Q3 2020 Merck & Co Inc Earnings Call

At this time I would like to welcome everyone didn't wait until Q3 sales and earnings conference call.

Operator: I would like to welcome everyone to the Merck & Co. Q3 Sales & Earnings conference call. All lines have been placed on mute to prevent any background noise.

All lines have been placed in me give event any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star, then the number 1 on your telephone keypad. To withdraw your question, press the pound key.

He could you mikes there will be a question and answer session.

I'd like to ask a question. During this time seem to be press Star then the number one on your telephone keypad.

Well you press the pound key.

Operator: Thank you. I would now like to turn the call over to your host today, Peter Dannenbaum, Vice President, Investor Relations. Please go ahead.

Thank you.

I'd now like to turn the call over to your host today.

Vice President Investor Relations. Please go ahead.

Peter Dannenbaum: Thank you, Laura, and good morning. Welcome to Merck's third quarter 2020 conference call. Today I'm joined by Ken Frazier, our Chairman and Chief Executive Officer, Rob Davis, our Chief Financial Officer, Dr. Roger Perlmutter, President of Merck Research Labs, Frank Clyburn, our Chief Commercial Officer, Mike Malley, our Chief Marketing Officer, and Dr. Dean Lee, Head of Discovery Research. Before we get started, I'd like to point out a few things. You will see that we have items in our gap results, such as acquisition-related charges, restructuring costs, and certain other items. You should note that we have excluded these from our non-GAAP results and provided a reconciliation in our press release.

Thank you Laura and good morning, welcome to Merck's third quarter 2020 conference call today, I'm joined by Ken Frazier, Our Chairman and Chief Executive Officer, Rob Davis, Our Chief Financial Officer, Dr., Roger Perlmutter, President of Merck Research Labs.

Thank fiber in our Chief commercial officer, Mike Mally, our Chief marketing Officer, and Dr. Deeley set of discovery research.

Before we get started 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 have excluded these from our non-GAAP results provide a reconciliation in our press release.

Peter Dannenbaum: We've also provided a table in our press release to help you understand the sales in the quarter for the business units and products. I would also 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 1995.

We've also provided a table in our press release to help you understand the sales in the quarter for the business units and products.

I would also 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 1995, such statements are made based on the current belief of Merck's management are subject to significant risks and uncertainties.

Peter Dannenbaum: Such statements are made based on the current belief that Merck's management is 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 1A in the 2019 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 of our forward-looking statements made this morning. Merck undertakes no obligation to publicly update any forward-looking statement. Our SEC filings, today's earnings release, and an investor presentation with highlights of our results are all posted on Merck.com. With that, I'd like to turn the call over to Ken.

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 day in the 2019 10-K identify certain risk factors and cautionary statements that could cause the company's actual results could differ materially from those projected that many of our forward looking statements made this morning, Merck undertakes no obligation to publicly update any forward looking statements.

SEC filings today's earnings release, and Investor presentation with highlights of our results are all posted on merch dotcom.

That I'd like to turn the call over to Ken.

Unknown Attendee: Thank you, Peter. Good morning, and thank you all for joining today's call. I want to start by acknowledging the extraordinary efforts of scientific experts across the biopharmaceutical industry who are rising to the challenge and working tirelessly to find solutions to help end the pandemic. We remain confident that science will prevail over COVID-19, and Merck is committed to contributing its scientific expertise and resources in support of these worldwide efforts. The momentum in the development of medicines and vaccines to address the pandemic is a testament to the societal value of our industry's continuing investments in science and to the women and men who are working with urgency and dedication to make it happen. Merck has a special responsibility to apply its expertise, given its long and productive history in antiviral and vaccine research, and we are advancing our vaccine and antiviral programs through focused investments of effort and resources. We have made significant progress over the last few months across our COVID program, and our learnings reinforce our confidence that the approaches we've selected are among the most promising. We are moving forward with dispatch and diligence.

Thank you Peter.

Good morning, and thank you all for joining todays call.

I want to start by acknowledging the extraordinary efforts of five specific experts across the biopharmaceutical industry, who are rising to the challenge and working tirelessly to find solutions to help and the pandemic.

We remain confident that size will prevail over COVID-19, and Merck is committed to contributing its scientific expertise and resources in support of these worldwide effort.

The momentum for the development of medicines and vaccines to address the pandemic is a testament to the societal value of our industries continuing investments in science and the women and men, who are working with urgency and dedication to make it happen.

Merck have special responsibility to apply it expertise given its long and productive history and anti viral vaccine research and we are advancing our vaccine and anti viral programs to focus investment of effort and resources.

We have made significant progress over the last few months across our cobot program and our learnings reinforce our confidence that the approaches we've selected are among the most promising.

We are moving forward with dispatched in diligence design.

Unknown Attendee: Designing our clinical studies in a manner that, if successful, will provide physicians and patients confidence that our candidates are safe, effective, simple to administer and distribute, and capable of being used not just in millions, but billions of people. While we understand the importance of moving expeditiously in light of the pandemic, Our experience with the natural history of other pandemic and epidemic viral diseases counsels us to seek enduring solutions that can be deployed globally now, and for future generations. It is an exciting time at Merck, and I am encouraged by our scientists' enthusiasm for the innovative research happening in our labs, not just on the COVID front, but across our broad pipeline of promising medicines and vaccines that we are continuing to invest, Our deep pipeline and the team of world-class scientists at Merck Research Labs is the result of the stellar leadership and many meaningful contributions made by Dr. Roger Perlmutter, who will be stepping down from his current role at the end of this year.

Designing a clinical studies in a manner that if successful will provide physicians and patients confident that our candidate per se.

Active simple to administer and distribute and capable of being used not just the millions but billions of people.

While we understand the importance of moving expeditiously in light of the pandemic.

Our experience with the natural history of all the pandemic epidemic viral diseases Council so to.

To speak enduring solution that can be deployed globally now and for future generations.

It is an exciting time at Merck and I am encouraged by our science. This enthusiasm for the innovative research happening in our lab not just on the cobot front, but across our broad pipeline of promising medicines and vaccines that we're continuing to invest in.

Our deep pipeline and the team have world class scientists at Merck Research labs.

As a result of the stellar leadership at many meaningful contributions made by Dr. Roger Perlmutter.

Who will be stepping down from his current role at the end of this year.

Unknown Attendee: I am grateful for the extraordinary contributions Roger has made to science, medicine, and the health and well-being of people around the world, as well as to all of us here at Merck. Roger leaves behind a strong legacy of historic breakthroughs in immuno-oncology and many other fields of medicine that have transformed clinical practice and improved patient outcomes. Under his leadership, the company has received more than 100 regulatory approvals for its medicines and vaccines globally, and he has revitalized the future of R&D at Merck. Dr. Dean Lee, currently Senior Vice President of Discovery Sciences and Translational Medicine, has been appointed to succeed Roger as head of Merck Research Laboratories, effective January 1.

I'm grateful for the extraordinary contributions Roger has made to science medicine in the health and well being of people around the world as well as to all of US here at Merck.

Roger leaves behind a strong legacy of historic breakthrough in immuno oncology and many other fields of medicine that has transformed clinical practice and improve patient outcomes.

Under his leadership the company has received more than 100 regulatory approval sports medicines and vaccines globally and he has revitalized the future R&D at Merck.

Dr de lever.

Currently senior Vice President of Discovery Sciences, and translational medicine.

Has been appointed to succeed Roger its head of Merck Research laboratories effective January one.

Unknown Attendee: And I look forward to welcoming him to Merck's senior leadership team. I am confident that Dean's knowledge, energy, and experience, as well as this purposeful pursuit of new technologies and transformational discoveries, will help Merck sustain the successful execution of our broad portfolio during this important time, advance our scientific strategy, and build on the strong momentum in our pipeline. Now, moving to our third quarter performance.

And I look forward to welcoming him could Merck senior leadership team.

I am confident that dean knowledge energy and experience.

And this is purposeful pursuit of new technologies and transformational discovery will help sustain the successful execution of our broad portfolio. During this important time.

Advanced our scientific strategy and build on the strong momentum in our pipeline.

Now moving to our third quarter performance.

Unknown Attendee: We continued executing on our strategic priorities while once again delivering year-over-year growth and revenue despite some ongoing impacts of the pandemic. Importantly, we exited the quarter with continuing business momentum. We are performing at a high level with production, supply, and distribution of our medicines, vaccines, and animal health products, and clinical trials moving forward with minimal disruption. The underlying demand for our products remains robust globally, as evidenced by the growth we achieved in oncology and animal health. We are also encouraged by the recovery we are seeing in vaccines and those parts of the portfolio most affected by the pandemic's impact on health care delivery. We are executing well in the marketplace to drive growth across our existing portfolio and in our labs by advancing our innovative research program.

We continued executing on our strategic priorities, while once again delivering year over year growth in revenue. Despite some ongoing impacts of the pandemic.

Very strong EPS growth.

Importantly, we exited the quarter with continuing business momentum.

We are performing at a high level with production supply and distribution of our medicines vaccine and animal health products and clinical trials moving forward with minimal disruption.

The underlying demand for our products remains robust globally as evidenced by the growth we achieved in oncology in animal health.

We're also encouraged by the recovery, we are seeing in vaccine and those parts of the portfolio most affected by the Pandemics impact on health care delivery.

We are executing well in the marketplace to drive growth across our existing portfolio and in our lab by advancing our innovative research program.

Unknown Attendee: Meaningful new data that we've recently disclosed in several areas of research, including oncology, vaccines, HIV, and others, increases the confidence we have in our ability to introduce new innovations to the market and sustain strong long-term growth. And our financial strength also allows us to execute on our capital allocation priorities, including our ongoing investments in both internal R&D and external business development, such as the recent Oncology collaboration with CJED. At the same time... We're advancing our plans to spin off Organon, which is on track for completion in the second quarter of 2021. We remain confident in our decision to create two more focused companies devoted to their respective strengths and portfolios and better positioned to navigate an evolving healthcare landscape and enhance value for patients and shareholders. We continue to hire talented and experienced leaders who will help drive organized success as an independent company.

Meaningful new data that we've recently disclosed in several areas of research, including oncology vaccine HIV and other increases the confidence we have in our ability to introduce new innovations to the market and sustained strong long term growth.

And our financial strength also allows us to execute on our capital allocation priorities, including our ongoing investments in both internal R&D and external business development such as the recent oncology collaborations would begin.

Okay.

At the same time.

