Merck outlines $50B growth opportunity by mid-2030s as pipeline and new launches accelerate

Earnings Call Insights: Merck & Co., Inc. (MRK) Q3 2025

MANAGEMENT VIEW

* CEO Robert Davis stated that "We continue to make meaningful progress in using the power of leading-edge science to save and improve lives around the world," highlighting approximately 80 Phase III trials across diverse therapeutic areas and investments behind more than 20 launch opportunities. Davis noted the completion of the strategic acquisition of Verona Pharma and described it as providing "another important growth driver with multibillion-dollar commercial potential into the next decade."
* Davis emphasized, "We're making strong progress across the business, and I remain confident in our ability to further broaden our impact to patients and deliver long-term growth and value for shareholders." He also referenced ongoing engagement with the U.S. administration regarding healthcare policy and announced a "broader plan that will result in the investment of more than $70 billion in expanded domestic manufacturing and R&D."
* CFO Caroline Litchfield reported, "Total company revenues were $17.3 billion, an increase of 4% or 3% excluding the impact of foreign exchange." Litchfield added, "We delivered solid performance in the quarter, with growth driven by continued strength in Oncology and Animal Health as well as increasing contributions from our many new product launches." She confirmed EPS of $2.58 for the quarter and highlighted a gross margin of 81.9%, an increase of 1.4 percentage points.
* Litchfield provided guidance for 2025: "We expect full year revenue to be between $64.5 billion and $65 billion," with EPS guidance of $8.93 to $8.98 and a gross margin assumption of approximately 82%.
* Executive VP Dean Li highlighted clinical and regulatory milestones, including FDA approval for KEYTRUDA QLEX and positive top line results from the CORALreef Lipids trial for enlicitide. He underscored the expansion of the immunology pipeline and described OHTUVAYRE, acquired through Verona, as a "first-in-class dual phosphodiesterase 3 and 4 inhibitor for the maintenance treatment of chronic obstructive pulmonary disease."

OUTLOOK

* Litchfield stated, "We expect full year revenue to be between $64.5 billion and $65 billion," and EPS guidance of $8.93 to $8.98, noting the range includes a negative impact from foreign exchange and a benefit from the restructured agreement for Koselugo. The guidance now incorporates the Verona Pharma acquisition and the restructured Koselugo agreement. She added, "As we look to 2026, we expect an acceleration in underlying operating expense growth driven by investments in both R&D and SG&A to fuel our pipeline and new launches, including more than $0.5 billion of investment to maximize the potential of OHTUVAYRE."
* Management maintained its commitment to its dividend and continued pace of share repurchases, expecting approximately $5 billion for the full year.

FINANCIAL RESULTS

* Revenues for the third quarter were $17.3 billion. Oncology sales, led by KEYTRUDA, increased 8% to $8.1 billion, with growth from both metastatic and earlier-stage cancers. WELIREG sales rose 41% to $196 million. GARDASIL sales were $1.7 billion, down 25%, with U.S. growth offset by declines in Japan and China. CAPVAXIVE sales reached $244 million, and ENFLONSIA recorded $79 million in initial sales. WINREVAIR saw global sales of $360 million, with a noted timing impact from distributor purchases. Animal Health sales increased 7%. Gross margin was reported at 81.9%, and operating expenses were $6.6 billion, including $300 million in business development charges.
* Litchfield highlighted, "Our current guidance midpoint of $8.96 reflects a benefit from the restructured agreement for Koselugo of $0.09, partially offset by an estimated negative impact related to the acquisition of Verona of $0.04."

