Q2 2019 Earnings Call
We want to the marketing company Q2 sales and earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question press. The pound key. Thank you I would now like to turn the call over to Terry Maxim SVP Investor Relations and Global Communications. Please go ahead.
Thank you Darla and good morning, welcome to Merck's second quarter 2019 conference call today, I'm joined by Ken Frazier, Our Chairman and Chief Executive Officer, Rob Davis, Our Chief Financial Officer, and Dr. Roger Perlmutter President of Merck Research Labs, who will each have prepared remarks. In addition, I'm also joined by Mike Nally, Our Chief marketing Officer, and Frank <unk>.
<unk>, our chief commercial officer, who will be available for the Q&A portion of the call before I turn the call over to Ken I'd like to point out a few items you will see that we have items in our GAAP results such as acquisition related charges restructuring costs and certain other items you should note that we've excluded these from our non-GAAP results and provide a reconciliation of these in our press release, we have also.
<unk> provided a table in our press release to help you understand the sales in the quarter for the business units and products I would like to remind you that some of the statements that we make during today's call may be considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1095.
Such statements are made based on the current beliefs that merck's management and are subject to significant risks and uncertainties.
If our underlying assumptions prove inaccurate or uncertainties materialize actual results may differ materially from those set forth in the forward looking statements, our SEC filings, including item one a in the 2018 10-K identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected in any forward looking statements.
Made this morning.
Merck undertakes no obligation to publicly update any forward looking statements you can see our SEC filings as well as today's earnings release on Merck Dot Com. We've also posted a presentation to the investor section of Merck Dot Com, which includes some of our highlights from the quarter with that I'd like to turn the call over to Ken.
Thank you Terry.
Good morning, and thank you all for joining the call.
Our science led strategy together with our clinical and commercial execution drove another quarter of accelerating revenue growth with strength across our global portfolio.
Our results demonstrate the continued momentum of our business through the first half of the year and further show that our focus on the kind of innovation that significantly improves health outcome is paying off.
As highlighted at our recent Investor day, we are confident that our innovative portfolio of products and significant pipeline opportunities supported by unparalleled R&D and commercial execution will continue to drive strong growth, while we invest in cutting edge science to deliver breakthroughs over the <unk>.
Next decade and beyond.
Over the past quarter, we continued to advance our pipeline and presented encouraging data across our programs, including two additional regulatory approvals and are filing acceptance for keytruda.
New regulatory approvals in infectious diseases, as well as new clinical data on the V 1414, pediatrics trials MK.
$85 91, and many others are.
Our clinical and regulatory progress reflects merck's unwavering commitment to biomedical research aimed at bringing forward products that can make a meaningful difference in the lives of patients around the world.
In addition, we continue to strategically invest in business development to strengthen our pipeline through value enhancing external opportunities.
This quarter alone, we announced two acquisitions that will bolster our oncology pipeline with peloton therapeutics and <unk> therapeutics, respectively.
We also successfully completed our tender offer for immune design and closed on the acquisition of <unk> in animal health.
We remain confident that our strategy.
Growth prospects outstanding scientific and commercial talent.
And leadership team together with our focus on execution will enable us to drive significant value for patients and shareholders this year and for years to come.
And with that I'll now turn the call over to Rob to review the details of our quarterly performance Rob.
Thanks, Ken and good morning, everyone.
As Ken mentioned, our performance in the second quarter was a clear testament to the strong momentum and growth potential of our business.
Our results over the last several quarters continue to reinforce the confidence we have in our ability to drive sustained long term revenue growth and meaningful operating margin expansion.
Maintaining a disciplined capital allocation strategy focused both on investing in the business and returning capital to shareholders.
Now turning to our results.
Total company revenues were $11 8 billion, an increase of 12% year over year or 15%, excluding the negative impact from foreign currency.
This growth was led by our human health business, which increased 17% this quarter excluding exchange.
Animal health grew 9% excluding exchange.
The remainder of my comments pertaining to sales will all be on an ex exchange basis.