We are advancing our plans to spin off organized which is on track for completion in the second quarter of 2021.

We remain confident in our decision to create two more focused company devoted to their respective strengths in portfolio and.

Better position to navigate and evolving healthcare landscape and enhance value for patients and shareholders.

We continue to hire talented and experienced leaders will help drive organized success as an independent company.

Unknown Attendee: Let me conclude by expressing my confidence in the business and our ability to advance our pipeline despite the challenges posed by the pandemic. Additionally, I express my sincere gratitude to the frontline healthcare workers and our employees who have worked around the clock to help patients affected by COVID-19. Their dedication inspires all of us at Merck to remain committed to our mission and relentlessly pursue innovative science to help prepare for the greatest health threats both now and in the future. Thanks Ken and good morning, everyone.

Let me conclude by expressing my confidence in the business and our ability to advance their pipeline. Despite the challenges posed by the pandemic.

Additionally, I express my sincere gratitude to the front line healthcare workers and our employees, who have worked around the clock to help patients affected by cold at 19.

Their dedication and size all of us at Merck to remain committed to our mission and relentlessly pursue innovative science to help prepare for the greatest health threat, both now and in the future.

And with that I'll now pass the call on to Rob to review the details of our performance and our outlook.

Thanks, Ken and good morning, everyone.

Rob Davis: As Ken noted, we continue to be encouraged by the strength and resiliency of our business as we once again delivered year-over-year growth despite ongoing impacts from the pandemic. Merck employees across the organization are continuing their important work, progressing the pipeline, and ensuring patients have access to our portfolio of medically important medicines and vaccines while contributing to industry-wide efforts to develop solutions to the pandemic. In the quarter, we saw a strong recovery in our performance and underlying demand for products across our key growth pillars, setting us up for a strong close to the year, as reflected in our updated guidance. We continue to execute on our long-term strategy, including our capital allocation priorities.

As Ken noted, we continue to be encouraged by the strength and resiliency of our business as we once again delivered year over year growth despite ongoing impacts from the pandemic.

Mark employees across the organization are continuing their important work progressing the pipeline and ensuring patients have access to our portfolio medical important medicines and vaccines, while contributing to industry wide efforts to develop solutions to the pandemic.

In the quarter, we saw strong recovery in our performance and the underlying demand for products across our key growth pillars, setting us up for a strong close to the year as reflected in our updated guidance.

We continue to execute on our long term strategy, including our capital allocation priorities, we're investing behind our deep pipeline, including our cobot candidates that have been active on the business development front.

Rob Davis: We are investing in our deep pipeline, including our COVID candidates, and have been active in business development. Of note, this quarter, we successfully entered into strategic collaboration agreements with CIGEN to gain access to two oncology assets that further augment our pipeline. We are committed to investing in our business for the long term, and we will continue to do so in line with our mission of following the science to solve unmet needs of patients around the world. Now, let's turn to our third quarter results. Total company revenues were $12.6 billion, an increase of 1% year over year, or 2% excluding the negative impact from foreign currency. The pandemic negatively impacted our third-quarter human health results by approximately $475 million, mostly in our vaccines portfolio. There was minimal impact on animal health.

Note. This quarter, we successfully entered into a strategic collaboration agreement with CGEN to gain access to two oncology assets to further augment our pipeline.

We are committed to investing in our business for the long term and we will continue to do so in line with our mission of following the science to solve unmet needs of patients around the world.

Now turning to our third quarter results.

Total company revenues were $12.6 billion, an increase of 1% year over year or 2%, excluding the negative impact from foreign currency.

The pandemic negatively impacted our third quarter human health results by approximately $475 million, mostly in our vaccines portfolio.

There was minimal impact to animal health.

Rob Davis: Our revenue growth, excluding this estimated impact, would have been approximately 5% or 6% x exchange. The remainder of my comments will be focused on the underlying performance of our key growth drivers and near-term trends, and will be on an exchange-based basis. Our human health revenues increased 2%. In oncology, Katrina sales grew 21% year-over-year, reaching $3.7 billion. In the United States, growth in Keytruda usage across all key tumor types remains strong, and Keytruda continues to be the leader in lung cancer by a widening margin. We are strengthening our leadership in I.O. across a broadening array of indications outside of one, notably in melanoma, bladder, and head and neck cancer, with momentum from launches in renal cell and endometrial carcinoma. It's worth noting that indications outside of lung now represent roughly 50% of our sales in the United States and will continue to grow over time as we further penetrate these indications. We will continue to add new indications going forward.

Our revenue growth, excluding the estimated impact would have been approximately 5% or 6% ex exchange.

The remainder of my comments will be focused on the underlying performance of our key growth drivers in near term trends and will be on an ex exchange basis.

Human health revenues increased 2%.

In oncology Keytruda sales grew 21% year over year, reaching $3.7 billion.

In the United States growth and Keytruda usage across all key tumor types remained strong and contributor continues to be the leader in lung cancer by a widening margins.

We are strengthening our leadership in Io across a broadening array of indications outside of lung cancer, notably in melanoma, bladder and head and neck cancers with momentum from launches and renal cell and endometrial carcinoma.

It's worth noting that indications outside of long now represents roughly 50% of our.

Our sales in the United States and will continue to grow over time as we further penetrate these indications they continue to add new indications going forward.

Rob Davis: Uptake following the launch of our Q6 weekly adult dosing regimen helped to offset the impact of reduced new patient starts caused by the pandemic. Outside of the United States, lung cancer indications remain the driver of contributive growth. In the EU, growth continues to be driven by the uptake of Keynote 189 and Keynote 407 in the first-line setting, where we continue to see strong penetration. In Japan, the combined impact of the two huge seller pricing adjustments in the first half of the year more than offset underlying volume growth.

Uptake following the launch of our Q six weekly adult dosing regimen helped to offset the impact of reduced new patient starts caused by the pandemic.

Outside of the United States lung cancer indications remain the driver of country to growth.

In the EU growth continues to be driven by the uptake of keynote 189 in Q4.

So seven in the first line setting.

We continue to see strong penetration.

In Japan, the combined impact of the two huge solar pricing adjustments in the first half of the year more than offset underlying volume growth.

Rob Davis: Lynn Parza and Lynn Vima continue to demonstrate strong growth and remain meaningful contributors to our broader oncology portfolio, growing 58% and 29%, respectively, year over year. Additionally, PARSA's performance in the quarter continues to reflect strong growth and leadership in the PARP class in the U.S. despite increasing competition.

Lynparza inland bema continue to demonstrate strong growth and remain meaningful contributors to our broader oncology portfolio growing 58% and 29% respectively year over year.

When parcells performance in the quarter continues to reflect strong growth and leadership in the PARP class in the U.S.

By increasing competition.

Rob Davis: Incremental Contributions from an Expanded Indication in Ovarian Cancer, Early Launch Uptake in Prostate Cancer, LENVIMA maintains market leadership in first-line hepatocellular carcinoma, and the combination with Keytruda and endometrial carcinoma is now the leading regimen in the metastatic setting in the United States. Turning to Vax, As mentioned, while our vaccine portfolio made a strong recovery from the second quarter, year-over-year comparisons were negatively impacted by continued below-normal levels of wellness visits, particularly in the United States. Progressive sales declined 10% year over year as growth in ex-U.S. markets was more than offset by pandemic-driven impacts in the United States. Planned sales in the key back-to-school season were below normal, particularly among adolescents. Sales were also impacted by delayed public sector purchases.

Incremental contributions from an expanded indication in ovarian cancer and early launch uptake in prostate cancer.

When bema maintains market leadership in first line Hepatocellular carcinoma, and the combination with Keytruda in endometrial carcinoma does now the leading regiment in the metastatic setting in the United States.

Turning to vaccines as.

As mentioned, while our vaccines portfolio made a strong recovery from the second quarter year over year comparisons were negatively impacted by continued below normal levels of wellness visits.

Particularly in the United States.

Gardasil sales declined 10% year over year as growth in ex us markets was more than offset by pandemic driven impacts in the United States.

Poignant than the key back to school season were below normal, particularly among adolescents.

Sales were also impacted by delayed public sector purchases.

Rob Davis: XUS growth was driven by continued strong volume in China and the expansion of gender-neutral vaccination programs in Europe, partially offset by reduced demand in Hong Kong. Pneumovax delivered 58% growth due to heightened awareness of the importance of protection against pneumococcal disease amidst the pandemic and heading into the flu season, partially offsetting the Gardasil decline. While our vaccines business, and in particular Gardasil, is always subject to quarter-over-quarter variability, the longer-term trends for underlying demand continue to strengthen. We remain confident in the future growth prospects for Gardasil due to growing global recognition of its important role in preventing certain cancers, reinforced by recent data published in Sweden. Our hospital performance also improved from the second quarter level. Most notably, recovery and elective surgical procedures benefited Britain, which grew 13% year over year.

Ex us growth was driven by continued strong volume in China, and the expansion of general neutral vaccination programs in Europe.

Partially offset by reduced demand in Hong Kong.

Pneumovax delivered 58% growth due to heightened awareness of the importance of protection against pneumococcal disease amidst the pandemic and heading into the flu season, partially offsetting the go to fuel decline.

While our vaccines business and in particular, Gardasil, there's always subject to quarter over quarter variability the longer term trends for underlying demand continued to strengthen.

We remain confident in the future growth prospects for Gardasil due to growing global recognition of its important role in preventing certain cancers.

Forced by recent data published on Sweden.

Our hospital performance also improved from second quarter levels, most notably the recovery in elective surgical procedures benefited bridion, which grew 13% year over year.

Rob Davis: Our ongoing preventive launch also contributed favorably, growing 69%. Our human health business had a standout quarter, achieving sales of $1.2 billion and delivering 12% growth year over year. Companion Animal Group 18, Thank you for joining us today. Livestock grew 8%, reflecting contributions across our ruminants, wine, and poultry products, as well as growth from our technology products.

Our ongoing problem. This launch also contributed favorably rolling 69%.

Our human health business had a standout quarter.

Achieving sales of $1.2 billion, and delivering 12% growth year over year.

Opinion animal grew 18%, reflecting underlying demand for the productive liner products and strength from our portfolio of companion companion animal vaccines.

Lifestyle grew 8%, reflecting contributions across our remnants swine and poultry products as well as growth from our technology products.

