On April 24, 2025 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the first quarter of 2025 (Press release, Merck & Co, APR 24, 2025, View Source [SID1234652105]).
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"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," said Robert M. Davis, chairman and chief executive officer, Merck. "We are working with focus and urgency to both realize the full potential of our near-term opportunities and to rapidly progress the next wave of innovation that will positively impact the lives of patients and drive future value creation for all of our stakeholders."
Financial Summary
$ in millions, except EPS amounts
First Quarter
2025
2024
Change
Change Ex-
Exchange
Sales
$15,529
$15,775
-2%
1%
GAAP net income1
5,079
4,762
7%
12%
Non-GAAP net income that excludes certain items1,2*
5,611
5,279
6%
11%
GAAP EPS
2.01
1.87
7%
13%
Non-GAAP EPS that excludes certain items2*
2.22
2.07
7%
12%
*Refer to table on page 7.
For the first quarter of 2025, Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $2.01 and non-GAAP EPS was $2.22. GAAP and non-GAAP EPS in the first quarter of 2024 include a charge of $0.26 per share for the acquisition of Harpoon Therapeutics, Inc. (Harpoon).
Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, and income and losses from investments in equity securities.
First-Quarter Sales Performance
The following table reflects sales of the company’s top products and significant performance drivers.
First Quarter
$ in millions
2025
2024
Change
Change Ex-Exchange
Commentary
Total Sales
$15,529
$15,775
-2%
1%
Pharmaceutical
13,638
14,006
-3%
-1%
Decline driven by vaccines, virology and immunology, partially offset by growth in oncology, cardiology and diabetes.
KEYTRUDA
7,205
6,947
4%
6%
Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer, renal cell carcinoma and non-small cell lung cancer, as well as continued strong global demand from metastatic indications, including increased uptake in bladder, endometrial and microsatellite instability-high (MSI-H) cancers, partially offset by timing of wholesaler purchases in the U.S.
GARDASIL/GARDASIL 9
1,327
2,249
-41%
-40%
Decline primarily due to lower demand in China, partially offset by higher demand in most international regions, particularly in Japan, as well as higher pricing and demand in the U.S. Excluding China, sales grew 14%, or 16% excluding impact of foreign exchange.
JANUVIA/JANUMET
796
670
19%
21%
Increase primarily due to higher net pricing in the U.S., partially offset by lower demand in most international markets due to ongoing generic competition, and in the U.S. due to competitive pressure.
PROQUAD, M-M-R II and VARIVAX
539
570
-5%
-5%
Decrease primarily reflects lower U.S. sales of PROQUAD that resulted from borrowing of doses from the U.S. Centers for Disease Control and Prevention Pediatric Vaccine Stockpile, partially offset by higher U.S. sales of M-M-R II largely attributable to private-sector buy-in due to measles outbreaks and higher pricing.
BRIDION
441
440
–
1%
Relatively flat compared with prior year, as higher demand and pricing in the U.S. were offset by lower demand in several international markets due to ongoing generic competition.
Lynparza*
312
292
7%
8%
Increase primarily due to higher demand in the U.S. and certain international markets.
WINREVAIR
280
–
–
–
Represents continued uptake since second-quarter 2024 launch in the U.S.
Lenvima*
258
255
1%
2%
Increase primarily due to higher demand in the U.S.
VAXNEUVANCE
230
219
5%
7%
Growth largely driven by higher demand in Europe and the Asia Pacific region, partially offset by lower demand in the U.S. due to competitive pressure.
PREVYMIS
208
174
19%
22%
Growth primarily due to higher demand in the U.S.
WELIREG
137
85
62%
63%
Growth primarily driven by higher demand in the U.S.
CAPVAXIVE
107
–
–
–
Represents continued uptake since third-quarter 2024 launch in the U.S.
LAGEVRIO
102
350
-71%
-69%
Decline largely driven by lower demand in the Asia Pacific region, particularly in Japan.
SIMPONI
–
184
-100%
-100%
Marketing rights in former Merck territories reverted to Johnson & Johnson on Oct. 1, 2024.
Animal Health
1,588
1,511
5%
10%
Growth primarily due to higher demand for Livestock products, as well as inclusion of sales from Elanco aqua business that was acquired in July 2024.
Livestock
924
850
9%
16%
Growth primarily driven by higher demand across all species, a benefit from timing of ruminant product sales, as well as inclusion of sales from Elanco aqua business that was acquired in July 2024.
Companion Animal
664
661
–
3%
Sales consistent with prior year. Sales of BRAVECTO were $327 million and $332 million in current and prior year quarters, respectively, which represents decline of 1%, or growth of 2% excluding impact of foreign exchange.
