Q4 2020 Merck & Co Inc Earnings Call

Yeah.

Good morning, My name is Laura and that'll be a conference operator today, but that's the line I would like to welcome everyone did and break and tell you for sales and earnings conference call.

Lara: Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to the Merck & Co. Q4 sales and earnings conference call. All lines have been placed on mute to prevent any background noise.

All lines have been placed on mute to prevent any background noise and.

Lara: 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.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question Jay and this time simply press star and the number one and your telephone keypad to make by your question press. The pound key thank you and I would now like to turn the call over to Peter Gannon Baum, Vice President Investor Relations Sir please.

Peter Dannenbaum: Thank you. I would now like to turn the call over to Peter Dannenbaum, Vice President, Investor Relations. Sir, please go ahead.

Peter Dannenbaum: Thank you, Lara. And good morning. Welcome to Merck's fourth quarter 2020 conference call. Today, I'm joined by Ken Frazier, our Chairman and Chief Executive Officer, Rob Davis, our Chief Financial Officer, Dr. Dean Lee, President of Merck Research Labs, Frank Clyburn, our Chief Commercial Officer, and Mike Nally, our Chief Marketing Officer. Before we get started, I'd like to point out a few items. 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.

Go ahead.

Thank you Laura and good morning, welcome to Merck's fourth quarter 2020 conference call today, I'm joined by Ken Frazier, Our Chairman and Chief Executive Officer, Rob Davis, Our Chief Financial Officer, Dr. Dean Lee President of Merck Research Labs, Frank Library, and our Chief commercial Officer, and Mike Nally, Our Chief Marketing Officer.

Before we get started I'd like to point out a few items you will see that we have items and 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 and provide a reconciliation in our press release we.

We've also provided a table in our press release to help you understand the sales and the quarter from the business units and products and the supplemental financials posted to our website include recast 2020 quarters based on the reporting change we are announcing today.

Peter Dannenbaum: We have also provided a table in our press release to help you understand the sales in the quarter from the business units and products, and the supplemental financials posted to our website include recast 2020 quarters based on the reporting change we are announcing today. 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 Security Litigation Reform Act of 1995

I'd also like to remind you that some of the statements that we make during today's call maybe considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1095, such statements are made based on the current beliefs and Merck's management and are subject to significant risks and uncertainties.

Peter Dannenbaum: Such statements are made based on the current beliefs of Merck's management and are subject to significant risk and uncertainty. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statement. Our SEC filings, including Item 1A and 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.

Our underlying assumptions prove inaccurate or uncertainties materialize actual results may differ materially from those set forth and the forward looking statements.

Our SEC filings, including item, one and 2019 10-K identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected and any of our forward looking statements made this morning, Merck undertakes no obligation to publicly update any forward looking statements are SEC filings today's earnings release, and and Investor presentation with highlights of our <unk>.

Peter Dannenbaum: Merck undertakes no obligation to publicly update any forward-looking statements. 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 Kevin.

<unk> are all posted on Merck Dot com.

That I would like to turn the call over to Ken.

Thank you Peter.

Kevin: Thank you, Peter. Good morning and thank you all for joining today's call. Before turning to our financial results and our future perspective, I'd like to make a few comments about this morning's others.

Good morning, and thank you all for joining today's call.

Before turning to our financial results and our future perspective.

I'd like to make a few comments about this mornings other announcement.

And it's been a distinct honor and privilege to serve this great company as its CEO over the past decade.

Unknown Attendee: It has been a distinct honor and privilege to serve this great company as its CEO over the past decade. I thank all of my Merck colleagues for their extraordinary support throughout this period. We are making this leadership change secure in the knowledge that Merck has the elements in place for a Strong Future of Scientific Innovation and Profitable Growth.

I. Thank all of my Merck colleagues for their extraordinary support throughout this period.

We are making this leadership change the cure and the knowledge that Merck has the elements in place force.

And for a strong future of scientific innovation and profitable growth.

Rob Davis is well prepared.

Unknown Attendee: Rob Davis is well prepared and well suited to help Merck capitalize on the many exciting opportunities before it, as well as to take on the challenges that lie ahead. He and the Merck senior team will provide outstanding leadership for our company in the coming years. Given Merck's current position of strength, the Merck board and I believe it is a good time to begin transitioning the company's day-to-day decision-making as well as its strategic direction to Rob, who will assume the title of president in April, at which point our operating divisions, human health, animal health, manufacturing, and research, will begin reporting to him. I will retire as CEO at the end of June but remain for some period of time as Executive Chairman to assist Rob, Dean, and the rest of the senior team.

And well suited to help capitalize on the learning and exciting opportunities before it.

As well as to take on the challenges that lie ahead.

He and the Merck senior team will provide outstanding leadership for our company and the coming years.

Given <unk> current position of strength.

<unk> Board and I believe it is a good time to begin transitioning the company's day to day decision, making as well as the strategic direction to Rob who will assume the title of President and April.

Which point, our operating divisions human health animal health manufacturing and research and we'll begin reporting to him.

I will retire as CEO at the end of June.

And for some period of time as executive Chairman to assist Rob Dean and the rest of the senior team.

I am extremely confident and the capabilities and commitment of Merck people.

Unknown Attendee: I am extremely confident in the capabilities and commitment of Merck's people and Rob's ability to guide the company to an even brighter future. Moving on, to our results. Despite challenges from the pandemic, Merck achieved solid growth in revenues and earnings in 2020, made meaningful advancements in our pipeline, and added important assets through business development. Despite the particular impact on our portfolio, the underlying demand for our innovative medicines and vaccines remains strong. And our initial guidance reflects our expectation for a return to strong growth this year, 2021. Looking out to 2024, we continue to believe our revenue potential is underappreciated.

And Rob the ability to guide the company to an even brighter future.

Moving on to our results.

The challenges from the pandemic Merck achieved solid growth and revenues and earnings and 2020 may.

It made meaningful advancements in our pipeline and.

Added important assets through business development.

Despite the particular impact to our portfolio the underlying demand for our innovative medicines and vaccines remain strong and.

And our initial guidance reflects our expectation for a return to strong growth this year 2021.