Rob Davis: We are encouraged by the resilience of our animal health business, which has outperformed our expectations in this challenging environment. Turning to the rest of our P&L, my comments will be on a non-gap basis. Gross margin was 74.8% in the quarter, a decrease of 110 basis points due to a combination of pricing pressure, inventory write-offs, collaboration amortization, and foreign exchange, offset in part by product misses. Operating expenses decreased 6% year-over-year to $4.5 billion.

We are encouraged by the resilience of our animal health business, which has outperformed our expectations in this challenging environment.

Turning to the rest of our PML my comments will be on a non-GAAP basis.

Gross margin was 74.8% in the quarter, a decrease of 110 basis points due to a combination of pricing pressure inventory write offs collaboration amortization and foreign exchange offset in part by product mix.

Operating expenses decreased 6% year over year to $4.5 billion.

Rob Davis: In total, COVID favorably impacted spending by approximately $115 million, driven largely by lower promotional, selling, and administrative costs, along with lower laboratory travel and meeting expenses, partially offset by increased spending to advance our COVID-19 antiviral and vaccine research program. The significant year-over-year increase in other income was driven by unrealized gains in our security holdings, primarily reflecting our direct and indirect investments in Moderna. The effective tax rate for the quarter was 14.8% and was driven by a lower assumed four-year effective tax rate as a result of favorable earnings measures.

Total cobot favorably impacted spending by approximately $115 million driven largely by lower promotional selling and administrative costs, along with lower laboratory travel and meeting expenses, partially offset by increased spending to advance our COVID-19, and a viral in vaccines research programs.

The significant year over year increase in other income was driven by unrealized gains in our security holdings, primarily reflecting our direct and indirect investments in Medina.

The effective tax rate for the quarter was 14.8%.

And was driven by a lower assumed full year effective tax rate as a result of favorable earnings mix.

Rob Davis: Taken together, we earned $1.74 per share, an increase of 18%, reflecting strong operational performance that more than overcame COVID headwinds, as well as contributions from our other, Now turning to the guidance. Our updated guidance reflects our confidence and the underlying strength of our business. We now expect revenues of $47.6 billion to $48.6 billion, which reflects an increase of $150 million from our previous mid-period. Our guidance assumes roughly $2.35 billion of COVID headwind for the year, an increase from our prior assumption of $1.95 billion. We now assume a negative impact from foreign exchange of roughly 1.5 percentage points using mid-October rates.

Taken together, we earned $1.74 cents per share an increase of 18%, reflecting strong operational performance more than overcame overt headwinds as well as contributions from our other income.

Now turning to guidance.

Our updated guidance reflects our confidence in the underlying strength of our business.

We now expect revenues of $47.6 billion to $48.6 billion.

Which reflects an increase of $150 million from our previous midpoint.

Our guidance assumes roughly $2.35 billion of coal that headwind for the year, an increase from our prior assumption of $1.95 billion.

We now assume a negative impact from foreign exchange of roughly 1.5 percentage points using mid October rates.

Rob Davis: Overall, our guidance implies 3% to 5% growth in revenues for the full year, excluding the impact of exchange. Excluding the impact of the pandemic, our guidance range implies year-over-year growth of 8-10%. Thank you for joining us. Thank you. Thank you. Broadly, we're encouraged by the recovery of our business, which has been largely consistent with our original expectations, with Garasil being the primary exception. Bartosil is trending in the right direction, but the phasing of the recovery is slower than we anticipated, largely due to the impact of the pandemic on the back-to-school season, particularly in the United States. We're also seeing some residual negative impacts of the pandemic extend into the fourth quarter in some parts of the world, primarily in Europe and certain emerging markets.

Overall, our guidance implies 3% to 5% growth in revenues for the full year, excluding the impact of exchange.

Excluding the impact of the pandemic, our guidance range implies year over year growth of 8% to 10%, reflecting continued strong underlying demand for our products.

Broadly we're encouraged by the recovery of our business, which has been largely consistent with our original expectations with gardasil being the primary exception.

First of all is trending in the right direction, but the phasing of the recovery is slower than we anticipated.

Largely due to the impact of the pandemic on the back to school season, particularly in the United States.

We're also seeing some ridges visual negative impacts of the pandemic extend into the fourth quarter and some parts of the world primarily in Europe and certain emerging markets.

Rob Davis: Most importantly, our operational performance remains strong and has enabled us to offset the impact of the pandemic. As we end the year and head into 2021, our confidence is further reinforced by the ability of healthcare systems around the world to adapt and deliver care and by the value of our medically important products delivery to patients. As a result, we continue to believe in our long-term growth prospects, which remain under. We continue to expect gross margin to be roughly 75%. Operating expenses are now expected to decline at a low single-digit rate year-over-year, driven by reduced spending due to the pandemic and strong expense management.

Most importantly, our operational performance remains strong and has enabled us to offset the impact from the pandemic.

As we end the year and head into 2021, our confidence is further reinforced by the ability of the healthcare systems around the world to adapt and deliver care and by the value of our medically important products delivery to patients.

As a result, we continue to believe in our long term growth prospects, which remain underestimated by the street.

We continue to expect gross margins to be roughly 75%.

Operating expenses are now expected to decline at a low single digit rate year over year, driven by reduced spending due to the pandemic and strong expense management.

Rob Davis: We now expect our full-year tax rate to be 15.5%, reflecting improved earnings. We now expect other income of roughly $750 million, reflecting higher income from investment in equity securities. We continue to anticipate 2.54 billion shares outstanding.

We now expect our full year tax rate to be 15.5%, reflecting improved earnings mix.

We now expect other income of roughly $750 million, reflecting higher income from investments in equity securities.

We continue to anticipate 2.54 billion shares outstanding.

Rob Davis: Taken together, we now expect our non-GAAP EPS to be between $5.00 and $91.00, $26.01, which reflects an increase of $0.25 from our previous midpoint. This range includes a negative impact from foreign exchange of roughly two and a half percent.

Taken together, we now expect our non-GAAP EPS to be between $5.91 to $6.01, which reflects an increase of 25 cents from our previous midpoint.

This range includes a negative impact from foreign exchange of roughly two and a half percentage points.

Rob Davis: Our results continue to benefit from an improved tax rate and higher other income due to gains from our equity holdings. That said, our operational strength continues to drive leverage in the P&L through robust revenue growth and expense management, allowing for meaningful investments in our pipeline while at the same time delivering margin expansion. We continue to make progress on our strategy to evolve our operating model in order to drive efficiency and productivity throughout the organization. This is occurring through process improvements and the leveraging of new digital capabilities, which have become increasingly important as we find new ways to engage with patients and physicians during this pandemic. Our balance sheet remains strong, and we are well positioned to execute on our capital allocation priorities.

Our results continued to benefit from an improved tax rate and higher other income due to gains from our equity holdings.

That said, our operational strength continues to drive leverage and the PML through robust revenue growth and expense management, allowing for meaningful investments in our pipeline while at the same time delivering margin expansion.

We continue to make progress on our strategy to evolve our operating model in order to drive efficiency and productivity throughout the organization. This.

This is occurring through process improvements and the leveraging of new digital capabilities, which have become increasingly important as we find new ways to engage with patients and physicians in this pandemic.

Our balance sheet remains strong and we are well positioned to execute on our capital allocation priorities.

Rob Davis: Fully investing in our key growth drivers and pipeline remains our top priority, and we are committed to growing the dividend and to driving value-enhancing business development that will help position Merck for long-term success. To conclude, the swift recovery we experienced in the third quarter serves as an indicator of the true value our products provide to patients around the world and our ability to deliver them. We remain confident in the fundamental strength of our business and the significant runway for growth that our de-risked portfolio of assets provides.

Fully investing in our key growth drivers and pipeline remains our top priority and we are committed to growing the dividend and to driving value enhancing business development that will help position Merck for long term success.

To conclude the Swift recovery, we experienced in the third quarter serves as an indicator of the true value our products provide to patients around the world and our ability to execute.

We remain confident in the fundamental strength of our business and the significant runway for growth that our de risk portfolio of assets provides.

Rob Davis: Furthermore, the spin-off of Organon in the second quarter will enable it to realize the growth potential of its portfolio of medically important products and will allow us to focus our attention and investments more fully on our key growth drivers and robust pipeline to deliver innovative medicines and vaccines to patients around the world now and long into the future. Before I close, I'd also personally thank Roger for his many contributions to Merck, which will benefit our company and the patients we serve for many years to come. It's been a pleasure working alongside you and learning from you. With that, I'd like to turn the call over to Roger.

Further the spinoff of working on in the second quarter will enable us to realize the growth potential of its portfolio of medically important products.

And will allow us to focus our attention and investments more fully on our key growth drivers and robust pipeline to deliver innovative medicines and vaccines to patients around the world now and long into the future.

Before I close I'd like to also personally thank Roger for his many contributions to Merck, which will benefit our company and the patients we serve for many years to come.

It's been a pleasure working alongside you and learning from you.

With that I'd like to turn the call over to Roger.

Roger Perlmutter: Thank you very much, Rob. During the third quarter, our laboratories made important advances on many fronts, including regulatory approvals, the filing of new drug applications, obtaining meaningful new clinical data, advancing new product opportunities into development, and forging new R&D alliances. Our press release tabulates many of these accomplishments but cannot convey the rapid pace at which these programs are advancing. As an example, during the third quarter, the United States Food and Drug Administration approved an expanded label for Keytruda in the setting of relapsed or refractory classical Hodgkin lymphoma, based on our Keynote 204 study that compared Keytruda monotherapy to treatment with Brentuximab, But note that approval of this indication was received just three months after acceptance of the file, a reflection of the high quality of the underlying work by our clinical development and regulatory colleagues.

Thank you very much.

During the third quarter, our laboratories made important advances on many fronts, including regulatory approvals filing of new drug applications obtained meaningful new clinical data advancing new product opportunities into development and forging new R&D alliances. Our press release Tabulate is many of these accomplishments.

But cannot convey the rapid pace of which these programs are advancing as an example, during the third quarter EBITDA, United States Food and drug administration approved an expanded label for Keytruda in the setting of relapsed or refractory classical Hodgkin lymphoma based on our keynote tool for study that compared Keytruda monotherapy treatment with sprint.

Tux, among the dose and a standard therapy.

But note that approval of the syndication was received at just three months after acceptance of the fun.

Reflection of the high quality of the underlying work by our clinical development and regulatory colleagues Keytruda.