Other Revenues**
303
258
17%
16%
Increase primarily due to higher payments received for out-licensing arrangements and higher royalties, partially offset by lower revenue from third-party manufacturing arrangements.
*Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
**Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.
First-Quarter Expense, EPS and Related Information
The table below presents selected expense information.
$ in millions
GAAP
Acquisition-
and
Divestiture-
Related Costs3
Restructuring
Costs
(Income)
Loss From
Investments
in Equity
Securities
Non-
GAAP2
First Quarter 2025
Cost of sales
$3,419
$620
$36
$ –
$2,763
Selling, general and administrative
2,552
23
–
–
2,529
Research and development
3,621
7
–
–
3,614
Restructuring costs
69
–
69
–
–
Other (income) expense, net
(35)
(3)
–
(107)
75
First Quarter 2024
Cost of sales
$3,540
$463
$116
$-
$2,961
Selling, general and administrative
2,483
21
5
–
2,457
Research and development
3,992
16
2
–
3,974
Restructuring costs
123
–
123
–
–
Other (income) expense, net
(33)
(4)
–
(116)
87
GAAP Expense, EPS and Related Information
Gross margin was 78.0% for the first quarter of 2025 compared with 77.6% for the first quarter of 2024. The increase was primarily due to the favorable impacts of product mix and lower restructuring costs, partially offset by higher amortization of intangible assets and the unfavorable impact of foreign exchange.
Selling, general and administrative (SG&A) expenses were $2.6 billion in the first quarter of 2025, an increase of 3% compared with the first quarter of 2024. The increase was primarily due to higher administrative and promotional costs, partially offset by the favorable impact of foreign exchange.
Research and development (R&D) expenses were $3.6 billion in the first quarter of 2025, a decrease of 9% compared with the first quarter of 2024. The decrease was primarily due to a $656 million charge for the acquisition of Harpoon in the first quarter of 2024 and the favorable impact of foreign exchange. The decrease was partially offset by a $100 million charge in the first quarter of 2025 associated with the achievement of a developmental milestone related to the 2024 acquisition of Eyebiotech Limited (EyeBio), increased compensation and benefit costs, higher clinical development costs, and increased discovery research and early drug development costs.
Other (income) expense, net, was $35 million of income in the first quarter of 2025 compared with $33 million of income in the first quarter of 2024.
The effective tax rate was 13.9% for the first quarter of 2025.
GAAP EPS was $2.01 for the first quarter of 2025 compared with $1.87 for the first quarter of 2024. The increase was primarily driven by a $0.26 per share charge included in the first quarter of 2024 for the acquisition of Harpoon, partially offset by the unfavorable impact of foreign exchange.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 82.2% for the first quarter of 2025 compared with 81.2% for the first quarter of 2024. The increase was primarily due to the favorable impact of product mix, partially offset by the unfavorable impact of foreign exchange.
Non-GAAP SG&A expenses were $2.5 billion in the first quarter of 2025, an increase of 3% compared with the first quarter of 2024. The increase was primarily due to higher administrative and promotional costs, partially offset by the favorable impact of foreign exchange.
Non-GAAP R&D expenses were $3.6 billion in the first quarter of 2025, a decrease of 9% compared with the first quarter of 2024. The decrease was primarily due to a $656 million charge for the acquisition of Harpoon in the first quarter of 2024 and the favorable impact of foreign exchange. The decrease was partially offset by a $100 million charge in the first quarter of 2025 associated with the achievement of a developmental milestone related to the 2024 acquisition of EyeBio, increased compensation and benefit costs, higher clinical development costs, and increased discovery research and early drug development costs.
Non-GAAP other (income) expense, net, was $75 million of expense in the first quarter of 2025 compared with $87 million of expense in the first quarter of 2024.
The non-GAAP effective tax rate was 14.2% for the first quarter of 2025.
Non-GAAP EPS was $2.22 for the first quarter of 2025 compared with $2.07 for the first quarter of 2024. The increase was primarily driven by a $0.26 per share charge included in the first quarter of 2024 for the acquisition of Harpoon, partially offset by the unfavorable impact of foreign exchange.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
First Quarter
$ in millions, except EPS amounts
2025
2024
EPS
GAAP EPS
$2.01
$1.87
Difference
0.21
0.20
Non-GAAP EPS that excludes items listed below2
$2.22
$2.07
Net Income
GAAP net income1
$5,079
$4,762
Difference
532
517
Non-GAAP net income that excludes items listed below1,2
$5,611
$5,279
Excluded Items:
Acquisition- and divestiture-related costs3
$647
$496
Restructuring costs
105
246
Income from investments in equity securities
(107)
(116)
Decrease to net income before taxes
645
626
Estimated income tax (benefit) expense4
(113)
(109)
Decrease to net income
$532
$517
Pipeline and Portfolio Highlights
In the first quarter, Merck continued to advance its broad and diverse pipeline, achieving key regulatory and clinical milestones across a range of therapeutic areas.