Moving out to 2024, we continue to believe our revenue potential is under appreciated.

Longer term the work, we are doing and advancing our internal pipeline and and adding assets through business development gives us increasing line of sight to significant potential growth drivers later this decade and into the next.

Unknown Attendee: Longer term, the work we are doing in advancing our internal pipeline and in adding assets through business development gives us increasing line of sight to significant potential growth drivers later this decade and into the next. I'm amazed by the dedication of our employees who have rallied to keep supply uninterrupted, regulatory filings on track, and clinical and commercial execution in line with our goals. And I remain continually inspired by what Merck accomplishes for patients around the world.

I am amazed by the dedication of our employees, who rally to keep supply other interrupted.

<unk> filing is on track and clinical and commercial execution in line with our goals and.

And I remain continually inspired by what Merck accomplishes for patients around the world.

Im also encouraged by the progress scientific experts across the biopharmaceutical industry have achieved and bringing vaccines to market that will help address the pandemic and start to return the world and normalcy.

Unknown Attendee: I'm also encouraged by the progress scientific experts across the biopharmaceutical industry have achieved in bringing vaccines to markets that will help address the pandemic and start to return the world to normal. These successes further underscore the societal value of our industry's ongoing investments in science and innovation. Merck remains committed to developing an effective response to COVID-19. We have discontinued development of our COVID-19 vaccine candidates, but our therapeutic research programs continue to move forward.

These successes further underscore the societal value of our industry's ongoing investment and science and innovation.

Merck remains committed to developing and effective response to COVID-19 also.

We have discontinued development of a COVID-19 vaccine candidate.

Therapeutic research programs continue to move forward.

We believe that our oral anti viral candidate mom and peer or there could make an important contribution to treating COVID-19 patients and we look forward to seeing the results of our pivotal trials.

Unknown Attendee: We believe that our oral antiviral candidate, Momu Pirovir, could make an important contribution to treating COVID-19 patients, and we look forward to seeing the results of our pivotal trial. Furthermore, more recently, we acquired Oncoimmune and have accelerated the development of MK7110, a Phase 3 candidate with strong potential for the treatment of severe and critical COVID-19 patients.

More recently, we acquired Oncall immune and has accelerated the development of MK 711.

Phase III candidate with strong potential and the treatment of severe and critical COVID-19 patients.

I am encouraged by the innovative research happening in our labs, not just from the Covid front, but across our broad late stage pipeline of promising medicines, and vaccines, including and oncology HIV and pneumococcal disease.

Unknown Attendee: I am encouraged by the innovative research happening in our labs, not just on the COVID front, but across our broad, late-stage pipeline of promising medicines and vaccines, including in oncology, HIV, and pneumococcal disease. We remain highly focused on business development to enhance our internal pipeline. We completed 120 transactions in total in 2020, including important acquisitions such as OncoImmune, Velos Bio, and RQL, and collaborations including CGen and Ridgeback. Our plan to spin off Organon remains on track for completion late in the second quarter.

We remain highly focused on business development to enhance our internal pipeline.

We completed 120 transactions in total and 2020, including important acquisitions, such as autoimmune <unk> bio and <unk> and collaborations, including CE, Gen and which that.

Our plan and spinoff Organon remains on track for completion late in the second quarter.

As independent more focused company and <unk>.

Unknown Attendee: As independent, more focused companies, I'm confident Merck and Organon will have the ability to more effectively pursue their respective market opportunities and business strategies to bring more value to patients and shareholders. Let me conclude by expressing my confidence in the leaders of this company and how proud I am of the Merck team's success in advancing our pipeline and maintaining business continuity in a challenging environment. Additionally, I'd like to recognize and thank the frontline healthcare workers, scientists, and government officials working together to bring the world back to normal. And with that, I'll pass it on to my colleague, Rob, to review the details of our performance and our outcome. Thanks, Ken, and good morning, everyone.

<unk>, Merck and Oregon on will have the ability to more effectively pursue their respective market opportunities of different strategies to bring more value to patients and to shareholders.

Let me conclude by expressing my confidence and the leaders of this company and how proud I am of the Merck team success, and advancing our pipeline and maintaining business continuity and a challenging environment.

Additionally, I'd like to recognize and thank the frontline health care worker scientists and government officials working together to bring the world back and normalcy.

And with that I'll pass it on to my colleague Rob to review the details of our performance and our outlook.

Thanks, Ken and good morning, everyone.

I'm honored and humbled to be named as Merck next Chief Executive Officer.

Rob Davis: I'm honored and humbled to be named Merck's next Chief Executive Officer. I look forward to continuing the important work we do to bring our medicines and vaccines to the people who need them. Under my leadership, Merck will remain focused on scientific innovation as the source of sustained long-term value for both patients and shareholders. Chen's unrelenting commitment to excellence in scientific innovation, with patient care at the center of everything we do, permeates the culture of the company and its employees.

And look forward to continuing the important work, we do to bring our medicines and vaccines to the people who need them and.

Under my leadership, Merck will remain focused on scientific innovation as the source of sustained long term value for both patients and shareholders.

Jim's unrelenting commitment to excellence and scientific innovation with patients at the center of everything we do permeates the culture of the company and its employees.

Under Ken's leadership, Merck has achieved improved gross.

Rob Davis: Under Ken's leadership, Merck has achieved improved growth and clinical success, most notably with Katrina, and a revitalized pipeline and discovery research capability that will benefit both the company and the patients we serve for many years to come. Ken has put us in a position of financial and operational strength from which we will be able to pursue our important mission to save and sustain lives through ongoing scientific innovation. The company has benefited from Ken's leadership. I personally and professionally benefited from his mentorship and guidance and want to thank him for that.

Clinical success, most notably with Keytruda and a revitalized pipeline and discovery research capability.

Benefit both the company and the patients we serve for many years to come.

Jim has put us in a position of financial and operational strength from which we will be able to pursue our important mission to save and sustain lives through ongoing scientific innovation.

While the company has benefited from Ken's leadership.

Personally and professionally benefited from his mentorship and guidance and want to thank them for them.

The issues won't be easy to fill and so many ways both within Merck, but also including as many principled and valuable contributions to important issues facing society today.