Roger Perlmutter: Keytruda is also under review for the first-line treatment in combination with chemotherapy of previously untreated locally recurrent inoperable or metastatic triple negative breast cancer with tumors expressing PD-L1 with a combined proportion score of 10 or greater based on the results of our Keynote 355 study with a PDUFA date of November 28, and also for the neoadjuvant and adjuvant treatment of triple negative breast cancer Results from these studies have been previously presented.

Keytruda is also under review for the first line treatment in combination with chemotherapy of previously untreated locally recurrent inoperable or metastatic triple negative breast cancer.

Tumors expressing PD L. One the combined proportion score of 10 or greater based on the results of our keynote Sci Fi five study with a PDUFA date of November 28.

And also for the Neal adds an adjuvant treatment of triple negative breast cancer based on the results of our keynote size to two study with a PDUFA date of March 29, 2000, or 20000 22021 site results from these studies have been previously presented.

Roger Perlmutter: In Europe, the Committee for Medicinal Products for Human Use, or CHMP, adopted positive recommendations for lymparza's monotherapy in the treatment of patients with metastatic BRCA mutant, castrate-resistant prostate cancer who have progressed following treatment with a modern androgen-blocking agent. Lynn Parza also received a favorable opinion for the first-line maintenance treatment in combination with bevacizumab of advanced homologous re Meanwhile, in Japan, we obtained approval for Keytruda in the second-line treatment of PD-L1-positive esophageal cancer, based on data from our Kino 181 study. We also received approval in Japan for the 400 mg every 6 weeks regimen for Keytruda across all adult indications, an approach already adopted in Europe and in the United States.

In Europe, the committee for medicinal products for human use or CMP adopted positive recommendations for lynparza as monotherapy in the treatment of patients with metastatic BRC, a mutant castrate resistant prostate cancer, who have progressed following treatment with a modern androgen blocking age.

Lynparza also received favorable opinion for the first line maintenance treatment in combination with Bevacizumab of advance homologous recombination deficient ovarian cancer based on the results of the power one phase three study.

Meanwhile, in Japan, we obtained approval for Keytruda in the second line treatment of PDL, one positive soft Geo cancer based on data from our keynote wondering one study. We also received approval in Japan for the 400 milligram every six weeks regimen for Keytruda across all adult indications and approach already adopted in Europe, and the United States I mentioned each of.

These approvals because the documents that continued progress of our broad base registration programs for Keytruda and for our partnership with Astrazeneca and partisan just conducted around the world. Despite the challenges imposed by the COVID-19 pandemic.

Roger Perlmutter: I mention each of these approvals because they document the continued progress of our broad-based registration programs for Keytruda and for our partnership with AstraZeneca on Mimparza, which is conducted around the world, despite the challenges imposed by the COVID-19 pandemic. At the European Society for Medical Oncology meetings in early September, we highlighted long-term data demonstrating the durable impact of Keytruda in the treatment of mal For example, data from our Keynote 024 study in the first-line treatment of non-small-cell lung cancer in patients whose tumors expressed PD-L1 on at least 50% of tumor cells showed that after 5 years, overall survival nearly doubled in the Keytruda treated group as compared with those who received traditional chemotherapy. This despite a high rate of crossover to Keytruda in the chemotherapy arm. Similarly, a combination of chemotherapy plus Keytruda as compared with chemotherapy alone meaningfully improved overall survival at four years in squamous cell carcinoma of the head and neck, especially in those tumors that had combined proportion scores for PD-L1 expression of greater than one based on our Keynote 048 study.

At the European Society for medical oncology meetings in early September we highlighted long term data demonstrating the durable impact for keytruda in the treatment of malignant disease. For example data from our keynote <unk> four study the first line treatment of non small cell lung cancer in patients, whose tumors expressed PD L. One on at least 50 per se.

Tumor cells showed that after five years overall survival nearly doubled and keytruda treated group as compared with those who received traditional chemotherapy. This despite a high rate of crossover to keytruda in the chemotherapy arm.

Similarly at combination of chemotherapy, plus keytruda as compared with chemotherapy alone meaningfully improved overall survival at four years in squamous cell carcinoma of the head neck.

Especially in those tumors that combined proportion scores for PD lone expression of greater than one.

Based on our keynote <unk> four study.

And then the occupant treatment of melanoma following surgical resection long term data showed a 40% reduction in the risk of distant metastasis season, the keytruda treated population as opposed to those who did not receive therapy together. These data speak to the durable improvement in outcomes, the tens or the use of keytruda and otherwise difficult.

Roger Perlmutter: And in the adjuvant treatment of melanoma following surgical resection, long-term data showed a 40% reduction in the risk of distant metastases in the Keytruda-treated population as opposed to those who did not receive adjuvant therapy. Together, these data speak to the durable improvement in outcomes that led to the use of Keytruda in otherwise difficult-to-manage malignancies. At ESMO 2020, we also presented data regarding potential new cancer therapies, including Viva Stolomab, our anti-ticket animal, which we hope may improve treatment responses when combined with Keytruda in non-small-cell lung cancer patients whose tumors express low levels of PD-L1, including in patients who have progressed on prior checkpoint inhibitor therapy. Viva Stolomab is one of three new agents that We also presented data for MK4830, an ILG4 antibody that acts to block immune suppression imposed by elements of the tumor microenvironment.

Tonnage malignancies.

And there's no 2020, we also presented data regarding potential new cancer therapies, including Veeva stolen.

Our anti TIGIT antibody, which we hope may improve treatment responses when combined with keytruda in non small cell lung cancer patients, whose tumors express low levels of PD one.

Putting in patients who have progressed on prior checkpoint inhibitor therapy veeva stolen that was one of three new agents that we have try to prioritize for combined therapy with Keytruda and we will advance this agent pivotal trials in 2021.

We also presented data for MK, 40, 30, and LG forehead, a body that acts to block immune suppression imposed by elements of the tumor micro environment.

Okay, 40, 30 showed promising activity in multiple tumor types, including in patients, whose tumors had progressed on PD one therapy.

Ongoing expansion cohorts will explore the activity of MK 48, 30 in pancreatic adenocarcinoma, glioblastoma head and neck cancer advanced non small cell lung cancer and gastric cancer.

More recently at the North American conference on lung cancer, we presented data on the combination of both on when that our novel Sea, Chile, four directed therapy at a dose of 25 milligrams every six weeks in combination with Keytruda in the first line treatment of non small cell lung cancer data obtained after 16.9 months median follow so overall risk.

Roger Perlmutter: MK4830 showed promising activity in multiple tumor types, including in patients whose tumors had progressed on PD-1 therapy. Ongoing expansion cohorts will explore the activity of MK-4830 in pancreatic adenocarcinoma, glioblastoma, head and neck cancer, advanced non-small cell lung cancer, and gastric cancer. More recently, at the North American Conference on Lung Cancer, we presented data on the combination of Clavonlamab, our novel CTLA-4-directed therapy, at a dose of 25 mg every 6 weeks, in combination with Keytruda and the first-line treatment for non-small cell lung cancer. Data obtained after 16.9 months of median follow-up showed an overall response rate of 37.5% and a median overall survival of 18.1 months. Importantly, the median duration of response in the responding population was not reached.

Funds rate of 37.5% and a median overall survival of 18.1 months importantly, the median duration of response and to respond and population was not reached a.

The registration, enabling study testing for Montelimar co formulated with Keytruda is planned for 2021.

The third quarter gave us the opportunity to advance many other new drug candidates in a variety of other therapeutic areas. For example, we presented additional data on the activity of MTS 64, 82 hits two alpha inhibitor for the treatment of budget. The Lindau disease documenting shrinkage of tumors with MK 64, 82 therapy in the kidney.

So the overall response rate, including only confirmed responses was 36.1% for pancreatic lesions in this disease. The confirmed overall response rate was 63.9% and dementia blastoma the central nervous system. The confirmed overall response rate was 30.2% these are meaningful responses.

Roger Perlmutter: A registration enabling study testing co-formulated with Kiputa is planned for 2021. The third quarter gave us the opportunity to advance many other new drug candidates in a variety of other therapeutic areas. For example, we presented additional data on the activity of MK-6482, our HIF-2 alpha inhibitor, in the treatment of von Dippel-Lindau disease, documenting shrinkage of tumors with MK-6482 therapy in the kidney, where the overall response rate, including only confirmed responses, was 36.1%. For pancreatic lesions in this disease, the confirmed overall response rate was 63.9%. And hemangioblastomas of the central nervous system, the confirmed overall response rate was 30.2%. These are meaningful responses. Especially since current therapy for von Hippel-Lindau disease requires surgical extirpation of tumors, often involving dozens of procedures extending over many years.

Actually since current therapy provides ample linda disease required surgical extra patient tumors, often involving dozens of procedures extending over many years.

In the infectious disease area, we continue to advance his latrobe here our novel non decided reverse transcriptase look translocation inhibitor for daily administration in combination with to sell truck sales to be 96 week data presented at the HIV, Glasgow meeting demonstrated sustained viral suppression in treatment naive patients, which.

Longer as well for the future this regimen.

Phase three studies will begin in February of this year. So I'm sorry began in February of this year. We also advanced empty 85 of seven new long acting non nuclear side, a reverse transcriptase inhibitor, which we believe will partner well with this lots of here in extended dose regimens.

Meanwhile, we announced positive Immunogenicity results for four additional phase III studies of dealing with for our 15 Vaillant pneumococcal conjugate vaccine when dose in adults.

These data help to complete the entire set of adult registration studies, which will be filed before the end of the year.

Roger Perlmutter: In the infectious disease area, we continue to advance Eslatrevir, our novel non-nucleosidal reverse translocation inhibitor, for daily administration in combination with Pitheltro. Phase 2B 96-week data presented at the HIV Glasgow meeting demonstrated sustained viral suppression in treatment-naive patients, which augurs well for the future of this regimen. Phase III studies will begin in February of this year.

Finally during the third quarter, we made substantial progress in our COVID-19 directed programs.

Turning first to moan the pure there formerly known as MK 44, 82, which is a direct acting orally bioavailable anti viral drug that we are developing in partnership with Ridgeback Therapeutics phase.

Phase one studies completed during the first quarter provided evidence that the compound is well tolerated as monotherapy in single doses as high as 1.6 grams and the multiple doses of 800 milligrams twice per day for five days, we believe that the concentration of the active malignancy that were achieved should be more than sufficient to terminate pires per day.

