Merck & Co., Inc. (MRK) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance, optimistic guidance, and strategic investments. Despite some concerns about GARDASIL's demand in China and management's avoidance of specific details, the overall sentiment is positive. The launch of new products like WINREVAIR and CAPVAXIVE, alongside a robust pipeline, suggests growth potential. The restructuring and cost-saving initiatives are expected to enhance margins. The Q&A section reveals confidence in managing external challenges, such as tariffs and biosimilar competition. Considering these factors, the stock is likely to see a positive movement in the next two weeks.
Key Financial Performance
Total Company Revenue $15.8 billion, a decrease of 2% year-over-year. The decline was primarily due to a $1.3 billion drop in GARDASIL sales in China, which reduced growth by 9 percentage points. Excluding these sales, global growth was 7%, driven by strength in oncology, Animal Health, and new products like WINREVAIR and CAPVAXIVE.
KEYTRUDA Sales $8 billion, an increase of 9% year-over-year. Growth was driven by robust demand from metastatic indications, increased uptake in earlier-stage cancers, and usage in tumors predominantly affecting women, including breast, cervical, and endometrial cancers. Additional growth came from its combination with Padcev in urothelial cancer and a new treatment regimen for head and neck cancer.
WELIREG Sales $162 million, an increase of 29% year-over-year. Growth was predominantly driven by increased use in certain patients with previously treated advanced renal cell carcinoma in the U.S.
GARDASIL Sales $1.1 billion, a decrease of 55% year-over-year. The decline was primarily driven by reduced sales in China and Japan. In China, channel inventories remained elevated, and demand was soft. In Japan, the expiration of reimbursement for the catch-up cohort and timing of public sector purchases contributed to the decline. However, U.S. sales grew by 2% due to price increases and higher demand.
CAPVAXIVE Sales $129 million. Growth was driven by demand from retail pharmacies and non-retail customers, including integrated delivery networks and clinics.
VAXNEUVANCE Sales Increased by 20% year-over-year. Growth in the U.S. was supported by approximately $60 million from CDC stockpile activity, partially offset by competitive pressures. Outside the U.S., growth was offset by a competitor's preferential recommendation in Japan.
WINREVAIR Sales $336 million. Cumulative net sales exceeded $1 billion in just 15 months since launch. Growth was driven by strong demand in the U.S., where more than 1,600 new patients received prescriptions during the quarter, and progress in approvals and reimbursement outside the U.S.
Animal Health Sales Increased by 11% year-over-year. Livestock growth was driven by higher demand across all species and sales from the aqua portfolio acquired from Elanco. Companion Animal sales growth was driven by price increases. Both segments benefited from improved supply.
Gross Margin 82.2%, an increase of 1.3 percentage points year-over-year. The improvement was driven by favorable product mix.
Operating Expenses $6.6 billion, including a $200 million charge related to a license agreement with Hengrui. Excluding this charge, operating expenses grew by 4%, reflecting investments in the pipeline and key growth drivers.
Earnings Per Share (EPS) $2.13. The EPS reflects the overall financial performance, including revenue, operating expenses, and tax rate.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
WINREVAIR: Achieved $1 billion in cumulative sales within a year of approval. Strong clinical benefits for pulmonary arterial hypertension (PAH) patients. FDA granted priority review for a supplemental Biologics License Application based on Phase III ZENITH trial data. Japan recently approved WINREVAIR.
ENFLONSIA: FDA approved and ACIP recommended for RSV prevention in infants. Orders have started for the upcoming RSV season.
CAPVAXIVE: Achieved $129 million in sales, driven by demand from retail pharmacies and clinics.
Ohtuvayre: Acquired through Verona Pharma acquisition. First-in-class treatment for COPD with bronchodilatory and anti-inflammatory properties. FDA approved in June 2024.
China Market: GARDASIL sales declined by $1.3 billion due to soft demand and elevated channel inventories. No shipments to China expected through the end of the year.
Japan Market: GARDASIL sales impacted by expiration of reimbursement for the catch-up cohort. WINREVAIR and CAPVAXIVE expected to launch in Japan.
Revenue: Total revenue for Q2 2025 was $15.8 billion, a 2% decrease due to GARDASIL sales decline in China. Excluding China, global growth was 7%.
Optimization Initiative: A multiyear program to redirect $3 billion in cost savings from mature areas to new growth drivers, leveraging technology for productivity.
Pipeline Expansion: Over 80 Phase III studies ongoing across therapeutic areas. Verona Pharma acquisition to enhance cardiopulmonary program.
