Kenneth Frazier, one of only a handful of black executives leading major US companies, will step down as chief executive officer at the end of June and be replaced by Chief Financial Officer Robert Davis, Merck said on Thursday.
Frazier, 66, will not be handing over the reins completely, at least for now. He will remain with the drugmaker as executive chairman for a transition period.
Frazier was one of only five black CEOs in last year’s Fortune 500 list, released in June 2020. That number has dropped even lower since then, as TIAA CEO Roger Ferguson, Jr. will retire in March.
However, joining the ranks, Roz Brewer, who was previously Starbucks’ chief operating officer, is set to become CEO of Walgreens in March.
The dearth of black CEOs at top American companies comes as corporate boards are being pressured to focus on improve their diversity, particularly among their companies’ leadership.
He was set to retire in 2019, but the company scrapped a policy requiring its CEO to retire at the age of 65.
Davis will inherit a company with one of the world’s best selling drugs in its cancer immunotherapy Keytruda and a tightened focus after it completes the spinoff of its slower growing women’s health, biosimilar drugs and older products later this year.
Frazier joined Merck nearly 30 years ago and climbed the ranks, becoming CEO of the Fortune 500 company in 2011. He made his name at Merck as general counsel by steering the company safely through daunting litigation over Vioxx. He also played a significant role in Merck’s 2009 acquisition of NJ drugmaker Schering-Plough, which then held Keytruda, or pembrolizumab, as a pipeline asset.
“That deal was done at a time where, frankly, we saw an opportunity in the market based on where the valuations of companies were,” he said. “None of us were really smart enough to know that among the assets we were acquiring was pembrolizumab.”
Under Frazier’s leadership, Keytruda has eclipsed Bristol Myers Squibb’s cancer immunotherapies, which hit the market first. Keytruda’s sales topped $14 billion last year.
Shares of the company more than doubled over his tenure.
Frazier, the grandson of a sharecropper, made headlines in 2017 when he became the first business leader to leave former President Donald Trump’s manufacturing council following Trump’s comments on a white nationalist rally held in Charlottesville, Virginia. He also spoke out last year after the killing of George Floyd by a white police officer, saying that he felt Floyd “could be me.”
“His shoes won’t be easy to fill in so many ways, both within Merck but also including his many principled and valuable contributions to important issues facing society today,” Davis said on a post-earnings conference call.
Frazier’s transition follows the recent retirement of Roger Perlmutter, who ran the company’s research and development division for much of Frazier’s tenure and was also considered a major force behind the success of Keytruda. Dean Li took over for Perlmutter on Jan. 1.
Davis has been CFO since 2014 and in charge of the company’s business development, real estate and other corporate strategic functions since 2016.
A career healthcare executive, he was the president of Baxter International’s medical products business before joining Merck, and also spent 14 years at Eli Lilly.
Citi analyst Andrew Baum said the elevation of Davis suggests the company will work to reduce its dependency on Keytruda.
Merck also reported fourth-quarter earnings of $1.32 per share that missed analysts’ estimates of $1.38 per share on lower-than-expected sales of diabetes drugs Januvia and Janumet.
It forecast a better-than-expected profit in 2021, although it said the COVID-19 pandemic would hurt sales of certain drugs, especially vaccines.