Merck The group announced third-quarter profits and revenue above estimates on Thursday, driven by strong demand for its cancer immunotherapy Keytruda.
The drugmaker also reduced its full-year profit outlook to reflect, among other factors, a decline in estimated tariff costs. Merck shares closed flat on Thursday.
Keytruda sales exceeded $8 billion for the first time in a quarter, up 10% from the same period last year. The drug’s revenue of $8.14 billion was slightly below the $8.24 billion analysts expected, according to StreetAccount estimates.
These results come as Merck cuts costs by $3 billion by the end of 2027 and prepares to offset revenue losses due to the upcoming expiration of Keytruda’s patent in 2028.
The pharmaceutical giant now expects its 2025 adjusted earnings to be between $8.93 and $8.98 per share. This compares to its previous outlook of $8.87 to $8.97.
Merck said this reflected several new elements, including “a decline in estimated costs related to the impact of tariffs.” In the previous two quarters, the company included an estimated $200 million from tariffs that President Donald Trump has put in place so far, but not from levies planned specifically for pharmaceuticals. Merck did not disclose a new cost estimate for existing tariffs.
Merck said the forecast also reflects a benefit from a modified deal with AstraZeneca for a pill for a specific genetic disease, partially offset by costs related to the company’s now-completed acquisition of Verona Pharma.
Merck expects revenue for the year to be between $64.5 billion and $65 billion, a figure reduced on both sides from its previous forecast of $64.3 billion to $65.3 billion.
Here’s what Merck reported for the third quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $2.58 adjusted vs. $2.35 expected
- Income: $17.28 billion versus $16.96 billion expected
The company reported net income of $5.79 billion, or $2.32 per share, for the quarter. That compares to net income of $3.16 billion, or $1.24 per share, for the year-ago period.
Excluding acquisition and restructuring costs, Merck earned $2.58 per share for the third quarter.
Merck generated $17.28 billion in revenue for the quarter, up 4% from the same period last year.
Merck continues to face problems with sales in China of Gardasil, a vaccine that prevents cancer caused by HPV, the most common sexually transmitted infection in the United States.
In February, Merck announced its decision to halt shipments of Gardasil to China starting that month. In July, Chief Financial Officer Caroline Litchfield said the company would not resume shipments to China until at least the end of 2025, noting that inventories remained high and demand was still weak.
Gardasil generated revenue of $1.75 billion for the quarter, down 24% from the same period last year, due to lower demand in China. Still, that was what analysts expected, according to StreetAccount.
Investors are eager to receive additional updates on Gardasil’s presence in China and details from Merck on possible drug pricing agreements with Trump under his controversial “most favored nation” policy. Trump has so far signed agreements with Pfizer, AstraZeneca and EMD Serono, the world’s largest maker of fertility drugs, which aim to make their drugs easier for Americans to access.
In an earnings conference call Thursday, Merck CEO Rob Davis said the company shares the Trump administration’s goal of “lowering out-of-pocket patient costs for our products in the United States while realizing higher prices for our medicines and vaccines in countries that have not paid fair value for the innovation we deliver.”
Merck is “actively engaged” with the administration to carry out these efforts.
Pharmaceutical sales, animal health
Merck’s pharmaceutical unit, which develops a wide range of drugs, reported third-quarter revenue of $15.61 billion. This represents an increase of 4% compared to the same period a year earlier.
Keytruda’s increase is due to higher use of the drug for early-stage cancers and strong demand for the treatment of metastatic cancers, which spread to other parts of the body, the company said.
Meanwhile, Winrevair, Merck’s new drug used to treat a rare and fatal lung disease, reported revenue of $360 million for the quarter. Analysts expected the drug to gross $413 million, according to StreetAccount estimates.
Winrevair’s growth largely reflects higher adoption in the United States. But it was partially offset by the timing of distributors’ purchases of the drug and lower net prices nationwide, primarily due to changes to Medicare’s prescription drug plans.
Merck’s animal health division, which develops vaccines and drugs for dogs, cats and cattle, reported revenue of nearly $1.62 billion, up 9% from the same period a year earlier. The company said this primarily reflects higher demand for livestock products.
Correction: Sales at Merck’s animal health division increased 9% from the same period last year. An earlier version incorrectly stated the percentage.