Merck reported positive financial results for the first quarter of 2025, with adjusted earnings increasing 7%, supported by lower operating costs. This performance came despite a 2% decline in sales, due to a previous decision to suspend shipments of the Gardasil vaccine to China due to reduced demand.
Impact of Tariffs on Financial Performance
Recent trade tensions directly impacted Merck’s financial performance during the first quarter. The company estimated additional tariff costs of approximately $200 million. These include tariffs imposed by the U.S. government on imports of pharmaceuticals and components from various countries, particularly China.
In addition, Merck faces retaliatory tariffs from foreign governments, increasing operational pressures. These costs represent an unexpected burden within operating costs, forcing management to revise its annual earnings forecast.
Although the company continues to generate strong earnings, tariff costs have limited its ability to expand. They also resulted in a marginal reduction in adjusted earnings per share estimates. The data showed that the new forecast ranges between $8.82 and $8.97 per share, compared to previous estimates of $8.88 and $9.03.
Moreover, these challenges have prompted Merck to rethink its global supply chain. This includes seeking local manufacturing alternatives and reducing reliance on markets with high trade risks.
In this context, management indicated that volatile trade policies have become a major factor in its growth strategies. Therefore, the company may seek to strengthen its local investments to reduce its exposure to global market fluctuations.
In light of these developments, the impact of tariffs remains a key factor in determining Merck’s future performance, especially as trade tensions continue to escalate. Merck’s first-quarter 2025 results demonstrate the company’s ability to deliver strong earnings despite the challenges related to tariffs and market changes. As trade tensions persist, Merck will need flexible strategies to adapt to the changing economic environment.
First-quarter financial performance details
Merck began 2025 with strong financial results. It posted quarterly profits of $5.61 billion, equivalent to $2.22 per share, exceeding analysts’ expectations of $2.14. This performance was supported by cost-cutting policies implemented by the company since late last year.
On the other hand, global sales decreased 2% to $15.5 billion. Despite the decline, this figure exceeded the average estimate of $15.3 billion. The data showed that sales would have grown 1% had it not been for the impact of foreign exchange rates.
The decline in Gardasil shipments to China significantly pressured revenue. Despite this, the company maintained stable profits, reflecting the resilience of its operating model. Net profit increased 7% to $2.01 per share.
This strong first-quarter performance bolsters investor confidence and demonstrates Merck’s resilience. It also reflects its success in controlling expenses despite external challenges. Key Product Performance
Merck’s key products saw markedly mixed performance during the first quarter of 2025. Despite overall pressures, some treatments continued to grow.
In contrast, sales of Gardasil fell 41% to $1.3 billion. This decline was attributed to the decision to halt shipments to China, which was a result of weak demand there. Despite the severity of the decline, the figure was in line with analyst expectations, minimizing the severity of the market reaction.
Keytruda maintained its growth, with sales increasing 4% to $7.2 billion. However, the figure remained below market estimates of $7.4 billion, reflecting increased competitive pressures in the oncology market.
On the other hand, Winrivir, a lung disease drug, recorded strong performance despite its new market entry. Sales reached $280 million, confirming the success of the company’s early marketing strategies.
2025 Outlook
In the animal health segment, sales increased 5% to $1.6 billion. This growth was attributed to increased demand for veterinary vaccines and preventive treatments in emerging markets.
Overall, Merck’s pharmaceutical portfolio remained well-balanced. Despite declines in some products, others supported overall revenue. The company’s diversification within product lines appears to provide it with a good ability to absorb market shocks.
For 2025, Merck announced that it continues to expect sales of $64.1 billion to $65.6 billion. However, it lowered its adjusted earnings per share forecast to $8.82 to $8.97, from a previous forecast of $8.88 to $9.03. Analysts expected earnings of $8.95 per share in 2025, on revenue of $65 billion.
Responding to Trade Policies
Merck faces increasing challenges due to global trade policies. The company announced that it will incur an estimated $200 million in tariffs. These tariffs include those imposed by the United States on pharmaceutical imports from other countries, particularly China.
Moreover, Merck cited additional burdens resulting from a licensing agreement with Hengrui Pharma. These burdens include regulatory fees and transfer costs. These pressures prompted the company to revise its earnings forecast for the current year.
In this context, Merck lowered its adjusted earnings per share forecast range. It now ranges between $8.82 and $8.97, down from $8.88 to $9.03 previously. It expected tariff pressures to continue throughout the year.
On the other hand, the company has moved strategically to counter these policies. It is reviewing its supply chains and seeking to increase manufacturing within the United States. It also supports US government initiatives to boost domestic pharmaceutical production, especially in critical sectors such as immunology and oncology.
In response, the former Trump administration opened an investigation into the pharmaceutical sector. This investigation aims to assess the extent to which America needs to enhance self-sufficiency in pharmaceuticals.