Roger Perlmutter: We also advanced MK-8507, a new, long-acting, non-leukocyto-reverse transcriptase inhibitor, which we believe will partner well with isloxavir in extended-dose regimens. Meanwhile, we announced positive immunogenicity results for four additional Phase III studies of B.1.1.4, our 15-valent pneumococcal conjugate vaccine, when dosed in adults. These data help to complete the entire set of adult registration studies, which will be filed before the end of the year.

Yeah.

Three relatively small phase two dose escalation studies evaluating the antiviral effective bundling peer of your encoded 19 patients were initiated by our colleagues Ridgeback and data from these studies will soon become available.

Meanwhile, we have initiated two large global phase two three study one hospitalized patients and second in ALS patients together. These studies will enroll more than 2700 patients and will examine clinical outcomes, including both efficacy and safety.

Roger Perlmutter: Finally, during the third quarter, we made substantial progress in our COVID-19 directed program. Turning first to Molnupiravir, formerly known as MK-4482, which is a direct-acting, orally-available antiviral drug that we are developing in partnership with Ridgeback Biotherapeutics. Phase 1 studies completed during the first quarter provided evidence that the compound is well-tolerated as monotherapy in single doses as high as 1.6 grams and in multiple doses of 800 milligrams twice per day for five days. We believe that the concentration of the active molecule that was retrieved should be more than sufficient to terminate virus production.

Based on its mechanism of action, we are hopeful that this new therapy, which is administered orally and capsule form will meaningfully reduce morbidity and mortality in posted 19 patients along with this progress in clinical development, we have secured resources to produce millions of doses on the pure here before the end of 2021.

Even greater supply becoming available early in 2021.

It should be mentioned that in preclinical studies among the peer of yours active against numerous corona virus species, including those responsible for Sars and mergers as well as a wide variety of R&D viruses, including the influenza virus and small new peer there could prove to be a useful antiviral agent in a variety of settings.

Roger Perlmutter: Three relatively small Phase II dose escalation studies evaluating the antiviral effect of monolipiravir in COVID-19 patients have been initiated by our colleagues at Ridgeback, and data from these studies will soon become available. Meanwhile, we have initiated two large global Phase II-III studies, one in hospitalized patients and the second in outpatients. Together, these studies will enroll more than 2,700 patients and will examine clinical outcomes, including both efficacy and safety. Based on its mechanism of action, we are hopeful that this new therapy, which is administered orally in capsule form, will meaningfully reduce morbidity and mortality in COVID-19 patients. Along with this progress in clinical development, we have secured resources to produce millions of doses of monolupiravir by the end of 2020, with an even greater supply becoming available early in 2021. It should be mentioned that in preclinical studies, small nupiravir is active against numerous coronavirus species, including those responsible for SARS and MERS, as well as a wide variety of RNA viruses, including the influenza virus, and small nupiravir could prove to be a useful antiviral agent in a variety of settings.

Our COVID-19, directed vaccine candidates were also advance into clinical trials during the third quarter as Ken mentioned in developing a vaccine against COVID-19, we have pursued proven platforms focusing in particular on replicating virus vectors that could provide durable protection following a single administration.

Our first vaccine candidate developed in partnership with the Institute pasture, and Paris employs a modified measles virus vaccine that has been engineered to express the major surface protein Sars koby to dirt.

During the third quarter. This vaccine candidate the Fivenine one was advanced into two phase one clinical studies involving nearly 300 healthy volunteers.

The five the Fivenine one phase one studies have enrolled well such that Immunogenicity data should become available before the end of the year.

Second vaccine can this be 590.

Developed in collaboration with the International AIDS vaccine initiative already Abhi.

Makes use of of the secular Sonoma tied as fire sector, which has the same vector system that we use to develop for veeva. The first successful vaccine for the prevention that is built with higher seats.

The phase one program for Vbloc 90 is proceeding in much the same passions that for Viasat, one, albeit offset by several weeks here again, we are optimistic that the candidate vaccine will elicit durable immune responses to the Sars koby to spiked 15, following a single dose and that it will be safe and well tolerated.

Roger Perlmutter: Our COVID-19-directed vaccine candidates will also advance into clinical trials during the third quarter. As Ken mentioned, in developing a vaccine against COVID-19, we have pursued proven platforms, focusing in particular on replicating virus vectors that could provide durable protection following a single administration. Our first vaccine candidate, developed in partnership with the Institut Pasteur in Paris, employs a modified measles virus vaccine that has been engineered to express the major surface protein SARS-CoV-2.

For both the Fivenine Dnbi Fivenine, one we are developing facilities that will enable us to produce many millions of vaccine doses in the near term and hundreds of millions of doses should those be required and the longer term. Our expectation is that these vaccines will be made available in a format that from its global distribution was appropriate cold chain management ideally.

Which way the temperatures.

Our prior experience in developing vaccines against many other viral diseases gives us some confidence that we will succeed in producing an effective agent proposal access against cobot 19th in this context I would call your attention to new data from a study published in the New England Journal of Medicine at the beginning of October that make use of Swedish demographic and health registries, which path.

Roger Perlmutter: During the third quarter, this vaccine candidate, B591, was advanced into two phase one clinical studies involving nearly 300 healthy volunteers. The V591 Phase 1 studies have enrolled well, such that immunogenicity data should become available before the end of the year. A second vaccine candidate, B590, developed in collaboration with the International AIDS Vaccine Initiative, or IAVI, uses a vesicular stomatitis virus vector, which is the same vector system that we used to develop Irvivo, the first successful vaccine for the prevention of Ebola virus disease.

Your health data on the entire population sleep the.

The study included 1.67 million girls, who women tend to 30 years of age evaluated during the period 2006 to 2017 in that group after adjustment for all covariance. There was an 88% reduction in the risk of cervical cancer as a result of immunization with Gardasil before the age of 17.

These new data offer hope for the potential eradication of this disease, which according to the World Health organization claims the lives of more than 300000 women each year. The new suite to study adds further impetus to our efforts to expand production of Gardasil nine with the goal of producing enough.

Roger Perlmutter: The Phase I program for V-590 is proceeding in much the same fashion as that for V-591, albeit offset by several weeks. Here again, we are optimistic that the candidate vaccine will elicit durable immune responses to the SARS-CoV-2 spike protein following a single dose and that it will be safe and well tolerated. For both V590 and V591, we are developing facilities that will enable us to produce many millions of vaccine doses in the near term and hundreds of millions of doses should those be required in the longer term. Our expectation is that these vaccines will be made available in a format that permits global distribution with appropriate cold chain management, ideally, and refrigerated temperatures. Our prior experience in developing vaccines against many other viral diseases gives us some confidence that we will succeed in producing an effective agent for prophylaxis against COVID-19.

All of this vaccine and about 200 million doses per year summit permit girls and boys around the world to be successfully vaccinated.

Finally, I wish to express my gratitude to my colleagues throughout Merck and especially to those in the Merck research laboratories, with whom I have worked on and off since 1996.

It's been my privilege to join you and translating breakthrough research into medicines that improve and extend lives. Your success in developing new vaccines like Gardasil nine novel antibiotics, new antiviral drugs, new drugs that battled cancer drugs that improve outcomes in heart failure and others that offer hope for those suffering from.

Opponents diseases and chronic debilitating syndromes.

The success has not only improved an extended life that has inspired the world.

As I plan to assume an advisory role that Merck I'm confident the Dean Lee who will exceed succeed me as president is well prepared to lead and morale even greater achievements.

Roger Perlmutter: In this context, I would call your attention to new data from a study published in the New England Journal of Medicine at the beginning of October that made use of Swedish demographic and health registries that capture health data on the entire population of Sweden. The study included 1.67 million girls and women, 10 to 30 years of age, evaluated during the period 2006 to 2017.

We have orchestrated an orderly transition in leadership.

Hedging to ensure in the words of George W. merger.

That human life will earn still greater freedom from suffering and proceeds.

Ill now turn the call over to Peter.

Thank you Roger as Larry if you could assemble the queue for questions. Please and I'd like to ask the analysts today to limit themselves to one question, we're going to try to end right at nine because I know, there's other calls that you're looking to get on.

Roger Perlmutter: In that group, after adjustment for all covariates, there was an 88% reduction in the risk of cervical cancer as a result of immunization with Gardasil before the age of 17. These new data offer hope for the potential eradication of this disease, which, according to the World Health Organization, claims the lives of more than 300,000 women each year. The new Swedish study adds further impetus to our efforts to expand production of Gardasil 9 with the goal of producing enough of this vaccine, about 200 million doses per year, to permit girls and boys around the world to be successfully vaccinated. Finally, I wish to express my gratitude to my colleagues throughout Merck and especially to those in the Merck Research Laboratories, with whom I have worked on and off since 1996.

Okay.

Thank you Sam.

At this time I would like to remind everyone I wanted to ask a question. Please.

So then the number one on your telephone keypad.

Beginning because maybe you had your first question coming from the line of Steve Scala from Cowen. Your line is now like that will happen.

Oh, Thank you and it's tough to limit to one question, but all comply.

Ken Merck has profoundly transformed under your leadership in the wake of Dr. promoters retirement I wanted to note that I believe two years ago.

Can you agreed to stay on beyond 2019 may.

May I ask whether or not you will stay on as CEO of Merck beyond 2021 to see this.

Further transformation that the company is undertaking thank you.

Roger Perlmutter: It has been my privilege to join you in translating breakthrough research into medicines that improve and extend lives. Your success in developing new vaccines like Gardasil 9, novel antibiotics, new antivirals, New Drugs That Battle Cancer, Drugs That Improve Outcomes in Heart Failure, and Others That Offer Hope for Those Suffering from Metabolic Diseases and Chronic Debilitating Syndromes has not only improved and extended life but inspired the world. If I plan to assume an advisory role at Merck, I am confident that Dean Li, who will succeed me as president, is well prepared to lead MRL to even greater achievement. We have orchestrated an orderly transition in leadership, pledging to ensure, in the words of George W. Merck, that human life will enjoy still greater freedom from suffering and disease. I'll now turn the call over to Peter.

Thank you Steve.

The board will continue to evaluate the timing.

CEO succession right now there's no specified timeframe for CEO retirement, what I will say is that I am confident that we have internally strong candidates to take this job and I look forward to working with the board.

After we review our leadership in succession planning and to ensure that we have an orderly transfer when the board deems it appropriate.

Thank you Steve next.

Next question please.

Thank you.

Your next question will come from the line as David Risinger from Morgan Stanley. Your line is now lets go ahead. Please.

Yes, thanks very much.

