Key Highlights from the 2025 Financial Reports

• Financial Growth and Revenue: Merck reported fourth-quarter 2025 total company revenues of 16.4billion∗∗,markinga5.Forthefullyear2026,thecompanyexpectsrevenuetorangebetween∗∗65.5 billion and $67 billion.

• Oncology Leadership: The Keytruda family remains a primary growth driver, with Q4 sales reaching $8.4 billion, a 5% increase. Growth was bolstered by uptake in earlier-stage cancers, such as breast and cervical cancer, and the launch of Keytruda QLex (the subcutaneous formulation), which recorded $35 million in initial sales.

• Cardiometabolic and Respiratory Success: Winrevair, a treatment for pulmonary arterial hypertension (PAH), achieved global sales of 467million∗∗inQ4,withover9,100patientsstartingtherapy.Additionally,∗∗Ohtuvayre∗∗(forCOPD)contributed∗∗178 million following the acquisition of Verona Pharma.

• Strategic Acquisitions: Merck completed the acquisitions of Verona Pharma and Sidera Therapeutics in 2025. The Sidera acquisition brought in MK-1406, a first-in-class antiviral for influenza prevention with an estimated revenue potential exceeding $5 billion.

• Pipeline and Long-Term Outlook: Management has expanded its “line of sight” to over $70 billion of potential commercial opportunity by the mid-2030s, an increase of $20 billion over the previous year’s estimate. This outlook is supported by 20 potential new growth drivers and a robust animal health business expected to double by the mid-2030s.

• Loss of Exclusivity (LOE) Strategy: To prepare for the eventual patent expiration of Keytruda (IV), Merck is focused on transitioning 30% to 40% of the market to Keytruda QLex by 2028. While the compound patent expires in December 2028, Merck intends to defend additional patents that could extend protection into late 2029.

• Vaccine Performance and Challenges: Gardasil sales fell 35% to 1billion∗∗duetolowerdemandinChinaandJapan,thoughotherinternationalmarketssaw8.Conversely,the∗∗Capvaxive∗∗launchprogressedwellwith∗∗279 million in sales.

Merck & Co. Q4 2025 Sales and Earnings Analysis Briefing

Executive Summary

Merck & Co. (MRK) concluded 2025 with a strategic focus on transforming its portfolio to ensure sustainable growth beyond the late-decade Loss of Exclusivity (LOE) for its flagship oncology therapy, Keytruda. The company reported Q4 2024 revenues of $16.4 billion, a 5% increase (4% ex-exchange), driven by strong demand in oncology, animal health, and new product launches in cardiometabolic and respiratory sectors.

Key takeaways from the analysis include:

• Expanded Commercial Opportunity: Merck now projects over $70 billion in non-risk-adjusted commercial opportunity by the mid-2030s—a $20 billion increase over previous estimates—driven by a deep pipeline and strategic acquisitions.
• Strategic Acquisitions: The company completed the acquisitions of Verona Pharma (Otuve) and Sedera Therapeutics (MK1406), the latter of which provides a first-in-class influenza antiviral with estimated peak revenue potential exceeding $5 billion.
• Pipeline De-risking: Ten key programs representing the majority of the $70 billion long-term opportunity are expected to be substantially clinically de-risked by the end of 2027.
• Keytruda Strategy: While the compound patent for Keytruda expires in December 2028, management expressed growing confidence in defending additional method patents that could extend protection into May or November 2029. The transition to the subcutaneous formulation (QLex) is underway, with a 30% to 40% adoption target by 2028.
• 2026 Financial Outlook: Merck anticipates 2026 revenue between $65.5 and $67 billion, reflecting modest top-line growth as the company absorbs headwinds from generic competition and pricing regulations (IRA).

——————————————————————————–

Financial Performance and 2026 Guidance

Fourth Quarter 2025 Results

Merck’s Q4 performance was characterized by the continued dominance of Keytruda and growth in the animal health sector, partially offset by declining vaccine sales in international markets.

2026 Full-Year Guidance

The company’s initial 2026 outlook accounts for a significant one-time charge related to the Sedera acquisition.

• Revenue: $65.5 Billion to $67.0 Billion (1% to 3% growth).
• Non-GAAP EPS: $5.00 to $5.15 (includes $3.65 per share charge for Sedera).
• Operating Expenses: $35.9 Billion to $36.9 Billion.
• Headwinds: Approximately $2.5 billion impact from generic competition (Januvia, Bridion, Dificid), IRA price setting, and lower Lagevrio demand.

