MSD plans $3bn cuts amid competition for Irish-manufactured cancer drug Keytruda
The drugmaker will cut administrative, sales and research jobs, as well as reduce its real estate holdings around the world, the company said in a statement on Tuesday. The company expects the restructuring to be completed by the end of 2027, the year before Keytruda's key patents expire and the drug faces US government price cuts.
The company said it plans to reinvest the savings into developing new drugs and launching new products. MSD shares were down 1.9% in premarket trading in New York.
For now, MSD's cash cow is still propelling growth. Keytruda beat analysts' sales estimates in the second quarter, growing by 9% year-over-year and helping the company outperform Wall Street's profit expectations. Quarterly revenue was in-line with analysts' view, and MSD narrowed its full-year projections for sales and profit.
The planned restructuring comes just days before US president Donald Trump's long-delayed tariffs on pharmaceutical imports are slated to start. Levies are expected to begin August 1 on drugs brought in from the European Union, with broad tariffs on the entire sector promised later in the month.
MSD has already taken defensive action, stockpiling enough doses of Keytruda, which is primarily manufactured in Ireland, to protect itself from any tariffs imposed in 2025. It also previously disclosed plans to invest more than $9bn (€7.78bn) in US manufacturing over the next four years, part of an effort to make more of its medicines domestically.
The company reiterated that it expects to spend $200m (€172m) on tariffs in 2025, a number that reflects levies already in place and doesn't account for future tariffs on pharmaceuticals.
MSD has lost more than 30% of its value over the last 12 months amid mounting investor concern about its post-Keytruda future. The cancer medicine accounts for nearly half of the company's revenue and continues to grow, foreshadowing a multibillion-dollar hole in the company's business plan.
It's also still dealing with the fallout over its second-biggest medicine, the HPV vaccine Gardasil. A dramatic decline in Chinese demand forced it to halt shipments to the country and rescind its previous forecast of $11bn (€9.5bn) in annual sales of the shot by 2030. Gardasil sales fell 55% in the second quarter. Excluding China, sales declined 3%.
The company has touted Winrevair, approved to treat a rare lung disease, as a blockbuster in the making and pointed to a pipeline of new medicines for cancer, cardiovascular disease and HIV.
Sales of Winrevair outperformed analysts' estimates in the second quarter, an encouraging sign for its ongoing launch. The company's animal health business beat expectations on the quarter, while its vaccine for measles, mumps and rubella fell short of projections.
MSD's plan to ease Keytruda's inevitable decline rests in part on persuading patients and physicians to adopt an easier-to-use version of the drug, expected to win approval later this year. The revamped Keytruda, which is administered through a shot rather than an intravenous infusion, will eventually capture between 30% and 40% of the market for the original, MSD said.
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