Q&A

* Asad Haider, Goldman Sachs: Asked about business development priorities and potential for transformative deals. Davis responded that Merck seeks opportunities aligned with key therapeutic areas, focusing on deals in the $1 billion to $15 billion range but is open to larger transactions if science and value align. "Our focus will be on bringing in pipeline assets, not on those types of deals."
* Geoffrey Meacham, Citigroup: Inquired about expanding development of TL1A immunology. Li explained the move into rheumatology and dermatology, emphasizing the importance of Phase III trials in Crohn's and SSc-ILD.
* Akash Tewari, Jefferies: Queried about the solid tumor strategy and the relative excitement for TROP2 vs. PD-1 VEGF. Li said Merck is "extremely excited about the TROP2, the sac-TMT," and is eager to see results in broader settings.
* Evan Seigerman, BMO: Sought updates on ENFLONSIA's U.S. launch. Davis noted a later launch into the season but stated, "We feel good about where we are with ENFLONSIA" and expect increasing impact into 2026. Litchfield added, "Feedback from customers has been very good."
* Daina Graybosch, Leerink: Asked about KEYTRUDA's early-stage sales. Davis reported more than half of KEYTRUDA's growth is from earlier-stage indications, exceeding 25% of total sales.
* Chris Schott, JPMorgan: Sought updates on MFN policy. Davis said, "We are in continuing discussions with the administration" and is "very optimistic that we're going to have a constructive outcome."
* Carter Gould, Cantor: Inquired about WELIREG and overall survival data. Li stressed the importance of OS and expressed eagerness for future results.
* Terence Flynn, Morgan Stanley: Asked about 2026 top line expectations. Litchfield projected solid growth fueled by new launches and acknowledged headwinds from loss of exclusivity and IRA price setting.

SENTIMENT ANALYSIS

* Analysts focused on business development, pipeline progress, and policy risks, with a neutral to slightly positive tone, probing for strategic clarity and competitive positioning.
* Management maintained a confident and optimistic outlook in both prepared remarks and Q&A, using phrases like "we remain highly focused" and "I remain confident." During Q&A, management continued to project confidence, though occasionally more cautious or measured when addressing policy and pricing questions.
* Compared to the previous quarter, the tone is steady, with continued emphasis on pipeline strength and new launches. Analysts' tone remains inquisitive but balanced, while management sustains a theme of constructive optimism.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year revenue and EPS was reaffirmed, now including Verona Pharma and Koselugo impacts, with minor adjustments for FX and acquisition effects. In Q2, Verona Pharma was an announced but pending acquisition, now completed and integrated into guidance.
* Oncology growth remains a key driver, with continued strong performance for KEYTRUDA and WELIREG. New product launches (WINREVAIR, CAPVAXIVE, ENFLONSIA) are contributing more meaningfully, and OHTUVAYRE is now incorporated following the Verona acquisition.
* Strategic focus has shifted to executing and integrating recent deals, further broadening the pipeline and investing in manufacturing.
* Analysts have maintained focus on product launches, business development, and policy headwinds. Management’s confidence in pipeline execution and future growth remains consistent with the prior quarter.

RISKS AND CONCERNS

* Management noted potential headwinds from U.S. healthcare policy, price pressures, and loss of exclusivity for key products such as DIFICID, BRIDION, and JANUVIA. Litchfield stated, "We do expect some headwind from price in our ex-U.S. markets."
* The potential impact of government reforms and pricing changes was raised by both management and analysts, with ongoing discussions highlighted but no concrete resolutions yet.
* Competition in both human and animal health segments, as well as in vaccines (e.g., VAXNEUVANCE in Japan), was specifically mentioned.

FINAL TAKEAWAY

Management underscores the transformation underway at Merck, with growing contributions from a diversified portfolio, ongoing strategic acquisitions like Verona Pharma, and a robust pipeline of over 80 Phase III trials. The company stresses its ability to drive long-term growth and value for shareholders by investing in innovation, executing new product launches, and maintaining strategic discipline in business development. The outlook remains confident, backed by strong third-quarter results, expanding manufacturing investments, and clear guidance for the year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mrk/earnings/transcripts]

MORE ON MERCK

* Merck & Co., Inc. (MRK) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4835542-merck-and-co-inc-mrk-q3-2025-earnings-call-transcript]
* Merck & Co., Inc. 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4835454-merck-and-co-inc-2025-q3-results-earnings-call-presentation]
* Merck: Wall Street Surprised By Q3 Strength, Keytruda Sales Surge [https://seekingalpha.com/article/4835377-merck-wall-street-surprised-by-q3-strength-keytruda-sales-surge]
* Merck stock dips after narrowing full-year sales outlook [https://seekingalpha.com/news/4511010-merck-stock-dips-after-narrowing-full-year-sales-outlook]
* Merck Non-GAAP EPS of $2.58 beats by $0.23, revenue of $17.3B beats by $320M [https://seekingalpha.com/news/4511134-merck-non-gaap-eps-of-2_58-beats-by-0_23-revenue-of-17_3b-beats-by-320m]