How Merck (MRK) Makes Money: A Deep Dive Into Revenue Streams And Business Model

Merck is one of the largest pharmaceutical companies in the world, but understanding how Merck makes money requires looking beyond a single blockbuster drug. The company generates revenue from multiple segments, including human health pharmaceuticals, animal health products, and a growing oncology pipeline. Breaking down Merck's revenue streams and identifying which parts of the business are expanding fastest gives investors a clearer picture of the company's long-term value and risk profile.

Key takeaways

• Merck's pharmaceutical segment (branded as "Human Health") accounts for the vast majority of total revenue, driven heavily by oncology and vaccines.
• A single franchise can represent an outsized share of Merck's revenue, which creates both opportunity and concentration risk.
• The Animal Health segment is a meaningful but smaller contributor, offering diversification away from patent-dependent drug sales.
• Merck's growth beyond its core blockbuster relies on pipeline depth, acquisitions, and expanding indications for existing therapies.
• Evaluating how MRK makes money means tracking not just total revenue but the mix shift between mature products and newer launches.

How does Merck make money? The big picture

Merck operates primarily as a research-driven pharmaceutical company. Its revenue comes from discovering, developing, manufacturing, and selling prescription medicines, vaccines, and animal health products. If you look at the Merck business model at a high level, it breaks into two major reporting segments: Pharmaceutical (often called Human Health) and Animal Health.

The Pharmaceutical segment is the engine. It includes oncology drugs, hospital acute care products, immunology therapies, cardiovascular medicines, diabetes treatments, and vaccines. Animal Health covers veterinary pharmaceuticals, vaccines, and related products for livestock and companion animals. There's no ambiguity about which side dominates: Human Health typically generates around 85-90% of total company revenue.

Revenue concentration risk: When a single product or therapy area accounts for a large percentage of a company's total sales, investors face concentration risk. If that product loses patent protection or faces competitive pressure, the impact on overall revenue can be dramatic.

What are Merck's biggest revenue streams?

Within the Pharmaceutical segment, Merck's revenue streams cluster around a few therapeutic areas. Oncology is the largest by a wide margin. Merck's flagship immunotherapy franchise has become one of the best-selling drug programs in pharmaceutical history, generating tens of billions in annual sales. Vaccines represent the second major pillar, with products targeting HPV, pneumococcal disease, and other infectious diseases contributing meaningfully to the top line.

Here's where it gets interesting for investors. The oncology franchise alone can represent somewhere around 40-50% of Merck's total revenue in a given year. That's an extraordinary level of dependence on a single therapeutic platform. Vaccines might account for roughly 15-25% of total revenue. The remaining pharmaceutical sales spread across cardiovascular, diabetes, hospital products, and immunology, but none of these individually rival the top two categories.

Animal Health, while smaller, is not trivial. It typically generates somewhere in the range of 10-15% of total revenue. This segment has its own competitive dynamics, with products for both livestock (poultry, cattle, swine) and companion animals (dogs, cats). It provides a buffer against the patent cliff risk that looms over every pharmaceutical company's branded drug portfolio.

How does the Merck business model compare to other pharma giants?

Most large-cap pharmaceutical companies share a similar model: invest heavily in R&D, protect discoveries with patents, price products at a premium during the exclusivity window, and then face generic competition once patents expire. What differentiates Merck's business model is the degree of concentration in a single blockbuster franchise and the company's strategic bets on immuno-oncology.

Compare this to diversified peers who spread revenue more evenly across dozens of drugs. Merck's approach has delivered outsized growth when the lead franchise expands, but it also means investors need to watch the patent expiration timeline carefully. When you're researching a company like Merck, you can pull up the MRK stock page on Rallies.ai to see how analysts and AI models are framing the company's fundamentals.

The tradeoff is clear: Merck has enjoyed higher revenue growth rates than many pharmaceutical peers during the franchise's peak years, but faces a steeper revenue replacement challenge as that exclusivity window eventually closes.