HIV Programs: Promising pipeline with MK-8527 as a potential first once-monthly pill for HIV prevention. FDA accepted a new drug application for a fixed-dose combination for HIV treatment.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Decline in GARDASIL sales in China: Sales of GARDASIL in China decreased by approximately $1.3 billion, reducing growth by 9 percentage points. This decline is attributed to elevated channel inventories and soft demand, with shipments to China not expected to resume through at least the end of the year.
Regulatory and competitive pressures in vaccines: Sales of GARDASIL in Japan declined due to the expiration of reimbursement for the catch-up cohort, and VAXNEUVANCE faced competitive pressures in Japan. These factors could impact future vaccine revenue growth.
Foreign exchange impact: The company expects a negative impact from foreign exchange on revenue and hedges, which could affect overall financial performance.
Tariff-related costs: The company has included $200 million of costs related to the impact of tariffs in its guidance, pending the outcome of additional potential government actions.
Operational and cost optimization challenges: The multiyear optimization program aims to redirect $3 billion in cost savings from lower-growth areas to higher-potential areas. This involves leveraging technological advancements and streamlining operations, which could pose execution risks.
Dependence on KEYTRUDA and LOE risks: The company is navigating the loss of exclusivity (LOE) for KEYTRUDA, which is a significant revenue driver. While management views this as a 'hill' rather than a 'cliff,' it remains a critical challenge.
Supply chain and inventory risks: The company noted improved supply in its Animal Health segment but highlighted elevated channel inventories for GARDASIL in China, which could pose risks to operational efficiency.
Business development and acquisition risks: The acquisition of Verona Pharma and integration of its team and products, such as Ohtuvayre, could present challenges in terms of execution and achieving expected synergies.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Expectations: Merck expects full-year revenue for 2025 to be between $64.3 billion and $65.3 billion, representing growth of 1% to 2%, excluding a negative impact from foreign exchange of approximately 0.5%.
Operating Expenses: Operating expenses for 2025 are projected to be between $25.6 billion and $26.4 billion, including a $300 million milestone payment to LaNova.
Earnings Per Share (EPS): Non-GAAP EPS guidance for 2025 is set at $8.87 to $8.97, including a negative impact from foreign exchange of approximately $0.15.
Pipeline and Product Launches: Merck plans to reinvest $3 billion in cost savings from lower-growth areas into higher-potential areas, focusing on its robust pipeline and new growth drivers. The company is optimistic about the launch of WINREVAIR in Japan in Q3 2025 and the continued growth of products like CAPVAXIVE and ENFLONSIA.
Market Trends and Growth Drivers: Merck anticipates a return to growth in the second half of 2025, driven by oncology, animal health, and new product launches. The company is also focusing on expanding its cardiopulmonary and HIV portfolios.
Regulatory Milestones: The FDA has granted priority review for WINREVAIR's supplemental Biologics License Application, with a PDUFA date of October 25, 2025. Additionally, the FDA accepted a New Drug Application for a fixed-dose combination of doravirine and islatravir for HIV treatment, with a target action date of April 28, 2026.
Capital Allocation: Merck plans to continue share repurchases at approximately $1.3 billion per quarter for the remainder of 2025 and maintain its dividend strategy, aiming for increases over time.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividend Commitment: We remain committed to our dividend with the goal of increasing it over time.
Share Repurchase: We continued our pace of share repurchases with approximately $1.3 billion in the quarter. We expect to maintain a similar level of repurchases in each of the third and fourth quarters of 2025, given our strong balance sheet.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Can you help us understand CADENCE and its outcomes?
A:CADENCE is being explored in a select population with heart failure, focusing on those with a PH physiology. The primary outcomes are PVR and 6-minute walk distance. The most important signal is PVR. A Phase III trial may be required to demonstrate effectiveness in this broader patient population.
Q:Can you quantify the patient population for CADENCE and discuss the ex U.S. uptake of WINREVAIR?
A:The patient population for CADENCE is underdiagnosed due to the lack of treatment, but it is estimated to be in the range of pulmonary arterial hypertension. For WINREVAIR, ex U.S. uptake is early, with most reimbursements expected in the second half of the year. The global market is about 90,000 patients, with half in the U.S. and the other half in Europe and Japan.
Q:Can you provide details on the $3 billion restructuring announcement and its impact on operating margins or OpEx growth?
A:The $3 billion restructuring is a reallocation from slower growth areas to fast-growing areas, fully funding launches and the Phase III pipeline. Overall spend will grow, but more productively. Savings will come from R&D, SG&A, and cost of goods, with reinvestments in R&D and SG&A for new product launches.
Q:What is the outlook for GARDASIL in the U.S. and China?
A:In the U.S., growth is driven by price and demand, offset by CDC purchasing dynamics. Growth is expected in 2025 and beyond, not considering dosing schedule changes. In China, demand is soft, and no shipments are planned for the year. GARDASIL China represents less than 1% of the company’s revenue.
