Merck Q2 Earnings Top, Sales Meet Estimates, 2025 View Narrowed

Merck MRK reported second-quarter 2025 adjusted earnings per share (EPS) of $2.13, which beat the Zacks Consensus Estimate of $2.01. Earnings, however, declined 7% year over year on a reported basis and 5% excluding foreign exchange (Fx). The decrease was due to an upfront payment made by the company for a license agreement with Hengrui Pharma.Including acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings were $1.76 per share, down 18% on a reported basis and 16% excluding Fx.Revenues declined 2% year over year on a reported basis as well as excluding Fx to $15.81 billion. Sales were in line with the Zacks Consensus Estimate.All sales growth numbers discussed below are on a year-over-year basis and exclude Fx impact.Sales Performance of MRK's Oncology DrugsMerck’s flagship product, Keytruda, generated sales of $7.96 billion in the quarter, up 9%. Sales of the drug benefited from rapid uptake across earlier-stage indications in triple-negative breast cancer, renal cell carcinoma and non-small cell lung cancer. Also, continued strong momentum in metastatic indications boosted sales growth.Keytruda sales beat the Zacks Consensus Estimate of $7.90 billion and our estimate of $7.87 billion.Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the second quarter. Merck has a deal with British pharma giant AstraZeneca AZN to co-develop and commercialize PARP inhibitor Lynparza and a similar one with Japan’s Eisai for its tyrosine kinase inhibitor, Lenvima.Alliance revenues from AZN-partnered Lynparza increased 15% to $370 million in the quarter, driven by higher demand globally. Lenvima alliance revenues totaled $265 million, up 5%.Welireg recorded sales of $162 million, up 29%. The drug’s sales benefited from higher demand in the United States as well as early launch uptake in certain European markets.Sales Performance of MRK's Other Key ProductsIn vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — plunged 55% to $1.13 billion due to lower demand in China as well as the timing of public-sector purchases in certain international markets. The Gardasil/Gardasil 9 sales figure missed the Zacks Consensus Estimate of $1.30 billion and our estimate of $1.43 billion.Proquad, M-M-R II and Varivax vaccines recorded combined sales of $609 million, down 2%. Sales of the rotavirus vaccine, Rotateq, declined 26% to $121 million, while Pneumovax 23 (pneumococcal vaccine polyvalent) vaccine sales declined 37% to $38 million.Sales of the pneumococcal 15-valent conjugate vaccine Vaxneuvance rose 20% to $229 million, primarily driven by favorable public-sector activity in the United States and higher demand in ex-U.S. markets.Capvaxive, Merck’s recently launched pneumococcal 21-valent conjugate vaccine, generated sales worth $129 million compared with $107 million reported in the previous quarter.In the hospital specialty portfolio, neuromuscular blockade medicine, Bridion injection, generated sales of $461 million in the quarter, up 1%. While the drug’s sales benefited from higher demand in the United States, the gains were offset by generic competition in certain international markets.In Diabetes, Januvia/Janumet franchise sales remained flat year over year at $623 million. Sales of the drug have been affected by lower demand in China,  generic competition in most international markets and lower demand in the United States. New PAH drug Winrevair, which received FDA approval in March 2024, generated sales of $336 million compared with $280 million in the previous quarter, reflecting continued strong uptake.Sales of Lagevrio (molnupiravir) declined 27% to $83 million in the quarter.MRK's Animal Health SegmentThe segment generated revenues of $1.65 billion, up 11% year over year both on a reported basis and excluding Fx. This growth was driven by higher demand for livestock products and the inclusion of sales from the Elanco aqua business acquired last July. Sales from this segment beat the Zacks Consensus Estimate as well as our model estimate of $1.55 billion.MRK's Cost and Margin DiscussionAdjusted gross margin was 82.2% up 130 basis points year over year, driven by a favorable product mix.Adjusted selling, general and administrative expenses were $2.63 billion in the second quarter, down 2% year over year, owing to lower administrative and promotional costs.Adjusted research and development spending was $3.99 billion, up 15% from the year-ago quarter levels. The increase was due to an upfront payment of $200 million made for a license agreement with Hengrui Pharma, as well as higher compensation and benefit costs.MRK's 2025 GuidanceMerck narrowed its sales and EPS guidance for the year despite a less negative impact from currency. The company now expects revenues to be in the range of $64.3-$65.3 billion, compared with the previous expectation of $64.1-$65.6 billion. The updated guidance includes a revised negative impact on sales from Fx of around 0.5% versus the prior estimate of 1%.Adjusted EPS is expected to be between $8.87 and $8.97 versus the prior estimated range of $8.82 and $8.97. This guidance range includes a revised negative impact of Fx of around 15 cents per share compared with the previous estimate of more than 20 cents per share.Shares of Merck were trading down in pre-market today due to the tightening of the sales and EPS outlook.Year to date, shares of Merck have lost 15.5% against the industry’s increase of 2.3%.Image Source: Zacks Investment ResearchThe revision of the EPS guidance continues to reflect a one-time charge of $200 million payable as an upfront payment to China-based Hengrui Pharma for in-licensing the latter’s investigational oral Lp(a) inhibitor, HRS-5346.The revised guidance now also accounts for a one-time charge of $300 million (to be recorded in the third quarter of 2025) related to a payment made to LaNova for the technology transfer for MK-2010, which will impact EPS by almost 16 cents in aggregate.The adjusted gross margin is expected to be around 82%, which is unchanged from the previous expectation.Adjusted operating costs are now expected to be in the range of $25.6 to $26.4 billion (previously: $25.6-$26.6 billion). The adjusted tax rate is now expected to be around 15% to 16% versus the prior guidance of 15.5% to 16.5%.Please note that the updated guidance does not include the impact of Merck’s upcoming acquisition of Verona Pharma VRNA.In early July, Merck announced a definitive agreement to acquire Verona Pharma for approximately $10 billion. The transaction is expected to be closed in the fourth quarter of 2025.The deal will add Verona’s Ohtuvayre, approved for the maintenance treatment of chronic obstructive pulmonary disease.Merck & Co., Inc. Price, Consensus and EPS Surprise Merck & Co., Inc. price-consensus-eps-surprise-chart | Merck & Co., Inc. QuoteMRK's Zacks RankMerck currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Higher. Faster. Sooner. 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(MRK): Free Stock Analysis Report Verona Pharma PLC American Depositary Share (VRNA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks