Merck Corporation announced on Tuesday (February 4th) that due to weak disposable income among Chinese consumers, the company will delay the supply of its HPV vaccine, Gardasil, to China until at least mid-year. This decision has impacted the company’s annual performance forecast and led to a more than 8% drop in Merck’s stock price in pre-market trading.
Gardasil is a vaccine that prevents cancers caused by the human papillomavirus (HPV) and is one of Merck’s key growth drivers, apart from its cancer drug Keytruda. Since the second quarter of 2024, sales of the vaccine in the Chinese market have significantly slowed down, resulting in a 17% decrease in global sales for the vaccine in the fourth quarter compared to the same period the previous year. The Chinese market had previously been a key source of international growth for the company.
Reuters reported that Merck’s CEO, Rob Davis, stated, “Like many other companies, we have felt the pressure of disposable income among Chinese consumers, and this impact has extended to the vaccine market. The demand for Gardasil has not yet recovered to our expected level.”
Merck has announced that it has ceased supplying Gardasil to China starting this month. The company had previously mentioned that the Chinese Communist Party’s anti-corruption campaign has also affected sales of the vaccine.
Sales of Gardasil in the fourth quarter fell short of expectations for Merck, leading the company to retract its long-term goal of achieving $11 billion in sales by 2030.
The company anticipates total revenue for 2025 to range from $64.1 billion to $65.6 billion, which is lower than the $67.3 billion predicted by analysts based on LSEG data.
BMO Capital analyst Evan Seigerman stated, “The ongoing challenges with Gardasil in China will continue to exert pressure on Merck’s stock price, especially against the backdrop of the new round of trade wars opening today.”
On Tuesday, U.S. President Donald Trump announced a 10% tariff on all Chinese imports, meaning that drugs produced by Merck in Chinese factories and sold to the U.S. will be subject to higher tariffs.
Caroline Litchfield, the former CFO of Merck, previously mentioned in response to questions about the potential impact of President Trump’s tariffs on goods from China, Mexico, and Canada that the company’s manufacturing levels in these three countries are “very low,” and any future tariffs are not expected to have a “significant impact.”
Merck expects to earn $8.88 to $9.03 per share in 2025, which aligns with analysts’ predictions of $9.03 per share.
In the fourth quarter, Gardasil sales amounted to $1.55 billion, lower than Wall Street’s estimate of approximately $1.8 billion. Market expectations for vaccine sales have been lowered by nearly 20% since Merck disclosed issues in the Chinese market last summer.
However, strong sales of Keytruda have offset this impact. In the fourth quarter, sales of the drug exceeded $7.8 billion, far surpassing analysts’ predictions of approximately $7.4 billion.
Merck’s total revenue for the fourth quarter increased from $14.6 billion in the same period the previous year to $15.6 billion, slightly higher than the forecasted $15.5 billion by analysts.
After deducting one-time items, Merck reported a profit of $4.37 billion for the quarter, with earnings per share of $1.72, exceeding analysts’ expectations of $1.62 per share.