So I wanted to say congratulations to you Roger and and thank you for all your contributions including transforming cancer treatment for patients.

Worldwide.

Peter Dannenbaum: Thank you, Roger. Lara, could you assemble the queue for questions, please? And I'd like to ask the analysts today to limit themselves to one question. We're going to try to end right at nine because I know there are other calls that you're looking to get on.

And your contributions will be will be missed.

So my question is with respect to the phase two oral anti viral data from rich back could you provide some more color on.

Operator: Thank you, sir. At this time, I would like to remind everyone, in order to ask a question, please press star then the number 1 on your telephone keypad. For the beginning of the Q&A, we have your first question coming from the line of Steve Scala from Kellen. Your line is now live.

How you expect that data to be communicated.

And.

You know what what you would focus us on thank you.

Thanks, very much David yes, the the phase two studies carried on in in the United States and the UK are relatively small studies that are focusing on neurological endpoints that is understanding.

Steve Scala: Go ahead. Oh, thank you. And it's tough to limit yourself to one question, but I'll comply.

Unknown Attendee: Merck has profoundly transformed under your leadership in the wake of Dr. Perlmutter's retirement. I wanted to note that I believed two years ago, Would you agree to stay on beyond 2019? May I ask whether or not you will stay on as CEO of Merck beyond 2021 to see this further transformation that the company is undertaking? Thank you. Thank you, Steve. The board will continue to evaluate the timing of CEO succession right now. There is no specified time frame for CEO retirement.

Reductions in viral load and reductions in bars infectivity from patient samples.

So these data I'm hopeful that that has the studies complete enrollment in their dose escalation studies.

That these studies will provide data over the next couple of months.

And as the once those data are looked at and there's enough data that has accrued.

Unknown Attendee: What I will say is that I am confident that we have internally strong candidates to take this job, and I look forward to working with the board to actively review our leadership and succession planning and to ensure that we have an orderly transfer when the board deems it appropriate. Thank you, Steve. Next question, please. Thank you. Your next question will come from the line of David Weisinger from Morgan Stanley. Your line is now live.

Then, presumably we would provide a topline.

Statement about those data.

But of course, the full scientific results will will be published shortly thereafter, we will certainly move expeditiously because of course, we know the world is very interested in this as we ourselves.

Thank you Dave next question please.

Your next question comes from the line of Tim Anderson from Wolfe Research. Your line is more likely to happen.

Thank you I have a question on Keytruda and add to that.

Operator: Go ahead. Yes, thanks very much. So I wanted to say congratulations to you, Roger, and thank you for all of your contributions, including transforming cancer treatment for patients worldwide. And your contributions will be missed.

Previously Astra announced a delay in the readout of their edge event lung trial because of your results.

Acetate event design adjust geopark positive patients on Tagrisso and.

And I'm guessing that's going to impact other companies edge event lung trials as well can you comment on the timing of senior first as long as you can read outs.

And more broadly imagine what's the timing of the next address readout for you. Thanks.

Roger Perlmutter: So my question is, with respect to the phase 2 oral antiviral data from Ridgeback, could you provide some more color on how you expect that data to be communicated and, you know, what you would focus us on? Thank you. Thanks very much, David. Yeah, the Phase II studies carried out in the United States and the UK are relatively small studies that are focusing on neurological endpoints, that is, understanding reductions in viral load and reductions in virus infectivity from patient samples. So these data, I'm hopeful that as the studies complete enrollment, and they are dose escalation studies, these studies will provide data over the next couple of months. And once those data are looked at, and there's enough data that have accrued, then presumably we would provide a top-line statement about those data. But of course, the full scientific results will be published shortly thereafter. We'll certainly move expeditiously because, of course, we know the world is very interested in this, as we are. Thank you, Dave.

Right so actually for you.

Oh, I'm sorry, yes.

Yes go ahead Roger please yeah. So so.

Our management studies in non small cell lung cancer are proceeding as planned we are not at the moment undertaking any reevaluation of those studies again, it's difficult to comment on it.

Exactly when the studies will read out because.

Course recruiting events.

But we are anticipating that.

First as an additive lung study will be available sometime later next year.

And that's our hope, but time will tell.

Thank you.

Next question please.

Your next question comes from the line of Chris Schott from JP Morgan Your line is more likely to happen.

Great. Thanks, very much and then Roger our best of luck with everything and congrats on all the success over the years.

My question was on card to sell in the U.S.. What do you think it's going to take to normalize results here I guess my question is do we need to wait until we get another back to school season for this to normalize or do you think that trends can start to get back to normal even in a hosted environment like we're operating today.

Roger Perlmutter: Next question, please. Your next question will come from the line of Tim Anderson from Wolf Research. Your line is now live, go ahead. I have a question on...

And I guess when things normalize should we think about there being some sort of catch up bullish for the patients who missed their vaccination. This year or is this going to go back to just kind of a.

Operator: Previously, Astra announced a delay in the readout of their adjuvant lung trial because of the Adora. More broadly in the adjuvant, what's the timing of the next one? Alright, so... Our adjuvant studies in non-small cell lung cancer are proceeding as planned. We are not, at the moment, undertaking any re-evaluation of those studies.

Kind of a normal cadence of what we've historically seen with with that vaccine. Thanks. So much.

Frank.

Hi, This is Frank with regards to Gardasil in the US I think I'll take the second part of your question first with regards to.

Roger Perlmutter: Again, it's difficult to comment on exactly when the studies will read out because, of course, we're accruing events. But we are anticipating that the first results from an adjuvant lung study will be available sometime later next year. And that's our hope, but time will tell.

The catch up.

Our hope is that we will see some catch up over time in particular, as we put more commercial efforts and making sure that the adolescent cohort in particular are well aware of the importance of getting vaccinated with gardasil. So.

So that is our plan with regards to.

Looking at the timing I think back to school as you head into 21 will be an important timeframe.

Roger Perlmutter: Thank you, Tim. Next question, please. Your next question will come from the line of Chris Schott from J.B. Morgan. Your line is now live. Go ahead. Great, thanks very much.

Just to give you some additional color or what's happening in the U.S. well visits were down in the adolescent cohort about 30%.

Operator: And Roger, best of luck with everything and congratulations on all the success over the years. My question was on Gardasil in the US. What do you think it's going to take to normalize results here? I guess my question is, do we need to wait until we get another back-to-school season for this to normalize?

Care to three year historical averages as Rob mentioned, we are seeing a more positive trend, although not what we expected.

So we'll have to see here over the next several quarters, how things evolve.

Frank Clyburn: Or do you think that trends can start to get back to normal even in a COVID environment like we're operating in today? And I guess when things normalize, should we think about there being some sort of catch-up bolus for the patients who missed their vaccination this year? Or is this going to go back to just kind of a normal cadence of what we've historically seen with that vaccine? Thanks so much. Frank.

But we're still very confident in gardasil growth in the us as well as globally.

To Roger's point.

The Sweden data is very important data, which I think reinforces the importance of that.

Chance to prevent cervical cancer for girls.

Girls and boys around the World. We also saw significant growth continue in China as well as Germany in many of our ex US markets. So I would say we're going to look over obviously the next couple of quarters, but our confidence in Gardasil, both mid and long term is still very strong.

Frank Clyburn: Yeah, hi, this is Frank. With regard to Gardasil in the US, I think I'll take the second part of your question first. With regard to the catch-up, our hope is that we will see some catch-up over time, in particular as we make more commercial efforts, making sure that the adolescent cohort, in particular, is well aware of the importance of getting vaccinated with Gardasil. So that is our plan. With regard to looking at the timing, I think going back to school as you head into 21 will be an important timeframe.

We still feel very strong about the overall demand prospects for the product.

Thank you.

Thank you quick next question please.

Next question will come from the line of Matt Goldstein from Mizuho Securities. Your line is open line for helping great. Thanks. So much for taking my question I just wanted to ask on the covert vaccine program. Maybe if you could just discuss that clinical program in the context of that pending readouts from our their vaccines and contingency plans.

Frank Clyburn: Just to give you some additional color of what's happening in the US, well, visits were down in the adolescent cohort by about 30% compared to three-year historical averages. So we'll have to see here over the next several quarters how things evolve, but we're still very confident in Gardasil growth in the U.S. as well as globally. To Roger's point, the Sweden data is very important data, which I think reinforces the importance of, you know, the chance to prevent cervical cancer for girls and boys around the world. We also saw significant growth continue in China as well as in Germany and many of our ex-U.S. markets.

To make sure that you're able to fully enroll those trials on a timely basis.

Right. Thanks now are they the.

The of course, it's very difficult to speculate on on what the results of other studies will be.

Like everyone elsewhere.

We're hopeful.

That there will be many vaccines that yield positive readouts.

In terms of reduction in morbidity and mortality associated with COVID-19 infection time will tell.

But in reality, we will be sitting at the end of the year with what we hope will be quite strong single dose.

Frank Clyburn: So I would say, you know, we're going to look over, obviously, the next couple of quarters, but our confidence in Gardasil, both mid and long term, is still very strong, and we still feel very strong about the overall demand prospects for the product. Thank you. Thank you, Chris.

Immunogenicity data and we have well.

Well designed phase two three protocols that we can begin at that point.

Those are global protocols, and my expectation and unfortunately, given the.

Very large impact of the pandemic my expectation is that it would not be difficult to enroll those studies in a relatively short period of time Justice has happened for the other studies that have been conducted using for example, the MRT vaccines or the additives.

Operator: Next question, please. Your next question will come from the line of Mara Goldstein from Mizzou Securities. Your line is now live.

Operator: Go ahead. Great. Thanks so much for taking the question. I just wanted to ask about the COVID vaccine program. Maybe if you could just discuss the clinical program in the context of the pending readouts from other vaccines and contingency plans to make sure that you're able to fully enroll those trials on a timely basis. Right. Thanks, Mara.

Novartis vaccines, so I'm not sure that there is anything there to respond to except that.

So we're eager to see the data just as everyone else's and we hope very much that there will be a efficacy and a good safety profile.

Thank you My next question please.

Your next question comes from the line as we move forward from Evercore. Your line is now right.

Roger Perlmutter: Of course, it's very difficult to speculate on what the results of other studies will be. Like everyone else, we're hopeful that there will be many vaccines that yield positive readouts in terms of reduction in morbidity and, ideally, mortality associated with COVID-19 infection. Time will tell.

Hi, Thanks, so much for taking my question Roger.