Kris in human Health revenues was led by key products in our oncology vaccines and hospital businesses.
In oncology Keytruda sales exceeded $2 $6 billion this quarter, an increase of 63% year over year growth was driven by the increased adoption globally in the first line lung setting as well as uptake in recently approved indications.
In the U S strong demand across all indications continues to drive performance.
<unk> is firmly established as the standard of care for indicated patients in first line lung and we continue to further penetrate segments of the population, including low and non PD lone expressing patients.
In addition, we are encouraged by our recent launches in most I think renal cell carcinoma, and adjuvant melanoma, where we are already seeing strong adoption by oncologists.
We're also excited about our opportunity in first line head and neck cancer for which we received approval in June.
With 20 indications currently approved in the United States. We are further establishing keytruda as a foundational cancer treatment.
Outside the U S. Keytruda sales grew 73% driven by long as we continue to gain reimbursement for the chemo combo in more countries in the EU.
In Japan, we're now the leading anti PD, one agent, which speaks to our execution and the breadth of our indications and in China. We've seen very strong growth given the recent launch in first line lung and continued uptake in melanoma and our growth should continue as we reach more patients and expect to launch additional.
<unk>.
The truth is changing the way in which cancer being treated and we are still in the early days of the contributor journey.
We remain very confident in the long term growth potential given our established Io leadership and our expectation for many additional approvals around the world.
Our results also reflect continued strength in both <unk> and parser inland bema products, we market in collaboration with Astrazeneca and <unk> respectively.
When parcel revenue more than doubled this quarter driven by further uptake in ovarian cancer based on the results of solo one in the United States as well as strength in Europe , China and Japan.
<unk> continues to lead the PARP inhibitor class in the United States with nearly 60% total patient share.
We look to further astellas went far as the as the PARP inhibitor of choice and additional tumor types.
And in combination with Keytruda.
<unk> revenue also more than doubled as we continue to drive sales in HCC in the United States and China and launch in several other markets.
We believe <unk> will be an important product for our oncology portfolio and look forward to the potential for additional indications across our broad development program.
Turning to vaccines.
Our vaccines business reflects strong growth in our pediatric portfolio as well as strength in Gardasil, which was driven by public sector purchases and greater demand in the adolescent cohorts in the United States as well as continued demand across Europe , and the emerging markets, especially China.
Our hospital business benefited from 20% growth in bringing on which is annualizing at over $1 billion, reflecting strong performance in the United States as we continue to increase share within the reversal market.
Animal health revenue increased 9% this quarter to $1 1 billion livestock grew 13% primarily due to the contributions from the products acquired in the until its acquisition.
<unk> animal sales grew 4% as volume growth in vaccines and insulin products were partially offset by the timing of customer purchases in the prior year for the vector.
Turning to the rest of our P&L my comments will be on a non-GAAP basis.
Gross margin was 75, 4% in the quarter, an increase of 100 basis points year over year.
Recall that a sizable catch up adjustment for an accrued sales milestone related to <unk> was included in the second quarter of 2018.
Operating expenses.
A $4 8 billion increased 9% year over year.
R&D drove a large portion of the increase in spend and reflects higher expenses in support of our discovery and clinical development efforts as well as business development transactions during the quarter.
SG&A also grew year over year, reflecting continued investments to accelerate our key growth drivers and the launch of new indications.
The decrease in other income this quarter reflected the unfavorable year on year impact of Mark to market income on equity securities as well as higher net interest expense.
Taken together.
We earned $1 30 per share an increase of 25% excluding exchange.
This growth demonstrates the continued momentum in our business as we drive strong top line growth combined with disciplined resource allocation, enabling operational leverage.
Turning to our outlook for the year.
Given the confidence we have in our strong continued performance, we are narrowing and raising both our revenue and non-GAAP EPS guidance ranges for the full year of 2019.
We now expect revenues of $45 2 billion to $46 2 billion, which represents 7% to 9% growth versus 2018, driven by strength across our key growth pillars.
