Merck released its full-year 2025 revenue guidance on Tuesday, falling short of Wall Street’s expectations due to a temporary pause in shipments of a key vaccine to China.
Shares of Merck dropped 8% by the market’s close on Tuesday.
The pharmaceutical giant projects 2025 sales between $64.1 billion and $65.6 billion, below the $67.31 billion expected by analysts surveyed by LSEG. In its release, the company attributed this forecast to its decision to halt Gardasil shipments to China starting in February, with the pause expected to last until at least mid-2025.
Gardasil is a vaccine that protects against HPV, the most prevalent sexually transmitted infection in the U.S., and a leading cause of certain cancers. Concerns over Gardasil’s sales in China have unsettled investors over the past year, as the country represents the majority of the vaccine’s international revenue.
Merck’s revenue forecast assumes no further shipments of Gardasil to China at the low end and less than $1 billion in sales at the high end.
On the company’s earnings call, CEO Robert Davis stated that Gardasil inventory levels in China “remain elevated at above normal levels,” adding that demand has not rebounded as expected due to factors such as softer consumer spending. He explained that pausing shipments would enable a “more rapid reduction of excess inventory” while also supporting the financial position of the company’s commercialization partner in China, Zhifei.
Davis further expressed confidence that the pause would allow Gardasil to return to a “more normal market dynamic,” as underlying demand absorbs the excess inventory held by Zhifei. However, he noted that the timeline for reducing inventory levels remains uncertain.
Given the “uncertain timing of an economic recovery in China,” Merck has withdrawn its $11 billion annual sales target for Gardasil, according to CFO Caroline Litchfield. However, she emphasized that the company still sees a “path” to reaching that revenue milestone.
Gardasil’s performance will play a crucial role in Merck’s strategy to offset future losses from Keytruda, the company’s top-selling cancer treatment, which will lose exclusivity in 2028. The company hopes that Gardasil’s recent approval for use in men aged 9 to 26 in China will eventually drive greater adoption of the vaccine.
“We believe China still represents a significant long-term opportunity for Gardasil given the large number of females, and now males with our recent approval, that are not yet immunized, and we remain both committed and well-positioned to maximize this potential for the long-term,” Davis stated.
Merck Company (Photo: Adobe Stock)For 2025, Merck anticipates full-year adjusted earnings of $8.88 to $9.03 per share, aligning closely with analysts’ expectations. This outlook includes a charge of approximately 9 cents per share related to the company’s license agreement with privately held drugmaker LaNova.
Sales of Keytruda, other oncology treatments, and Merck’s recently launched cardiovascular drug helped the company surpass fourth-quarter 2024 earnings expectations.
For the quarter, Merck reported net income of $3.74 billion, or $1.48 per share, compared to a net loss of $1.23 billion, or 48 cents per share, in the same period a year earlier.
Excluding acquisition and restructuring costs, Merck posted adjusted earnings of $1.72 per share. Both adjusted and non-adjusted figures include a 23-cent per share charge related to recent licensing agreements, including a deal to develop an experimental obesity medication from a Chinese drugmaker.
Quarterly revenue reached $15.62 billion, marking a 7% increase from the prior year.
Pharmaceutical Division
Merck’s pharmaceutical unit, which develops a broad range of medications, generated $14.04 billion in fourth-quarter revenue, reflecting a 7% year-over-year increase.
Keytruda brought in $7.84 billion for the quarter, up 19% from the previous year. That figure exceeded the $7.63 billion analysts had anticipated, according to estimates from StreetAccount.
The growth was primarily driven by increased use of Keytruda for earlier-stage cancers and strong demand for the drug in treating metastatic cancers, which spread to other parts of the body.
Meanwhile, Gardasil sales totaled $1.55 billion, representing a 17% decline from the fourth quarter of 2023. That figure came in slightly below analysts’ expectations of $1.58 billion, per StreetAccount estimates.
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Merck’s Type 2 diabetes treatment, Januvia, also experienced a sharp decline, with quarterly sales falling to $487 million, a 38% drop from the prior year. The company attributed this decline to lower U.S. pricing, supply constraints in China, and increasing competition from generic alternatives in international markets.
Januvia is among the 10 medications included in Medicare’s drug price negotiations under the Inflation Reduction Act, a policy designed to make expensive prescription drugs more affordable for older Americans. The first round of negotiated prices is set to take effect in 2026.
Animal Health Division
Merck’s animal health division, which produces vaccines and medications for pets and livestock, reported nearly $1.4 billion in sales for the quarter, reflecting a 9% increase from the same period last year. The company attributed the growth to higher pricing across its product lineup.