What's driving Merck's growth beyond its core pharmaceutical business?

Investors often ask what comes next. If the core oncology franchise faces biosimilar competition in the years ahead, where does growth come from? Merck has pursued several strategies to address this:

• Pipeline expansion: Merck has invested billions in R&D to develop next-generation oncology combinations, including subcutaneous formulations and new combination therapies designed to extend the commercial life of its immunotherapy platform.
• Acquisitions: Merck has been an active acquirer, targeting companies with late-stage or recently approved assets in oncology, cardiovascular, and immunology. These deals aim to diversify revenue and fill the gap left when blockbuster patents expire.
• Vaccine innovation: The vaccines business has its own growth trajectory, particularly in areas like pneumococcal vaccines where newer-generation products can capture market share from older formulations.
• Animal Health growth: This segment benefits from secular trends like rising pet ownership and increasing protein consumption in developing markets. It's a slower-growth business but with less patent cliff exposure.
• Geographic expansion: Merck generates a significant share of revenue outside the United States, with China, Europe, and emerging markets contributing to growth, particularly for oncology and vaccines.

Patent cliff: The period when a blockbuster drug's patent protection expires, allowing generic or biosimilar competitors to enter the market. This typically results in rapid revenue declines for that product. For pharmaceutical investors, understanding a company's patent cliff timeline is one of the most important elements of long-term analysis.

How do Merck's revenue streams break down by geography?

Merck is a global business, and geographic diversification matters. The United States typically accounts for roughly half of total pharmaceutical revenue, with international markets making up the rest. Within international markets, China has been a notable growth driver for oncology products, though regulatory and pricing dynamics vary significantly by country.

For the Animal Health segment, revenue is more evenly distributed globally, reflecting the worldwide nature of livestock farming and pet care. This geographic balance is worth noting because it means Merck's overall revenue is exposed to currency fluctuations, international pricing regulations, and country-specific reimbursement policies.

If you want to dig into how geographic mix affects Merck's financials, you can use the Rallies AI Research Assistant to ask follow-up questions about regional revenue trends and competitive positioning.

What risks should investors consider in the Merck business model?

No analysis of how Merck makes money is complete without talking about risk. The biggest and most obvious risk is revenue concentration. When a single franchise generates such a large share of total sales, anything that disrupts that franchise, whether it's patent expiration, clinical trial failures for new indications, or competitive entries, has an outsized impact.

Other risks include:

• Pricing pressure: Government negotiations, insurance formulary decisions, and international reference pricing can compress margins on key products.
• Pipeline uncertainty: Drug development is inherently risky. Late-stage clinical trial failures can wipe out billions in projected revenue.
• Acquisition integration: Merck has spent heavily on acquisitions. Whether those deals generate adequate returns depends on successful integration and commercial execution.
• Regulatory changes: Shifts in FDA approval standards, Medicare drug pricing negotiations, or international regulatory requirements can affect both revenue and margins.

Investors may want to weigh these factors carefully. One approach is to use a stock screener to compare Merck's risk profile against other large-cap pharmaceutical companies with different revenue concentration levels.

How to evaluate Merck's revenue mix over time

If you're researching how MRK makes money, looking at the revenue mix in a single snapshot isn't enough. You want to track how the mix shifts over time. Here's a framework:

1. Identify the top five products by revenue contribution. Look at quarterly or annual filings to see which drugs and vaccines generate the most sales.
2. Track growth rates by segment. Is oncology still growing? Are vaccines accelerating or decelerating? Is Animal Health gaining share?
3. Monitor the pipeline for upcoming launches. New product approvals can reshape the revenue mix within a few years. Pay attention to Phase 3 readouts and regulatory milestones.
4. Watch the patent expiration calendar. Know when key patents expire and what the company's strategy is for managing the transition, whether through lifecycle management, new formulations, or replacement products.
5. Compare margins across segments. Pharmaceutical margins tend to be significantly higher than Animal Health margins. A shift in revenue mix can affect overall profitability even if total revenue stays flat.

