Merck's Narrowed 2025 Sales View: What it Means After Q2 Results?

Merck MRK announced mixed second-quarter results last month. The company beat estimates for earnings while meeting the same for sales. Meanwhile, despite a less negative impact from currency, Merck narrowed its sales guidance for 2025. The company, however, raised the lower end of its EPS range.

The company now expects revenues to be in the range of $64.3-$65.3 billion, compared with the previous expectation of $64.1-$65.6 billion. The updated guidance includes a revised negative impact on sales from foreign exchange of around 0.5%, lower than the prior estimate of 1%. Excluding the impact of foreign exchange, the sales guidance indicates growth of 1% to 2%. Adjusted EPS is now expected to be between $8.87 and $8.97 versus the prior estimated range of $8.82 and $8.97. This guidance range includes a revised negative impact of foreign exchange of around 15 cents per share, lower than the previous estimate of more than 20 cents per share.

Notably, the guidance does not include the impact of Merck’s upcoming acquisition of Verona Pharma VRNA.

In early July, Merck announced a definitive agreement to acquire Verona Pharma for approximately $10 billion. The transaction is expected to be closed in the fourth quarter of 2025.

The deal will add Verona’s Ohtuvayre, which is approved for the maintenance treatment of chronic obstructive pulmonary disease.

After a weak sales performance in the first half of 2025, Merck expects to return to growth in the second half. The company expects growth to be driven by its oncology drugs, mainly Keytruda, the Animal Health segment and new products, which will be partially offset by lower sales of Gardasil in China and Japan.

Merck’s blockbuster PD-L1 inhibitor, Keytruda, generated sales worth $7.96 billion in the second quarter of 2025, up 9% year over year. The drug alone accounts for around 50% of MRK’s pharmaceutical sales. Merck’s Animal Health segment generated revenues of $1.65 billion, up 11% year over year, driven by higher demand for livestock products and the inclusion of sales from the Elanco aqua business.

Despite solid revenue growth in key segments, the revised outlook for 2025 reflects cautious expectations for the remainder of the year as the company navigates competitive and economic challenges. This also reinforces the company’s confidence and ability to drive long-term growth, supported mainly by its new products and other cost-optimization efforts.

In the second quarter, Merck’s new pulmonary arterial hypertension drug, Winrevair, delivered $336 million in sales, which rose 20% sequentially. Capvaxive, its new 21-valent pneumococcal conjugate vaccine, posted sales of $129 million, up 20.1%. Management sees both products as key revenue drivers, supporting long-term growth, especially after Keytruda loses exclusivity in 2028. On its Q2 conference call, management stated that cumulative net sales of Winrevair have already reached the $1 billion mark since its approval, reflecting strong uptake already.

MRK's Competition in the PAH Market

Though still in the early days, Winrevair is likely to face stiff competition in the PAH market. The target market remains highly competitive. Significant players in the PAH market are United Therapeutics UTHR and Johnson & Johnson JNJ.

UTHR markets four drugs to treat PAH in the United States — Remodulin, Orenitram, Tyvaso and Adcirca. United Therapeutics’ Remodulin, Orenitram and Tyvaso recorded sales of $134.7 million, $123.9 million and $469.6 million, respectively, in the second quarter of 2025.

J&J’s key PAH drugs include Opsumit and Uptravi. JNJ recorded revenues of $1.11 billion from its PAH franchise in the second quarter of 2025.

MRK's Price Performance, Valuation and Estimates

Year to date, shares of Merck have lost 18.8% compared with the industry’s decrease of 8.2%.

From a valuation standpoint, Merck appears attractive relative to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 8.64 forward earnings, lower than 13.71 for the industry and its 5-year mean of 12.79.

The Zacks Consensus Estimate for 2025 earnings has increased from $8.88 per share to $8.92, while the same for 2026 has decreased from $9.70 to $9.61 over the past 30 days.

MRK's Zacks Rank

Merck currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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