Risk factor changes · MRK

What changed in Merck's risk factors

Item 1A (Risk Factors) of Merck's FY2025 10-K compared with its FY2024 10-K, sentence by sentence.

Newer: 10-K filed 2026-02-24 · Older: 10-K filed 2025-02-25

New in the latest 10-K 38

• The Company may experience difficulties and delays in manufacturing certain of its products, including vaccines.
• As a consequence of the reduced sales of Gardasil/Gardasil 9, the Company s business in China declined significantly.
• See Cautionary Factors that May Affect Future Results below.
• Bridion will lose market exclusivity in the U.S. in July 2026 at which time the Company anticipates a significant and rapid decline in U.S. sales of Bridion .
• The Company expects to discontinue U.S. sales of Bridion by the end of 2026.
• In addition, Januvia and Janumet will lose market exclusivity in the U.S. in May 2026 and Janumet XR will lose market exclusivity in the U.S. in July 2026.
• The Company expects a significant decline in sales of Januvia in the first half of 2026 reflecting the impact of government price setting noted above and subsequently, following loss of market exclusivity in May 2026, the Company anticipates it will lose nearly all U.S. sales of Januvia and Janumet .
• Also, the Company expects that sales of Keytruda will be materially negatively impacted by biosimilar competition between 2028 and 2029.
• As previously disclosed, while two patents in the Keytruda composition of matter patent family expire in May and November of 2029, respectively, the Company expects these patents to be the subject of litigation and, thus, biosimilar competition could begin in December 2028 when the primary compound patent expires.
• There may, however, be attempts by one or more companies to challenge the patent or launch a biosimilar product despite the patent in some European jurisdictions following the expiration of data exclusivity in Europe in July 2026.
• In addition, in January 2026, HHS announced that Lenvima has been selected for government price setting, the set price for which will become effective on January 1, 2028.
• Also, as noted above, in December 2025, the Company entered into the MFN Agreement with the U.S. government pursuant to which the Company will provide key products through a direct-to-patient program at affordable prices for eligible patients in the U.S.
• This currently includes Januvia , Janumet , and Janumet XR , and will be expanded in the future to include enlicitide decanoate pending FDA approval.
• The Company also agreed to offer its existing medicines at discounted prices to Medicaid, excluding certain products.
• In addition, the Company has agreed that products launched during the term of the MFN Agreement (with certain exceptions) will be subject to most-favored-nation pricing in reference to prices for such products in the MFN Countries.
• Also, the Company expects that U.S. states will continue their focus on pharmaceutical pricing and may shift to more aggressive price control tools.
• As discussed above in Item 1.
• The Company anticipates all of these actions, and additional actions in the future, will continue to negatively affect sales and profits. 31 Table of Contents In addition, it is possible that as a consequence of the MFN Agreement, certain of the Company s products may not be launched in the MFN Countries or their launch may be delayed and as a result, the MFN Countries may take actions that adversely impact the Company.
• New legal and regulatory requirements with respect to climate-related matters, which may differ across jurisdictions, could result in the Company being subject to increased compliance burdens and costs to meet these obligations.
• These evolving regulatory requirements may result in increased costs and complexities of compliance in order to collect, measure and report on the relevant information, and could expose the Company to the risk of government enforcement actions and private litigation. 33 Table of Contents Failure to attract and retain highly qualified personnel could affect the Company s ability to successfully develop and commercialize products.
• As a consequence of the reduced sales of Gardasil/Gardasil 9 , the Company s business in China declined significantly.
• The Company s business in China experienced significantly lower sales of Gardasil/Gardasil 9 in 2025.
• Due to above normal inventory levels at the Company s commercialization partner in China, the Company made a decision to pause shipments to China beginning in February 2025 and has not resumed shipments to date.
• The Company will not resume shipments until inventory levels return to normal levels and it cannot predict when shipments to China will resume nor the levels of sales that the Company will achieve and as a result, the Company expects that sales of Gardasil/Gardasil 9 in China will not materially increase in 2026.
• In June 2025, a nine-valent HPV vaccine produced by a local manufacturer received regulatory approval in China for use in females 9-45 years of age.
• Negative events in the animal health industry could have a material adverse effect on future results of operations and financial condition of the Company or its Animal Health business.
• Any of these events could result in substantial costs.
• Biologics and vaccines require long manufacturing lead times, sometimes requiring planning years in advance of demand, which could increase the risk of inventory write-downs if that demand does not materialize.
• In addition, in January 2026, HHS announced that Lenvima has been selected for government price setting, the set price for which will become effective on January 1, 2028.
• Changes could also impact the CDC, including how recommendations for immunizations are issued and maintained.
• Changes that have been made to the CDC s recommended immunization schedule which could impact public and private coverage, as well as reduction in state-controlled school immunization requirements, could cause a decline in vaccine uptake.
• Alterations to the National Vaccine Injury Compensation Program also could impact how claims against vaccine manufacturers are adjudicated.
• The government also has discussed certain policy changes to facilitate market entry of biosimilar products.
• The FDA and foreign regulatory authorities, including in the EU, Japan and China, have substantial discretion to require additional testing, to delay or withhold registration and marketing approval and to otherwise preclude distribution and sale of a product.
• Similarly, new information that becomes available about products from other manufacturers may prompt new regulatory reviews of the Company s products, leading to actions that could negatively affect sales.
• The Company is subject to evolving and complex tax laws, which may result in additional liabilities that may affect results of operations and financial condition.
• If the IRS challenge to the Company s transition tax position is ultimately successful, the impact could be material to the Company s cash flows, results of operations and financial condition.
• Unauthorized use of open-source AI tools or generative AI platforms by employees or third parties could result in inadvertent disclosure of confidential information, intellectual property leakage, or regulatory violations.

