MRK · Q3 2025 Earnings

Cautious

Merck & Co.

Reported October 30, 2025

30-second summary

Revenue grew 4% YoY to $17.28B with Keytruda up to $8.14B and US sales +14.6%, but International fell 8% and China collapsed 62% to $377M as Gardasil shipments remained suspended. Vaccines were down franchise-wide; Oncology and Animal Health absorbed the damage. Management raised FY2025 guidance modestly — revenue to $64.5–65.0B and non-GAAP EPS to $8.93–8.98 (midpoint $8.96 vs prior $8.92), reflecting +9¢ from the restructured Koselugo agreement and -4¢ from Verona. MFN pricing framework remains in active negotiation with no quantification offered.

Headline numbers

EPS

Q3 FY2025

$1.57

Revenue

Q3 FY2025

$17.28B

+4.0% YoY

Gross margin

Q3 FY2025

77.7%

Operating margin

Q3 FY2025

39.0%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$17.28B	+4.0%	$15.81B	+9.3%
EPS	$1.57	—	$2.28	-31.1%
Gross margin	77.7%	—	77.5%	+21bps
Operating margin	39.0%	—	31.6%	+737bps

Guidance

No comparable guidance data available; neither prior quarter nor current quarter provided numerical guidance for Q3 FY2025 or forward periods.

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Pharmaceutical	$15.611B	+4.0%
Animal Health	$1.615B	+9.0%
Oncology	$8.935B	+10.8%
Vaccines	$3.37B	-8.3%
Keytruda Revenue	$8.142 billion	—
Gardasil/Gardasil 9 Revenue	$1.749 billion	—
Winrevair Revenue	$360 million	—
Bridion Revenue	$439 million	—
Livestock Revenue (Animal Health)	$1.023 billion	—

Other KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
United States	$10.012B	+14.6%
International	$7.264B	-8.3%
Europe	$2.675B	+2.1%
China	$0.377B	-62.0%
Operating Margin	39.0%	—
Gross Margin	77.7%	—
Effective Tax Rate	14.2%	—

Management tone

Rob Davis's BD posture was unchanged from prior quarters: $1–15B sweet spot, willing to go larger, explicitly not interested in synergy-driven transformative deals — the Verona/Ohtuvayre close is being cited as the template, and Davis was explicit that "we're not done."

On MFN pricing, Davis declined to specify whether Merck would adopt the Pfizer/AstraZeneca framework, said he is "very optimistic" about a "constructive outcome" and that an announcement will come when finalized. The evasion is the signal: a material pricing framework is in active negotiation with no quantification offered.

On Keytruda earlier-stage mix, Davis disclosed that the earlier-stage indication share has exceeded the prior 25% target Merck had set for 2024, and now represents over half of Keytruda's growth — a structural shift in the franchise's growth composition heading into the QLEX launch.

Q&A highlights

Asad Haider · Goldman Sachs

Asked about business development strategy, specifically what Merck is looking for in potential targets and whether larger transformative acquisitions might be reconsidered given industry trends.

Rob Davis stated Merck continues to focus on the $1-15 billion deal range but is willing to go larger. They remain focused on science-driven acquisitions in oncology, immunology, and cardiometabolic areas. Merck explicitly does not believe transformative, synergy-driven deals align with their strategy due to their robust pipeline, and will focus on bringing in pipeline assets across all development stages and commercial opportunities.

Primary deal size range: $1 billion to $15 billionWilling to exceed stated range for right opportunitiesFocus on pipeline assets, not synergy-driven dealsOpen to Phase 1 through Phase 3 assets and commercial opportunities

Ekash Tiwari · Jefferies

Asked about confidence in SAC-TMT (Trop-2 ADC) showing 6-12 month OS benefit versus PD-1 VEGF approach, and implications for running additional Keytruda combination trials.

Dean Lee emphasized excitement about SAC-TMT data and noted that different Trop-2 ADCs may not be equivalent despite being in same class. 10 of 15 Phase 3 studies are in indications where other Trop-2s haven't been explored. Management is advancing both SAC-TMT and PD-1 VEGF approaches in appropriate patient populations, with data evolution determining future strategy.

15 Phase 3 studies initiated this year10 Phase 3 studies in novel indications for Trop-2 ADCsSAC-TMT showing potentially differentiated profile versus competitor Trop-2 ADCsPursuing SAC-TMT with IO and precision-targeted therapies

Chris Schott · JPMorgan

Asked about Most Favored Nation (MFN) pricing negotiations with the administration, whether recent Pfizer and AstraZeneca frameworks should be viewed as industry benchmark, and status of Merck discussions.

Rob Davis stated Merck is aligned with administration's goal of lowering patient out-of-pocket costs while ensuring foreign governments pay fair prices. Merck is in continuing discussions with the administration and Davis expressed optimism about a constructive outcome, but declined to specify details until an agreement is finalized.

