Pharmaceutical giant Merck announced a lowered full-year profit outlook on Thursday, attributing the decrease to a combination of factors. The company now projects adjusted earnings between $8.82 and $8.97 per share, a slight dip from its previous forecast of $8.88 to $9.03. A significant contributor to this revision is the estimated $200 million in added costs due to tariffs, primarily stemming from trade tensions between the U.S. and China, as well as Canada and Mexico. Merck emphasized that this figure does not yet incorporate the potential impact of President Trump’s proposed tariffs on imported pharmaceuticals.
This announcement comes despite Merck exceeding expectations in its first-quarter earnings report. Revenue reached $15.53 billion, surpassing the anticipated $15.31 billion, and earnings per share hit $2.22 adjusted, outperforming the projected $2.14. Strong performance in the oncology portfolio and animal health division fueled these positive results, with contributions from newer drugs like Winrevair and Capvaxive also playing a role. These successes, however, are somewhat offset by the anticipated tariff impact and the impending loss of exclusivity for its top-selling cancer therapy, Keytruda, in 2028.
Further impacting the profit outlook is a one-time charge of approximately 6 cents per share linked to a licensing agreement with Hengrui Pharma, announced in March. The company maintained its full-year sales forecast of $64.1 billion to $65.6 billion, suggesting confidence in its overall market position despite the profit revision. While Keytruda’s sales increased by 4% year-over-year to $7.21 billion, it fell short of analyst expectations. This shortfall is partially attributed to challenges in the Chinese market, where Merck has temporarily halted Gardasil shipments, resulting in a 41% drop in sales compared to the first quarter of 2024.
Merck’s strategic response to the tariff threat involves increased investment in domestic manufacturing and R&D. The company has already invested $12 billion in U.S. operations and plans to add over $9 billion more by 2028. This proactive approach aims to mitigate future tariff impacts and secure its position within the U.S. market. Investors will likely be closely monitoring the company’s performance in the coming quarters, particularly the progress made in addressing the challenges in the Chinese market and the impact of any new tariff implementations.