This range assumes a negative impact from foreign exchange of just over one percentage point using mid July rates.
We expect Opex to increase by mid single digits, primarily driven by investments in R&D.
We now expect non-GAAP EPS to be in the range of $4 84.
The $4 94, which represents growth of approximately 12% to 14% versus 2018.
We now expect a slightly negative impact from foreign exchange.
All other elements of our guidance provided in April remain unchanged.
In summary, we.
We are operating from a position of strength as reflected in our second quarter results and our updated guidance.
We are confident in our ability to drive strong revenue growth in the near and long term and we remain committed to delivering a leveraged P&L, while balancing the need to invest in innovation.
All of which we expect will deliver significant and sustainable value to patients and our shareholders.
With that I'd like to turn the call over to Roger.
Thanks, Rob the second quarter was a very important one for Merck research laboratories with meaningful progress made in every part of our organization first we received numerous approvals from the U S food and drug administration, including as previously mentioned supplementary approval for the use of Keytruda, both as monotherapy and in combination with <unk>.
<unk> therapy, and the first line treatment of squamous cell carcinoma of the head and neck.
And supplementary approval of Keytruda as monotherapy for third line treatment of small cell lung cancer.
Also received supplementary approval for reserve axis in the treatment of hospital acquired ventilator associated pneumonia caused by sensitive bacterial strain. This represents an important advance in the treatment of a life threatening illness, especially when caused by for example resistant pseudomonas species.
More recently, we obtained approval of recovery.
Our combined independents <unk> therapy for complicated urinary tract or intra abdominal infections.
Back then was specifically engineered to enable extended activity of independent against certain otherwise resistant bacterial species expressing a form of beta latinize and as part of our effort to address the increasing threat of antimicrobial resistance.
During the second quarter. We also had the opportunity to review exciting new data from our anti retroviral program.
Including 48 week data from the combination of <unk> with our new nucleoside reverse transcriptase translocation inhibitor is lack of the year for the maintenance of low viral burden in patients infected with human immunodeficiency virus.
These data, which were presented last week at the International AIDS Society meetings in Mexico City were complemented by studies of a subcutaneous <unk> implant that Mike permit long term, perhaps once yearly prophylaxis against HIV infection.
In the infectious disease space. We also presented data on the Immunogenicity of D. One month for our new 15, valent pneumococcal conjugate vaccine in pediatric populations. We are very enthusiastic about <unk> four for which phase III data from our comprehensive development program will become available beginning towards the end of this year.
Returning to the oncology space, just yesterday, we announced that the data monitoring committee supervising our keynote <unk> two phase III studies of new adjuvant and adjuvant Keytruda combined with chemotherapy found that keytruda treatment was associated with an improvement in pathologic complete response rates, one or two dual primary endpoints.
<unk> of this study as compared with chemotherapy alone.
I wish to make two key points regarding this study.
First neo adjuvant therapy occupies an increasingly important role in the treatment of breast cancer, especially in the triple negative subset, which represents between 15 and 20% of breast cancers.
In this setting the use of <unk> therapy can reduce tumor burden permit less aggressive surgical resection and provide improvement in long term outcomes.
Second achievement of a pathologic complete response and much examination of the surgical assessment shows that tumor cells have been eliminated.
Repeatedly associated with improved event free survival and overall survival in this often quite aggressive malignancy and so we are very encouraged by the interim analysis demonstrating successful achievement of this endpoint in this context. The keynote <unk> two data monitoring committee recommended that the study continue unchanged until the data become mature enough to assess.
Yes event free survival in the meantime, we look forward to discussing the keynote <unk> two data with regulatory authorities and to presenting our data in an upcoming scientific meeting.
I wish to note that we anticipate risks pace of regulatory approvals in major jurisdictions that we have achieved during the first six months of the year will continue especially in the oncology space.
I look forward to sharing these notifications with you in due course now my colleagues and I will take your questions.
