Kenneth Frazier is among the highest-profile health-care executives in the country.
Spencer Platt/Getty Images
Drug company Merck announced Thursday that its CEO, Kenneth Frazier, would retire at the end of June after a decade leading the company. Merck’s current executive vice president, Robert Davis, will succeed him.
Frazier’s departure is long-awaited, and the company has been previewing its succession planning for years. Davis seems an obvious successor: He served as Merck’s (ticker: MRK) chief financial officer after joining the drug company in 2014, until his responsibilities were expanded in 2016.
He is a highly-respected leader and among the highest-profile health-care executives in the country. According to Fortune, Frazier is one of only five Black CEOs of a Fortune 500 company as of last June.
His exit comes during what is turning out to be a busy season for departures of prominent chief executives: Amazon (AMZN) boss Jeff Bezos and UnitedHealth Group (UNH) CEO David Wichmann announced their departures this week.
Merck shares were flat after the announcement of Frazier’s exit. The company also reported financial results for the fourth quarter of 2020 that missed Wall Street expectations, but laid out guidance for 2021 that were above analyst estimates.
Merck reported non-GAAP earnings of $1.32 per share for the quarter, up 14% from the previous year, but worse than the FactSet consensus estimate of $1.38 per share. The company reported fourth-quarter sales of $12.5 billion, up 5% from the same quarter last year, but below the FactSet consensus estimate of $12.7 billion.
“Despite extraordinary challenges brought on by the COVID-19 pandemic, Merck achieved solid growth and made meaningful progress in our pipeline in 2020,” Frazier said in a statement regarding the earnings. “We remain focused on our science-led strategy and are confident that this approach will continue to deliver value to patients and shareholders.”
Merck’s guidance for 2021 was above Wall Street estimates. The company said it expects sales of between $51.8 and $53.8 billion in 2021, above the FactSet consensus estimate of $51.7 billion. It expects non-GAAP earnings of between $6.48 and $6.68 per share, well above the FactSet consensus estimate of $6.30 per share.
“We remain positive on MRK despite a 4Q20 sales and EPS miss,” Cantor Fitzgerald analyst Louise Chen wrote in a note out early Thursday. “We think the Street should look through this quarter and focus on the new MRK with Rob Davis as the CEO and without Organon,” a company consisting of a number of Merck divisions that will spin off this year.
Merck announced in late January that it was dropping its Covid-19 vaccine programs. In its earnings release, the company highlighted its experimental Covid-19 antiviral molnupiravir, which it is developing with Ridgeback Biotherapeutics, and said the company expects interim efficacy data this quarter.
Investor focus, however, is likely to be on Frazier’s departure, at least in the short term. During his tenure, Merck introduced the cancer drug Keytruda, which had an enormous impact both on the company and on cancer care in general, ushering in a wave of immuno-oncology drugs. Merck sold $14.4 billion of Keytruda in 2020.
In a statement, Frazier praised his successor. “The board and I are delighted that Rob will serve as Merck’s next CEO,” Frazier said. “He has deep knowledge of our company and industry and has been a valued strategic thought partner to me and the Merck senior management team as well as a highly capable finance leader.”
Frazier will remain the executive chairman of the Merck board of director for an undetermined transition period.
“It has been a privilege to serve as Merck’s CEO for the past decade and to work with the most dedicated and talented employees and management team in the industry,” Frazier said. “As executive chairman, I look forward to collaborating with Rob and our board of directors to help Merck achieve even higher levels of success.”
Write to Josh Nathan-Kazis at [email protected]