Q:What is the approach to diligencing assets between Chinese and Western companies, specifically regarding Verona and PDE3/4 inhibitors?
A:Merck has a high standard for both Chinese and Western companies. Verona was chosen for its dual PDE3/4 inhibitor with bronchodilatory and anti-inflammatory properties, being the first novel mechanism approved for COPD. Other assets in China lacked the first-mover advantage critical for Merck.
Q:What is the status of the LaNova PD-1/VEGF program?
A:The LaNova PD-1/VEGF program is progressing as planned, with Merck maintaining its commitment to the program and the dual signaling space.
Q:What is the right cadence for WINREVAIR patient adds and its progress into earlier lines of setting?
A:WINREVAIR is adding 400-500 patients per month, with steady growth expected. 75% of use is for patients on triple therapy, and over 50% of prescribing physicians are using it for less severe patients or those on dual therapy. Data from HYPERION and ZENITH trials are contributing to confidence.
Q:What are the plans for enlicitide and its potential combinations?
A:Enlicitide aims to be the first and best oral PCSK9 inhibitor, effective for LDL-lowering and cardiovascular outcomes. Potential combinations include those targeting LDL, Lp(a), and inflammatory axes, aiming for incremental cardiovascular outcome improvements.
Q:What is the impact of a 15% tariff on pharmaceuticals on the 2026 outlook?
A:The impact of a 15% tariff would be minimal for 2025 due to inventory management and U.S. manufacturing shifts. Further guidance is needed for 2026, but Merck is well-positioned to manage the impact.
Q:How does the cost savings program relate to KEYTRUDA and new opportunities?
A:The cost savings program reallocates resources from KEYTRUDA to broader oncology opportunities, including tissue targeting agents, antibody conjugates, and small molecules. Spending on oncology will grow, focusing on new launches and opportunities.
Q:Does the One Big Beautiful Bill update shift KEYTRUDA's IRA selection timing?
A:Yes, the update implies KEYTRUDA's IRA selection shifts from 2028 to 2029 due to its initial orphan designation. The presence of biosimilars by then may affect its selection, but Merck focuses on post-LOE growth.
Q:What offsets KEYTRUDA's loss and when will growth return?
A:Merck sees over $50 billion in opportunities across oncology, cardiometabolic, ophthalmology, HIV, immunology, and Animal Health. Growth is expected to return quickly post-LOE, with a minimized cliff and a broad pipeline driving sustainability.
Q:What combinations and indications are planned for enlicitide?
A:Enlicitide combinations may include those targeting LDL, Lp(a), and inflammatory axes. It serves as a platform for cardiovascular outcome improvements, with potential combinations advancing quickly.
Q:Was Merck notified of Sino Biopharm's interest in LaNova, and does it affect the PD-1/VEGF program?
A:Merck's commitment to the PD-1/VEGF program remains unchanged, based on its long-standing interest in the space. Notification of Sino Biopharm's interest is not commented on.
Q:Why was the guidance midpoint maintained despite headwinds?
A:The guidance midpoint was maintained due to a modest FX tailwind offsetting headwinds like low COVID cases, an early pembrolizumab biosimilar in Argentina, and soft GARDASIL demand in China. Underlying growth is 6%-8% excluding GARDASIL China.
Q:Review of Unclear Management Responses
A:Management avoided directly answering the question about the exact market size for CADENCE, citing underdiagnosis and uncertain epidemiology due to the lack of treatment. Additionally, they did not provide specific details on the timing or implementation of the 15% pharmaceutical tariff or the exact impact of the One Big Beautiful Bill update on KEYTRUDA's IRA selection.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CDC
CORALreef
ENFLONSIA
FDA
HIV
Health
III trial
KEYTRUDA
LLC Research
Ohtuvayre
Phase III
RSV
Research Division
WINREVAIR
acquisition
adult
approval
area
cancer
candidate
combination
date
demand
disease
enlicitide
exchange
finding
infant
investment
launch
line
month
oncology
option
patient
portfolio
potential
program
regimen
result
sale
study
therapy
treatment
MRK Transcript
Merck & Co., Inc. (MRK) Presents at 44th Annual J.P. Morgan Healthcare Conference Transcript
Neutral1-12
Merck & Co., Inc. (MRK) Presents at Citi Annual Global Healthcare Conference 2025 Transcript
Neutral12-3
Merck & Co., Inc. (MRK) Presents at Evercore 8th Annual Healthcare Conference Transcript
Neutral12-3
Merck & Co., Inc. (MRK) Presents at Jefferies London Healthcare Conference 2025 Transcript
Neutral11-20
MRK Slides
MRK Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
