Initiating Coverage Of Merck & Co.
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Q3 FY12/25 Earnings Review
by Nathan Brinkman
Merck & Co. is a global pharmaceutical company with a diversified portfolio spanning oncology, vaccines, infectious disease, cardiometabolic disease, immunology, neuroscience, ophthalmology and animal health. Over the past decade, the company has been defined by the success of Keytruda, which accounts for ~50% of Merck’s total revenue. Its success has been driven through lifecycle expansion across tumor types, stages of disease, and combination regimens, making it the standard-of-care in multiple cancers. However, with Keytruda’s core patents expected to expire in the late 2020s, Merck is now approaching a consequential patent cliff starting in 2028. Gardasil (HPV vaccine), Merck’s second best selling product (~10% revenue) has faced recent challenges with significantly decreasing sales of the vaccine in China. In China, Gardasil is cash paid and not government reimbursed therefore, worsening economic conditions in the country are severely limiting sales (no sales in Q3 - 2025). This has resulted in Merck pausing all shipments since February 2025. However, strong growth, regardless of China, is expected long term.
Other significant and growing revenue streams include animal health (9%), hospital acute care (5%), and diabetes (4%). Yet, Merck’s future success will continue to be heavily reliant on the protection of Keytruda, the ongoing growth of their current products, and their future pipeline.