growth-55% (China); -4% (Japan); 2% (U.S.)%
    Clinical trial efficacy safety dataStatistically significant and clinically meaningful reductions
    Business development capacity deal appetiteHigh priority

    Product announcements

    3
    ProductTypeDetails
    ENFLONSIAlaunch
    NUMELVIlaunch
    Injectable once annual (Animal Health)launch

    Deals & partnerships

    5
    Verona PharmaAcquisition of Verona Pharma to obtain Ohtuvayre, a novel first-in-class treatment for chronic obstructive pulmonary disease (COPD).

    Acquisition of Verona Pharma, bringing Ohtuvayre, the first novel mechanism for inhaled maintenance treatment of COPD in over two decades. Expected to close in Q4, financed through cash on hand, commercial paper, and new debt issuance.

    Daiichi SankyoCollaboration for ifinatamab deruxtecan, an antibody-drug conjugate (ADC).

    Collaboration includes three Phase III trials for ifinatamab deruxtecan in esophageal, prostate, and small cell lung cancers.

    Gates FoundationCollaboration for Phase III studies of MK-8527 for HIV pre-exposure prophylaxis.

    Collaboration on EXPrESSIVE-10, a Phase III study for MK-8527 in women and adolescent girls.

    HengruiLicense agreement related to a charge in operating expenses.$200 million

    A $200 million charge related to the license agreement with Hengrui was recorded in Q2 operating expenses.

    LaNovaMilestone payment for tech transfer.$300 million

    A $300 million milestone to LaNova for tech transfer was completed earlier this month and is included in full-year operating expense guidance.

    Risks & headwinds

    7
    GARDASIL China market challengesH2 FY25 and potentially into FY26

    Sales decreased by $1.3 billion in Q2 FY25, reducing total company growth by 9 percentage points. No shipments through at least end of 2025.

    Mitigation: Actively working to activate demand with females and males; assessing 2026 shipment schedule at year-end.

    GARDASIL Japan market challengesH2 FY25

    Significant headwind to growth.

    Mitigation: None stated, attributed to lapping the increase in vaccinations from the catch-up cohort in 2024.

    Foreign exchange impactFY25

    Negative impact of approximately 0.5% on full-year revenue; approximately $0.15 negative impact on full-year EPS.

    Mitigation: Actively manages impact through revenue hedging program.

    LAGEVRIO sales declineSummer season

    Impacted by low level of COVID cases.

    Mitigation: None stated.

    Early biosimilar entry for pembrolizumabQ2 FY25

    Impacted revenues.

    Mitigation: None stated, specifically mentioned in Argentina.

    Potential 15% tariff on pharmaceuticalsFY25

    Minimal impact in 2025.

    Mitigation: Inventory management and shifting manufacturing to the U.S. have positioned the company well.

    IRA price cuts for KEYTRUDA2027 (selection), 2029 (implementation)

    Potential selection for negotiation in '27 for implementation in '29.

    Mitigation: Company's focus is on growing the business post-KEYTRUDA LOE and driving long-term sustainability, not fundamentally changed by this policy update.

    What to watch in Q3 FY25

    5

    WINREVAIR Japan Launch

    Q3 FY25
    CurrentApproved by MHLW
    TargetLaunch in Q3 FY25

    Why it matters

    Expansion into the Japanese market is a key driver for WINREVAIR's international growth and overall cardiovascular segment performance.

    Outside the U.S., we continue to progress with approvals and reimbursement, including in Japan, where we expect a launch later in the third quarter.

    Q&A highlights

    5

    What are the success criteria for the CADENCE trial (PVR and 6-minute walk distance) and would Phase II results be sufficient for registration or would a Phase III trial be required for HFpEF?

    Dean Li stated that the most important signal for the CADENCE trial is the PVR, given the unique patient population. While 6-minute walk distance is also important, he expects that a Phase III trial would likely be required by the FDA to demonstrate effectiveness in this broader patient population, even with positive Phase II data.

    “But my expectation in front of the data is I would imagine that the FDA would be interested in a Phase III trial to really demonstrate the effectiveness of this treatment in this broader patient population.”

    asked by Daina Graybosch · answered by Dean Li

    2 min read6 chapters

    Detailed Narrative

    01

    Pipeline Expansion and Diversification

    Merck is actively expanding and advancing its research program, currently conducting over 80 Phase III studies across various therapeutic areas. The company highlights over 20 new and potential future growth drivers, including recent successful launches like WINREVAIR and CAPVAXIVE. Novel late-phase compounds such as enlicitide, tulisokibart, sac-TMT, and MK-3000 are expected to drive significant scientific and commercial opportunities, reinforcing confidence in the company's ability to grow beyond the KEYTRUDA LOE period.

    02

    New Product Launch Momentum

    WINREVAIR, for pulmonary arterial hypertension, achieved over $1 billion in cumulative net sales within 15 months of launch, demonstrating strong patient impact and commercial execution. CAPVAXIVE, a pneumococcal vaccine, generated $129 million in sales, driven by demand from retail pharmacies and non-retail customers. ENFLONSIA, a monoclonal antibody for RSV prevention in infants, recently received FDA approval and ACIP recommendation, with orders already being taken, positioning it for a successful launch ahead of the upcoming RSV season.

    03

    Strategic Portfolio Optimization and Reinvestment

    Merck announced a multiyear optimization initiative to redirect $3 billion of cost savings from lower-growth areas of the business to higher-potential areas. This program aims to enhance productivity and streamline operations, allowing for full reinvestment into the robust early- and late-phase pipeline and key growth drivers. The company expects overall investment to continue increasing, reflecting compelling opportunities and a commitment to long-term innovation-driven growth.

    04

    Cardiopulmonary and Cardiometabolic Pipeline Progress

    The acquisition of Verona Pharma, expected to close in Q4, brings Ohtuvayre, a novel first-in-class treatment for COPD, complementing Merck's growing cardiopulmonary program. Positive top-line results were announced for enlicitide, an oral PCSK9 inhibitor, from two Phase III trials (CORALreef heterozygous familial hypercholesterolemia and CORALreef AddOn), showing statistically significant and clinically meaningful reductions in LDL-cholesterol. Enrollment for the Phase III CORALreef Outcomes trial is complete, with detailed findings to be presented at future medical meetings.

    05

    Oncology Leadership and Pipeline Beyond KEYTRUDA

    KEYTRUDA continues to expand its indications, with a recent FDA approval for its 42nd indication and 10th earlier-stage approval in head and neck squamous cell carcinoma. The broader oncology pipeline includes advancements in tissue targeting with three Phase III trials for ifinatamab deruxtecan through the Daiichi Sankyo collaboration. Positive progression-free survival and overall survival results were also announced for KEYTRUDA plus chemotherapy in ovarian cancer, marking a significant milestone for immune checkpoint inhibitors in this setting.

    06

    GARDASIL China and Japan Headwinds

    GARDASIL sales were significantly impacted by a 55% decrease, primarily due to a $1.3 billion decline in China. Elevated channel inventories and soft demand mean shipments to China will not resume through at least the end of 2025. Additionally, Japan is expected to be a more significant headwind in the second half of 2025 as the company laps the increased vaccinations from the 2024 catch-up📎 cohort. Despite these challenges, Merck expects full-year growth for GARDASIL excluding China.

    AI-generated summary of the company’s earnings call. Not investment advice.