Merck's Kenneth Frazier to Retire as CEO at End of June -- 2nd Update
February 04 2021 - 1:03PM
Dow Jones News
By Jared S. Hopkins
Merck & Co. said Kenneth Frazier, its chairman and chief
executive, is retiring as CEO at the end of June.
The Kenilworth, N.J., drugmaker said Thursday that Robert Davis,
currently executive vice president of global services and chief
financial officer, will succeed Mr. Frazier in the top job on July
1.
"It has been a distinct honor and privilege to serve this great
company as its CEO over the past decade," Mr. Frazier said on the
company's earnings call Thursday.
Under Mr. Frazier's leadership, Merck became a leader in the
emerging field of cancer immunotherapy and in the development of
the drug Keytruda, now one of its top sellers. The therapy, which
treats lung and other cancers, totaled more than $14 billion in
global sales last year.
Mr. Frazier, a lawyer who has led Merck since 2011, is among the
few Black CEOs at S&P 500 companies and has been a leading
industry voice in recent years encouraging companies to hire more
Black employees. He has also steered Merck through criticism from
politicians and patients about how the industry prices its
medications.
Merck's board removed a policy three years ago requiring its CEO
to retire after turning 65, allowing Mr. Frazier to remain in the
role upon reaching that age in 2019.
Just four of the chief executives of America's top 500 companies
-- or 1% -- are Black, including Mr. Frazier. The others are Marvin
Ellison of big-box hardware store Lowe's Cos., Roger Ferguson Jr.
of the financial-services firm Teachers Insurance and Annuity
Association of America and René Jones, who runs M&T Bank in New
York. When Rosalind Brewer takes the helm in March of Walgreens
Boots Alliance Inc., the number will rise briefly to five, as
TIAA's Mr. Ferguson is set to retire at the end of the month.
Despite Keytruda's success, some investors and analysts have
worried that Merck's growth might depend on the therapy too
heavily. The drugmaker has done deals for small companies to
augment its pipeline in the last couple of years, and it plans to
spin off some slow-growth legacy products.
The selection of Mr. Davis likely signals intensified business
development to reduce the company's dependency on Keytruda,
according to a Thursday note from Citigroup Inc. analyst Andrew
Baum. Keytruda sales made up nearly one-third of the company's
approximate $48 billion in revenue last year, Merck said
Thursday.
Still, Mr. Davis's elevation suggests Merck's overall strategy
is likely to remain steady in the short term, said Seamus
Fernandez, an analyst at Guggenheim Securities LLC, although he
added that "part of me wonders if this is a way to speed up and
accelerate decision-making" for deals.
A graduate of Harvard Law School, Mr. Frazier worked at law firm
Drinker Biddle & Reath before joining Merck in 1992. He became
general counsel in 1999 and defended Merck from allegations that
its top-selling painkiller Vioxx increased the risk of heart
attacks and strokes. Merck agreed in 2007 to pay $4.85 billion to
settle thousands of claims.
Issues of race and the workplace have been important to Mr.
Frazier, who last month helped start a nonprofit organization with
other CEOs to connect employers with Black workers.
He has also taken on delicate, sometimes controversial topics
during his tenure atop Merck, ranging from drug pricing to former
President Donald Trump. Mr. Frazier stepped down from a White House
business committee in 2017, calling his decision a matter of
conscience after Mr. Trump blamed both sides for deadly clashes
between white supremacists and counterprotesters in
Charlottesville, Va.
Mr. Frazier's announced exit follows the recent retirement of
longtime R&D chief Roger Perlmutter, whom Dean Li has succeeded
in that role.
Merck said Mr. Davis, who joined the company as CFO in 2014,
will become president on April 1, at which time the drugmaker's
four operating divisions will begin reporting to him. Before
joining Merck Mr. Davis held roles at Baxter International Inc. and
Eli Lilly & Co.
Mr. Davis is joining a small group of chief financial officers
who ascended to the top spot. Around 6% CFOs who have been promoted
to chief executive officers at companies in the S&P 500 and
Fortune 500 in recent years, according to the Crist|Kolder
Volatility Report. The most common path is an internal promotion
from the role of chief operating officer.
In reporting fourth-quarter earnings Thursday, Merck said it
expects total revenue this year of between $51.8 billion and $53.8
billion and adjusted earnings of $6.48 to $6.68 a share.
Analysts had been forecasting revenue of $51.66 billion and an
adjusted profit of $6.30 a share.
Merck's quarterly revenue of $12.5 billion was up 5% from $11.9
billion in the year-earlier quarter, as Keytruda sales rose nearly
one-third to around $4 billion. Analysts surveyed by FactSet were
expecting revenue of $12.67 billion in the latest period.
--Lynn Cook and Nina Trentman contributed to this article.
Write to Jared S. Hopkins at jared.hopkins@wsj.com
(END) Dow Jones Newswires
February 04, 2021 12:48 ET (17:48 GMT)
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