Rob Davis: His shoes won't be easy to fill in so many ways, both within Merck but also in his many principled and valuable contributions to important issues facing society today. The talent and commitment of Merck's employees worldwide, however, make me extremely confident that we will achieve continued success through this transition and long into the future as we build on Ken's legacy. Now, turning to the business. Our resilience in a year that brought us countless challenges amidst the global pandemic is a true testament to the talent, hard work, and dedication of Merck employees worldwide.

And the talent and commitment and Merck's employees worldwide. However makes me extremely confident that we will achieve continued success through this transition and long into the future as we build on Ken's legacy.

Now turning to the business.

Our resilience and a year that brought us countless challenges amidst the global pandemic.

A true Testament to the talent and hard work and dedication and Merck employees worldwide.

Our performance in this environment reinforces the confidence we have and our science led strategy and and our potential for strong growth in 2021 and beyond.

Rob Davis: Our performance in this environment reinforces the confidence we have in our science-led strategy and in our potential for strong growth in 2021 and beyond. Underlying demand for our key growth pillars allowed our business to deliver 2% growth year over year, or 4% excluding the impact of exchange, while absorbing approximately $2.5 billion of negative pandemic impact on revenue. Were it not for the pandemic impacts, we estimate growth for the year would have been approximately 9% x exchange rate.

Underlying demand for our key growth pillars allowed our business to deliver 2% growth year over year or 4%, excluding the impact of exchange, while absorbing approximately $2 $5 billion of noted a pandemic impact to revenues.

We're not from the pandemic impacts we estimate growth for the year would've been approximately 9% ex exchange.

Now turning to our fourth quarter results.

Rob Davis: Now turning to our fourth quarter results. Total company revenues were $12.5 billion, an increase of 5% year-over-year, both nominally and excluding the impact of foreign currency. However, fourth quarter results were negatively impacted by approximately $400 million due to the pandemic.

Total company revenues were $12 5 billion and increase of 5% year over year, both nominally and excluding the impact of foreign currency.

Fourth quarter results were negatively impacted by approximately $400 million due to the pandemic. Excluding this impact fourth quarter revenues would have grown by approximately 9% ex exchange.

Rob Davis: Excluding this impact, fourth quarter revenues would have grown by approximately 9% x exchange. The remainder of my comments will be on an ex-exchange basis. Our human health revenues increased 6%, and oncology revenues, Katrina Sales, in the quarter grew 27% to $4 billion and for the year by 30% to $14 billion. In the U.S., Keytruda continues to maintain its leadership position in lung cancer and is benefiting from strong usage across all key tumor types.

Remainder of my comments will be on an ex exchange basis.

Our human health revenues increased 6% and.

And oncology Keytruda sales and the quarter grew 27% to $4 billion.

And for the year by 30% to $14 billion.

And the U S. Keytruda continues to maintain its leadership position and lung cancer and is benefiting from strong usage across all key tumor types.

We continued to see strong growth outside of lung cancer, including and renal and endometrial carcinomas and further uptake and our Q six weekly dosing regimen.

Rob Davis: We continue to see strong growth outside of lung cancer, including in renal and endometrial carcinomas, and further uptake in our Q6 weekly dosing regimen. However, outside the U.S., protruded growth continues to be driven by lung cancer indications. Uptake from Keynote 189 and newly imbued markets for Keynote 407 remain the key growth drivers in the EU. In Japan, price adjustments in the first half of the year more than offset underlying volume growth.

Outside the U S. Keytruda growth continues to be driven by lung cancer indications uptake from keynote 189, and newly and Bruce markets for keynote 407 remain the key growth drivers in the EU and.

And Japan price adjustments and the first half of the year more than offset underlying volume growth.

And parser inland bema and continue to demonstrate strong growth and are meaningful contributors to our broader oncology portfolio growing 50, 53% and 26% respectively year over year.

Rob Davis: LIMPARSA and LENVIMA continue to demonstrate strong growth and are meaningful contributors to our broader oncology portfolio, growing 53% and 26%, respectively, year over year. However, our vaccine portfolio continues to be impacted by below-normal wellness visits, particularly in the United States. Starter sales grew year-over-year, mostly reflecting the impact of the $120 million CDC stockpile replenishment in the quarter and the initial $120 million borrowing in the fourth quarter of 2019, which had a combined positive impact of $240 million year-over-year. Our hospital performance showed continued improvement in the fourth quarter. Sales grew 13% year-over-year, driven by continued market share gains, offset in part by lower elective surgery procedures.

And our vaccines portfolio continues to be impacted by the low normal wellness visits, particularly in the United States.

<unk> sales grew year over year, mostly reflecting the impact from the $120 million CDC stockpile replenishment and the quarter and the initial $120 million borrowing and the fourth quarter of 2019, which had a combined positive impact of $240 million year over year.

Our hospital performance showed continued improvement and the fourth quarter.

Net sales grew 13% year over year, driven by continued market share gains offset in part by lower elective surgery procedures.

Our animal health business again delivered a strong quarter with sales of $1 2 billion and 6% growth.

Rob Davis: Our animal health business again delivered a strong quarter with sales of $1.2 billion and 6% growth. Companion Animal Health grew 9%, reflecting demand for companion animal vaccines and parasiticides. Livestock grew 4%, primarily reflecting an extra month of sales from the acquisition of Antelic, partially offset by distributor purchasing patterns. Turning to the rest of our P&L, my comments will be on a non-GAP basis. Gross margin was 73% in the quarter, an increase of 0.4 percentage points, driven by favorable product mix and manufacturing variance, although partially offset by higher inventory write-offs due to a recall of Zerbaxa, pricing pressure, and foreign exchange. Operating expenses grew 4% year over year to $5.4 billion.

Companion animal grew 9%, reflecting demand for companion animal vaccines and parasiticide.

<unk> grew 4%, primarily reflecting an extra month of sales from the acquisition of <unk>, partially offset by distributor purchasing patterns.

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

Gross margin was 73% and the quarter and increase of <unk> four percentage points, driven by favorable product mix and manufacturing variances, partially offset by higher inventory write offs due to a recall or baxter pricing pressure and foreign exchange.