Reworded 89

Removed words are struck through; added words are highlighted.

• The following is a summary of the principal risk factors facing the Company: 26 Table of Contents The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely affected.
• Key products generate a significant amount of the Company s profits and cash flows, and any events that adversely affect the markets for its leading products could have a material adverse effect on the Company s results of operations and operations, cash flows, financial condition. condition, and prospects.
• The Company faces continued pricing pressure with respect to its products. products in the public and private sectors.
• Unfavorable or uncertain economic conditions, together with cost-reduction measures being taken by certain governments, the U.S. and other countries, could negatively affect the Company s operating results.
• The Company has significant global operations, which expose it to additional risks, and any adverse event could have a material adverse effect on the Company s results of operations and operations, cash flows, financial condition. condition, and prospects.
• Climate change or legal, regulatory or market measures to address climate change may negatively affect the Company s business, results of operations, cash flows flows, financial condition, and prospects.
• Failure to attract and retain highly qualified personnel could affect the Company s ability to successfully develop and commercialize products. 26 Table of Content s The Company may experience difficulties and delays in manufacturing certain of its products, including vaccines.
• In 2024, the The Company s business in China experienced significantly lower sales of Gardasil/Gardasil 9 in China 2025 and the Company expects that sales of Gardasil/Gardasil 9 in China will decline significantly not materially increase in 2025. 2026.
• Biologics and vaccines carry unique risks and uncertainties, which could have a material adverse effect on the Company s future results of operations and operations, cash flows, financial condition. condition, and prospects.
• The Company s products, including products in development, cannot be marketed unless the Company obtains and maintains regulatory approval. approval or authorization.
• Developments following regulatory approval or authorization may adversely affect sales of the Company s products.
• Adverse outcomes in current or future legal matters could negatively affect Merck the Company s business.
• The Company is increasing its use of artificial intelligence (AI) systems to automate processes, analyze data, and support decision-making decision-making, which poses inherent risks.
• See Cautionary Factors that May Affect Future Results below. 27 Table of Content s Risks Related to the Company s Business The Company is dependent on its patent rights, and if its patent rights are invalidated or circumvented, its business could be materially adversely affected.
• Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies or in other circumstances, which could diminish or eliminate sales and profits from those regions and negatively affect the Company s results of operations. operations, cash flows, financial condition, and prospects.
• Further, court decisions relating to other companies patents, potential legislation in both the U.S. and 28 Table of Contents certain foreign markets relating to patents, as well as regulatory initiatives may result in a more general weakening of intellectual property protection.
• If one or more important products lose patent protection in profitable markets, sales of those products are likely to decline significantly as a result of generic or biosimilar versions of those products becoming available.
• The Company s business, cash flows, results of operations operations, financial position, and prospects may be adversely affected by the lost sales unless and until the Company has launched commercially successful products that replace the lost sales.
• Loss of patent protection for one of the Company s products typically leads to a significant and rapid loss of sales for that product as lower priced generic or biosimilar versions of that drug become available.
• The Company also expects to lose market exclusivity in Europe for Keytruda in 2031 following compound patent expiration.
• There may, however, be attempts by one or more companies to challenge the patent or launch a biosimilar product despite the patent in some European jurisdictions following the expiration of data exclusivity in Europe in July 2026. 28 Table of Content s Key products generate a significant amount of the Company s profits and cash flows, and any events that adversely affect the markets for its leading products could have a material adverse effect on the Company s results of operations and operations, cash flows, financial condition. condition, and prospects.
• The Company s ability to generate profits and operating cash flows depends largely upon the continued profitability of the Company s key products, such as Keytruda , Gardasil/Gardasil 9, Lynparza, Bravecto , Winrevair, and Bridion Bravecto .
• In particular, in the aggregate, in 2024, 2025, sales of Keytruda represented 46% 49% of the Company s total sales.
