Merck’s fourth quarter was marked by continued demand for its oncology and cardiometabolic franchises, as well as the impact of several new product launches and strategic acquisitions. Management attributed growth to ongoing uptake of Keytruda in earlier-stage cancers and to strong animal health results. CEO Robert M. Davis highlighted that “successful new product launches, the advancement of important clinical programs, and the expansion of our respiratory and infectious disease portfolios through acquisitions” were key contributors. Challenges included lower vaccine sales in key Asian markets and margin declines due to increased investment in the business and higher inventory reserves.
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Merck (MRK) Q4 CY2025 Highlights:
- Revenue: $16.4 billion vs analyst estimates of $16.12 billion (5% year-on-year growth, 1.8% beat)
- Adjusted EPS: $2.04 vs analyst estimates of $2.01 (1.5% beat)
- Adjusted EBITDA: $7.06 billion vs analyst estimates of $7.84 billion (43% margin, 10% miss)
- Adjusted EPS guidance for the upcoming financial year 2026 is $5.08 at the midpoint, missing analyst estimates by 9.8%
- Operating Margin: 23.5%, down from 27.5% in the same quarter last year
- Constant Currency Revenue rose 4% year on year (9% in the same quarter last year)
- Market Capitalization: $292 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Merck’s Q4 Earnings Call
- Mohit Bansal (Wells Fargo): Asked about the timing and design of the ANCHOR trial for MK1406 in influenza. Dr. Dean Y. Li explained the trial’s event-driven nature and the importance of robust data across geographies and subpopulations, without committing to an interim disclosure timeline.
- Akash Tewari (Jefferies): Questioned Merck’s development strategy for sac TMT (TROP2 ADC) compared to competitors. Dr. Li responded by emphasizing the breadth of Merck’s program, with 16 phase three studies and a focus on differentiation across tumor types.
- Alexandria Hammond (Wolfe Research): Inquired about the patent runway for Keytruda and QLEX ramp. CEO Robert M. Davis detailed the existing patent estate, highlighting conservative planning for loss of exclusivity in 2028 but noting potential extension to 2029.
- Evan Seigerman (BMO Capital Markets): Asked about the significance of dual-regimen HIV therapies versus the standard triple-regimen. Dr. Li highlighted the unmet need for integrase-sparing and weekly options, suggesting potential appeal for certain patient groups.
- Steve Scala (TD Cowen): Raised concerns about Merck’s modest growth guidance pre-Keytruda LOE. Davis defended the long-term growth outlook, citing a $70 billion commercial opportunity and the expected derisking of the pipeline by 2027.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be monitoring (1) the impact of new product launches, such as O2Ver and ongoing uptake in WinRevair, (2) results from pivotal phase three studies across oncology, infectious disease, and immunology, and (3) how Merck executes on integrating acquisitions and advancing its pipeline. The progression of regulatory approvals and competitive responses will also be important indicators for assessing the sustainability of Merck’s growth strategy.
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