Operating expenses grew 4% year over year to $5 4 billion.

Covid had a largely neutral impact as operating savings were offset by incremental spend and advance our COVID-19 research programs.

Operating expenses and the quarter reflect overall growth and R&D spending as well as a donation to the Merck Foundation.

Other income increased year over year, driven by income from equity Securities.

Rob Davis: COVID had a largely neutral impact as operating savings were offset by incremental spend to advance our COVID-19 research program. Operating expenses in the quarter reflect overall growth in R&D spending, as well as a donation to the Merck Foundation. Other income increased year-over-year driven by income from equity security. The effective tax rate for the quarter was 15.3%, a decrease of 1.6 percentage points from a year ago due to favorable earnings models.

The effective tax rate for the quarter was 15, 3% a decrease of one six percentage points from a year ago due to favorable earnings mix.

Taken together, we earned $1 32 per share and increase of 17%.

Now before detailing our 2021 outlook I want to highlight that our press release details reporting changes, we will be implementing beginning in the first quarter sort of reflected and our guidance ranges.

These changes result in a better alignment between our non-GAAP results and the underlying operational performance of our company and improve unpredictable quarter to quarter volatility.

Rob Davis: Now, before detailing our 2021 outlook, I want to highlight that our press release details reporting changes we will be implementing beginning in the first quarter that are reflected in our guidance range. These changes result in a better alignment between our non-GAAP results and the underlying operational performance of our company and improve unpredictable quarter-to-quarter volatility. All these changes will have an impact on our non-GAAP results going forward. However, there is no impact on cash flow.

While these changes will have an impact on our non-GAAP results going forward there is no impact to cash flow.

Turning to 2021 guidance.

And for Merck, we expect revenues of $51 8 billion to.

And to $53 8 billion.

Which represents growth of 8% to 12% versus 2020 and excludes any potential revenue from our Covid therapeutics.

This range assumes a positive impact from foreign exchange of roughly two percentage points using mid January rates.

We assumed full year pandemic impacts to be approximately 2% or roughly $1 billion largely in the first half of the year.

Our gross margin will be roughly 77%.

Including a benefit of one eight percentage points due to the reporting change.

We expect operating expenses to grow at a high single digit to low double digit rate.

Rob Davis: Turning to 2021 guidance. For Merck, we expect revenues of $51.8 billion to $53.8 billion, which represents growth of 8% to 12% versus 2020 and excludes any potential revenue from our COVID therapeutics. This range assumes a positive impact from foreign exchange of roughly 2 percentage points using mid-January rates.

Normalized for the impact of Covid operating expenses would be expected to grow closer to mid single digits.

We expect other expense of $400 million and our other income and expense line driven largely by net interest expense.

Under our prior reporting we would have guided to and expected $400 million of income, resulting in an $800 million unfavorable swing.

This difference is driven by an expected gain on the announced sales prevent us mark to market gains and our fund holdings, which include our indirect investment and <unk> and other expected investment gains that will now be excluded from non-GAAP.

Rob Davis: We assume full-year pandemic impacts of approximately 2% or roughly $1 billion, largely in the first half of the year. Our gross margin will be roughly 77%. Including a benefit of 1.8 percentage points due to the reporting, we expect operating expenses to grow at a high single digit to low double digit rate. Normalized for the impact of COVID, operating expenses would be expected to grow closer to mid-single-digit. We expect other expenses of $400 million in our other income and expense line, driven largely by net interest expense.

We expect our full year tax rate to be between 15 and 16%.

We anticipate $2 $5 3 billion shares outstanding taken together, we expect our non-GAAP EPS to be between $6 48 to.

And to $6 68.

Which reflects growth of 12% to 15% versus 2020 recast EPS.

Thanks.

This range includes a positive impact from foreign exchange of roughly three percentage points.

Our EPS growth under the new reporting convention benefits from the removal of the disproportionate mark to market equity gains we recorded in 2020.

Rob Davis: Under our prior reporting, we would have guided to an expected $400 million of income, resulting in an $800 million unfavorable swing. This difference is driven by an expected gain on the announced sale of Preventus, mark-to-market gains on our fund holdings, which include our indirect investment in Moderna, and other expected investment gains that will now be excluded from non-GAAP. We expect our full-year tax rate to be between 15 and 16 percent

Importantly, however, under either reporting method, we expect strong operating margin leverage of one percentage point or more and 2021.

The benefit to our 2021 EPS guidance is only eight under new reported versus previous reporting.

We will continue to monitor the ongoing impact of the pandemic on wellness visits and delayed procedures as we move into and through 2021, we remain confident and our ability to grow both in the near and long term driven by our portfolio of de risked and innovative assets.

Now turning to organon.

And we're on track to complete the spinoff of organ on which we expect will take place and the second quarter I should say late in the second quarter.

Rob Davis: We anticipate 2.53 billion shares outstanding. Taken together, we expect our non-GAAP EPS to be between $6.48 and $6.68, which reflects growth of 12 to 15% versus 2020 recast EPS. This range includes a positive impact from foreign exchange of roughly 3%. Additionally, our EPS growth under the new reporting convention benefits from the removal of the disproportionate mark-to-market equity gains we recorded in 2020. Importantly, however, under either reporting method, we expect strong operating margin leverage of one percentage point or more in 2021.

And the strategic merits of this transaction are even more clear as we sit here today.

And 2020, we have the products we will.

Spinoff as part of the Organon achieved revenues of $6 5 billion.

The high level metrics for Oregon on that we provided a year ago remain largely unchanged.

We expect Oregon onto achieve 2021 revenues of $6 billion to $6 5 billion.

Although this base and as the negative impact of the loss of exclusivity on key brands diminishes we.

And we expect organon to achieve longer term revenue growth and the low to mid single digits.

As a Standalone company post spin we continue to expect organized operating margins to be in the mid 30% range and to increase over time.

This compares to a non-GAAP operating our operating margin of approximately 45% within Merck.