In oncology, at the European Lung Cancer Congress 2025, Merck presented pivotal data from the 3475A-D77 Phase 3 trial evaluating the subcutaneous administration of pembrolizumab with berahyaluronidase alfa (subcutaneous pembrolizumab). Based on these data, applications for subcutaneous pembrolizumab are under review in the U.S. and Europe; in the U.S., the Prescription Drug User Fee Act (PDUFA) date is Sept. 23, 2025. If approved, subcutaneous pembrolizumab has the potential to become a new, meaningful treatment option that may increase access and save time needed for administration compared to intravenous (IV) KEYTRUDA. Merck also announced the initiation of waveLINE-010, a Phase 3 trial evaluating a combination regimen that incorporates zilovertamab vedotin, an investigational antibody-drug conjugate (ADC) targeting receptor tyrosine kinase-like orphan receptor 1, for the treatment of patients with previously untreated diffuse large B-cell lymphoma (DLBCL).
Additional regulatory milestones include the U.S. Food and Drug Administration (FDA) granting Priority Review to Merck’s application for KEYTRUDA plus standard of care as perioperative treatment for resectable locally advanced head and neck squamous cell carcinoma (LA-HNSCC), following compelling results from the KEYNOTE-689 trial. The FDA has set a PDUFA date of June 23, 2025. In addition, Merck received approval from the European Commission (EC) for KEYTRUDA plus chemotherapy as first-line treatment for adult patients with unresectable non-epithelioid metastatic malignant pleural mesothelioma, based on results from the Phase 2/3 IND.227/KEYNOTE-483 trial. The company also received conditional EC approval for two indications for WELIREG, making it the first and only oral hypoxia-inducible factor-2 alpha inhibitor approved in the European Union, based on results from the Phase 2 LITESPARK-004 and Phase 3 LITESPARK-005 trials.
In vaccines and infectious diseases, Merck received EC approval for CAPVAXIVE for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in adults, marking the fourth approval for CAPVAXIVE following the U.S., Canada and Australia. Merck also received approval for GARDASIL 9 for males in China, making it the first 9-valent HPV vaccine approved for the prevention of certain HPV-related cancers and diseases in Chinese males 16-26 years of age. At the 32nd Conference on Retroviruses and Opportunistic Infections, Merck presented positive results from two pivotal Phase 3 trials of the investigational, once-daily, oral two-drug regimen of doravirine/islatravir (DOR/ISL) in adults with virologically suppressed HIV-1 infection. Merck plans to begin submitting applications for marketing authorization of DOR/ISL by mid-2025.
In cardiovascular disease, results were presented from the Phase 3 ZENITH trial evaluating WINREVAIR when added to background therapy in adults with pulmonary arterial hypertension (PAH, Group 1 PH) WHO functional class (FC) III or IV at high risk of mortality. The results, presented at the American College of Cardiology’s 74th Annual Scientific Session and Expo, demonstrated that WINREVAIR reduced the risk of a composite of all-cause death, lung transplantation and hospitalization for PAH by 76% compared to placebo. The trial was stopped early due to overwhelming efficacy at the interim analysis.
Merck continued executing on its business development strategy to expand and diversify its pipeline. The company entered into an exclusive license agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd. (Hengrui Pharma) for HRS-5346, an investigational oral small molecule Lipoprotein(a) [Lp(a)] inhibitor currently being evaluated in a Phase 2 clinical trial in China. The transaction is expected to close in the second quarter of 2025.
Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows.