This kind of framework analysis is exactly what the Rallies AI Research Assistant is built for. You can ask it to walk you through any of these steps for Merck or any other company.

Try it yourself

Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:

• Break down how Merck makes money — what are their biggest revenue segments, how much comes from blockbuster drugs versus newer products, and what's driving their growth beyond the core pharmaceutical business?
• Break down how Merck makes money — what are their biggest revenue streams and what's growing fastest?
• What does Merck's patent expiration timeline look like, and how is the company preparing to replace lost revenue from its top-selling drugs?

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Frequently asked questions

What is the Merck business model?

Merck is a research-driven pharmaceutical and animal health company. It discovers, develops, and sells prescription medicines, vaccines, and veterinary products. The bulk of its revenue comes from patented pharmaceutical products sold globally, with a smaller but meaningful contribution from its Animal Health division. Merck reinvests heavily in R&D and acquisitions to replenish its pipeline as older products face generic competition.

What are Merck's main revenue streams?

Merck's revenue streams fall into two segments: Pharmaceutical (Human Health) and Animal Health. Within pharmaceuticals, oncology is the dominant category, followed by vaccines, cardiovascular, diabetes, and hospital products. Animal Health covers veterinary medicines and vaccines for both livestock and companion animals. Oncology and vaccines together typically account for the majority of pharmaceutical segment sales.

How does MRK make money from its oncology franchise?

Merck's oncology revenue comes primarily from its immunotherapy platform, which is approved across a wide range of cancer types. The therapy is used as a first-line and second-line treatment in lung cancer, melanoma, head and neck cancer, and many other indications. Each new indication approval expands the addressable patient population and drives incremental revenue growth.

Is Merck's Animal Health segment important to the overall business?

Animal Health typically represents around 10-15% of Merck's total revenue. While it's not the primary growth driver, it provides diversification away from patent-dependent pharmaceutical products. The segment benefits from long-term trends in global protein demand and pet ownership, and it generally faces less dramatic revenue cliffs than the branded drug business.

What happens when Merck's key drug patents expire?

Patent expiration allows biosimilar and generic competitors to enter the market, which typically causes significant revenue declines for the affected product. Merck's strategy to manage this includes developing next-generation formulations, pursuing new combination therapies, acquiring companies with promising late-stage pipelines, and expanding its vaccines and animal health businesses. How successfully Merck navigates its patent cliff is one of the most important questions for long-term investors.

How can I research Merck's revenue breakdown myself?

Start with Merck's annual report and 10-K filing, which break down revenue by segment and product. Quarterly earnings releases provide more recent data. You can also use tools like the Rallies.ai MRK research page to explore fundamentals and ask AI-powered follow-up questions about specific aspects of Merck's financials.

How does Merck's revenue concentration compare to other pharmaceutical companies?

Merck has higher revenue concentration in a single franchise than most of its large-cap pharmaceutical peers. Some competitors spread revenue more evenly across a larger number of products, which reduces the impact of any single patent expiration. This concentration has been a double-edged sword for Merck: it enabled faster top-line growth during the franchise's expansion phase but creates a larger replacement challenge ahead.

Bottom line

Understanding how Merck makes money comes down to a few core dynamics: a dominant oncology franchise that drives the majority of revenue, a meaningful vaccines business, a diversifying Animal Health segment, and a pipeline strategy built on R&D and acquisitions. The Merck revenue streams are concentrated in ways that amplify both the upside and the risk, which makes tracking the revenue mix over time a critical part of any investment research process.

If you're evaluating pharmaceutical stocks, start by understanding the business model before looking at valuation. For more frameworks on analyzing individual companies, explore the stock analysis resources on Rallies.ai and do your own research before making any investment decisions.

Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.

Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.