Financial Trends -- 6/10
MRK financial trends score 6/10. Revenue grew +1.9% to $64.5B in FY2025, decelerating from +5.3% in FY2024.
Keytruda ($31.7B, +7.5% YoY) remains the dominant franchise at 49% of total revenue -- concentration is
worsening, not improving. Gardasil collapsed -39% to $5.2B on a China implosion (-71.5%). New launches
(Winrevair $1.4B, Capvaxive $759M) are bright spots but cannot offset Gardasil losses. Non-GAAP EPS
of $8.98 grew +17.4% YoY (normalized), and gross margins expanded to 81.5%. FCF declined -32% to $12.4B.
The fundamental question -- can Merck replace $30B+ of Keytruda revenue by LOE (~2028-2029) -- remains
unanswered by the financial data.
Weight: 25%
FY2025 Revenue
$64.5B
+1.9% YoY | decelerating from +5.3%
Keytruda FY2025
$31.7B
+7.5% YoY | 49% of total revenue
Non-GAAP EPS
$8.98
+17.4% YoY (normalized)
FY2025 FCF
$12.4B
-32% YoY | 4.1% FCF yield
Revenue Trajectory (Annual, USD M) -- Calendar FY
Revenue growth decelerating: +5.3% (2024) to +1.9% (2025) to guided +1-3% (2026).
The step-up from $48B to $59B in FY2022 was Lagevrio-driven ($5.7B). Since then, growth has stalled
at low-single-digits. Keytruda continues to grow but at a decelerating rate. Gardasil collapsed -39%
in FY2025 on a China implosion (-71.5% YoY). New launches (Winrevair, Capvaxive, Ohtuvayre) are
ramping but not yet large enough to offset the Gardasil headwind. Non-Keytruda revenue actually
declined from $35.1B (2023) to $32.8B (2025) despite new product ramps.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Total Revenue | $48,000M | $48,700M | $59,300M | $60,100M | $63,300M | $64,500M |
| YoY Growth | — | 1.5% | 21.7% | 1.4% | 5.3% | 1.9% |
| Keytruda | $14,400M | $17,200M | $20,900M | $25,000M | $29,500M | $31,700M |
| Keytruda YoY | — | 19.5% | 21.8% | 19.5% | 17.9% | 7.5% |
| Gardasil | $3,900M | $5,700M | $6,900M | $8,900M | $8,600M | $5,200M |
| Gardasil YoY | — | 44.1% | 21.6% | 28.8% | -3.4% | -39.0% |
| Animal Health | $4,700M | $5,600M | $5,600M | $5,600M | $5,900M | $6,400M |
| Animal Health YoY | — | 18.4% | -0.3% | 1.4% | 4.5% | 8.1% |
| Winrevair | — | — | — | — | $419M | $1,443M |
| Lagevrio | — | $1,000M | $5,700M | $1,400M | $1,000M | $400M |
| Capvaxive | — | — | — | — | — | $759M |
Revenue peaked at $60.1B in FY2023 ex-Lagevrio. Keytruda now 49% of total. Gardasil China -71.5% from 2023 peak. Data from Daloopa and MRK 10-K filings.
Keytruda Quarterly Revenue and YoY Growth -- Critical Trajectory
Keytruda deceleration is stark: from high-teens YoY in 2024 to mid-single-digit in 2025.
Q1 2025 was the weakest quarter (+3.7% YoY), partially timing-related. The drug is approaching natural
maturity ahead of LOE (~2028-2029). Subcutaneous Keytruda QLEX launched Q4 2025 with $35M initial sales;
a permanent J-code expected April 2026 should accelerate adoption. Even so, the trajectory from +18-20%
growth to +4-10% growth over just four quarters is a clear signal that the franchise is maturing.
At 49% of total revenue, this matters enormously.
| Metric | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|
| Keytruda ($M) | $6,947M | $7,270M | $7,429M | $7,836M | $7,205M | $7,956M | $8,142M | $8,372M |
| YoY Growth | 19.9% | 15.9% | 17.2% | 18.6% | 3.7% | 9.4% | 9.6% | 6.8% |
Keytruda growth decelerated from +19.9% (Q1 24) to +3.7% (Q1 25). QLEX launched Q4 2025 ($35M). LOE ~2028-2029. Data from Daloopa and MRK earnings transcripts.
