Merck & Co., Inc. is a global biopharmaceutical company built around prescription medicines, vaccines and animal health products. Its business model converts scientific research and externally sourced innovation into patented products, then uses clinical development, regulatory, manufacturing and commercial capabilities to scale those products globally.
In 2025, Merck generated $65.0 billion of worldwide sales, up 1% from $64.2 billion in 2024. Pharmaceuticals contributed $58.1 billion and Animal Health $6.35 billion. KEYTRUDA remained the economic center of the portfolio with $31.64 billion of sales—nearly 49% of total company revenue—while newer products such as WINREVAIR and CAPVAXIVE began broadening the growth base.
1. Industry Problem Merck Solves
Serious diseases create enormous unmet need, but discovering and developing effective therapies is expensive, scientifically uncertain and time-consuming. Potential medicines must move through research, clinical trials, regulatory review and manufacturing before reaching patients, and many candidates fail before commercialization.
Vaccines add another challenge: companies need to anticipate infectious-disease needs, establish clinical evidence, manufacture reliably at scale and work within national immunization systems. Animal health similarly requires medicines and vaccines adapted to livestock and companion-animal markets.
Merck solves these problems by combining internal science with partnerships and acquisitions, then applying a global development and commercialization platform. For management’s priorities, read our Merck Business Strategy 2026.
2. Merck’s Unique Solution
Merck concentrates resources in areas where differentiated science can create large clinical and commercial opportunities. Oncology is the clearest example: KEYTRUDA has become a foundational cancer therapy across numerous tumor types and treatment settings.
The company also uses lifecycle development aggressively. A successful molecule can be tested across additional indications, combinations, stages of disease and formulations. KEYTRUDA QLEX, for example, adds a subcutaneous formulation to the franchise.
Merck supplements internal R&D with alliances and acquisitions. Alliance revenue from Lynparza, Lenvima and Reblozyl demonstrates how partnerships can add economically meaningful products without Merck owning every asset outright.
The model extends beyond human pharmaceuticals. Animal Health generated $6.35 billion in 2025, providing a distinct revenue stream serving livestock and companion animals. For a consolidated assessment of advantages and vulnerabilities, see our Merck SWOT Analysis 2026.
3. Merck Business Model
Internal research and clinical development
Merck invests heavily in discovering and validating new medicines and vaccines. Research and development expense was approximately $15.8 billion in 2025, about 24% of total sales, illustrating how much current revenue is reinvested into future products.
Patent-protected pharmaceuticals
Successful therapies can generate substantial sales during patent and regulatory exclusivity. The economic model depends on earning attractive returns during this period while preparing replacement products before competition arrives.
Vaccines
Merck develops and commercializes vaccines including GARDASIL/GARDASIL 9, CAPVAXIVE and pediatric vaccines. Vaccine demand can differ from therapeutic medicines because government programs, public-health recommendations and inventory patterns influence sales.
Alliances and external innovation
Collaborations allow Merck to share development and commercialization economics. Acquisitions can accelerate entry into new therapeutic areas or add late-stage assets, although they require disciplined capital allocation.
Animal Health
Animal Health sells veterinary pharmaceuticals and vaccines globally. In 2025, livestock sales were $3.90 billion and companion-animal sales $2.46 billion, providing diversification beyond human health.
For the external forces affecting these economics, read our Merck PESTEL Analysis 2026.
4. How Does Merck Make Money?
Oncology
KEYTRUDA generated $31.64 billion in 2025, up 7% from $29.48 billion. Alliance revenue from Lynparza reached $1.45 billion, Lenvima $1.05 billion, Welireg $716 million and Reblozyl $525 million. Oncology is therefore Merck’s largest and most strategically important revenue engine.
Vaccines
GARDASIL/GARDASIL 9 generated $5.23 billion, down 39% from $8.58 billion, while CAPVAXIVE rose to $759 million and VAXNEUVANCE generated $825 million. The portfolio shows how vaccine sales can shift materially between products and markets.
Cardiometabolic and other pharmaceuticals
Newer medicines are becoming more important. WINREVAIR generated $1.44 billion in 2025 compared with $419 million in 2024, establishing a meaningful new growth driver in pulmonary arterial hypertension.
Established products
Merck continues earning revenue from products such as JANUVIA/JANUMET, BRIDION and PREVYMIS. These products contribute cash and diversification even as individual franchises face competition or changing demand.
Animal Health
Animal Health generated $6.35 billion, up 8% from $5.88 billion. Livestock revenue grew 13% to $3.90 billion while companion-animal revenue reached $2.46 billion.
5. Merck Financial Analysis
Sales growth
Total sales increased $843 million, or about 1.3%, to $65.01 billion in 2025. Pharmaceutical sales grew 1.3% to $58.14 billion, while Animal Health increased 8.1% to $6.35 billion.
KEYTRUDA concentration
KEYTRUDA alone represented about 48.7% of total 2025 sales. Its $2.16 billion year-over-year increase provided a major offset to weaker vaccine revenue, but such concentration makes future exclusivity and lifecycle execution exceptionally important.
GARDASIL decline
GARDASIL/GARDASIL 9 sales fell by $3.35 billion, or 39%, to $5.23 billion. This explains why strong growth in KEYTRUDA, WINREVAIR, CAPVAXIVE and Animal Health translated into only modest consolidated sales growth.
