Merck & Co., Inc. Q4 FY2025 earnings call

• Robert M. Davis noted the company's purpose to save and improve lives, progress in 2025 including new product launches, clinical program advancements, and acquisitions. The portfolio transformation is underway with a line of sight to over $70 billion of potential commercial opportunity by mid-2030s. • Caroline A. Litchfield discussed 2025 results, including revenue growth, oncology, vaccine, cardiometabolic and respiratory, and animal health performance. Also spoke about 2026 non-GAAP guidance. • Dean Y. Li provided updates on cardiometabolic, respiratory, infectious disease, HIV, and oncology programs, including phase III results, regulatory approvals, and pipeline progress in 2025 and upcoming milestones in 2026.

Total company revenues were $16.4 billion, an increase of 5% or 4% excluding the impact of foreign exchange. In oncology, Keytruda family sales increased 5% to $8.4 billion. Wellyrec sales were $220 million, up 37%. In vaccines, Gardasil sales were $1 billion, down 35% due to lower demand in China and Japan; Cefaxib sales were $279 million. Inflonsia sales were $21 million. In cardiometabolic and respiratory, WinRevair global sales were $467 million; O2Ver sales were $178 million. Animal health sales increased 6%, with livestock sales up 9% and companion animal sales flat.

• Expect revenue to be between $65.5 and $67 billion in 2026, representing growth of 1% to 3%, including a positive impact from foreign exchange of approximately one percentage point. • Gross margin assumption is approximately 82%. Operating expenses are assumed to be between $35.9 billion and $36.9 billion, including a one-time charge of approximately $9 billion related to the acquisition of Sidera. • Other expense of approximately $1.3 billion includes financing costs for Sidera and Verona. • Assume a full-year tax rate between 23.5% and 24.5%. • Expect EPS of $5 to $5.15, with a midpoint of $5.08, including a positive impact from foreign exchange of approximately $0.10. Excluding certain charges, midpoint would be $9.03. • Growth in 2026 driven by increasing contributions from new launches, oncology, and animal health, despite headwinds from generic competition, IRA price setting, and restructured agreement for Koselugo.

Q: Mohit Bansal asked about the flu trial ANCHOR, including event rates, trial enrollment, and interim disclosure.

A: Dean Y. Li said enrollment completed in Northern Hemisphere, parallel recruiting in Southern Hemisphere, trial is event-driven, and no communication plan for IA discussed yet.

Q: Akash Tewari asked about SAT GMP in certain settings and Trope-two development strategy.

A: Dean Y. Li said sac TMT has potential to be best in class trope two-directed ADCs with 16 phase three studies.

Q: Alexandria Hammond asked about KEYTRUDA IP runway and QLEX ramp.

A: Robert M. Davis said patent estate has patents expiring in 2028, 2029, and confidence in defending them has grown, but planning assumes 2028; QLEX adoption expected to increase.

Q: Evan Seigerman asked about HIV dual regimen importance.

A: Dean Y. Li said islatravir is a next-generation nucleoside analog with unique mechanism, and two-drug regimens offer different options.

Q: Steve Scala asked about Merck's future growth.

A: Robert M. Davis said confidence in sustainable growth with $70 billion potential, early-stage pipeline assets, and business development.

Q: James Shin asked about Cadence's ACA presentation and Phase III CPC PH endpoints.

A: Dean Y. Li said provided data at ACC, discussions ongoing with FDA on endpoints.

Q: Carter Gould asked about Merck's TL1A and combinations.

A: Dean Y. Li said ambition to be first and best in class TL1A, with focus on Atlas UC and potential combinability.

Q: Geoffrey Meacham asked about WINRVERE trends and pulmonology indications.

A: Dean Y. Li and Robert M. Davis discussed WINRVERE's impact, compliance, safety, and potential in pulmonology.

Q: Umer Raffat asked about balancing $70 billion revenue opportunity and prior deals.

A: Robert M. Davis said BD strategy focuses on scientific advancement, unmet need alignment, and value creation with discipline.

Q: Christopher Thomas Schott asked about confidence in a key near-term product.

A: Dean Y. Li and Robert M. Davis discussed the opportunity of MK3000 and MK8748 in ophthalmology.

Q: Daina Michelle Graybosch asked about biomarker strategy for TMT.

A: Dean Y. Li said biomarker strategy is context-dependent on tumor and comparator.