Oncology
FDA Granted Priority Review for Merck’s Application for KEYTRUDA Plus Standard of Care as Perioperative Treatment for Resectable LA-HNSCC; Based on Results From Phase 3 KEYNOTE-689 Trial; FDA Set PDUFA Date of June 23, 2025
(Read Announcement)
WELIREG Received First Conditional EC Approval for Two Indications; Based on Results From Phase 2 LITESPARK-004 and Phase 3 LITESPARK-005 Trials
(Read Announcement)
Merck’s Investigational Subcutaneous Pembrolizumab With Berahyaluronidase Alfa Demonstrated Noninferior Pharmacokinetics Compared to IV KEYTRUDA in Pivotal 3475A-D77 Trial; FDA Set PDUFA Date of Sept. 23, 2025
(Read Announcement)
Merck Announced Phase 3 waveLINE-010 Trial Initiation Evaluating Zilovertamab Vedotin, an Investigational ADC, for the Treatment of Patients With Previously Untreated DLBCL
(Read Announcement)
Vaccines
EC Approved CAPVAXIVE for Prevention of Invasive Pneumococcal Disease and Pneumococcal Pneumonia in Adults
(Read Announcement)
Cardiovascular
WINREVAIR Reduced Risk of a Composite of All-Cause Death, Lung Transplantation and Hospitalization for PAH by 76% Compared to Placebo in Phase 3 ZENITH Trial
(Read Announcement)
Infectious Diseases
Merck Announced Positive Data From Phase 3 Trials That Show the Investigational, Once-Daily, Oral Two-Drug Regimen of Doravirine/Islatravir (DOR/ISL) Maintained HIV-1 Viral Suppression at Week 48
(Read Announcement)
Manufacturing and R&D Investment
Merck is making long-term investments in its U.S. manufacturing and R&D capabilities. Merck has allocated more than $12 billion toward U.S. capital investment since 2018 and expects to invest over $9 billion more by the end of 2028. This includes the recently announced opening of a new, $1 billion, 225,000-square-foot facility dedicated to vaccine manufacturing at Merck’s Durham, North Carolina, site.
Upcoming Investor Event
Merck will host an Oncology Investor Event to coincide with the American Society for Clinical Oncology Annual Meeting on Monday, June 2, 2025, 6 p.m. CT, at which senior management will provide an update on the company’s oncology strategy and program. The event will take place in Chicago and will be accessible via live audio webcast at this weblink.
Full-Year 2025 Financial Outlook
The following table summarizes the company’s full-year financial outlook.
Full Year 2025
Updated
Prior
Sales*
$64.1 billion to $65.6 billion
$64.1 billion to $65.6 billion
Non-GAAP Gross margin2
Approximately 82%
Approximately 82.5%
Non-GAAP Operating expenses2**
$25.6 billion to $26.6 billion
$25.4 billion to $26.4 billion
Non-GAAP Other (income) expense, net2
$300 million to $400 million expense
$300 million to $400 million expense
Non-GAAP Effective tax rate2
15.5% to 16.5%
16.0% to 17.0%
Non-GAAP EPS2***
$8.82 to $8.97
$8.88 to $9.03
Share count (assuming dilution)
Approximately 2.51 billion
Approximately 2.53 billion
*The company does not have any non-GAAP adjustments to sales.
**Includes $300 million for an anticipated milestone payment to LaNova Medicines Ltd. (LaNova) associated with the technology transfer for MK-2010 and an anticipated $200 million upfront payment to Hengrui Pharma upon closing of the license agreement. Outlook does not assume any additional significant potential business development transactions.
***Includes expected one-time charges of approximately $0.15 per share in the aggregate related to the $300 million payment to LaNova upon completion of the technology transfer for MK-2010 and the $200 million upfront payment to Hengrui Pharma upon closing of the license agreement.
Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and income and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company’s future GAAP results.
Merck continues to expect full-year 2025 sales to be between $64.1 billion and $65.6 billion, including a revised negative impact of foreign exchange of approximately 1% at mid-April 2025 exchange rates.
Merck’s outlook includes the impact of tariffs implemented to date by the U.S. government on imports from other countries, plus the tariffs imposed by foreign governments on the U.S., the most significant of which relate to China. Merck estimates the impact of these tariffs will lead to incremental costs of approximately $200 million, which will primarily be recorded in Cost of Sales, negatively impacting gross margin.
Merck now expects its full-year non-GAAP effective income tax rate to be between 15.5% and 16.5%.
Merck now expects its full-year non-GAAP EPS to be between $8.82 and $8.97, including a negative impact of foreign exchange of more than $0.20 per share. This revised non-GAAP EPS range now reflects an anticipated one-time charge of $200 million, or approximately $0.06 per share, for an upfront payment to be made upon closing of the license agreement with Hengrui Pharma, which is expected in the second quarter of 2025. If not for this newly anticipated charge, the updated non-GAAP EPS outlook would have been unchanged from the prior outlook. The guidance range continues to reflect an anticipated one-time charge of $300 million, or approximately $0.09 per share, related to the payment to LaNova that will be recognized upon completion of the technology transfer for MK-2010. In 2024, non-GAAP EPS of $7.65 was negatively impacted by a net charge of $1.28 per share related to certain asset acquisitions, licensing agreements and collaborations.
Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the call on Thursday, April 24, at 9 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures and slides highlighting the results, will be available at www.merck.com.
All participants may join the call by dialing (800) 369-3351 (U.S. and Canada Toll-Free) or (517) 308-9448 and using the access code 9818590.