Merck KGaA cites Trump tariffs, funding cuts as it scales back 2025 contracting forecast

As has been the case for several quarters now, Merck KGaA’s life science business continues to serve as a weathervane for the broader biopharma industry.

For the full year, Merck now expects sales from its life science arm—which provides R&D and CDMO services plus key materials for partners—to land between 8.8 billion euros and 9.4 billion euros.

The decision to scale back from a previous forecast of 9.1 billion euros to 9.8 billion euros can be blamed in large part on the “current uncertainties around tariffs,” Merck said in a Thursday press release.

“In response to the challenging global backdrop, we've slightly adjusted our guidance but continue to remain confident that we are well-positioned to achieve sustainable growth for 2025 and beyond,” the company’s CEO, Belén Garijo, said in a statement.

Production aside, contract research work suffered in the first quarter as well, with Merck attributing the decline in an earnings presentation (PDF) to "U.S. policy changes impacting U.S. academic and government labs spending."

While tariffs form a major piece of the second Trump administration’s trade policy, much-feared duties on pharmaceuticals were exempted in a large tariff rollout last month. Still, the administration continues to stress that sector-specific trade penalties remain on the table.

In turn, some drugmakers like Merck KGaA have baked potential tariff threats into updated guidance ranges for the year. Meanwhile, leaders at certain biopharma outfits like Eli Lilly, Bristol Myers Squibb and Johnson & Johnson have come out with direct criticism of President Donald Trump’s trade policy and the unintended consequences it could have on U.S. healthcare.

While pharmaceutical-specific tariffs have yet to touch down, Merck KGaA has already had to factor trade duties into its operations this year by adding a surcharge to life science orders for customers in China.

Still, Merck KGaA got some relief on that front this week after the U.S. and China agreed to temporarily scale back their dueling tariffs, Reuters reported Wednesday. In the wake of that announcement, Merck discontinued the temporary surcharge for China-based customers.

Merck KGaA also revised its overall 2025 guidance down to a range of 20.9 billion euros ($23.4 billion) to 22.4 billion euros ($25 billion), citing a challenging political and economic environment plus currency exchange fluctuations.

The company had previously expected to generate total sales between 21.5 billion euros and 22.9 billion euros in 2025.

Over the first three months of the year, Merck’s overall net sales climbed 2.5% to 5.3 billion euros ($6 billion) compared to the same quarter in 2024. The company's healthcare sector grew sales 3.4% to 2.1 billion euros ($2.34 billion), which Merck KGaA credited to strong performances in its cardiovascular, metabolism and endocrinology segments.

While certain medications like cancer drug Erbitux and multiple sclerosis treatment Mavenclad enjoyed sales boosts in the quarter, other former big earners, such as carcinoma med Bavencio, continued to flounder.

Bavencio—which won its original FDA nod in Merkel cell carcinoma 2017—suffered a more than 15% sales decline to 157 million euros ($176 million) in the first quarter. In an earnings breakdown, Merck attributed Bavencio’s ongoing fall from glory to steep North American competition in bladder cancer. 

In a bid to boost its foothold in oncology, Merck KGaA late last month announced a deal to purchase cancer-focused Pfizer spinout SpringWorks Therapeutics for $3.9 billion.

The health of Merck KGaA’s life science business has frequently reflected the broader challenges facing the industry in recent quarters, although, prior to the tariff threat, many of the issues Merck’s earnings brought to light revolved around contract development and manufacturing.

While Merck, like many in the business, has struggled to grow its CDMO unit following the contracting heights of the COVID-19 pandemic, the company began to telegraph a turnaround for the unit last spring.

In its latest earnings presentation, Merck suggested the modest life science growth it witnessed in the first quarter—carried by a process solutions boost—helps validate its thesis that the business unit overall is recovering.