aibioMerck approves 2025 restructuring program with about $3.0 billion in pretax costs
Tickers MRK
Merck expects to eliminate certain positions in sales, administrative and research and development organizations and expects annual savings of approximately $1.7 billion, substantially realized by the end of 2027.
Key facts
- Company
- Merck KGaA (XETR: MRK)
- News type
- Distress
- Primary source
- Merck & Co., Inc. Form 8-K filed July 29, 2025 (SEC EDGAR)
Merck & Co., Inc. (NYSE: MRK) approved a new restructuring program on July 25, 2025 that it expects to cost approximately $3.0 billion before taxes and to cut positions in its sales, administrative and research and development organizations. The company disclosed the 2025 Restructuring Program in a Form 8-K filed July 29, 2025, under Item 2.05, the item for costs associated with exit or disposal activities.
What the filing says
Merck says the program is designed to position the company for its next chapter of growth and to advance its pipeline and launch new products across multiple therapeutic areas. As part of it, the company expects to eliminate certain positions in sales and administrative organizations, as well as research and development. Merck says it will continue to hire employees into new roles across all strategic growth areas of the business.
The company will also reduce its global real estate footprint and continue to optimize its manufacturing network. It says this will align the geography of its global manufacturing footprint to its customers and reflect changes in its business.
Costs, savings and timing
Most actions under the program are expected to be largely completed by the end of 2027. Certain manufacturing actions are expected to be substantially completed by the end of 2029.
The cumulative pretax costs of the program are estimated at approximately $3.0 billion. About 60% of that will be cash, relating primarily to employee separation expense and contractual termination costs. The rest will be non-cash, relating primarily to the accelerated depreciation of facilities.
Merck expects the actions to produce annual cost savings of approximately $1.7 billion, substantially realized by the end of 2027. The program is part of a multiyear optimization initiative that the company anticipates will achieve $3.0 billion in annual cost savings by the end of 2027. Merck says those savings will be fully reinvested into strategic growth areas of the business, so the filing does not present them as a boost to profit. The 8-K does not give a payback period for the $3.0 billion in costs.
The second-quarter results released the same day
The 8-K also furnishes, under Item 2.02, a press release on second-quarter 2025 results. Total worldwide sales were $15.8 billion, a decrease of 2% from the second quarter of 2024. KEYTRUDA sales were $8.0 billion, growth of 9%. GARDASIL and GARDASIL 9 sales were $1.1 billion, a decline of 55%, which the release attributes primarily to lower demand in China. GAAP earnings per share were $1.76 and non-GAAP earnings per share were $2.13.
In the release, Robert M. Davis, chairman and chief executive officer, described "a multiyear optimization initiative that will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers." The release also reports that the company announced an agreement to acquire Verona Pharma, with the transaction expected to close in the fourth quarter of 2025. Merck narrowed its full-year 2025 worldwide sales range to between $64.3 billion and $65.3 billion, and said the outlook does not include the anticipated impact of the Verona Pharma acquisition.
About the company
In its Form 10-K filed February 25, 2025, Merck described itself as a global health care company that delivers health solutions through prescription medicines, including biologic therapies, vaccines and animal health products. It has two operating segments, Pharmaceutical and Animal Health. The 10-K reported total company sales of $64,168 million for 2024.
People named in the filing
Kelly E. W. Grez, Corporate Secretary, signed the 8-K. The 10-K signature page lists Robert M. Davis as Chairman, Chief Executive Officer and President, Caroline Litchfield as Executive Vice President and Chief Financial Officer, and Dalton Smart as Senior Vice President Finance-Global Controller. Verona Pharma is the company Merck announced it would acquire.