Thanks, Roger Darla, we'll turn it over to the Q&A portion and I would like to remind everyone. If they can keep their questions to a maximum of two to allow as many questions on the call as possible.
If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.
And your first question is from Terence Flynn with Goldman Sachs.
Hi, Thanks for taking the question.
Ken there's obviously been a more significant focus on larger deals in this space. Following some of the recent announcements would just welcome your latest thoughts here on Merck's capital allocation strategy I know you touched on this a little bit at your Investor day about a month ago, but just wondering if you could provide us an update there. Thank you very much.
Thank you very much for the question Karen you have watched some of the activity around us in that sector.
Each one of those companies is evaluating their own growth prospects over the next few years, we feel very very confident in our growth prospects prospects going forward.
We have said in the past given all of that we're not interested particularly in a large merger that we believe can be disruptive to the company, including R&D.
Turning to look at bolt on deals.
We do look across the spectrum in terms of size for bolt ons, we don't define it by a dollar amount, but I think I heard the day, we think the operational complexity the cultural disruption the R&D disruption that has been associated with large mergers counsel that we should not go there, particularly because we feel very.
Confident about our ability to grow our company organically supplemented by bolt on deals.
Thank you we'll take the next question please.
I'm Seamus Fernandez with Guggenheim.
Oh, thanks very much for the question so.
Just two very quickly on the first one.
Some spectacular growth in the pediatric vaccines across the board.
As well as guard itself could you guys just help us more fully understand the sustainability of the kind of growth that we saw this quarter.
Then.
And just incremental to that if you could just comment on <unk>.
What happened with Nuvaring this quarter in particular and then the second question.
Just broadly speaking for Roger eight $5 91.
The data looks solid for the driver and combination obviously the prep.
Information is quite.
Perhaps give an exciting, particularly if you can get to annual dosing with the implants, but just wanted to better understand how you guys are working towards finding a better partner than <unk>.
$85 91, and if youre willing to work with other companies.
And collaborate on those programs.
With some concerns raised by.
Physician that that other great products are out there and that.
Unfortunately, it doesn't look like the companies are collaborating with each other on that front. So I just wanted to.
Ask on that front. Thanks, so much.
Alright, Thanks, Seamus, we'll start with Frank sure Sarah So let me let me start first with Nuvaring No really new news there no generic entry this quarter.
So we continue to promote nuvaring as we have done in the past with regards to vaccines. A couple of things. Let me start with Gardasil Gardasil had a very strong quarter growth of 15%. If you would exclude exchange on a global basis.
We did see in the U S. We did see CDC purchases in Q2 of this year, which actually took place in Q1 of last year. So you do see some bumping is with some of our vaccine sales, but I would ask to take a look at Seamus on a year to date basis vaccines for Gardasil globe.
It's up about 35%. So we're seeing very strong demand, especially in our 11% to 12 year old cohorts in the U S and some in the 19% to 26 cohorts. We're also seeing very strong ex U S demand as we talked about at our Investor day in particular in China, and Europe and allow the gender neutral programs that are rolling out so.
We're still very confident in our growth prospects for Gardasil. The pediatric vaccines did also see a very strong quarter. This quarter that was driven by demand as well there was some buying to the private sector within the U S. This quarter based on some of the Measle outbreaks that you've read in the.
News and we do believe that we'll continue to see growth for our pediatric vaccines going forward. So the durability of our vaccine business, we feel very good about both for near term and long term growth as we mentioned just on Investor day.
Thanks Seamus.
Roger with regard to.
As lots of DRAM to $85 91, I mean first of all I would say again that.
The performance of this loss of <unk> <unk>.
Remarkable and especially in the in the implant setting that durability is remarkable and it's important to note that.
The very long intracellular half life of the latter of the year and Barry.
Impressive resistance profile I would take nothing away from <unk> in terms of its capabilities.
For many in the market they are used to the previous non nucleoside reverse transcriptase inhibitors.
<unk> in particular, which had a lot of adverse events associated with them.
<unk> is superior to those and it's a very effective agent.