Rob Davis: The benefit to our 2021 EPS guidance is only $0.08 under new reporting versus previous reporting. We will continue to monitor the ongoing impact of the pandemic on wellness visits and delayed procedures as we move into and through 2021. We remain confident in our ability to grow both in the near and long term, driven by our portfolio of de-risked and innovative assets. Now, turning to Organo.

What's the difference, reflecting additional costs organon will incur to operate as an independent company.

EBITDA margins are now expected to be and the high 30% range initially and are expected to grow over time.

This is a slight decrease from our prior guidance due to a lower proportion of capital assets transferred to Oregon on versus our initial expectations.

We expect Oregon on tab initial debt of 9% to $9 5 billion.

Rob Davis: We are on track to complete the spinoff of Organon, which we expect will take place in the second quarter, or I should say late in the second quarter. The strategic merits of this transaction are even more clear as we sit here today. In 2020, the products we will spin off as part of Organon will achieve revenues of $6.5 billion. The high-level metrics for Organon that we provided a year ago remain largely unchanged.

Merck expects to receive a special tax free dividend of eight $5 billion to $9 billion.

Higher to the spin.

We continue to expect organon to pay a meaningful dividend that will be entirely incremental to that of Merck.

The spinoff of organ on and is expected to enable incremental operating efficiencies.

Proximately $1 $5 billion.

Over three years, including approximately $500 million in 2021, which is included in our guidance.

We now expect to deliver operating margins of greater than 42% and 2024 and increase of two percentage points versus our prior expectation of greater than 40% as a result of the impact of the reporting change.

Rob Davis: We expect Organon to achieve 2021 revenues of $6 billion to $6.5 billion, off of this base, and as the negative impact of the loss of exclusivity on key brands diminishes. We expect Organon to achieve longer-term revenue growth in the low to mid-single-digits. As a standalone company post-spin, we continue to expect Organon's operating margins to be in the mid-30% range and to increase over time. This compares to a non-GAAP operating margin of approximately 45% within Merck, with a difference reflecting additional costs Organon will incur to operate as an independent company. EBITDA margins are now expected to be in the high 30% range initially and are expected to grow over time.

For modeling purposes, please be aware that Merck will continue to incur overhead costs previously allocated to the Oregon on products, which we estimate to be approximately $400 million on a full year basis.

These stranded costs will be reduced over time and are netted into the overall efficiency target.

To conclude the strength and resilience of our business in 2021, and 2020 reinforces our confidence as we begin the new year.

Demand for our key growth drivers remains intact and we are confident that we will deliver strong growth in 2021 and long into the future.

We will continue to use our strong financial position to invest and meaningfully and our pipeline capitalizing both internal and external opportunities and to make the right strategic decisions like the spinoff of organ on to position our company for continued success.

With that I'll turn the call back over to Ken.

Thank you Rob.

And.

As I've underscored many times innovative research is the cornerstone and Merck.

Rob Davis: This is a slight decrease from our prior guidance due to a lower proportion of capital assets transferred to Organon versus our initial expectation. We expect Organon to have initial debt of nine to nine and a half billion dollars, and Merck expects to receive a special tax-free dividend of $8.5-9 billion prior to the spin.

This is why we plan carefully for Dr. Roger Perlmutter retirement, and the transition of leadership of the Merck Research laboratories to Dr. Dean Lee, who I am pleased to welcome to today's call.

Dean is a physician scientist who has a keen understanding of Merck submission and dedication of science and our early and late stage asset <unk>.

We have hands on experience, leading key areas of research, including early discovery and translational medicine, while under Roger's leadership at Merck as well as a means of prior roles, where he exploited new technologies to found company and was a leader and an academic health care delivery system.

Rob Davis: We continue to expect Organon to pay a meaningful dividend that will be entirely incremental to that of Merck. The spin-off of Organon is expected to enable incremental operating efficiency of approximately $1.5 billion over three years, including approximately $500 million in 2021, which is included in our guidance. We now expect to deliver operating margins of greater than 42% in 2024, an increase of 2 percentage points versus our prior expectation of greater than 40% as a result of the impact of the reporting. For modeling purposes, please be aware that Merck will continue to incur overhead costs previously allocated to the Organon products, which we estimate to be approximately $400 million on a four-year basis. These stranded costs will be reduced over time and will be netted into the overall efficiency target.

We believe he is uniquely positioned and click on the important role from advance Merck promising pipeline.

I am confident that under <unk> leadership Merck's legacy of innovative R&D will continue and we will persist and successfully bringing forward breakthrough medicines and vaccines that make a real difference for patients and shareholders alike Dean.

Thank you Ken and.

I'm delighted to be here from my first earnings call as head of Merck Research laboratories, and so for my remarks today I will provide an update on our Covid research effort.

Key regulatory milestones clinical update and recent business development first and our oncology pipeline and then the broader pipeline.

Regarding our COVID-19 research programs Merck has made the decision to discontinue development of its vaccine candidate <unk> Zoro and <unk> dollars 91.

Rob Davis: To conclude, the strength and resilience of our business in 2020 reinforces our confidence as we begin the new year. Demand for our key growth drivers remains intact, and we are confident that we will deliver strong growth in 2021 and long into the future. We will continue to use our strong financial position to invest meaningfully in our pipeline, capitalizing both internal and external opportunities, and to make the right strategic decisions, like the spinoff of Organon, to position our company for continued success. With that, I'll turn the call back over to Ken.

And this decision was based on clinical findings from phase one study showing that while the vaccines were well tolerated and immune responses were inferior to those observed with natural infection and those reported for other authorized COVID-19 vaccines, we are grateful to our collaborators and the volunteers who participated in these trials.

Our COVID-19 efforts now shift and advancing our two therapeutic candidates ammonia and <unk> also known as MK $44 82 and.

Unknown Attendee: Thank you, Rob. As I've stressed many times, innovative research is the cornerstone of Merck. This is why we planned carefully for Dr. Roger Perlmutter's retirement and the transition of leadership of the Merck Research Laboratories to Dr. Dean Lee, whom I'm pleased to welcome to today's call. Dean is a physician-scientist who has a keen understanding of Merck's mission, dedication to science, and our early and late-stage assets.

And MK seven 110.

