Merck has launched a sweeping cost-cutting effort designed to save $3 billion annually by the end of 2027, the company said Tuesday in its quarterly report.
Merck, which is facing plummeting sales of HPV vaccine Gardasil and the impending loss of patent protection for cancer powerhouse Keytruda, said that the savings will be “fully reinvested” to support “new product launches.”
Earlier this year, the company touted 20 products in its pipeline that have blockbuster potential and could provide $50 billion in annual revenue.
“You look at the impressive opportunity we have with these 20-plus launches, we will and we need to fully fund behind those launches,” CEO Rob Davis said in a conference call. “We will be growing our spend over time but we want to do it productively and efficiently, and that’s why we’re looking to reallocate money and resources from the slower-growth areas of the business to fully fund into the fast-growing areas of our business.”
The New Jersey company revealed few details on how it would cut costs. There was no mention of how many employees would be laid off.
The initiative comes just three weeks after Merck revealed a $10 billion buyout of Verona Pharmaceuticals and its potential COPD blockbuster Ohtuvayre. The deal was the second largest in the biopharma industry this year after Johnson & Johnson’s $14.6 billion acquisition of Intra-Cellular.
“With these actions, I am confident that we are well positioned to generate near- and long-term value for our shareholders and, most importantly, deliver for our patients,” Davis added in the release.
While Merck said that it will eliminate designated administrative, sales and R&D positions, it also will “hire employees into new roles across strategic growth areas of the business.”
The company will also “reduce its global real estate footprint and continue to optimize its manufacturing network, aligning the geography of its global manufacturing to its customers and reflecting changes in the company’s business.”
The changes are necessary as the company will undergo massive transformation with biosimilar competition coming for Keytruda, likely starting in 2028 in the United States. Second-quarter sales results illustrated the company’s dependence on the cancer superstar. For the first time ever, Keytruda’s quarterly sales, at $8 billion, accounted for more than half of the company’s revenue, which came to $15.8 billion for the period.
Additionally, sales of Gardasil tumbled to $1.1 billion in the second quarter, which was a 55% fall year over year. As sales in China have evaporated over the last year, the quarterly revenue generated by Gardasil has plummeted in each quarter from $2.48 billion in Q2 of 2024, to $2.31 billion, $1.55 billion, and to $1.33 billion in the following quarters.
Earlier this year, Merck said it had halted shipments of Gardasil to China. On Tuesday, chief financial officer Caroline Litchfield said that demand in China remains “soft” and that the company will not ship further product this year.
“We will assess at the year end what the appropriate schedule should be for 2026,” Litchfield added.
Merck isn’t the only Big Pharma company undergoing a significant cost-cutting effort. Over the last two years, Bayer has reduced its headcount by more than 11,000 under an initiative designed to save 2 billion euros ($2.3 billion) through 2026.
Bristol Myers Squibb has launched a “strategic productivity initiative,” which will slash $2 billion in costs through 2027. In April, Pfizer upped the ante on its cost-cutting program, aiming to save $7.7 billion through 2027.
On Tuesday, Merck also revealed a narrowing of its 2025 revenue projection to a window of $64.3 billion to $65.3 billion, from the previous guidance of $64.1 billion to $65.6 billion. Last year’s sales came in at $64.2 billion.
Editor's Note: The story was updated to include additional comments from Merck's second-quarter earnings call.