Merck & Co., Inc. (NYSE: MRK)
Company Overview
Merck reported third-quarter earnings and revenue this morning that topped estimates, with the drugmaker also narrowing its full-year profit outlook to reflect lower estimated tariff costs. The company’s Q3 2025 earnings per share of $2.58 surpassed the forecast of $2.35, marking a surprise of 9.8%, while revenue reached $17.28 billion compared to the forecasted $16.98 billion.
What makes this morning’s earnings particularly significant is the milestone achievement for Keytruda: Sales of Keytruda topped $8 billion for the first time in a quarter, rising 10% from the same period a year ago to $8.14 billion. The increase in Keytruda was driven by higher uptake of the drug for earlier-stage cancers and strong demand for the treatment for metastatic cancers. Additionally, Merck’s newer drug Winrevair, used to treat a rare, deadly lung condition, recorded $360 million in sales for the quarter, demonstrating the company’s pipeline diversification efforts ahead of Keytruda’s 2028 patent expiration.
Key Technical and Fundamental Drivers
Fresh Earnings Beat → This Morning’s 9.8% Surprise Merck’s Q3 2025 EPS of $2.58 surpassed the forecast of $2.35, marking a 9.8% surprise, while revenue exceeded expectations at $17.28 billion versus $16.98 billion forecasted, demonstrating strong execution.
Keytruda Milestone → First $8B+ Quarter Sales of Keytruda topped $8 billion for the first time in a quarter, rising 10% year-over-year to $8.14 billion, driven by higher uptake for earlier-stage cancers and strong metastatic cancer demand.
Reduced Tariff Impact → Guidance Raise Merck raised its 2025 adjusted earnings guidance to between $8.93 and $8.98 per share from the previous $8.87 to $8.97, reflecting lower estimated costs related to tariff impacts.
New Drug Launch → Keytruda QLex Approved The company received FDA approval and launched Keytruda QLex at the end of the quarter, a subcutaneous version that could improve patient convenience and extend the franchise value.
Cost Reduction Program → $3B Savings by 2027 Merck is slashing $3 billion in costs by the end of 2027 as it prepares to offset revenue losses from the upcoming patent expiration of Keytruda in 2028, positioning for sustained profitability.
Market Takeaway
Merck’s earnings beat this morning demonstrates the pharmaceutical giant’s ability to navigate multiple challenges while maintaining strong growth in its core oncology franchise. The milestone of Keytruda surpassing $8 billion in quarterly sales for the first time validates the drug’s expanding role in earlier-stage cancer treatments, not just late-stage indications. This matters because it extends the runway for Keytruda revenue growth even as the company prepares for patent expiration in 2028.
The raised guidance reflecting lower tariff costs provides additional upside, while the successful launch of Keytruda QLex (the subcutaneous version) and strong performance from Winrevair ($360 million in Q3 sales) show the company is successfully building its post-2028 product portfolio. With the $3 billion cost reduction program underway through 2027, Merck is strategically positioning itself to maintain profitability even as Keytruda faces biosimilar competition. While Gardasil headwinds in China continue, the strength of the oncology portfolio and emerging products like Winrevair provide multiple growth drivers. Traders should watch for any updates on the Keytruda QLex adoption rate and Winrevair’s trajectory, as these newer products will be critical to Merck’s long-term growth story beyond its blockbuster cancer drug’s patent cliff.