Core Viewpoint - Merck & Co. is implementing a $3 billion cost-cutting initiative by the end of 2027 to reinvest in new product launches and its drug pipeline, in response to upcoming revenue losses from the patent expiration of Keytruda in 2028 and external pressures such as tariffs on pharmaceuticals [1][2][3]. Cost-Cutting and Restructuring - The multi-year optimization initiative aims to redirect investments from mature business areas to new growth drivers, facilitating portfolio transformation and innovation-driven growth [3]. - A new restructuring program has been approved, which will eliminate certain administrative, sales, and research and development positions, reduce global real estate, and pare back the manufacturing network, expected to generate around $1.7 billion in annual cost savings by the end of 2027 [4]. - The total pretax costs related to the restructuring program are estimated to be approximately $3 billion, with a $649 million charge recorded in the second quarter [5]. Financial Performance - In the second quarter, Merck's revenue fell short of Wall Street estimates for the first time since April 2021, reporting $15.81 billion compared to the expected $15.89 billion [5][10]. - The company posted a net income of $4.43 billion, or $1.76 per share, down from $5.46 billion, or $2.14 per share, in the same period last year [9]. - Adjusted earnings per share for the second quarter were $2.13, which may not be directly comparable to estimates of $2.01 [11]. Sales and Guidance - While Keytruda sales grew, Merck faced challenges with Gardasil sales in China, leading to a halt in shipments until at least mid-2025 due to high inventories and soft demand [6][7]. - Merck has narrowed its full-year guidance for 2025 adjusted earnings to between $8.87 and $8.97 per share and revenue expectations to between $64.3 billion and $65.3 billion [8].

Core Viewpoint - President Trump has threatened to impose tariffs of up to 200% on imported pharmaceuticals, indicating a significant shift in trade policy that could impact the pharmaceutical industry in the U.S. [1][2] Group 1: Tariff Announcement - The proposed tariffs would be set at a very high rate, potentially reaching 200% [1] - Trump mentioned that there would be a grace period of about one to one and a half years for drugmakers to adjust before the tariffs take effect [2] - This announcement marks Trump's most significant comment on pharmaceutical tariffs since the initiation of a Section 232 investigation in April [3] Group 2: Industry Impact - The planned tariffs are expected to negatively affect pharmaceutical companies, which have warned that such levies could increase costs, deter investments in the U.S., and disrupt the drug supply chain, ultimately putting patients at risk [4] - The pharmaceutical industry is already facing challenges from Trump's drug pricing policies, which threaten their profitability and ability to invest in research and development [4] Group 3: Manufacturing Incentives - Trump has stated that the tariffs would encourage drug companies to relocate their manufacturing operations back to the U.S. [5] - Companies like Eli Lilly, Johnson & Johnson, and AbbVie are reportedly increasing their investments in the U.S. as domestic drug manufacturing has significantly declined over the past few decades [5]