• As a result of the Company s dependence on key products, any event that adversely affects any of these products or the markets for any of these products, such as the slowing materially lower demand for Gardasil/Gardasil 9 in China which the Company has experienced, could have a significant adverse impact on results of operations and operations, cash flows, financial condition. condition, and prospects.
• Other events could include loss of patent protection, selection for IRA price setting, lower than expected utilization of Keytruda Qlex , increased costs associated with manufacturing, generic generic, biosimilar or over-the-counter availability of the Company s product or a competitive product, the discovery of previously unknown side effects, results of post-approval trials, increased competition from the introduction of new, more effective treatments and discontinuation or removal from the market of the product for any reason.
• Expected declines in sales of products after the loss of market exclusivity mean that the Company s future success is dependent on its pipeline of new products, including new products that it may develop 29 Table of Contents through collaborations and joint ventures and products that it is able to obtain through license or acquisition.
• Therefore, the Company may abandon a product candidate or use in which it has invested substantial amounts of time and resources.
• Products Product candidates or uses that appear promising in development may fail to reach the market or fail to succeed for numerous reasons, including the following: findings of ineffectiveness, superior safety or efficacy of competing products, or harmful side effects in clinical or preclinical testing; 29 Table of Content s failure to receive the necessary regulatory approvals, including delays in the approval of new products and new indications, or the anticipated labeling, and uncertainties about the time required to obtain regulatory approvals and the benefit/risk standards applied by regulatory agencies in determining whether to grant approvals; failure in certain markets to obtain reimbursement commensurate with the level of innovation and clinical benefit presented by the product; changes in clinical preferences or standards of care, including competitor innovations, that diminish the value of the product; lack of economic feasibility due to manufacturing costs or other factors; and preclusion from commercialization by the proprietary rights of others.
• The Company faces continued pricing pressure with respect to its products. products in the public and private sectors.
• The Company faces continued pricing pressure globally and, particularly in mature markets, from managed care organizations, government agencies and programs that could negatively affect the Company s sales 30 Table of Contents and profit margins.
• Competition and the Health Care Environment, in 2023, HHS selected Januvia for the first year of the IRA s price setting program, which will result resulted in a government set price becoming effective on January 1, 2026.
• In January 2025, HHS announced that selected Janumet and Janumet XR have been selected for government price setting, which will become effective on January 1, 2027.
• Furthermore, the Company expects that in 2026 2027 HHS will include Keytruda in a subsequent selection of products to undergo IRA price setting, with such price to become effective on January 1, 2028 2029 and the Company expects that, as a result, U.S. sales of Keytruda will decline materially after that time.
• Unfavorable or uncertain economic conditions, together with cost-reduction measures being taken by certain governments, the U.S. and other countries, could negatively affect the Company s operating results.
• Uncertainty in global economic and geopolitical conditions may result in a slowdown to the global economy that could affect the Company s business by reducing the prices that drug wholesalers and retailers, hospitals, government agencies and managed health care providers may be able or willing to pay for the Company s products or by reducing the demand for the Company s products, which could in turn negatively impact the Company s sales and result in a material adverse effect on the Company s business, cash flows, results of operations, financial condition and prospects. 30 Table of Content s As discussed above in Item 1.
• In addition, the Company s sales performance in 2024 2025 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs, including in the U.S., the expansion of the Federal 340B Drug Discount Program.
• Although it is the Company s policy to actively protect its patent rights, generic challenges to the Company s products can arise at any time, and the Company s patents may not prevent the emergence of generic or biosimilar competition for its products.
• Availability of generic or biosimilar substitutes for the Company s drugs may adversely affect its results of operations and cash flows.
• In addition, proposals emerge from time to time in the U.S. and other countries for legislation to further encourage the early and rapid approval of generic or biosimilar drugs.
• Any such proposal that is enacted into law could worsen this substantial negative effect on the Company s sales, business, cash flows, results of operations, financial condition and prospects.