And I think the combination of that is attributed to <unk> will be good that said, we're also considering lots of other combinations in it that lots of other conversations and over time, you'll have the opportunity to see that the broader impact of Latvia, and a variety of different settings important things emphasizes that can be administered on a daily weekly or monthly or even a loss.
<unk> duration.
<unk>.
<unk> offers great possibilities I think for us changing treatment patterns in HIV infected individuals.
Thanks, we'll take the next question please.
Is from Andrew Baum with Citi.
Thank you a couple of questions. Please.
Just interested in your thoughts on the Senate proposal to fund catastrophic coverage given your exposure to then be then deposit Geneva and others.
Second there's lots of a question for Roger.
Thinking about perhaps folks with the implants as well as the once monthly do you think the FCA is ready to accept anything other than traditional non inferiority trials.
You think that could do to the timelines in order to bringing <unk> to market as Pat. Thank you.
Okay. So let me just comment generally about what's happening with the various statements that are going on in some of these proposals that were included in the Senate.
Finance package, let me start by saying that as a company we are very supportive.
The kinds of changes that will relieve patients in terms of the out of pocket costs I think the catastrophic.
<unk>.
Step in the right direction, but thats, a very small number of people, who actually progressed through the system and get the catastrophic. So we continue to work with people as part of the legislative process any administration.
Because we support lowering cost for seniors at the counter.
Not just at the cash stopping portion and so with respect to the impact of our own portfolio I'm going to turn it over to Frank Yes. So just on the oncology front I think you are from our colleagues Astrazeneca Lynn parse.
Part D is approximately 25% of our business flows through part D.
To remind everyone with regards to Keytruda that is reimbursed through part B. So it is not a part D product. So we feel as though were balanced across our oncology portfolio going forward.
Yeah, and Andrew with respect to prep regimens I think it is.
A great concern to the community as a whole.
That if one has to do active comparator controls.
Because equipoise.
That's understandable.
Event rates are so low that you will need very very large populations and very difficult to execute clinical trials.
FDA and other regulatory agencies are not unaware of this there have been discussions.
Among a variety of sponsors and particularly a knee and they're very active.
Patient community.
About this and what could be done and we have a lot of ideas in mind that thus far we don't really have a novel trial design that would permit more rapid registration watch this space I mean, we're very concerned about decision.
Thanks, we'll move on to the next question.
It's from Chris Schott with J P. Morgan.
Great. Thanks, very much for the questions. Just two here, maybe first elaborate a little bit more on the China dynamics that are driving that 51% growth I guess what products in particular are behind this and can you just remind us the overall size of your China business at this point.
And my second question was just Keytruda in RCC can we just get a quick update in terms of uptake you're seeing so far we're in the market you're seeing you can see the most traction with the data et cetera, just I know, it's obviously an important.
<unk> new indication for you guys. Thank you.
Hi, Chris It's Frank on China, China is about $725 million this quarter and it grew to your point, 50%, it's really being driven by a number of products.
As we mentioned, we've pivoted to innovation, so our oncology portfolio and parcel and bema Keytruda is driving the growth Gardasil has had a significant uptake in China. We have <unk> listing also for Januvia. So it's a broad base innovative portfolio that is driving that 50% growth and we believe that.
We will continue in China.
With regards to RCC, we are very excited Chris about where we are today.
As we mentioned when we rolled out the data for RCC.
Important to note that Keytruda plus exit NIM shows a benefit across all three risk groups, which differentiates us from the competition. So we are seeing uptake across all three risk groups and it's really based on the strong overall survival progression free survival and very strong response rates 80 person.
<unk> of our targeted accounts in the U S Apple.
Adoption this regimen into their guidelines, which I think is a very strong early indicator and we're seeing and hearing very strong feedback from both community and academic physicians. So I feel really good Chris about RCC in the U S and as you know we also plan to be rolling that out around the world. So we see this as a key indication key growth.
Rob is for us going forward.
Great and Roger.
On slide 22.
Sorry, I thought I misheard the question Jason.
Next question please.
