Merck’s Kenneth Frazier will retire as CEO in late June

“It has been a great honor and privilege to serve this great company as its CEO for the past decade,” said Frazier in the company’s earnings conference call on Thursday.

Under Mr. Frazier’s leadership, Merck has become a leader in the emerging field of cancer immunotherapy and in the development of the drug Keytruda, now one of its best sellers. The therapy, which treats lung cancer 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 an industry-leading voice in recent years, encouraging companies to hire more Black employees. He also led Merck through criticism from politicians and patients about how the industry prices its drugs.

Merck’s board removed a policy three years ago that required its CEO to retire after turning 65, allowing Frazier to remain in office when he reached that age in 2019.

Only four of the top executives at America’s 500 largest companies – or 1% – are black, including Frazier. The others are Marvin Ellison, from the Lowe’s Cos. Hardware store, Roger Ferguson Jr. of the financial services company Teachers Insurance and Annuity Association of America and René Jones, who runs the M&T Bank in New York. When Rosalind Brewer takes over the Walgreens Boots Alliance in March Inc.,

the number will soon rise to five, as TIAA’s Ferguson is due to retire later this month.

Despite Keytruda’s success, some investors and analysts fear that Merck’s growth may depend heavily on therapy. The drugmaker has made deals for small businesses to increase its pipeline over the past two years and plans to create some slow-growing legacy products.

Davis’ choice likely signals the intensification of business development to reduce the company’s dependence on Keytruda, according to a note from Citigroup on Thursday. Inc.

analyst Andrew Baum. Keytruda’s sales accounted for nearly a third of the approximate $ 48 billion in revenue last year, Merck said on Thursday.

Still, Davis’ rise suggests that Merck’s overall strategy is likely to remain stable 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 accelerate and accelerate decision making ”for business.

A graduate of Harvard Law School, Mr. Frazier worked at the law firm Drinker Biddle & Reath before joining Merck in 1992. He became a general counsel in 1999 and defended Merck against allegations that his best-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.

Race and workplace issues have been important to Frazier, who last month helped start a nonprofit organization with other CEOs to connect employers with black workers.

He also addressed sensitive and sometimes contentious topics during his tenure at Merck, ranging from drug prices to former President Donald Trump. Mr. Frazier left the 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 counter-protesters in Charlottesville, Va.

Frazier’s announced departure follows the recent retirement of former R&D chief Roger Perlmutter, whom Dean Li held.

Merck said Davis, who joined the company as a CFO in 2014, will become president on April 1, when the four operating divisions of the pharmaceutical company will begin reporting to him. Prior to joining Merck, Mr. Davis held positions at Baxter International Inc.

and Eli Lilly & Co.

Davis is joining a small group of chief financial officers who have moved up to number one. About 6% of CFOs have been promoted to CEOs at companies in the S&P 500 and Fortune 500 in recent years, according to Crist | Kolder Volatility Report. The most common path is an internal promotion of the function of chief operating officer.

In reporting fourth-quarter earnings on Thursday, Merck said it expects total revenue this year to be between $ 51.8 billion and $ 53.8 billion and adjusted earnings of $ 6.48 to $ 6, 68 per share.

Analysts had forecast revenue of $ 51.66 billion and an adjusted profit of $ 6.30 per share.

Merck’s quarterly revenue of $ 12.5 billion increased by 5% from $ 11.9 billion in the same quarter a year ago, as Keytruda’s sales increased by almost a third to about $ 4 billion. Analysts surveyed by FactSet had expected revenue of $ 12.67 billion in the last period.

—Lynn Cook and Nina Trentmann contributed to this article.

Write to Jared S. Hopkins at [email protected]