Merck Shares Tumble Amid Weak Q1 Performance and Strategic Missteps in China Market

Merck & Co. (MRK) recently faced significant challenges as evidenced by its latest Q1 financial performance. On May 6, the company experienced a notable stock dip of 4.59%, marking a consecutive four-day decline totaling 7.23%. This follows their Q1 results, which disclosed a total revenue of $155.29 billion, representing a 2% decrease compared to the previous year. The core pharmaceutical sector saw a 3% decline, with a particularly sharp decrease of 62% in its China division, reducing its contribution to the global pharma segment from 9.4% to 4.9%.

The dip in sales can primarily be attributed to underperformance in the sales of its leading drugs, Keytruda and the Gardasil HPV vaccines. In 2024, Merck had decided to halt shipments of Gardasil to China, aiming to assist its distributor, Zhifei Biological, with inventory clearance strategies that ultimately proved less effective than anticipated, also impacting Zhifei's sales performance. This strategic misstep contributed to a further decline in market confidence.

The challenges Merck faces are multifaceted. Firstly, the demand for Gardasil has plunged due to market saturation; where vaccination rates have climbed significantly among the target female demographic of 9 to 45 years. Economic factors and prevailing misconceptions contribute to resistance among the remaining population, diminishing new vaccine uptake. Additionally, Merck's discontinuation of vaccine supply has exacerbated panic within distribution channels, resulting in a shift towards domestic bivalent alternatives by local institutions.

Furthermore, initiatives by several Chinese provinces to provide free domestic HPV vaccines have intensified competition. Regions like Guangdong and Zhejiang have begun implementing these policies as of 2025, significantly affecting Merck's market dominance. Aggressive cost-cutting by domestic competitors, reducing prices from $580 per dose down to $27.5, has compounded Merck's market pressures, undermining its historically profitable high-margin model.

Merck's strategy to explore the male HPV vaccine market comes as a potential rescue strategy. The company has introduced its four-valent vaccine for males aged 9 to 26, and expanded the nine-valent vaccine applicability to males aged 16 to 26 in China. This market presents significant potential, yet actual revenue impact remains pending in initial financial results, as the Q1 reports did not reflect substantial changes.

The road to establishing a foothold in the male HPV market will be challenging, with cultural misconceptions about HPV still prevalent among men creating barriers to broader acceptance and adoption. Additionally, local companies, such as Walvax Bio and Reko Biologics, are swiftly advancing clinical trials of male HPV vaccines, poised to compete directly against Merck's offerings.