Our orally available anti viral candidate <unk>, which we are developing in collaboration with Ridgeback biotherapeutics.

Continues to progress and our phase two slashed III trials studying hospital loans and non hospitalized patients. The primary completion date is in May 2021, but it is possible that we may have interim efficacy data and the first quarter, which of course, we would share publicly if meaningful.

Dean Y. Li: He has hands-on experience leading key areas of research, including early discovery and translational medicine while under Rogers' leadership at Merck, as well as in his prior roles where he exploited new technologies to found companies and was a leader in an academic health care delivery system. We believe he is uniquely positioned to take on this important role and advance Merck's promising type. I'm confident that under Dean's leadership, Merck's legacy of innovative R&D will continue, and we will persist in successfully bringing forward breakthrough medicines and vaccines that make a real difference for patients and shareholders alike. Thank you, Ken.

<unk> has the potential to play an important role and the current pandemic as well as other emerging novel Corona virus infections, we have been scaling production capacity and expect to have over 10 million courses of therapy available by the end of 2021.

We recently added the second candidate to address COVID-19 through the acquisition of arc immune and this agent MK. Seven 110 is a recombinant fusion protein administered by IV infusion that targets and novel immune checkpoint final results are expected in our and the clinical trial and the first quarter.

Dean Y. Li: I'm delighted to be here for my first earnings call as head of Merck Research Laboratory. And so in my remarks today, I will provide an update on our COVID research effort, cover key regulatory milestones, clinical updates, and recent business developments, first in our oncology pipeline, and then the broader pipeline. Regarding our COVID-19 research programs, Merck has made the decision to discontinue development of its vaccine candidates, V590 and V591. This decision was based on clinical findings from phase one studies showing that while the vaccines were well tolerated, immune responses were inferior to those observed with natural infection and those reported for other authorized COVID vaccines.

Turning to oncology and the fourth quarter Keytruda received and additional new approval and the U S and combination with chemotherapy for first line treatment of patients with metastatic triple negative breast cancer with <unk>.

Tumors Express PDL, one at a combined proportion score of 10 or greater.

The approval was based on progression free survival results from keynote 355, and this marks the 17th tumor type for which Keytruda has been approved.

Also in the last quarter, the FDA accepted our supplemental new drug application with priority review for Keytruda in combination with chemotherapy and previously untreated patients with <unk> carcinoma, regardless of PD Lone expression based on keynote 509 zero.

Dean Y. Li: We are grateful to our collaborators and the volunteers who participated in these trials. Our COVID-19 efforts now shift to advancing our two therapeutic candidates, Monu Parivar, also known as MK-4482, and MK-7110. Our oral antiviral candidate, Monupiravir, which we are developing in collaboration with Ridgeback Biotherapeutics, continues to progress in our Phase 2-3 trials studying hospitalized and non-hospitalized patients. The primary completion date is in May 2021, but it is possible that we may have interim efficacy data in the first quarter, which we would share publicly if meaningful. Monu Piravir has the potential to play an important role in the current pandemic.

These results demonstrated clinically meaningful improvement and overall survival progression free survival and overall response rate. The FDA target action date is April 2014.

Working with our partners at ASI. We are pleased to note positive results from the keynote <unk> eight one trial for Keytruda, plus one and bema versus Sunitinib for first line treatment of renal cell carcinoma study demonstrated statistically significant improvements across primary and secondary endpoints and these data will be.

And it at <unk> next week, we also announced a keynote 775 evaluating keytruda plus loans bema for treatment of second line endometrial carcinoma was stopped early.

Independent data monitoring committee reported that <unk> demonstrated a significant improvement across all endpoints versus chemotherapy.

Dean Y. Li: As well as other emerging novel coronavirus infections, we have been scaling production capacity and expect to have over 10 million courses of therapy available by the end of 2021. We recently added the second candidate to address COVID-19 through the acquisition of Oncomune. This agent, MK7110, is a recombinant fusion protein administered by IV infusion that targets the novel immune checkpoint.

The success of keynote 581, and keynote 775 reinforces the opportunity presented by the combination of Keytruda and the multi kerosene kinase inhibitor Lynn bema.

We continue to explore this combination and 19 studies spanning multiple tumor types.

Now looking ahead, we look forward to meeting with the Fda's Oncologic drug Advisory Committee to discuss data from the third interim analysis from keynote <unk>, two evaluating neo adjuvant and adjuvant treatment of patients with early stage triple negative breast cancer as compared with an alternative.

Dean Y. Li: Final results are expected in the clinical trial in the first quarter. Turning Town College, In the fourth quarter, Katruda received another new approval in the U.S. in combination with chemotherapy for first-line treatment of patients with metastatic triple negative breast cancer whose tumors expressed PD-L1 at a combined proportion score of 10 or greater. Approval was based on progression-free survival results from Keynote 355 and this mark. This is the 17th tumor type for which Keytruda has been approved.

Regiment.

That includes data from this study is currently under FDA review with a <unk> date next month.

Business development remains a priority and the fourth quarter, we completed the acquisition of <unk> Bio who lead candidate BSS BLS 101, known as MK 210 is a roar one targeted antibody drug conjugate currently being evaluated and a phase II study of patients with <unk>.

Dean Y. Li: Also in the last quarter, the FDA accepted a supplemental new drug application with priority review for Keytruda in combination with chemotherapy in previously untreated patients with esophageal carcinoma regardless of PD-L1 expression based on Keynote 590. These results demonstrated clinically meaningful improvement in overall survival, regression-free survival, and overall response rate. The FDA target action date is April 13. Working with our partners at ACI, we are pleased to note positive results from the Keynote 581 trial for Keytruda pluslandhema versus sunitinib for first-line treatment of renal cell carcinoma.

Solid tumor and and phase one for patients with hematologic malignancies this opportunity.

Along with the live one antibody drug conjugate that we're developing in partnership with CJ <unk>.

Underscores our commitment to investigating tumor targeted chemotherapy using next generation antibody drug conjugates now as part of our strategy to explore new tumor targeting technology.

We recently entered collaborations with <unk> biotherapeutics, and our Teva biotherapeutics aimed at evaluating opportunities for T and NK cell therapies, and a third collaboration with <unk> therapeutics on their T cell engaging technology. These collaborations along with work already underway with dragonfly thorough.