Aligned with administration goal on patient out-of-pocket cost reductionSeeking fair-value pricing internationallyActively in discussions with administrationManagement optimistic about outcome

Louisa Hector · Barclays

Asked about Keytruda QLEX (subcutaneous) conversion expectations from IV formulation and clarification on whether Keytruda growth slowdown in 2026 applies to total franchise or IV-only, with question on separate reporting.

Rob Davis confirmed 30-40% patient adoption target over 18-24 months remains on track. Noted temporary J-code will slow early uptake (~6 months), but commercial contracting strategy designed to enable frictionless conversion. Caroline Litchfield confirmed growth slowdown applies to total Keytruda franchise, and they will report QLEX separately in 2026.

Target: 30-40% patient adoption rateTimeline: 18-24 months to achieve adoption targetPermanent J-code expected ~6 months after launchTemporary J-code period expected to slow uptake

Carter Gould · Cantor Fitzgerald

Asked about confidence in achieving overall survival (OS) benefit in WELREG Phase 3 study (LightSpark22) and importance of OS for driving adoption in HIF-2-alpha inhibitor setting.

Dean Lee stated OS is critical for patients and regulators, and Merck is 'eagerly awaiting' results to see if the OS boundary is crossed. Confirmed exciting first-in-class WELREG profile and multi-indication development program, with results to be shared when available.

OS outcomes pending for LightSpark22 studyPositioning WELREG as first-in-class HIF-2-alpha inhibitorDual indication approach: adjuvant and advanced RCCDemonstrated efficacy on top of VEGF-blocking agents

Answers to last quarter's watch list

Gardasil China 2026 decision. Not resolved on the print. China Pharma revenue was $377M (-62% YoY), and Gardasil shipments to China were $0 for the second straight quarter. Management has not yet guided on 2026 resumption.

Continue monitoring

Winrevair patient adds. Q3 revenue $360M, with ~1,500 new patient starts and 24,000+ total scripts dispensed. An approximate $40M distributor timing headwind in Q3 fully reversed in October.

Resolved positively

Operating margin under reinvestment. Non-GAAP gross margin printed 81.9% (+140bps YoY) and non-GAAP opex of $6.6B included $300M of BD charges (vs $2.2B a year ago). Ex-BD, opex was flat, with management flagging accelerated 2026 opex growth including >$500M behind Ohtuvayre. Status: Resolved — reinvestment ramp is now explicit for 2026

ACIP agenda for late-2025 meetings. Not addressed on the call.

Continue monitoring

Keytruda growth deceleration. Q3 Keytruda revenue $8.14B (+10% YoY), helped by ~$100M from an extra shipping Tuesday in the US; Q4 will carry a ~$200M YoY negative from wholesaler timing per CFO. Earlier-stage indications now drive over half of franchise growth. Status: Not addressed (no 2026 franchise reset on this call)

Verona / Ohtuvayre close. Davis confirmed the Verona acquisition closed in October and characterized Ohtuvayre as a "multi-billion dollar" opportunity, with >$500M of incremental investment planned in 2026.

Resolved positively

What to watch into next quarter

MFN pricing framework disclosure. Davis declined to quantify or detail the framework on the Q3 call. Watch for a binding announcement before or during the Q4 print — and specifically whether the structure mirrors the Pfizer/AstraZeneca templates or diverges. Material to gross-to-net assumptions.

FY2025 EPS landing vs $8.93–8.98 guide. With Q4 carrying a ~$200M Keytruda US headwind from wholesaler timing, watch whether Merck lands at the high end or above the refreshed range — and whether Q4 includes additional BD-related charges.

Keytruda QLEX launch metrics. Q4 will be the first full quarter with launch dynamics visible following the late-September FDA approval. Watch early uptake and any commentary on J-code dynamics.

Gardasil China 2026 guide. Shipments have been zero for two consecutive quarters. The Q4 print is the deadline — either resumption framing or a structural step-down. The $0 China Gardasil figure (vs ~$1B run-rate pre-suspension) frames the gap.

Welireg LightSpark 22 OS readout. Lee said Merck is "eagerly awaiting" the data. A positive OS signal materially expands the adjuvant RCC opportunity; a miss compresses it to advanced-line.

FY2026 initial guide framing. With Keytruda LOE approaching and management already flagging an opex acceleration in 2026 (including >$500M for Ohtuvayre), the first FY2026 commentary at JPM in January will reset the bridge narrative around Winrevair, Ohtuvayre, Capvaxive, Inflonsia and QLEX.

Sources

Merck Q3 2025 earnings press release (SEC EDGAR Ex. 99.2): https://www.sec.gov/Archives/edgar/data/310158/000110465925103974/tm2529620d1_ex99-2.htm
Merck Q3 2025 earnings call prepared remarks and Q&A (Rob Davis, Caroline Litchfield, Dean Lee).

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.