——————————————————————————–

Portfolio Performance and Growth Drivers

Oncology

Keytruda remains the primary revenue driver, with the family of products generating $8.4 billion in Q4 (up 5%).

• Market Expansion: Growth is supported by uptake in earlier-stage cancers and metastatic indications, particularly in breast, cervical, and endometrial cancers.
• Keytruda QLex: The subcutaneous formulation launched with $35 million in Q4 sales. A permanent J-code is expected in April 2026 to facilitate broader adoption.
• Wellyreg: Sales rose 37% to $220 million, driven by use in advanced renal cell carcinoma (RCC).

Cardiometabolic and Respiratory

• Winrevair: Global sales reached $467 million. Management highlighted its potential to reshape the standard of care for pulmonary arterial hypertension (PAH).
• Otuve: Following the Verona Pharma acquisition, Otuve generated $178 million in Q4, showing strong new patient starts in the COPD market.

Vaccines and Animal Health

• Gardasil: Experienced a 35% decline in sales to $1 billion, primarily due to lower demand in China and Japan.
• Capvaxive: The pneumococcal vaccine launch is progressing well with $279 million in sales.
• Animal Health: Grew 6% in Q4, driven by livestock species. This business is projected to more than double in size by the mid-2030s.

——————————————————————————–

Pipeline Advancement and Clinical Milestones

Infectious Disease: The Sedera Acquisition

The acquisition of Sedera Therapeutics brings MK1406 (formerly CD388), a long-acting, strain-agnostic antiviral for influenza prevention.

• Strategic Value: Rob Davis noted, “We believe MK1406 has greater than $5 billion in revenue potential and can be a meaningful driver of growth later this decade.”
• Clinical Status: Phase III ANCHOR study enrollment is complete in the Northern Hemisphere; Southern Hemisphere enrollment is ongoing to capture diverse circulating strains.

Oncology: Antibody-Drug Conjugates (ADCs)

Merck is aggressively pursuing ADCs, specifically SAC-TMT, its TROP2-directed candidate.

• Broad Development: The company has 16 Phase III studies underway for SAC-TMT, targeting differentiated or first-in-class status across multiple tumor types.
• Differentiated Strategy: Dr. Dean Lee emphasized that Merck is using a context-dependent biomarker strategy to identify patients who will benefit most from TROP2-directed therapy.

Cardiometabolic and HIV

• Inlicitide: An investigational oral PCSK9 inhibitor. Phase III data showed statistically significant reductions in LDL cholesterol.
• HIV (Islatravir): Merck is developing once-daily and once-weekly oral regimens. The Islatravir/Doravirine combination demonstrated non-inferiority to Biktarvy in Phase III trials.

Ophthalmology

The company is targeting a $15 billion market with MK3000 (Wnt agonist) and MK8748 (TIE2 agonist/VEGF inhibitor) for retinal diseases.

• Unmet Need: Approximately 30-40% of patients are suboptimally responsive to current anti-VEGF therapies, providing a significant opening for Merck’s novel mechanisms.

——————————————————————————–

Intellectual Property and Regulatory Strategy

Keytruda Patent Runway

Management provided clarity on the intellectual property landscape for Keytruda:

• Compound Patent: Expires December 2028.
• Additional Patents: One “method of making” patent extends to May 2029, and a “method of use” patent extends to November 2029.
• Strategy: Rob Davis stated, “Our confidence that we will be able to defend those additional two patents has grown… there is a potential that you’re going to see protection actually make it through either May or November of 2029.”

Impact of the Inflation Reduction Act (IRA)

The IRA is expected to impact pricing for Keytruda starting in 2029. Merck’s strategy involves transitioning patients to the subcutaneous QLex formulation and diversifying the revenue base through new launches to mitigate this regulatory headwind.

——————————————————————————–

Strategic Commentary and Business Development

Merck maintains a disciplined but active business development (BD) posture.

• Target Size: While the “sweet spot” for acquisitions remains under $15 billion, CEO Rob Davis indicated the company would “go bigger” for the right scientific and value-creating opportunity.
• Confidence in Growth: Responding to concerns about modest top-line growth in 2026, Davis emphasized that the underlying strategic assets are growing at a rate of 5% to 8% when excluding non-strategic LOEs.

“The transformation of our portfolio is well underway, and momentum is building… we now have line of sight to over $70 billion of potential commercial opportunity by the mid-2030s.” — Rob Davis, Chairman and CEO