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Merck On Thursday, it lowered its annual profit guidance, citing estimated tariff costs and claims related to recent transactions.
The company currently expects adjusted revenue for 2025 to be between $8.82 and $8.97, a slight decline from its forecast of $8.88 to $9.03 per share.
The company said its expected tariff claims primarily reflect tax levies to a lower degree, primarily between the US and China, Canada and Mexico. Merck has built a robust presence in China, which is considered one of the company’s most important markets, and is part of its partners and manufacturing and research and development sites.
Merck noted that the new outlook does not take into account President Donald Trump’s planned tariffs on drugs imported into the US.
This includes Merck, which invests $12 billion in US manufacturing and research and development, and is expected to enter the country by the end of 2028.
In a revenue call on Thursday, Merck CEO Rob Davis said “If you look at 2025, there’s plenty of stock to ease what we can see in the short term.” He added that in the medium to long term, “we are already beginning to identify locations for our own manufacturing relocation,” which may appear to “change priorities of existing plants or create more internal production by bringing external manufacturing to “bridge disparities.”
“In many ways, we are in line with what the administration wants and we feel we are in a position to do it very effectively,” he said.
The new guidance includes a one-time fee of approximately 6 cents per share related to the company’s licensing agreement with Hengri Pharma announced in March.
Merck repeated its full-year sales forecast between $64.1 billion and $65.6 billion.
Also on Thursday, drugmakers reported first quarter revenues and profits that beat expectations as they said they had strengths in their oncology portfolio and animal health products.
Merck also cited “increasingly meaningful” sales contributions from two recently launched drugs. They are vaccines that are used to treat rare and deadly lung conditions, Capvaxi-type, designed to protect adults from bacteria known as pneumococcus pneumoniae, which can cause serious illnesses and lung infections.
The sale of these drugs is important to Merck’s efforts to offset losses from keytruda, the head of sales cancer therapy that will lose its exclusivity in 2028.
Based on an analyst survey by LSEG, here is what Merck reported in the first quarter compared to what Wall Street had expected:
Earnings per share: $2.22 adjusted vs. $2.14 forecast revaluation: $155.3 billion vs. $153.1 billion forecast
The company recorded net income of $5.08 billion, or $2.01 per share, for the quarter. This is compared to net profit of $4.766 billion, or $1.87 per share, year-on-year.
Merck won $2.22 per share in the first quarter, excluding acquisition and restructuring costs.
Merck earned quarterly $15.53 billion, down 2% from the same period a year ago.
Pharmaceuticals and animal health sales
Merck’s drug unit, which develops a wide range of drugs, booked revenue of $13.644 billion in the first quarter. This is a 3% decrease from the same period a year ago.
Keytruda recorded revenue of $7.21 billion in the quarter, up just 4% year-on-year.
This increase was driven by higher intake of Keytruda for early stage cancer and a strong demand for metastatic cancer drugs that spread to other parts of the body. Still, StreetAccount estimates showed analysts’ forecast of $7.433 billion in sales.
In particular, Merck continued to have problems selling Gardasil in China, a vaccine that prevents cancer from HPV, the most common sexually transmitted disease in the United States.
In February, Merck announced its decision to halt Gardasil’s shipments to China from that month, moving on to at least mid-2025. Investors may be looking for updates on their efforts during Thursday’s revenue call.
The Chinese market accounts for the majority of the international revenue of the hit shot. Merck hopes that Gardasil’s expanded approval for men between the ages of 9 and 26 in China will help boost the vaccine’s intake.
Gardasil won sales at $1.333 billion, down 41% from the first quarter of 2024, primarily due to low demand in China. StreetAccount estimates that this is below the $1.45 billion analysts had been expecting.
China is retaliating with a 125% tariff on goods from the US, with some experts saying that Chinese tariffs on US products could lead to an increase in prices or limited supply of popular Western medicines for Chinese patients.
Merck’s Animal Health Department, which develops vaccines and drugs for dogs, cats and cattle, recorded sales of nearly $1.59 billion, up 5% from the same period a year ago. The company said there was high demand for livestock products and sales from Elanco’s Aqua business, which it acquired last year, and it accelerated its growth.