And Jacob from UBS.
Hi, Thanks for taking the question two sorry, if I missed this but.
Would it be possible to quantify how much of the U S. Gardasil.
Public sector buying pattern was.
You could actually quantify that amount that would be helpful. And then just on Keytruda plus <unk>.
And first line lung could you remind us where those trials are when we could expect to see readouts there.
And as a corollary to that Keytruda in prostate cancer.
We're going to be starting a three phase III trials, there as well wondering when we could hear updates from those trials as well. Thank you very much.
I'll start with <unk>.
Roger.
Right Okay.
As we have on <unk>.
Discussed and we've showed some data from our.
Investor Day, there's quite a large opportunity for combinations.
<unk>.
With.
Linda <unk> and in one of those cases is prostate cancer. We have indicated that we will be starting registration enabling studies for those.
As the studies move forward, obviously, they take some time to conduct that will then have a chance to update you on the results, but we're enthusiastic about the opportunity of the combination and believe that there will be many circumstances I should point out that not only are inland karthik combination, Switzerland, <unk> combination as well where we're.
We just received breakthrough designation for this.
Got a cellular carcinoma first line indication of two so there is an awful lot going on in combination studies with both agents.
Yes.
And on Gardasil as I mentioned, we had a CDC purchase in Q2.
Which was not purchased in Q2 of 2018 was actually purchased in Q1 of <unk>. So the way in which I would characterize gardasil is in the U S year to date, we have grown 20%. When you look almost six month basis I think that's the best way to look at it from a gardasil perspective, so think of the U S growing about 20.
Percent right now versus prior year for the half year, Mark because you are going to see different timing with regards to the CDC purchases.
Next question.
<unk> please.
And a robot with Evercore.
Hi, Thanks, so much for taking my questions I.
I had two if I may 1st Ken you mentioned low complexity as being a key consideration for bolt ons or youre looking at and in that vein. I guess my question is are you open to therapeutic areas like orphan and also if there is a company with let's say $50 billion market cap or value is that still a tuck in as long as the.
Flex these low.
And secondly on gross margin so I see two big drivers going forward one of course being Keytruda is Bristol Myers royalty reduction in 2023.
But also.
You may be baking in on pricing reform I was curious if you could add numbers around each of those thank you very much.
So I'll start with the PD questions. Thanks.
To your questions.
I don't think the size of the issue necessarily for complexity.
It has to do with whether or not the two companies overlap and whether or not we're spending a lot of our time integrating IP systems manufacturing systems. So if it's a true add on a separate kind of business a true bolt on that I don't think the size drives the complexity at all.
As it relates to orphan versus other times our preferences.
To do the most good for most people, but having said that we are not against the right kind of therapy, even including orphan indications or orphan approaches to two.
To therapy, what we care about is are we getting.
Good science that we can leverage together with our internal efforts to actually create value for our shareholders as well as patients.
Good morning. This is this is rob.
To your question just to remind everyone for gross margin over over time as we indicated at the Investor Day, we do expect to see.
Gross margin generally flat because while we do see product mix benefits flowing from products like Keytruda.
Our vaccines business. We also as we mentioned and have assumed negative price going forward the impact of royalties you could obviously, the one with keytruda that does step down in 2023.
And the impact of the collaboration which in the near term will be a drag on margin, although long term they become accretive we havent given specific dollar numbers to those and frankly, we don't want to give that specific guidance, but clearly how those interplay will determine whether you see our product gross margin slightly up slightly.
Down or flat over the period with most of what's driving.
Our operating margin expansion as we've talked about coming from reducing growth in operating expense relative to sales.
Thanks, Rob next question. Please is from.
And vaccines and clearly the measles outbreak has driven some of that demand expression in the private sector. We also did see buying this quarter in queue too. We do anticipate that some of that buying will come out in Q3, and Q4, but as I mentioned before we see our pediatric vaccine business.
This is a very strong part of our growth story, and we say it is a very durable business going forward.
Okay I'll take the next question please.
