Merck & Co., Inc.
Business Model Analysis
How Merck Makes Money
Annual Revenue: $65.0B
- How does Merck make money?
- Merck makes money from Keytruda, Gardasil / Gardasil 9, Winrevair and Januvia / Janumet.
Merck generates revenue primarily through Pharmaceuticals / Biotechnology / Animal Health, with roughly $65.0B in annual revenue.
Core Growth Engine: Merck's strategy is to use Keytruda cash flow to build a broader portfolio before 2028. It moved patients toward subcutaneous Keytruda Qlex (FDA-approved September 19, 2025), expanded Keytruda into earlier-stage cancers,...
Revenue Model & Pricing
Merck makes money by selling patent-protected prescription medicines, vaccines and animal health products. The Pharmaceutical segment produced about $58.1 billion of 2025 sales, led by Keytruda/Keytruda Qlex ($31.7 billion), Gardasil ($5.2 billion), Januvia/Janumet ($2.5 billion) and Winrevair ($1.4 billion). Animal Health added about $6.4 billion from companion-animal products such as Bravecto and livestock vaccines. Sales go mainly to wholesalers, hospitals, governments and immunization programs, and the U.S. accounts for more than half of revenue. Merck reinvests heavily, spending $15.8 billion on R&D in 2025, and buys late-stage assets (Verona Pharma, Cidara, Terns) to replace revenue before patents expire.
Core Revenue Streams
Keytruda (pembrolizumab)
~US$31.7B in FY2025; approximately 49% of total company sales; highest-margin segment productKeytruda is a humanized monoclonal antibody targeting the programmed death-1 (PD-1) receptor on T-cells, which restores
Gardasil / Gardasil 9
~US$5.2B in FY2025 (down 39% from US$8.6B in FY2024); second-largest product; global market leader in HPV cancer preventionGardasil and its successor nine-valent formulation Gardasil 9 are prophylactic vaccines that prevent infection by the hu
Winrevair (sotatercept)
~US$1.4B in FY2025 (US$419M in partial FY2024); fastest-growing new product; projected US$3-5B annual peak salesWinrevair is a first-in-class activin signaling inhibitor approved by the FDA in March 2024 for the treatment of pulmona
Januvia / Janumet (sitagliptin)
~US$2.5B in FY2025 (up 12% from US$2.3B in FY2024); mature franchise under competitive pressure from GLP-1 agents and genericsJanuvia (sitagliptin) and the fixed-dose combination Janumet (sitagliptin plus metformin) are dipeptidyl peptidase-4 inh
Growth Strategy
Merck's strategy is to use Keytruda cash flow to build a broader portfolio before 2028. It moved patients toward subcutaneous Keytruda Qlex (FDA-approved September 19, 2025), expanded Keytruda into earlier-stage cancers, and bought late-stage or commercial assets: Verona Pharma for about $10 billion (completed October 2025, adding COPD drug Ohtuvayre), Cidara Therapeutics for about $9.2 billion (completed January 2026, adding influenza preventive CD388), and Terns Pharmaceuticals for about $6.7 billion (completed in Q2 2026, adding CML candidate MK-4208). Earlier deals include Acceleron ($11.5 billion, 2021), Prometheus Biosciences ($10.8 billion, 2023) and the Daiichi Sankyo ADC collaboration (up to $22 billion, 2023).
How Merck Makes Money: FAQ
How does Merck & Co. generate revenue across human health and animal health?
Merck operates a high-margin, research-intensive biopharmaceutical business model. It generates over $60 billion in annual revenue primarily across two divisions: 1) Human Health (prescription oncology therapies, hospital acute care drugs, cardiometabolic medicines, and pediatric/adult vaccines), representing ~88% of sales, and 2) Animal Health (livestock and companion animal pharmaceuticals and digital tracking), representing ~12% of sales.
What is Keytruda's oncology franchise strategy and multi-tumor indication expansion?
Merck pioneered a 'pan-tumor' clinical development strategy for Keytruda, investing billions in over 1,600 clinical trials across dozens of oncology indications and combination therapies. By establishing Keytruda as the standard of care in first-line non-small cell lung cancer (NSCLC) and expanding into early-stage adjuvant settings, Merck created an oncology revenue stream.
What is Winrevair (sotatercept) and how does it drive cardiometabolic revenue?
Approved by the FDA in 2024 following Merck's $11.5 billion acquisition of Acceleron Pharma, Winrevair (sotatercept) is a first-in-class activin signaling inhibitor for Pulmonary Arterial Hypertension (PAH). Winrevair addresses the underlying vascular proliferation in PAH, creating a multi-billion-dollar rare-disease blockbuster franchise.
How does Merck monetize its global HPV vaccine franchise through Gardasil 9?
Gardasil 9 protects against nine HPV strains responsible for most cervical, anal, and throat cancers. Merck sells Gardasil to national public health immunization programs and private healthcare markets worldwide; Gardasil/Gardasil 9 sales fell 39% to US$5.2 billion in 2025 (from US$8.6 billion in 2024) as sales in China contracted sharply.
What is Merck's strategy for subcutaneous (SC) Keytruda delivery?
To manage the upcoming Keytruda patent expiry, Merck developed a subcutaneous formulation combining pembrolizumab with Halozyme Therapeutics' ENHANZE drug-delivery enzyme. Subcutaneous Keytruda can be administered via a simple 2-minute under-the-skin injection rather than a 30-minute IV hospital infusion, extending patent exclusivity and enhancing patient convenience.
How does Merck Animal Health generate high-margin recurring cash flows?
Merck Animal Health sells pharmaceuticals, vaccines, and connected identification microchips (Allflex) directly to veterinarians, livestock farmers, and pet owners. Unlike human pharma, animal health is less vulnerable to government price negotiations and generic patent cliffs, providing steady, recession-resistant operating cash flow.
How does Merck manage its biopharmaceutical manufacturing supply chain?
Merck operates specialized biologic bulk manufacturing, sterile vial-filling, and chemical synthesis plants across the US, Ireland, the Netherlands, and Singapore. Because monoclonal antibodies and vaccines require complex living cell fermentation under strict FDA/EMA sterile regulations, manufacturing expertise acts as a strong competitive barrier.
What are Merck's commercial partnerships with Japanese pharma giants like Daiichi Sankyo?
In 2023, Merck signed a multi-billion-dollar global co-development and commercialization agreement with Daiichi Sankyo for three clinical-stage antibody-drug conjugates (ADCs), patritumab deruxtecan, ifinatamab deruxtecan, and raludotatug deruxtecan, investing up to $22 billion to build its next-generation targeted cancer pipeline.
How does Merck generate its pharmaceutical revenue?
Merck operates two primary business segments: Pharmaceutical (~90% of revenue) and Animal Health (~10%). Its human health revenue is anchored by the world's best-selling oncology drug, Keytruda (pembrolizumab), alongside blockbuster vaccines like Gardasil (preventing human papillomavirus and cervical cancer), hospital acute care antibiotics, and cardiovascular therapies like Winrevair.
How profitable is Merck's Animal Health division?
Merck Animal Health generates over $5.5 billion in stable annual revenue, developing pharmaceuticals, vaccines, and digital health monitors for livestock and companion animals (including Bravecto flea and tick treatments). Unlike human prescription drugs, animal health products face minimal government price regulation and do not experience sudden "patent cliff" revenue drops when patents expire.
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