Removed since the previous 10-K 24

• The Company s business in China has grown in the past few years, and the importance of China to the Company s overall pharmaceutical and vaccines business has increased accordingly.
• The Company lost market exclusivity for Bridion in Europe and Japan in 2023 and 2024, respectively, and the Company has experienced a substantial decline in Bridion sales in those markets.
• Bridion will lose market exclusivity in the U.S. in 2026 (subject to patent litigation discussed below) and the Company expects that sales of Bridion in the U.S. will decline substantially thereafter.
• In addition, the Company expects U.S. sales of Keytruda to decline beginning in January 2028 upon implementation of government pricing under the IRA, and to further decline upon loss of market exclusivity following expiration of the U.S. compound patent in December 2028.
• In 2024, the Company s oncology portfolio, led by Keytruda , represented substantially all of the Company s revenue growth.
• The Company anticipates all of these actions, and additional actions in the future, will continue to negatively affect sales and profits.
• The U.S. government has announced plans to significantly increase tariffs on foreign imports into the U.S., particularly from Canada and Mexico and has already increased tariffs on imports from China.
• It is too early for the 31 Table of Content s Company to assess if, or to what extent, such policies will be implemented or continue to be implemented, and the extent of any measures that have been or will be taken by any impacted countries.
• New legal and regulatory requirements are being enacted to prevent, mitigate, or adapt to the implications of a changing climate and its effects on the environment.
• These regulations, which may differ across jurisdictions, could result in the Company being subject to new or expanded carbon pricing or taxes, increased compliance costs, restrictions on GHG emissions, investment in new technologies, increased GHG emission disclosure (including costs resulting from mandatory or voluntary reporting, diligence or disclosure) and transparency, recurring investments in data gathering and reporting systems, upgrades of facilities to meet new building codes, and the redesign of utility systems, which could increase the Company s operating costs, including the cost of electricity and energy used by the Company.
• These evolving regulatory requirements are likely to result in increased costs and complexities of compliance in order to collect, measure and report on the relevant information.
• Failure to attract and retain highly qualified personnel could affect the Company s ability to successfully develop and commercialize products.
• For example, the Company is currently experiencing manufacturing delays related to Varivax and ProQuad which will result in supply constraints in 2025.
• The Company s business in China has grown in the past few years, and the importance of China to the Company s overall pharmaceutical and vaccines business has increased accordingly.
• The Company s business in China has grown in the past few years, and the importance of China to the Company s overall pharmaceutical and vaccines business has increased accordingly.
• Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd.
• (Zhifei), to disease and control prevention institutions and correspondingly into the points of vaccination, resulting in above normal inventory levels at Zhifei.
• Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024.
• Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels.
• Therefore, the Company made a decision to temporarily pause shipments to China beginning in February 2025 through at least the middle of the year and as a result, combined sales of G ardasil/Gardasil 9 will decline significantly in 2025 compared with 2024.
• The Company may not be able to realize the expected benefits of its investments in emerging markets.
• Centers for Disease Control and Prevention (CDC) to issue or maintain recommendations for vaccines.
• Developments following regulatory approval may adversely affect sales of the Company s products.
• If the IRS disagrees with the Company s transition tax position, it may result in a significant tax liability.

Source: SEC EDGAR filings, compared sentence by sentence by EdgarStack. Sentence matching is automated and may pair or split passages imperfectly; check the linked filings before relying on any passage. A software tool, not financial advice. Not affiliated with the U.S. Securities and Exchange Commission.