Merck Q1 Earnings Preview: Can Keytruda and Strategic Moves Drive Growth?

Investors will turn their attention to Merck & Co. (NYSE: MRK) on April 24, 2025, when the pharmaceutical giant releases its first-quarter earnings. Analysts anticipate a modest 4.4% year-over-year rise in earnings per share (EPS) to $2.16, but the market’s focus will extend far beyond quarterly results. With Merck’s stock down 37% over the past year amid concerns about its reliance on blockbuster drug Keytruda and challenges in key markets like China, the earnings call could offer critical insights into the company’s trajectory.

Key Areas to Watch

1. Keytruda’s Dominance—and Its Limits

Keytruda (pembrolizumab), Merck’s $20 billion-a-year cancer drug, remains the engine of its oncology portfolio. Analysts will scrutinize whether sales growth is holding steady as Keytruda gains new indications, such as in early-stage lung cancer. However, the looming threat of generic competition—Keytruda loses U.S. exclusivity in 2028—is a Sword of Damocles. Any updates on partnerships, licensing deals, or pipeline progress in oncology could alleviate investor anxiety.

2. Gardasil’s China Woes and Recovery Hopes

Merck’s Gardasil vaccine, which prevents HPV-related cancers, has been a bright spot, but shipments to China—a critical market—were halted in late 2024 due to regulatory disputes. While Merck has expressed confidence in resolving the issue, investors will want clarity on whether sales to China are resuming and whether the delay impacted Q1 results. A recovery in Gardasil’s growth could help offset Keytruda’s eventual decline.

3. Medicare Part D Redesign and Pricing Pressure

The Medicare Part D overhaul, effective in 2025, aims to reduce drug costs by capping out-of-pocket expenses for beneficiaries. While this could boost patient access to Merck’s therapies, it may also squeeze margins. Executives will likely address how the company is navigating this shift and whether it’s adjusting its pricing or rebate strategies.

4. Diversification Efforts

With Keytruda’s golden years waning, Merck’s ability to diversify revenue is under the microscope. Progress on newer drugs like Welireg (for myelofibrosis) and Capvaxive (a novel vaccine) will be key. Additionally, the Animal Health division, a consistent performer, could offer stability. Investors will seek evidence that Merck’s pipeline is robust enough to sustain long-term growth.

The Numbers Tell a Cautionary Tale

Despite the Q1 EPS forecast of $2.16—beating estimates in four of the past five quarters—Merck’s stock has struggled. Over the past year, it has lost nearly 40% of its value, underperforming the S&P 500, which rose 3.2%. Analysts project full-year 2025 EPS of $8.96, up 17% from 2024, with further gains to $9.82 in 2026. However, these numbers hinge on executing a strategy that balances near-term challenges with long-term opportunities.

Risks and Opportunities

• Keytruda’s Decline: Even a slight miss on Keytruda sales could spook investors.
• China Regulatory Risks: Gardasil’s delayed return to the Chinese market could drag on revenue.
• Pipeline Execution: Failures in late-stage trials or delayed approvals for new therapies could undermine growth.

Conclusion: A Pivot Point for Merck

Merck’s Q1 results are more than just a quarterly snapshot—they’re a litmus test for its ability to navigate a crossroads. While the EPS beat is likely, the real value lies in management’s vision for post-Keytruda growth. If the company can demonstrate progress in diversifying its portfolio, resolving the China issue, and adapting to Medicare reforms, its stock could rebound. However, with Keytruda’s peak years behind it and competition intensifying, investors will demand more than incremental wins.

With a 37% underperformance relative to the broader market, Merck’s stock is pricing in pessimism. But if the earnings call delivers clarity on these strategic priorities—and reaffirms the $8.96 EPS forecast for 2025—this could be the catalyst to turn the tide. The next 72 hours will reveal whether Merck can turn its challenges into opportunities—or if it’s time to look elsewhere for biopharma growth.