Gardasil Quarterly Revenue -- China Implosion
Gardasil collapse is severe: from $8.9B peak (2023) to $5.2B (2025), a -41% decline.
China revenue implosion (-71.5%, from $6.8B in 2023 to $1.9B in 2025) is the primary driver. Q2 2025
was the worst quarter at -54.6% YoY. US Gardasil grew modestly (+7% in Q4 2025), but it is far too
small to offset the China headwind. Management has not provided clear guidance on when China stabilizes.
No trough is yet visible in the data.
| Metric | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|
| Gardasil ($M) | $2,249M | $2,478M | $2,306M | $1,550M | $1,327M | $1,126M | $1,749M | $1,031M |
| YoY Growth | 14.1% | 0.8% | -10.8% | -17.2% | -41.0% | -54.6% | -24.2% | -33.5% |
Gardasil China revenue: $6.8B (2023) to $1.9B (2025), -71.5%. US Gardasil growing modestly. No trough signal from management. Data from Daloopa and MRK transcripts.
Winrevair Launch Trajectory -- Genuine Bright Spot
Winrevair is the standout new launch: $1.4B in Year 1, exiting at ~$1.9B annualized.
Reached $1B cumulative sales within ~13 months of launch. 27,000+ total prescriptions dispensed by Q4.
Over 1,500 new patients per quarter and expanding beyond prostacyclin-background patients. International
launches ongoing. Phase II CADANCE trial data supports label expansion into additional pulmonary
hypertension subtypes. This is a genuine bright spot in the portfolio.
Winrevair launched Q2 2024. $1.4B in first full year. Run-rate exiting Q4 2025 = ~$1.9B annualized. CADANCE Phase II supports expansion. Data from Daloopa and MRK transcripts.
Keytruda Concentration Risk -- Worsening, Not Improving
Concentration risk is worsening, not improving. Keytruda is 49% of revenue, up from 30% in 2020.
While Winrevair ($1.4B), Capvaxive ($759M), and Animal Health ($6.4B) are growing, they cannot offset
the Gardasil collapse. Non-Keytruda revenue actually declined from $35.1B (2023) to $32.8B (2025) despite
new launches, because Gardasil/Lagevrio headwinds exceeded Winrevair/Capvaxive tailwinds. The
diversification thesis has gone backward even as new products ramp.
| Metric | FY2020 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Keytruda % of Revenue | 30.0% | 41.6% | 46.6% | 49.1% |
| Gardasil % of Revenue | 8.2% | 14.8% | 13.6% | 8.1% |
| Non-Keytruda Rev | $33,600M | $35,100M | $33,800M | $32,800M |
Keytruda concentration: 30% (2020) to 49% (2025). Non-Keytruda revenue declined from $35.1B to $32.8B despite new launches. Data from Daloopa and MRK 10-K filings.
Profitability: Margin Expansion and EPS Growth
Margin expansion is a consistent positive: non-GAAP GM from 74.3% (2020) to 81.5% (2025).
Favorable Keytruda mix and lower Lagevrio drag are driving the improvement. Q4 2025 dipped to 79.7%
due to higher inventory reserves, but 2026 guidance of ~82% implies continued expansion. FY2025
non-GAAP EPS of $8.98 grew +17.4% YoY on a normalized basis (2023 EPS was depressed by the ~$10.2B
Prometheus Bio acquisition charge). Quarterly EPS showed strength in Q3 (+64.3% YoY) and Q4 (+18.6%).
| Metric | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|
| Non-GAAP Gross Margin | 81.2% | 80.9% | 80.5% | 80.8% | 82.2% | 82.2% | 81.9% | 79.7% |
| Non-GAAP EPS | $2.1 | $2.3 | $1.6 | $1.7 | $2.2 | $2.1 | $2.6 | $2.0 |
| EPS YoY Change | — | — | — | — | 7.2% | -6.6% | 64.3% | 18.6% |
Non-GAAP GM expanded 720 bps from 2020 to 2025. FY2025 EPS of $8.98 vs $7.65 in FY2024 (+17.4%). 2023 EPS depressed by Prometheus charge. Data from Daloopa and MRK filings.