Roger I noticed for the cobot anti viral.

With a dedicated phase one phase two trial Val.

Evaluating viral clearance, however, I'm heading into the two phase threes were seeing online it doesn't look like viral clearance as a primary endpoint or even a secondary endpoint at least not on Clin trials and I also noticed you mentioned good safety so.

Roger Perlmutter: But in reality, you know, we'll be sitting at the end of the year with what we hope will be quite strong single-dose immunogenicity data, and we have well-designed Phase 2, 3, protocols that we can begin at that point. And those are global protocols.

Just wanted to understand are you expecting a viral clearance benefit and how do you see the efficacy look different or similar relative to what we've seen rem density so far.

Right. Thanks, very much for the question.

To be honest I am expecting to see.

Roger Perlmutter: And my expectation, unfortunately, given the very large impact of the pandemic, is that it would not be difficult to enroll those studies in a relatively short period of time, just as has happened for the other studies that have been conducted using, for example, the mRNA vaccines or the adenovirus vaccines. So I'm not sure that there's anything there to respond to except that, you know, we're eager to see the data just as everyone else is. And we hope very much that there will be efficacy and a good safety profile. Thank you, Mara.

Viral clearance improve and that's that's based on a whole variety of inputs and the fundamental mechanism of the drug.

I do think that in terms of reduction of viral burden that it is very likely that moment pure if there will be superior to rem density or based on preclinical studies.

Of course that has demonstrated in the clinic, but we will have quite a lot of phase two virologic data based on the respect studies, which of course were intimately involved with the dose escalation studies.

From a certain perspective have initio this.

This is a viral mediated disease, if you get rid of the virus you should get rid of the disease. The question is can you get in early enough and is the effect strong enough.

Operator: Next question, please. Your next question will come from the line of Umer Raffat from Abercore. Your line is now live.

The good news is that this is an orally administered drug it could in principle be given to individuals who leads our systematic or who have.

Umer Raffat: Go ahead. Hi Roger, I noticed for the COVID antiviral, there was a dedicated phase one, phase two trial evaluating viral clearance. However, heading into the two phase threes we're seeing online, it doesn't look like viral clearance is a primary endpoint or even a secondary endpoint, at least not in CLIN trials. And I also noticed you mentioned good safety.

Been in contact with viral infected people.

But in order to broaden the use we need to understand both pre clinically and clinically that the drug is safe to administer to people who are otherwise healthy and just at risk. So when we speak about safety, that's really what we're concerned about and and we're waiting for additional data from more subjects who have.

Roger Perlmutter: So just wanted to understand, are you expecting a viral clearance benefit, and how do you see the efficacy looking different or similar relative to what we've seen in remdesivir so far? Right, thanks very much for the question. To be honest, I am expecting to see viral clearance improve, and that's based on a whole variety of inputs and the fundamental mechanism of the drug. I do think that in terms of reduction of the viral burden, it is very likely that molnupiravir will be superior to remdesivir based on preclinical studies. Of course, that has to be demonstrated in the clinic, but we will have quite a lot of phase two virologic data based on the RISVAC studies, which of course we're intimately involved with, the dose escalation studies. From a certain perspective, ab initio, this is a virally mediated disease. If you get rid of the virus, you should get rid of the disease. The question is, can you get in early enough, and is the effect strong enough?

Have been treated with the drug is the drug is has been used it's in the five day regimen.

And across now several hundred people seems to be extremely well tolerated, we're not aware of any safety signals at all with the drug Leds a moment.

So, we'll just wait and see that the that's the important information that we need to have.

Thank you our next question please.

Your next question will come from the line of credit sales that's come to live Tim Ryan is more likely to happen.

Thank you and best of luck to Roger ending for Whats next I have a question on V. One one for sort of a maybe an R&D and marketing question.

Other than any timing advantage as you might have versus Pfizer, particularly on the pediatric side.

How do you envision having a meaningful share of this market overtime, if Pfizer successfully develops its 20 valent product investors tend to view this as a winner take all type of market.

I think you've made some comments to the contrary maybe you can put some more details on how that could be achieved thank you.

Roger Perlmutter: The good news is that this is an oral drug. It could, in principle, be given to individuals who either are symptomatic or who have been in contact with virally infected people. But in order to broaden its use, we need to understand, both preclinically and clinically, that the drug is safe to administer to people who are otherwise healthy and just at risk. When we speak about safety, that's really what we're concerned about, and we're waiting for additional data from more subjects who have been treated with the drug. The drug has been used. It's in a five-day regimen, and across now several hundred people, it seems to be extremely well tolerated. We're not aware of any safety signals at all with the drug right now, so we'll just wait and see.

Mike now so.

So thank you for the question when we look at the market the first and foremost.

Area that we're looking at it.

He is making sure that we actually confer protection across the 13 shared Ferrotype PCB 13, and I think what we've been able to demonstrate in the phase two results that you've seen in the pediatric population is that you see.

Robust immune response across those 13 shared serotypes.

And that's after dose three which I think is also an important factor because the.

Primary series completion is really an important time point.

When you think about what's next then it's about how do we add to that those 13 shared serotypes and for our program. We've been able to show robust immune response on 22 Sn 30 Threea.

As well as a really robust response on serotypes, three which is a key contributing factor to residual disease and so I think when we look at the real effort on be win win for its always been about making sure that we provide the relevant level of protection in the core serotypes, but then ask add other serotypes to it.

Roger Perlmutter: That's the important information that we need to have. Thank you, Umer. Next question, please. Your next question will come from the line of Greg Gilbert from Truist. Your line is now live. Go ahead, please.

Operator: Thank you. And best of luck to you, Roger and Dean, for what's next. I have a question on V114, sort of maybe an R&D and a marketing question. Other than any timing advantages you might have versus Pfizer, particularly on the pediatric side, how do you imagine having a meaningful share of this market over time if Pfizer successfully develops its 20-valent product? Investors tend to view this as a winner-take-all type of market.

I think the question on the first year of life will be an important one as well and we're looking forward to say more data from both our program as well as Pfizer's program.

Thanks, Greg next question please.

Your next question comes from the line of Levine take get some you'd want your line is now like.

Hi, Thanks for taking my question.

My congrats as well to Roger Roger wondering if you think it's feasible for a covert vaccine.

Unknown Attendee: I think you've made some comments to the contrary. Maybe you can give some more details on how that could be achieved. Thank you. Mike Mallon.

Specifically yours, but.

But also just generally to achieve.

Sterilizing immunity.

Obviously, the focus of the all most of the trials currently our is reduction in symptoms, but given the.

Mike Mallon: So thank you for the question. You know, when we look at the market, the first and foremost area that we're looking at is making sure that we actually confer protection across the 13 shared serotypes with PCV13. And I think what we've been able to demonstrate in the phase two results that you've seen in the pediatric population is that you see a robust immune response across those 13 shared serotypes, and that's after dose three, which I think is also an important factor because primary series completion is really an important time point. When you think about what's next, then it's about how we add to those 13 shared stereotypes.

Discussion around herd immunity.

And the importance of herd immunity.

For opening the economy hopefully back open.

What does that mean if.

Vaccines aren't able to achieve significant amount of reduction in infection.

Right. Okay. Thanks for the question.

I think first and foremost of course, what we want out of events is to prevent clinical disease.

I don't think any of us would care that much if people were infected but.

Mike Mallon: And for our program, we've been able to show a robust immune response on 22F and 33F, as well as a really robust response on serotype 3, which is a key contributing factor to residual disease. And so I think when we look at the real effort on V114, it's always been about making sure that we provide the relevant level of protection in the core serotypes, but then add other serotypes to it. I think the question on the first year of life will be an important one as well, and we're looking forward to seeing more data from both our program as well as Pfizer's program. Thanks, Greg. Next question, please. Your next question will come from the line of Naveen Jacob from UBS. Your line is now live; go ahead.

But.

Didnt develop any diseases, if we could guarantee that that would always be the case of course provided that enough people can be can be immunized, I think sterilizing immunity will be difficult.

Just in the nature of things.

In these respiratory infections. It is difficult to present any viral colonization that will be challenging.

But frankly, we are still in the in the early phases of understanding COVID-19, and Sars koby to the causative agent. So we really don't understand a lot about the viral dynamics here.

The state of the immune response in the natural infection setting.

Operator: Hi, thanks for taking the question. My congratulations as well to Roger. Roger, wondering if it's feasible for a COVID vaccine, specifically yours, but also just generally, to achieve sterilizing immunity. Obviously, the focus of most of the trials currently is on reduction in symptoms, but given the discussion around herd immunity and the importance of herd immunity for opening the economy fully back open, what does that mean if vaccines aren't able to achieve a significant amount of reduction in infection?

And the durability of that immunity either from.

Natural infection or what we hope will see after immunization. There is a lot yet that we need to study. It is clear that at least in rare circumstances individuals who have been infected and cleared the infection can be re infected.

In that you know should be a cautionary note for all of us.

Overtime that could evolve.

The fashion that that re administration of the vaccine is required in order to prevent.

Naveen Jacob: Right, okay, thanks for the question. I think, first and foremost, of course, what we want out of a vaccine is to prevent clinical disease. I don't think any of us would care that much if people were infected but didn't develop any disease if we could guarantee that that would always be the case, of course, provided that enough people could be immunized. I think sterilizing immunity will be difficult. Just in the nature of things. In these respiratory infections, it is difficult to prevent any viral colonization, which will be challenging.

Recruit essence of disease after exposure to two.

Or it may be the case that that we're.

We were able to control it with a single administration, which is of course, what we hope for I. Just think we don't have that information right now and and learned a great deal of the next few months since as additional data become available.

Back in to the next question please.

Your next question will come from the line of Jeff Chen from Bank of America. Your line is now likely to happen.

Roger Perlmutter: But, you know, frankly, we are still in the early phases of understanding COVID-19 and SARS-CoV-2, the causative agent, so we really don't understand a lot about the viral dynamics here, the state of the immune response in the natural infection setting, and the durability of that immunity, either from natural infection or what we hope we'll see after immunization. There's a lot yet that we still need to study. It is clear that, at least in rare circumstances, individuals who have been infected and cleared the infection can be reinfected, and that, you know, should be a cautionary note for all. Over time, this could evolve in a fashion that re-administration of a vaccine is required in order to prevent recrudescence of disease after exposure to the virus, or it may be the case that we're able to control it with a single administration, which is, of course, what we hope for.

Morning, guys. Thanks for the question Raj.

