Merck & Co on Tuesday announced job and cost cuts that it said will save $3 billion a year, after it posted lower second-quarter results due to persistently weak demand for its Gardasil vaccine in China.
The drugmaker, which paused Gardasil shipment to China in January, said it will not resume the deliveries through at least the end of this year, pushing further from the middle of this year, per the management’s earlier estimation, sending its shares down over 4% in premarket trading.
Gardasil, which prevents cancers caused by the human papillomavirus (HPV), has been one of Merck’s top growth drivers aside from blockbuster cancer immunotherapy Keytruda, and much of its international growth has come from China.”The Gardasil pain looks like it might drift into 2026 – credibility for management on this topic is still a sore point,” said Bernstein analyst Courtney Breen.
Softer Gardasil demand in Japan also hurt Merck’s sales. The company now expects the region to be a “more significant headwind” in the back half of the year.
Merck said the cost cuts include $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 optimize its manufacturing network.
It expects to achieve the full $3 billion in annual savings by the end of 2027.The company also kept its outlook for tariff-related costs unchanged at $200 million, pending any additional potential government actions.
While Merck is “beginning to take some of the right actions,” Bernstein’s Breen said more meaningful cuts are required to put the company in a better position to manage through the end of the decade.
Sales of Merck’s blockbuster cancer treatment Keytruda rose 9% to just under $8 billion in the quarter, topping analyst forecasts of $7.9 billion.
But investors have been concerned about where Merck will replace revenue from Keytruda – the world’s best-selling drug, which is set to lose patent protection toward the end of the decade.
Their fears were heightened as Gardasil sales missed already weak Wall Street estimates. The company said it sold $1.1 billion of the vaccine, down 55% from a year ago. Analysts had been expecting $1.3 billion in sales in the quarter.Merck said it earned $5.4 billion, or $2.13 a share, in the quarter, below $5.8 billion, or $2.28 a share, a year earlier.
Analysts, on average, had forecast earnings of $2.01 a share. Merck’s quarterly R&D costs were lower than expected.
Revenue in the quarter fell to $15.8 billion from $16.1 billion a year earlier, compared with analysts’ estimate of $15.9 billion.
The company, which announced a $10 billion takeover of UK-based Verona Pharma earlier in July, now expects to earn $8.87 to $8.97 a share in 2025. Analysts had forecast 2025 earnings to be $8.87.