Shares of Merck & Co. Inc. (NYSE:MRK) tumbled on Tuesday after the company revealed a lower-than-expected Merck 2025 sales forecast. A key reason for this setback is the temporary pause in shipments of its Gardasil vaccine to China, a move that surprised analysts and raised concerns about the company’s revenue prospects.

Gardasil Shipments Paused in China

Merck announced that it would suspend Gardasil shipments to China through at least mid-2025. CEO Robert Davis explained that this decision is aimed at reducing inventory and supporting the company’s local commercialization partner, which currently holds excess stock.

Davis cited weak consumer demand and a slowing Chinese economy as major challenges. Gardasil sales in China have already been under pressure for several quarters, and the company sees inventory reduction as a necessary step before resuming shipments.

The International Monetary Fund (IMF) recently projected China’s economic growth to slow from 4.8% in 2024 to 4.6% in 2025 and 4.5% in 2026. A declining real estate market in China has further eroded consumer confidence, making it harder for companies like Merck to maintain strong sales.

Declining Gardasil Sales Impact Earnings

Merck reported that overall Gardasil sales fell 17% year-over-year, generating $1.55 billion in revenue during the fourth quarter. This decline was largely driven by decreased demand in China.

Gardasil is a key revenue driver for Merck, offering protection against human papillomavirus (HPV), which can lead to cervical and other cancers. The vaccine recently gained approval in China for use in males, expanding its potential market. Despite this, Davis reaffirmed that near-term sales growth in China remains uncertain.

“China still represents a significant long-term opportunity for Gardasil,” Davis said. “With a large number of unvaccinated individuals, the potential for future expansion remains strong.”

Merck 2025 Financial Outlook Falls Short

Despite its strong position in the pharmaceutical industry, Merck’s financial outlook for 2025 failed to meet Wall Street expectations. The company forecasted adjusted earnings between $8.88 and $9.03 per share on revenue between $64.1 billion and $65.6 billion.

These projections fell short of analyst estimates compiled by FactSet, which had expected earnings of $9.13 per share on revenue of $67.07 billion. The lower-than-expected guidance contributed to the sharp decline in Merck’s stock price.

Keytruda Continues to Drive Growth

While Gardasil sales declined, Merck’s cancer treatment Keytruda continued to perform well, with sales increasing 19% to $7.84 billion in Q4. This underscores Merck’s reliance on oncology drugs as a primary growth driver.

For the fourth quarter, Merck reported an adjusted profit of $1.72 per share on total revenue of $15.6 billion, exceeding Wall Street estimates. Analysts had predicted earnings of $1.61 per share on $15.48 billion in revenue.

Market Reaction: Merck Shares Decline

Following the earnings announcement, Merck stock (NYSE:MRK) dropped 10%, or $10.07, to close at $89.72. This decline came even as broader market indexes posted gains, highlighting investor concerns over the company’s near-term revenue challenges.

Despite the stock decline, some analysts believe that Merck’s long-term prospects remain intact. The company’s continued investment in oncology, vaccines, and new drug development could offset short-term weaknesses.

Minimal Impact from Proposed Tariffs

Merck executives also addressed concerns about potential U.S. tariffs on Chinese, Mexican, and Canadian imports. They assured investors that Merck’s exposure to these tariffs is minimal due to its low levels of manufacturing in these regions.

Conclusion: Should Investors Be Concerned?

The Merck 2025 sales forecast has raised some red flags, particularly regarding its reliance on Gardasil sales in China. While short-term revenue expectations may be lower, the company’s long-term growth prospects remain solid, particularly in oncology and vaccine innovation.

Investors should weigh the risks of temporary sales disruptions against Merck’s strong product pipeline and leadership in key pharmaceutical markets.

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