Roger Congrats on the retirement, it's been great working with you, but at Merck and your time at Amgen.

Question on on volume peer of Air just wanted to see if getting more details from the phase one such as common ease or sales.

And given that it's an oral it does seem ideally suited for newly infected but mild patients.

I want to get your perspective on that thank you.

Right, Jeff Thanks, very much.

Yeah, among the pure veer from that again small small number of.

Subjects, who have received the drug in phase one studies and now in phase two studies.

It seems to be extremely well tolerated in a five day course be I'd dose.

Doses that are well above what.

Roger Perlmutter: But I just think we don't have that information right now, and we'll learn a great deal over the next few months as additional data become available. Thank you, Naveen. Next question, please. Your next question will come from the line of Geoff Meacham from Bank of America. Your line is now live. Go ahead. Morning, guys.

We believe is required to suppress viral replication.

Or actually result in error catastrophe and essentially the elimination of the virus.

So.

All of that looks looks quite good as you say because it's an orally administered drug in principle.

Operator: Thanks for the question. Roger, congrats on the retirement. It's been great working with you both at Merck and in your time at Amgen. Question on MOL-UNU-PIR-VIR.

All of the things being equal.

It.

It could be administered even prophylactically in.

Individuals at high risk.

At the moment, we are waiting for additional data because I point out that the drug is aims positive and bacterium get to Genesis has sales and although the drug did.

Geoffrey Meacham: Just wanted to see if you had any more details from the Phase 1, such as Common AEs or SAEs. And given that it's an oral, it does seem ideally suited for newly infected but mild patients. Want to get your perspective on that.

Did not score in UK periodic.

Mike the nucleus essays.

And.

And there are other reasons to believe that that won't be a problem. Nevertheless, we're performing a whole variety of studies to explore immunogenicity.

Roger Perlmutter: Thank you. Right, Geoff, thanks very much. Yeah, molnupiravir from the again, small, small number of subjects who have received the drug in phase one studies and now in phase two studies seems to be extremely well tolerated at five-day course BID doses that are well above what we believe is required to suppress viral replication or actually result in error, catastrophe, and essentially, the elimination of the virus.

Assuming that those studies are negative and I think we could think much more broadly about prophylactic administration at the moment, we're thinking mainly about the place where dense at risk is clearly the strongest of medicine individuals who are infected, particularly symptomatic individuals' early in the course of disease, an ideal place for an orally administered.

Roger Perlmutter: So all of that looks, as you say, because it's an orally-administered drug, in principle, all of the things being equal, it could be administered even prophylactically in individuals at high risk. At the moment, we are waiting for additional data because I point out that the drug is positive in the bacterial mutagenesis assay, and although the drug did not score in eukaryotic micronuclear assays, and there are other reasons to believe that that won't be a problem, nevertheless, we're performing a whole variety of studies to explore mutagenicity. Assuming that those studies are negative, then I think we could think much more broadly about prophylactic administration. At the moment, we're thinking mainly about the place where benefit-risk is clearly the strongest, and that is in individuals who are infected, particularly symptomatic individuals early in the course of disease, an ideal place for an orally-administered drug to attenuate the effects of that infection. Thank you, Geoff. Next question, please. The next question will come from the line of Terence Flynn from Golden Sac. Your line is now active. Go ahead, please.

To attenuate the effects of that infection.

Thank you Jeff next question please.

Your next question comes from the line of Kevin Flynn from Goldman Sachs. Your line is now likely to help.

Hi, Thanks for taking the question and best of luck Roger.

Thank you for everything you've done for the field.

You guys are advancing a co formulation of Keytruda and your CTO a four into phase three for lung cancer. Just wondering how broad your co formulation strategy is and if it's also possible you could co formulate keytruda with your anti TIGIT. Thanks.

Right well the the.

The reality is we've been working on checkpoint inhibitors for a long time now as have many others.

And.

Keytruda in particular, but PD one directed therapies more generally have very dramatic effects that are easy to see.

We hope to find something that would be even better than keytruda, but but.

Neither we nor anyone else has found such a thing.

We are pleased that our agents have.

Operator: Hi. Thanks for taking the question, and best of luck, Roger. Thank you for everything you've done for the field. You guys are advancing a co-formulation of Keytruda and your CTLA-4 into Phase III for lung cancer. Just wondering how broad your co-formulation strategy is, and if it's also possible you could co-formulate Keytruda with your anti-TIGIT. Thanks.

Activity when administered by themselves, but the activity is modest its not keytruda like activity and where we see the greatest effect is in combination with keytruda. So it makes sense that these things should be administered with Keytruda. That's that's the place where you're going to see the biggest benefit and were co formulation as possible that's kind of the.

Terence Flynn: Right. Well, the reality is we've been working on checkpoint inhibitors for a long time now, as have many others. And Keytruda in particular, but PD-1 directed therapies more generally, have very dramatic effects that are easy to see. We hope to find something that would be even better than Keytruda, but neither we nor anyone else has found such a thing yet. We are pleased that our agents have activity when administered by themselves, but the activity is modest.

That's what we would do because then was a single administration get get both drugs, assuming that you don't add a substantial safety Bert so.

So we've conducted our studies and looking at those kinds of questions clearly for.

For a detailed list for directed therapy. The the that makes a lot of sense, but it makes a lot of sense for for all of the agents that were looking at and.

We are looking both at the physical compatibility for co formulation and as well what does that make sense from a clinical perspective, where it does it's kind of the right thing to do for patients.

Roger Perlmutter: It's not a Keytruda-like activity, and where we see the greatest effect is in combination with Keytruda. So it makes sense that these things should be administered with Keytruda. That's the place where you're going to see the biggest benefit, and where co-formulation is possible, that's kind of the ideal. That's what we would do, because then, with a single administration, you get both drugs, assuming that you don't add a substantial safety burden.

Great. Thank you Sarah next question please.

Your next question will come from the line of seeing this spring mandates from Guggenheim Securities. Your line is now like very helpful.

Oh, thanks, very much and Roger Best of luck and it's been great working with you over the last many years.

Roger Perlmutter: So we've conducted our studies looking at those kinds of questions. For our CTLA-4-directed therapy, that makes a lot of sense, but it makes a lot of sense for all of the agents that we're looking at, and we are looking both at the physical compatibility for co-formulation and, as well, whether that makes sense from a clinical perspective. Where it does, it's kind of the right thing to do for PACE.

I wanted to ask a commercial question.

We're starting to see a lot of promotional efforts by other pharmaceutical companies to kind of drive.

Return to growth and a return to physicians offices.

As it relates to primary care business and.

Operator: Great. Thank you, Terence. Next question, please. Your next question will come from the line of Seamus Fernandez from Guggenheim Security. If your line is now live, go ahead. Oh, thanks very much.

Obviously impacting.

Agnosticism disease I'm, just wondering what Merck is doing on the commercial side.

Believed is necessary.

To really kind of get us back on the right track in in 2021.

Seamus Fernandez: And Roger, best of luck. And it's been great working with you over the last few years. You know, I wanted to ask you a commercial question.

How much of that are you seeing in your business and what are you doing to drive growth and 21.

Frank Clyburn: You know, we're starting to see a lot of promotional efforts by other pharmaceutical companies to kind of drive a return to growth and a return to physicians' offices, as it relates to primary care visits and obviously impacting diabetes and the diagnosis of disease. I'm just wondering what Merck is doing on the commercial side and believes is necessary to really kind of get us back on the right track in 2021. How much of that are you seeing in your business? And what are you doing to drive growth in 2021? Yeah, hi Seamus, this is Frank.

Yes, Hi, Seamus this is Frank.

I think it's really important and we're putting a lot of efforts as you can imagine a lot of those.

Activities right now are still virtually being done, especially in certain markets around the world, but if you look at what we're doing it in particular in the vaccine area. I think you maybe you have seen some of our non branded commercial activities to raise awareness about the importance of HPV vaccination.

Frank Clyburn: I think it's really important and we're putting a lot of effort into, as you can imagine, a lot of those activities right now are still virtually being done, especially in certain markets around the world. But if you look at what we're doing in particular in the vaccine area, I think you may have seen some of our non-branded commercial activities to raise awareness about the importance of HPV vaccination. You can see that we are continuing to put a lot of effort behind Katrina, with healthcare professionals as well as with our consumer campaigns and activities. And we are also in many markets around the world, continuing to engage in educational programs to make sure that physicians are well aware of a lot of the new data that you heard Roger speak about here this morning.

You can see that we are continuing to put a lot of effort behind could truda.

With health care professionals, as well as with our consumer campaigns and activities and we also are in many markets around the world continue to engage in educational programs to make sure that physicians are well aware of a lot of the new data that you heard Roger speak about here.

This morning so.

We have significant efforts around the world and that's why we're confident in our overall growth profile.

As we look towards not only on the rest of this year as we head into 2021.

Thank you Seamus so thank you all for limiting yourself to one question is great questions I would like to turn it over to Kent for closing comments that Peter as you've heard we remain extremely confident in our strategy and we're highly motivated by the opportunities before us we believe our ongoing scientific leadership promising pipeline upcoming launches and track record of solid commercial execute.

Frank Clyburn: So we have significant efforts around the world, and that's why we're confident in our overall growth profile as we look towards not only the rest of this year but also 2021. Thank you, Seamus, and thank you all for limiting yourselves to one question. Great questions. I'd like to turn it over to Ken for closing comments. Thanks Peter, as you've heard, we remain extremely confident in our strategy, and we're highly motivated by the opportunities before us. We believe our ongoing scientific leadership, promising pipeline, upcoming launches, and track record of solid commercial execution will drive long-term growth. We remain committed to bringing Merck's mission to life by sharpening our focus on R&D and being at the forefront of life-saving research that will be essential to solving this pandemic as well as other health care challenges.

And we will drive long term growth, we remain committed to bringing Merck mission to life by sharpening our focus on R&D and being at the forefront of lifesaving was so that will be essential to solving for the endemic as well as other healthcare challenges. So thank you for joining us today I hope that you and your family stay safe and healthy.

Thank you for much business and again. Thank you everyone for participating. This concludes today's conference you may now disconnect the sales level. Thanks.

[music].

Unknown Attendee: So, thank you for joining us today. I hope that you and your family stay safe and healthy. Thank you so much, presenters. And again, thank you, everyone, for participating. This concludes today's conference. You may now disconnect. Stay safe and have a lovely day. BF-WATCH TV 2021