Merck to cut jobs and costs as demand for Gardasil in China remains weak

Drugmaker Merck on Tuesday (Jul 29) announced job and cost cuts it said will save US$3 billion a year as it posted lower second-quarter results due to continuing weak demand for its Gardasil vaccine in China.

The company said the cost cuts include US$1.7 billion in annual savings from the elimination of certain administrative, sales and R&D positions. It also plans to reduce its global real estate footprint and optimise its manufacturing network.

Chief executive Rob Davis said in a press release that the moves “will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers.”

The company expects to achieve the full US$3 billion in annual savings by the end of 2027.

Investors have been concerned about where Merck will replace revenue from its blockbuster cancer treatment Keytruda – the world’s best-selling drug, which is set to lose patent protection towards the end of the decade. Gardasil’s problems in China have also been a drag on the company’s results.

Merck said it earned US$5.4 billion, or US$2.13 a share, in the quarter, down from US$5.8 billion, or US$2.28 a share, a year earlier.

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Analysts, on average, had forecast earnings of US$2.01 a share. Merck’s quarterly R&D costs were lower than expected.

Revenue in the quarter was US$15.8 billion, down from US$16.1 billion a year earlier. Analysts, on average, were expecting revenue of US$15.9 billion.

Gardasil sales missed already weak Wall Street estimates. The company said it sold US$1.1 billion of the vaccine, which prevents cancer caused by the human papillomavirus, down 55 per cent from a year ago. Analysts had been expecting US$1.3 billion of Gardasil sales in the quarter.

Merck paused shipments of Gardasil to China in January. It said the decline was primarily in China, but lower demand in Japan had hurt sales as well.

Sales of Keytruda rose 9 per cent to just under US$8 billion in the quarter, topping analyst forecasts of US$7.9 billion.

The company, which announced a US$10 billion takeover of UK-based Verona Pharma earlier in July, narrowed its full-year revenue forecast to a range of US$64.3 billion to US$65.3 billion. It had previously forecast revenue of US$64.1 billion to US$65.6 billion for the year.

It now expects to earn US$8.87 to US$8.97 a share in 2025. Analysts had forecast 2025 earnings to be US$8.87. REUTERS