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Merck Adjusts Profit Expectations Amid Tariff Impacts
Merck recently announced a downward revision of its full-year profit forecast, attributing this change to an anticipated $200 million in costs related to tariffs, alongside a charge from a new licensing agreement.
The pharmaceutical giant now projects adjusted earnings for 2025 to range between $8.82 and $8.97 per share, lowering its previous estimate of $8.88 to $9.03.
The tariffs primarily stem from ongoing trade tensions between the U.S. and China, with additional impacts noted from Canada and Mexico. Merck has a substantial operational presence in China, which remains a vital market for the company, hosting key partnerships as well as manufacturing and R&D facilities.
Importantly, this new earnings outlook does not factor in the proposed tariffs on imported pharmaceuticals that were mentioned by former President Donald Trump, a development that has encouraged some pharmaceutical companies, including Merck, to enhance their manufacturing capabilities within the U.S.
Merck has made significant investments totaling approximately $12 billion in U.S. manufacturing and research and development and plans to allocate an additional $9 billion in the country by the close of 2028.
A component of the revised guidance includes a one-time cost of about 6 cents per share tied to Merck’s license agreement with Hengrui Pharma, which the company initially announced in March.
Despite these challenges, Merck has maintained its full-year revenue forecast, expecting total sales between $64.1 billion and $65.6 billion.
In its latest financial report, Merck revealed first-quarter results that comfortably exceeded Wall Street expectations, bolstered by strong performances in its oncology portfolio and contributions from animal health products.
The company highlighted “increasingly significant” revenue from two newly launched medications: Winrevair, aimed at treating a rare and severe lung condition, and Capvaxive, a vaccine designed to protect adults against pneumococcal infections.
These new drugs are expected to play a vital role in helping Merck offset anticipated declines from its leading cancer treatment, Keytruda, which will face loss of exclusivity in 2028.
First Quarter Financial Overview
Here’s a summary of Merck’s financial performance in the first quarter compared to analyst predictions:
Earnings per share: $2.22 adjusted vs. $2.14 expected
Revenue: $15.53 billion vs. $15.31 billion expected
Merck’s net income for the quarter was $5.08 billion, equating to $2.01 per share, marking an increase from $4.76 billion or $1.87 per share from the same period last year. After accounting for acquisition and restructuring costs, the adjusted earnings stood at $2.22 per share.
Total revenue for the quarter reached $15.53 billion, representing a 2% decrease year-over-year.
Pharmaceutical and Animal Health Sector Performance
Merck’s pharmaceutical division generated $13.64 billion in revenue during the first quarter, reflecting a 3% decline compared to the previous year.
Keytruda achieved $7.21 billion in revenue, only a 4% increase from the same quarter last year. This growth was attributed to an increased use of Keytruda for earlier-stage cancers and robust demand for its treatment in more advanced metastatic cancer cases. However, sales fell short of analysts’ forecasts of $7.43 billion, according to estimates from StreetAccount.
Additionally, Merck has faced challenges regarding sales of Gardasil, its HPV vaccine, in China. In February, the company decided to suspend shipments of Gardasil to China until at least mid-2025. The Chinese market accounts for a substantial portion of Gardasil’s international revenue, and Merck is optimistic that a recent expansion of approval for male vaccination may enhance uptake.
Gardasil generated $1.33 billion in sales, a sharp 41% drop compared to the first quarter of the previous year, largely attributed to declining demand in China. This figure also fell below the expected $1.45 billion based on analyst forecasts.
In response to the ongoing trade tensions, China has imposed tariffs reaching as high as 125% on U.S. goods. Some analysts predict that these tariffs could lead to increased prices or reduced availability of several Western medications in China, adding further complexity to Merck’s operations in the region.
On a positive note, Merck’s animal health division, which develops vaccines and medicines for pets and livestock, reported nearly $1.59 billion in sales, a 5% increase year-over-year. This growth is attributed to heightened demand for livestock products and contributions from Elanco’s aqua business, which was acquired last year.
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