Dean Y. Li: The study demonstrated statistically significant improvements across primary and secondary endpoints, and these data will be presented at ASCO-GU next week. We also announced that Keynote 775, evaluating Keytruda pluslandhema for the treatment of second-line endometrial carcinoma, was stopped early. The Independent Data Monitoring Committee reported that Keytruda Pleslenzema demonstrated a significant improvement across all endpoints versus chemotherapy.

<unk> and designed targeted NK cell engages.

Support our commitment to tumor targeting technologies.

Now turning to our broader pipeline.

We continue to progress our suite of pneumococcal vaccine candidate to be one for the one six and vivo and one seven.

Each one is designed for targeted protection against prevalent pneumococcal disease types across different age groups.

Dean Y. Li: The success of Keynote 581 and Keynote 775 reinforces the opportunity presented by the combination of Keytruda and the multi-tyrosine kinase inhibitor Lenvima. We continue to explore this combination in 19 studies spanning multiple tumor types. Looking ahead, we look forward to meeting with the FDA's Oncologic Drug Advisory Committee to discuss data from the third interim analysis from Keynote 522 evaluating neoadjuvant and adjuvant treatment of patients with early-stage triple negative breast cancer as compared with an alternative register.

Paper V. One for our 15 Valent Pneumococcal vaccine candidate was recently granted priority review by the FDA for the prevention of invasive pneumococcal disease and adult the target action date.

Hi, <unk>.

Adults administered V. One four produced comparable levels of antibodies for all serotypes and the currently available conjugate vaccines with higher responses observed for a serotype three and one of the most common causes of invasive pneumococcal diseases.

Adults and and children.

Robust response to unique disease, causing serotypes 20, <unk> and 33 were also observed.

Dean Y. Li: The DLA that includes data from this study is currently under FDA review with a PDUFA date next month. Meanwhile, business development remains a priority. In the fourth quarter, we completed the acquisition of Vilos Biles, whose lead candidate, VLS-101, known as MK2140, is a ROR1-targeted antibody-drug conjugate currently being evaluated in a Phase II study of patients with solid tumors and in Phase I for patients with hematologic malignancies.

And the U S stereotypes 22, <unk> and 33 have been linked at 13% of invasive pneumococcal disease teen among adults, aged 65 and older and in Europe, 10% to 12% of adult cases.

<unk> hundred one for phase III pediatric studies are on track and we anticipate results from these trials this year.

In addition to V. One floor, we are progressing our adult and pediatric Nextgen vaccines V. One six and day one seven.

And the infectious disease space is larger for our novel nucleoside reverse transcriptase translocation inhibitor for HIV.

Dean Y. Li: This opportunity, along with the Live One Antibody Drug Conjugate that we are developing in partnership with CIGEN, underscores our commitment to investigating tumor-targeted chemotherapy using next-generation antibody drug conjugates. Now, as part of our strategy to explore new tumor targeting technologies We recently entered collaborations with A2 Biotherapeutics and Arteva Biotherapeutics aimed at evaluating opportunities for Qi and NK cell therapy, and a third collaboration with Janik Therapeutics on their T-Cell Engager technology, which along with work already underway with Dragonfly Therapeutics to design targeted NK cell engagers, support our commitment to tumor targeting technology.

<unk> to progress and both the treatment and in the prep setting and the Trepp setting we expect to begin recruitment soon for two new phase III trials empower 'twenty, two and empower 'twenty four and different populations at high risk of acquiring HIV infection now empower 'twenty two will evaluate the efficacy and safety of its Lee.

<unk> is a once monthly all capsule and adult women and adolescent girls and power 24 will evaluate the same regiment and men, who have sex with men and transgender women who have sex with net.

Also in the prep setting positive interim results from the phase II trial evaluating <unk> as a once monthly oral prep Regiment were recently presented at HIV research for prevention and 2021. These interim results showed that <unk> achieved the efficacy pharmacokinetic.

Dean Y. Li: Now turning to our broader pipeline, we continue to progress our suite of pneumococcal vaccine candidates, V114, V116, and V117. Each one is designed for targeted protection against prevalent pneumococcal disease serotypes across different age groups. L.A. For V.1.1.4, our 15-valent pneumococcal vaccine candidate, was recently granted priority review by the FDA for the prevention of invasive pneumococcal disease in adults. The target action date, Adults administered V114 produce comparable levels of antibodies for all serotypes in the currently available conjugate vaccine, with higher responses observed for serotype 3, one of the most common causes of invasive pneumococcal diseases in adults and in children.

Threshold at each of the two doses study 60 milligrams and 120 milligrams and that these doses are well tolerated. These findings offer further evidence for the potential there is lots from here to provide a monthly.

Oral prep option for people at risk of acquiring HIV now. In addition, as we announced previously we are advancing MK eight 507, and our non nucleoside reverse transcriptase inhibitor and.

In combination with <unk> and to a phase II study as a potential once weekly borrowed treatment option. This weekly is locked severe MK 850, southern combination and built on the once daily <unk> combination currently in phase III or phase III study, which we expect to start to readout and.

Dean Y. Li: Robust response to unique disease-causing serotypes, 22F and 33F, were also observed. Now, in the U.S., serotypes 22F and 33F have been linked to 13% of invasive pneumococcal disease seen among adults aged 65 and older, and in Europe, 7 to 12% of adult cases.

Second half of 2021.

And finally, we received FDA approval for Q low following priority review this new option for patients who have experienced worsening heart failure built on our commitment to develop therapies for patients with cardiovascular disease.

Dean Y. Li: RE114 Phase 3 Pediatric Studies are on track, and we anticipate results from these trials this year. In addition to V114, we are progressing our adult and pediatric next-gen vaccines, V116 and V117. The infectious disease space is large, and our novel nucleoside reverse transcriptase translocation inhibitor for HIV continues to progress in both the treatment and in the prep setting.

We at Merck Research laboratories are well positioned to continue to take full advantage of our considerable strength and oncology and vaccines, while investing in other therapeutic areas and exploring new modalities and complementing and supplementing our internal pipeline with external opportunities.