Which I'm, Tim Anderson with little French search.
Thank you a couple of questions.
Longer term question on Keytruda, we published an analysis awhile back, claiming that cancer drugs very often ultimately felt much more <unk>.
The us in the U S as they mature.
To the tune of 50 per cent more or so when I look at how we in the analyst community at large models Keytruda. Another P. D ones for that matter no one ever really seem to have X U S. Even surpassing the U S.
And I'm wondering if you can tell us what your long term model assumes in this regard.
The X U S markets.
Actually kind of blow away the U S market over time, it could be billions of dollars more potentially second question recent Bristol recently topline part one of 227.
Positive, which I think was a surprise can you remind us where you are.
You're a C T L. A for a combination program specifically what are the latest stage trials and and what tumor types. My guess is you may have kind of backed off and.
Initiative, you started maybe a couple of years ago. Thank you.
Oh.
Yeah. So for Detrude as we look longterm, we we do see significant opportunity outside the U S in particular markets like China.
Especially when you look at some of the GI malignancies in the actual prevalence. There we are seeing obviously very strong uptake in Japan as well not gonna give a specific number.
But we clearly do C E X U S opportunity is very significant and in fact this quarter alone we sold $1.1 billion outside the U S and grew 73%. So we see both X U S. N U S could chew the opportunities, but clearly China's the one I would highlight is significant potential growth.
For us going forward.
And same with respect to senior record directed.
Therapy or interest has been in demonstrating or assessing whether or not adding etiolate or directed therapy actually has.
An impact older Keytruda alone that is.
Sure in the study to see whether CCNA four plus Keytruda is in fact superior keytruda in any setting.
And we haven't done that in both with the dilemma math and also with an K 13 O eight our own seat fillers poor directed a therapy and so registration Maitland studies are going on in both settings and it with both kinds of combinations.
Which includes for example, the five nine each study.
And a couple of others and we could go through the details with me find them easily on clinical trials.
Alright, well move onto the next question. Please.
That's what I'm, Jason garbage, but thank God I'm Erica.
Hi, good morning, Thanks for taking my question.
First you have to follow up on the Bristol of Devo, Uruguay data just curious Roger how do you think oncologists, they're going to benchmark.
Checkmate 67 data against the already approved either Mirc combination or Katrina mono therapy, and the PDL, one greater than 1% populations and then my second question, maybe just for Frank can you frame the importance of NRDC listing for Keytruda in the lungs setting.
And when I'm, specifically curious about is the percent of the market accessible with and without the lifting thanks.
Let's start with Roger.
Well, Jason it's pretty hard to comment on on the data from the Checkmate 227.
Program, because we haven't actually seen it we have the top line announcements that one part of it and the PTO one greatest 1% did succeed in the combination.
We did the limit, but we don't know what that <unk>.
Success looked like an overall survival will be done the hazard ratios looked like an.
And there's a it's complicated study as you appreciate because the study was broken down.
Hearts.
Part of it was was.
Predicated on a tumor mutational Burton analysis and subsequent PDL one directed.
So without actually seeing the data pretty hard to know how oncologists will respond.
With time, the data will become available and I think people will want to have a look at it and understand what the meaning of that might be.
I.
Our own data I think are extremely strong of course with keytruda and the combination of Keytruda plus traditional chemotherapy.
With.
Typically on the order of a doubling of overall survival. So there is an important values that can be gained there and we are optimistic that we're going to continue to be able to.
Advanced therapies that will improve overall survival of this disease. Thanks triangles at a Frank on the Anarchy Allen, Yeah, and just one additional pointed to what Roger was saying commercially with regards so long I do believe we are in a very strong position with our data and as you mentioned with mono therapy on.
On the <unk> on high population with very strong overall survival as well as keynote 189, reducing the risk of death and have that data is playing very well around the world and it has helped us to penetrate now eight out of every 10, new eligible patients and lungs. So when you feel as though we'll there'll be a lot of.
