Merck narrows 2025 outlook, announces $3bn cost-saving initiative

Investing.com -- Merck (NYSE:MRK) on Tuesday reported second-quarter earnings and revenue that beat and missed analyst expectations, respectively, while narrowing its outlook for the year.

The company’s shares slid nearly 1% in premarket trading.

The drugmaker posted Q2 earnings per share (EPS) of $2.13, ahead of the consensus projection of $2.03. Revenue for the period came in at $15.81 billion, slightly below the forecasted $15.87 billion.

Sales of Keytruda rose 9% year-over-year to $8 billion, with growth unchanged when excluding foreign exchange effects.

Meanwhile, Gardasil/Gardasil 9 revenue declined sharply, falling 55% to $1.1 billion, also unaffected by currency movements.

Alongside the results, Merck also announced the launch of a "multiyear optimization initiative" aimed at generating $3 billion in annual cost savings by the end of 2027, with the savings to be fully reinvested in product launches and pipeline development.

As part of the plan, the company approved a new restructuring program in July, which includes job cuts in administrative, sales, and R&D roles, alongside reductions in its global real estate footprint and manufacturing network.

Merck expects the restructuring alone "to result in annual cost savings of approximately $1.7 billion, which will be substantially realized by the end of 2027." The company recorded $649 million in related charges in the second quarter.

“Today, we announced a multiyear optimization initiative that will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers, further enable the transformation of our portfolio, and drive our next chapter of productive, innovation-driven growth," said Robert M. Davis, chairman and CEO of Merck. 

For full-year 2025, Merck now expects adjusted EPS between $8.87 and $8.97, narrowing the range from its previous forecast of $8.82 to $8.97. The updated outlook compares with a consensus estimate of $8.87.

Revenue is projected to range between $64.3 billion and $65.3 billion, slightly tightened from prior guidance of $64.1 billion to $65.6 billion. Analysts were looking for $64.9 billion.

The company said its non-GAAP gross margin is expected to be approximately 82%.

Merck noted that the revised guidance does not factor in the potential impact of its planned acquisition of Verona Pharma (NASDAQ:VRNA).