Longtime Merck executive Ken Frazier, whose leadership helped bring the drugmaker one of the most lucrative medicines in history and who is one of the few remaining Black CEOs of a major corporation, is retiring.
Frazier, Merck’s CEO since early 2011 and an advocate for minority advancement who took on then-President Trump’s tacit support of white supremacists, will retire on June 30.
Frazier, 66, will be replaced by Rob Davis, the chief financial officer since 2014, the company said Thursday as it announced quarterly financial results. Frazier will become executive chairman of the board during a transition period. The change comes just months after Dr. Dean Li took over as head of Merck's research and development.
Frazier joined Merck, now based in Kenilworth, New Jersey, in 1992 as general counsel to one of the company's pharmaceutical businesses and worked his way up to the top job. He is one of the few Black CEOs at the head of a Fortune 500 company.
Last month, when Walgreens named Roz Brewer as its new CEO, there were four. With Frazier's departure, that number is back down to three.
Black people make up 12.8% of the U.S. population but only 0.6% of Fortune 500 CEOs are African-American. They earn 10% of all college degrees and hold 8% of professional positions, but only 3.2% of all senior-level roles at Fortune 500 companies, according to Coqual, a think tank that studies workplace diversity.
The main reason companies have few Black CEOs is that many rely on long-held perceptions of who has the skills to move into leadership roles, said Adia Harvey Wingfield, a sociology professor at Washington University in St. Louis. “Usually those images are not people of color, and usually they’re not of white women,” said Harvey Wingfield, who has researched racial and gender inequity in professional occupations. “What’s unspoken is these people are usually white men.”
Corporate policies about making promotions often are unclear, and research shows that Black workers are less likely to enter departments that channel workers into leadership roles, she said. “If you run a company and your view is just that implicitly you don’t see Black people as suitable for those types of jobs, chances are it’s going to be more difficult for them to get those types of jobs,” Harvey Wingfield said.
Last year, researchers at Stanford University’s Graduate School of Business studied the race, ethnicity and gender of employees who directly report to the CEOs of Fortune 100 companies. They found that women and people of color largely were not in positions that were responsible for leading a unit that reported a profit or loss, said David Larcker, a professor who took part in the study. Most CEOs, he said, are promoted after showing a record of posting profits.
“Under-represented groups were in functional areas that were very unlikely to result in promotion to CEO or board positions,” Larcker said.
Many people of color and women had jobs in human resources or other “cost center” areas that companies don’t usually mine for CEO or board positions, he said. But establishing why that happens is far more difficult, Larcker said.
“There are lots of explanations, discrimination is one,” he said. “There has to be lots of great talent and highly educated and high-energy, good ethics, across all genders and races."
Corporate America needs to change its perception of who is qualified to be a manager, and that can be done with leadership training programs that focus on advancing leaders of color, Harvey Wingfield said. They can also match promising Black employees with mentors rather than leaving it up to the employees to form relationships that could lead to promotions, she said.
At Merck, Frazier clashed with then-President Donald Trump over his refusal to condemn violence by the white supremacists who marched in Charlottesville, Virginia, in 2017.
“America’s leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry and group supremacy," Frazier said at the time.
He stepped down from the president's manufacturing council and was attacked repeatedly by Trump on Twitter the same day. Other executives followed and the council was quickly disbanded.
Frazier spoke out publicly about inequality in the U.S. again last year during the protests that followed the death of George Floyd at the hands of police in Minneapolis. Frazier said it could just as easily have been him.
Frazier, a social justice advocate who has won awards from the NAACP and the National Minority Quality Forum, co-founded OneTen, a coalition of organizations committed to training and promoting one million Black Americans into family-sustaining jobs.
A Harvard-trained lawyer who grew up in a poor, rough Philadelphia neighborhood, Frazier was instrumental in successfully defending Merck against an avalanche of lawsuits after its 2004 recall of painkiller Vioxx for causing heart attacks and strokes.
He also helped orchestrate arguably the best deal Merck ever made, its $41 billion acquisition of fellow New Jersey drugmaker Schering-Plough in 2009. That deal primarily was targeted at getting the company's Organon women's health business, which Merck now is in the process of spinning off to boost growth by both companies after the split.
But Schering-Plough's research labs had a hidden gem that, once discovered and developed, became the world's leading cancer immunotherapy drug, Keytruda.
“None of us were smart enough to know what we had in pembrolizumab,” Keytruda's chemical name, Frazier said during a conference call with analysts Thursday.
Keytruda now generates $14 billion in annual sales — more than a quarter of Merck's revenue. It's approved for dozens of cancer types and patient groups, including two approvals in the fourth quarter, and currently is being tested in about 1,400 studies for additional uses.
More recently, Merck executed about 120 deals last year, including one to buy cancer drug developer VelosBio to further expand Merck’s cancer drug franchise. Both Frazier and Davis said Merck will continue its focus on driving growth through innovative science, rather than megadeals partly meant to cut costs.
Merck, one of the world’s top vaccine makers, announced last week it was scrapping its two COVID-19 vaccine candidates, because the immune responses they triggered in volunteers in early testing “were inferior to those reported with natural infection and the results” of other companies' experimental vaccines, Li said. However, Merck is continuing to test a pair of potential treatments for the new coronavirus and should have some study results in the next few months.
Merck reported a fourth-quarter loss of $2.09 billion, or 83 cents per share, partly due to a $2.7 billion charge for buying VelosBio. Adjusted income came to $3.4 billion, or $1.32 per share, well short of the $1.38 Wall Street expected.
A year earlier, Merck posted net income of $2.36 billion, or 92 cents per share.
Overall revenue was $12.51 billion, up 5% from a year earlier, but shy of the $12.67 billion projected by analysts. Keytruda sales came in just under $4 billion in the quarter, up 28% from a year earlier.
In afternoon trading, Merck shares were down $1.28, or 1.7%, at $76.03. Share prices have more than doubled, and revenue has nearly doubled, under Frazier as CEO.
Merck & Co. said it expects earnings per share for 2021 to range between $5.52 and $5.72. It expects revenue for the year of $51.8 billion to $53.8 billion. Analysts were expecting $6.30 per share and revenue of $51.66 billion, on average.
However, the company said those estimates will change if the long-planned spinoff of its Organon subsidiary occurs in the second quarter as planned. Merck also said that it expects the pandemic’s impact will cut 2021 revenue by 2%.
AP Business Writer Tom Krisher contributed to this report from Detroit. Follow Linda A. Johnson at https://twitter.com/LindaJ_onPharma