Data readouts here from competition, but we feel as though our data positions us well alone today and in the future and our deal we are waiting to see if will be invited to actually participate for next year. It is an important.
Potential listing it does expand the population in China fairly significantly.
There is five to 600000 lung cancer patients in China, There's probably 300000 of those that are a part of our labeled indication and enter deal gives us a chance if invited to expand.
Into that patient population, we'd also like to highlight we expect to expand our label in China in Chinese can be important for us not only for 2020, but 2020 and beyond and we're also seeing good so pay market uptake in China as well, but clearly will keep you informed as Ionarde Prof.
Us unfolds.
Thanks for the next question please.
Some states Scanlan said Cowan.
Thank you a couple of questions both the Roger.
If you could clarify your keynote five Q2 comments I think you said you needed to.
To file, but that you would share that PCR data with regulators. So where are you implying you would seek to file and potentially garner approval on PCR that is why you are going to share in the first place or are you, saying you absolutely definitely need the F S.
And then secondly.
If British those 227 delivered 8% of patients alive greater than the 69%.
189 reported at 12 months, just wondering how Merck would respond or do you think that that is extremely unlikely. Thank you.
Alright, Steve so with respect to keen on 522.
The goal and discussing the data with regulatory agencies is to ask whether or not they think that represents.
A finding of sufficient.
Importance to consider making the drug available for patients in that setting. So that's the reason to do it.
As I indicated pathologic complete responses associated with favorable outcome, particularly the breast cancer setting and has it been repeatedly demonstrated to have that impact in the triple negative breast cancer setting on the other hand, this is or something that agencies have to look at and with regard to the totality of the data. So that's that's.
Basically where we are there and with regard to 227 pretty hard to respond to hypothetical without actually seeing what the data look like I really don't know what to say about that.
No I'm.
Inc.
Some interest in seeing with this subset beta look like obviously there.
The flip side of that was that.
Maybe unsurprisingly adviser, what we've seen beginning with checkmate O. Two six I mean that combination of Nivolumab plus chemotherapy was not successful in part two.
Which which.
Or us Keytruda plus chemotherapy, obviously gets very impressive results in terms of overall response rate progression free survival overall survival.
As we've demonstrated repeatedly and and non scream incentives squamous cell non small cell lung cancer. So.
Those are these are behaving differently in these settings for whatever reason.
Thank you we'll move onto the next question. Please [noise].
Yeah, nice guys have some relation but cantor.
Hi, Thanks for taking my questions. My first question is on Keytruda in China. Just curious if you will disclose down there we get that question a lots of seeing if you can provide any color and then how you compete with the local players that are much less expensive on a enterprise basis at least for now and then second question is just on potential competition for Keytruda.
Some of the upcoming trial weed ads and second half 19, and beyond that will be a non small cell lung cancer rspca melanoma. Thank you.
Thank you. So we don't intend to actually share our sales number for keytruda in China as far as competing with the local players we feel as though oncology as a data driven.
Market. There clearly are local players that are entering the market at a lower price. They are penetrating into some segments of the market. However, we're continuing to see very good penetration and very good growth in China. There are clearly patients that are in the stock market is where we compete today that can afford contributor.
We have a patient assistance programs and we have a very strong commercial presence in China. So Ah fairly really good there will be able to compete with the local players going forward.
Great and then the Keytruda.
Fissioning in the you ask it in Pierre Yeah, because we mentioned and it was going to be a lot of competitive data readouts and long and across many different cancer types. What I would say is right. Now we are in a very strong first mover advantage in many of those cancer types. When you think about 20 indications occur.
Cross 12 different tumors.
We right now have build a wall of data that we feel very comfortable with and in fact, many of the community oncologists are getting significant real world experience using keytruda. So we'll have to see how the data unfolds with the competition, but as Roger.
Have just mentioned, we feel as though our data right now strong overall survival across many different cancer types bladder renal cell carcinoma, I haven't even spoken about adjuvant melanoma, which is a very important launch for US right now hidden neck, the teams or just launching that indication off a strong overall survival and.