Merck to Cut $3 Billion Costs Amid Patent Concerns

NEW YORK, NY — Merck & Co. announced on Tuesday that it will cut $3 billion in costs by the end of 2027. This move aims to reinvest the savings into new product launches and its drug pipeline.

The decision comes as Merck prepares for anticipated revenue losses following the patent expiration of its cancer drug, Keytruda, in 2028. The multi-year effort coincides with growing pressures on the pharmaceutical sector as companies like Merck adjust to market changes brought on by government tariffs.

“Today, we announced a multiyear optimization initiative that will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers,” said Merck CEO Rob Davis. He expressed confidence that new product launches and business agreements would help the company navigate the challenges posed by Keytruda’s coming loss of exclusivity.

As part of the restructuring, Merck approved plans in July to eliminate some administrative, sales, and research positions. However, the company plans to continue hiring in areas related to growth. Additionally, Merck will cut its global real estate and reduce its manufacturing network.

Merck expects the restructuring to yield approximately $1.7 billion in annual savings, with most benefits kicking in by 2027. The pretax costs linked to this plan are estimated at $3 billion, with a charge of $649 million recorded for the second quarter.

In its recent earnings report, Merck’s second-quarter revenue fell short of Wall Street predictions for the first time since April 2021. While Keytruda sales increased, the company faced difficulties with its Gardasil vaccine sales in China. In February, Merck decided to stop shipments of Gardasil to China until at least mid-2025 due to soft demand.

Chief Financial Officer Caroline Litchfield noted the decision to halt shipments would not change until at least the end of 2025, as inventory levels remain high.

Merck narrowed its full-year earnings guidance, now projecting adjusted earnings of $8.87 to $8.97 per share, compared to a previous forecast of $8.82 to $8.97. The company anticipates annual revenue in the range of $64.3 billion to $65.3 billion.

For the second quarter, Merck announced a net income of $4.43 billion, or $1.76 per share, down from $5.46 billion, or $2.14 per share, from the same period last year. Keytruda generated $7.96 billion in revenue, showing a 9% increase, while Gardasil sales dropped 55% to $1.13 billion.

Merck’s animal health division saw significant growth, reaching nearly $1.65 billion in sales, an increase of 11% year over year.