Merck & Co. chief executive Rob Davis will succeed Ken Frazier as chairman of the pharmaceutical company’s board, cementing Davis’ leadership of the drugmaker one and a half years after he was named Frazier’s replacement as CEO.
Frazier, who ran Merck for a decade until stepping down last year, will retire on Nov. 30 and Davis will take his place as board chair on Dec. 1, the company said late Wednesday. The Wall Street Journal first reported the news.
The reshuffle means Davis will hold the two most powerful positions at Merck, similar to many of his CEO peers at other pharmaceutical companies. Among the 10 largest U.S. drugmakers by market value, only Johnson & Johnson, Regeneron Pharmaceuticals and Vertex Pharmaceuticals have different people as CEO and board chair.
The split at J&J is recent, after the company tapped Joaquin Duato to replace CEO Alex Gorsky, who continues to serve as executive chairman. Vertex’s state of affairs, meanwhile, is temporary, as chairman Jeffrey Leiden’s tenure is scheduled to expire in early 2024.
As CEO and chair, Frazier led Merck’s emergence as one of the industry’s top cancer drugmakers, directing it to invest heavily in the development of Keytruda, an immunotherapy that’s become a standard treatment for many types of tumors.
Keytruda’s success has helped insulate Merck from the expiration of patents protecting formerly top-selling products like Zetia, Vytorin and, more recently in Europe, Januvia. Since its U.S. approval in 2014, it has become one of the industry’s most lucrative medicines, earning Merck $17.2 billion in sales last year.
Sales continue to grow, too, reaching $5.4 billion in the three months between July and September, according to third quarter earnings figures released by Merck on Thursday. The company also raised its revenue guidance for the full year to between $58.5 billion and $59 billion, as third quarter sales surpassed Wall Street expectations.
Merck’s business is executing well, wrote Evercore ISI analyst Umer Raffat in a Thursday note to clients, and will likely mean Wall Street raises its estimates for Merck’s revenues next year.
Shares rose by 3% in Thursday morning trading, adding to a recent run that’s brought Merck’s market capitalization on par with Pfizer’s.
Keytruda’s success is also a challenge for Davis, who will be tasked with developing a pipeline of medicines that can replace the revenue Merck loses once key patents expire in 2028. Davis has turned to dealmaking, inking an $11.5 billion acquisition of Acceleron that was recently validated by positive clinical trial results for one of the key drugs involved.