Free Cash Flow and Capital Allocation
FCF declined -32% from $18.1B (2024) to $12.4B (2025).
The decline reflects lower Gardasil cash contribution and increased investment in pipeline and
manufacturing. Capex rose from $3.4B to $4.1B. FCF yield of ~4.1% on the current $298.8B market cap
remains reasonable for big pharma. Shares declining modestly via buybacks (2,541M to 2,507M). Dividend
yield of 2.81%. The question is whether FCF can sustain investment-grade levels through the Keytruda
LOE transition.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| CFO | $10,300M | $13,100M | $19,100M | $13,000M | $21,500M | $16,500M |
| Capex | $4,700M | $4,400M | $4,400M | $3,900M | $3,400M | $4,100M |
| Free Cash Flow | $5,600M | $8,700M | $14,700M | $9,100M | $18,100M | $12,400M |
| Shares (M) | 2,541 | 2,538 | 2,542 | 2,547 | 2,541 | 2,507 |
FCF peaked at $18.1B in FY2024. FY2025 decline driven by Gardasil and higher capex. Dividend yield 2.81%. Shares declining via buybacks. Data from Daloopa and MRK 10-K filings.
Forward Estimates and 2026 Guidance
Trailing P/E
16.6x
On FY2025 non-GAAP EPS of $8.98
FY2026 Rev Guide
$65.5-67.0B
+1% to +3% YoY growth
FY2026 Adj EPS
$8.65-8.80
Ex-Sidera | implies -2% to -4% decline
Next Earnings
Late Apr
Q1 2026 results
2026 guidance is cautious: low-single-digit revenue growth and flat-to-down adjusted EPS.
Reported non-GAAP EPS of $5.00-$5.15 includes ~$3.65 of one-time Sidera acquisition charges.
Adjusted (ex-Sidera) EPS of $8.65-$8.80 implies a -2% to -4% decline from FY2025, reflecting a heavy
investment year. Non-GAAP gross margin guided at ~82%. Tax rate elevated at 23.5-24.5% due to
non-deductible Sidera charges. The pipeline carries $70B+ of non-risk-adjusted commercial opportunity
by mid-2030s per management, with ~80 Phase III trials underway and 20+ potential new growth drivers.
Acceleration vs. Deceleration Summary
Decelerating
• Total revenue growth: +5.3% to +1.9% to guided +1-3%
• Keytruda growth: +17.9% (2024) to +7.5% (2025)
• Gardasil: -3.4% (2024) to -39.0% (2025), no trough
• FCF: -32% YoY decline in FY2025
• 2026 adjusted EPS guided -2% to -4%
• Keytruda growth: +17.9% (2024) to +7.5% (2025)
• Gardasil: -3.4% (2024) to -39.0% (2025), no trough
• FCF: -32% YoY decline in FY2025
• 2026 adjusted EPS guided -2% to -4%
Accelerating
• Winrevair: $419M to $1,443M (+244% YoY)
• Capvaxive: $0 to $759M in first full year
• Animal Health: +4.5% to +8.1% YoY
• Non-GAAP GM: 80.8% to 81.5%, expanding
• Normalized EPS: +17.4% YoY
• Capvaxive: $0 to $759M in first full year
• Animal Health: +4.5% to +8.1% YoY
• Non-GAAP GM: 80.8% to 81.5%, expanding
• Normalized EPS: +17.4% YoY
Score: 6.0/10. Base 6.5 minus 1.0 net adjustments (Keytruda concentration -1.0, Gardasil -0.5, revenue decel -0.5, FCF -0.25 offset by Winrevair +0.5, margins +0.25, EPS +0.5, pipeline +0.25, guidance -0.25). Data from Daloopa.