New growth engines
WINREVAIR added more than $1.0 billion of sales year over year, while CAPVAXIVE increased by about $662 million. These launches are strategically significant because Merck needs multiple products to reduce dependence on KEYTRUDA.
Innovation intensity
R&D expense of approximately $15.8 billion equaled roughly 24% of sales. That high reinvestment rate reflects the economics of biopharma: current blockbusters must finance a broad pipeline long before replacement products generate revenue.
6. Future of Merck’s Business Model
Merck’s future depends on transforming a portfolio currently dominated by KEYTRUDA into a more diversified set of growth drivers. The company has already begun that process through WINREVAIR, CAPVAXIVE, Welireg and other launches, while continuing to expand KEYTRUDA itself.
Lifecycle management remains important. New indications, combinations and formulations can extend the clinical and commercial relevance of major products. KEYTRUDA QLEX illustrates how formulation innovation can broaden how an established therapy is delivered.
External innovation will remain central because Merck cannot rely exclusively on internal discovery. Acquisitions and collaborations can add pipeline assets and new platforms faster, but the company must avoid overpaying for scientific promise that may not translate into approvals or commercial success.
Animal Health provides a useful counterweight to human pharmaceuticals. Its 8% growth in 2025 and different customer base diversify revenue, though the segment is far smaller than pharmaceuticals.
The key long-term metric is replacement capacity: whether revenue from newer products and future pipeline launches can scale before KEYTRUDA faces major exclusivity pressure. Merck’s $15.8 billion R&D investment shows the scale of resources committed to this transition. The business model succeeds if those investments produce several durable franchises rather than another single point of concentration.
Merck’s portfolio illustrates why pharmaceutical revenue must be analyzed by lifecycle rather than simply by product count. A small number of medicines can generate a disproportionate share of sales, while dozens of pipeline programs may produce no commercial revenue. The business therefore depends on continuously converting uncertain R&D investments into a few highly productive assets.
KEYTRUDA demonstrates the upside of this model. Its 2025 sales of $31.64 billion exceeded Merck’s entire Animal Health business by almost five times. Once a therapy achieves broad clinical relevance, additional indications and treatment settings can compound revenue on top of an established manufacturing and commercial platform.
The same concentration creates asymmetric risk. If a product approaching half of company revenue eventually declines faster than replacements scale, consolidated earnings can change materially even when other products perform well. This makes pipeline timing as important as pipeline size.
GARDASIL provides a different example of lifecycle volatility. Its $3.35 billion sales decline in 2025 was larger than the combined year-over-year increase from several new launches. One mature franchise can therefore offset impressive growth elsewhere in the portfolio.
WINREVAIR’s rapid scale shows how a new asset can begin changing the mix. Moving from $419 million to $1.44 billion in one year added more than $1 billion of incremental revenue. Several launches following this trajectory would materially reduce KEYTRUDA concentration.
CAPVAXIVE provides another diversification path because vaccines have different demand dynamics from oncology. Its increase to $759 million creates a new pneumococcal franchise, although vaccine uptake depends on recommendations, purchasing patterns and public-health systems as well as physician prescribing.
Alliance economics allow Merck to participate in products without bearing every development and commercialization cost alone. Lynparza and Lenvima generated combined alliance revenue of roughly $2.5 billion in 2025, demonstrating that partnerships can become meaningful components of the revenue base.
Animal Health has yet another economic profile. Livestock products are linked to animal disease management and food production, while companion-animal products benefit from pet-care spending. These drivers are not identical to oncology or vaccines, adding genuine diversification.
Geographic diversification also matters. Merck generated $36.5 billion of 2025 sales in the United States and $28.5 billion internationally. International markets expand product opportunity but introduce currency, pricing and regulatory differences that affect realized economics.
R&D intensity explains why pharmaceutical gross sales cannot be viewed like mature consumer revenue. Roughly one-quarter of sales was reinvested in research and development in 2025. Those expenditures support products that may not generate revenue for years, if ever.
Manufacturing is another essential component of the model. Biologics and vaccines require complex, regulated processes, so capacity and quality systems become competitive capabilities. Commercial demand cannot be monetized if supply is unreliable.
The strongest future version of Merck’s model would generate revenue from several large franchises across different therapeutic areas and modalities. That would preserve the high-return economics of innovation while reducing the financial impact of any single patent cliff or demand shock.
Revenue mix also shows the value of the pharmaceutical platform beyond KEYTRUDA. Pharmaceutical segment sales were $58.14 billion, about 89% of total segment sales, while Animal Health represented roughly 10%. This makes human health the overwhelming earnings engine even though Animal Health provides useful diversification.
Within pharmaceuticals, oncology remains dominant, but growth rates differ sharply by product. Welireg grew 41%, Reblozyl alliance revenue grew 41% and PREVYMIS increased 25%, providing smaller but increasingly relevant contributors around the core franchise.
The business model therefore benefits when several products grow simultaneously. A broad set of positive contributors can absorb declines in mature products and reduce the amount of replacement revenue required from any one launch.
Source: Merck & Co., Inc., 2025 Annual Report / Form 10-K.
