Merck has announced plans to cut $3 billion in costs by the end of 2027, a strategic move aimed at offsetting anticipated revenue losses tied to the 2028 patent expiration of its blockbuster cancer drug Keytruda. The company intends to fully reinvest the savings into launching new products and expanding its drug pipeline, particularly in light of rising challenges from U.S. pharmaceutical tariffs and shifting international demand.
The cost-saving initiative will involve restructuring efforts that include reductions in administrative, sales, and R&D roles, along with a scaled-back global real estate and manufacturing footprint. However, Merck emphasized that it will continue hiring in key growth areas. The restructuring program is expected to deliver $1.7 billion in annual savings by 2027, though the company anticipates pretax costs of about $3 billion. For the second quarter, Merck recorded a $649 million charge associated with the initiative.
CEO Rob Davis expressed confidence in Merck’s long-term growth trajectory, calling Keytruda’s patent cliff more of a “hill” than a sharp drop, citing ongoing product launches, licensing deals, and encouraging data. Still, the company faces immediate financial headwinds. Second-quarter revenue came in at $15.81 billion, missing estimates and down 2% year-over-year. Net income dropped to $4.43 billion from $5.46 billion a year earlier.
Keytruda generated $7.96 billion in revenue, a 9% increase driven by growing use in earlier-stage and metastatic cancers. Meanwhile, Gardasil, Merck’s HPV vaccine, reported a steep 55% decline to $1.13 billion, largely due to softened demand in China. The company has paused shipments to China through at least the end of 2025 due to high inventory levels. U.S. sales of Gardasil rose slightly by 2%, and Merck hopes expanded approval for the vaccine in China will spur renewed interest.
Newer drugs like Winrevair, which treats a rare lung condition, brought in $336 million, exceeding expectations. The company’s animal health division saw an 11% year-over-year increase in sales to $1.65 billion, supported by strong demand for livestock products and contributions from the recently acquired aqua business from Elanco.
Merck narrowed its full-year forecast, projecting 2025 adjusted earnings between $8.87 and $8.97 per share and revenue in the range of $64.3 billion to $65.3 billion. These estimates account for a $200 million impact from tariffs already imposed, primarily between the U.S. and China, as well as costs related to licensing deals, but exclude any effects from the recent Verona Pharma acquisition.
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