I will now turn the call back to Peter.

Thank you Dean.

Dean Y. Li: We expect to begin recruitment soon for two new phase three trials, empower 22 and empower 24, in different populations at high risk of acquiring HIV infection. Now, in Power 22, we'll evaluate the efficacy and safety of Zlativar as a once-monthly All capsule in adult women and adolescent girls; power 24 will evaluate the same regimen in men who have sex with men and transgender women who have sex. Also, in the PrEP setting, positive interim results from the Phase 2 trial evaluating Islachever as a once-monthly oral PrEP These interim results show that Islachever achieved the efficacy pharmacokinetic Threshold at each of the two doses studied, 60 mg and 120 mg, and that these doses are well tolerated.

And we recognize there could be additional.

Additional questions today, and we are prepared to extend the call past 90, but in order to get to as many analysts as possible and I ask that you. Please limit yourselves to one question Larry could you start the queue. Please.

Absolutely and it does.

And just to remind everyone and I'll get to ask a question you can press Star then the number one and your telephone keypad.

So your first question will come from the line of Mr. Seamus Fernandez from Citi. Your line is now line go ahead Paul.

Great. Thanks very much.

Rob Congratulations on.

And the CEO appointment just wanted to get a sense of your thoughts.

In terms of Merck moving forward you've talked about the.

Under appreciation of the upside that you see for the company and in 2023 plus.

Relative to consensus expectations, but the obvious question that is going to continue is.

How are you thinking about the evolution and the company and sort of 2026 to 2030.

Dean Y. Li: These findings offer further evidence for the potential of ezolotrivir to provide a monthly oral pre-exposure option for people at risk of acquiring HIV. Now, in addition, as we announced previously, we are advancing MKA507, our non-nucleoside reverse transcriptase inhibitor, in combination with ezolotrivir, into a phase two study as a potential once-weekly oral treatment option. This weekly ezolotrivir MKA507 combination builds on the once-daily ezolotrivir plus deraverin combination currently in phase three, a phase three study which we expect to start to read out in the second half of 2021.

As Keytruda basically approaches and its patent exploration.

What do you think the company really needs to do in that regard and then just as a follow up to that just from a strategic perspective.

Can you give us your thoughts around the animal health business.

Part of Merck could that be part of a future restructuring. Thanks, so much.

Great Good morning, and thanks Seamus for the question.

As we look forward from a strategic perspective, obviously, there will be a lot more time as we.

Moving to the months and quarters to come to continue to have the dialogue, but I think at its highest level. The important point is that the strategy. We've been under which is focused on scientific innovation is the core of who we are driven first by.

Dean Y. Li: Finally, we received FDA approval for Recuvo following priority review. This new option for patients who have experienced worsening heart failure builds on our commitment to develop therapies for patients with cardiovascular disease. We at Merck Research Laboratories are well positioned to continue to take full advantage of our considerable strength in oncology and vaccines while investing in other therapeutic areas, complementing and supplementing our internal pipeline with external opportunities. I will now turn the call back.

Really the revitalization of what we're doing and the drug discovery and and.

And from a clinical development perspective, which I think youre seeing the fruits of and obviously, what we're achieving with keytruda and with what we see as a growing.

Earlier stage pipeline, which we're excited about so as we look at 2025 and beyond and into the 2030 timeframe. It really is to continue to focus first and foremost on investing behind the best science, whether it comes from inside the company or outside of the company execute on the pipeline. We have we have a lot.

Dean Y. Li: Thank you, Dean. We recognize there could be additional questions today, and we're prepared to extend the call past 9 a.m. But in order to get to as many analysts as possible, I ask that you please limit yourselves to one question. Lara, could you start the queue, please?

Great and near term late stage launches coming we've got us launch of <unk>, We've got our V. One one for the entire pneumococcal franchise that we're building we have obviously, a whole host of opportunities and oncology, which I'm sure Deane and others would be happy to comment on looking at both what we can do to.

Lara: Absolutely. And at this time, just to remind everyone that in order to ask a question, you can press star then the number one on your telephone keypad. So your first question will come from the line of Mr. Seamus Fernandez. So your line is now live. Go ahead, please.

Extend the breadth of contributors reach to the number of patients that serves as well as its efficacy through combinations as well as broadening into other oncology fields and broader mechanisms, which we have so that all will be continued.

Rob Davis: Rob, congratulations on the CEO appointment. I just wanted to get a sense of your thoughts in terms of Merck moving forward. You've talked about the underappreciation of the upside that you see for the company in 2023 plus relative to consensus expectations, but the obvious question that is going to continue is, how are you thinking about the evolution of the company in 2026 to 2030 as Keytruda basically approaches its patent expiration? What do you think the company really needs to do in that regard?

B, where we will focus our efforts as we look at that we realize though we will need to continue to do business development to augment that and.

And we are committed to that we've been pretty consistent and talking about the urgency we have around business development that hasnt changed that won't change, but what also won't change as we will do it when we see and alignment of strategy and value.

And that is tied with our our scientific endeavor and that and so that is really the way we look but as we started to highlight even at the JP Morgan Conference.

I think people under appreciate what we have as growth opportunities as we start to move into that 2028 and beyond timeframe clearly we have.

Rob Davis: And then, just as a follow-up to that, just from a strategic perspective, can you give us your thoughts around the animal health business as part of Merck? Could that be part of a future restructuring? Thanks so much.

A real opportunity to continue to grow between now and then with contributor but I think actually we will have an opportunity to grow beyond them.

Rob Davis: Great. Good morning, and thanks, Seamus, for the question. You know, as we look forward from a strategic perspective, obviously, there will be a lot more time as we move into the months and quarters to come to continue to have the dialogue, but I think at its highest level, the important point is that the strategy we've been under, which is focused on scientific innovation as the core of who we are, driven first by really the revitalization of what we're doing in the drug discovery and from a clinical development perspective, which I think you're seeing the fruits of, and obviously, what we're achieving with Keytruda and with what we see as a growing earlier stage pipeline, which we're excited about.

Through all of the things I mentioned, so more of the same from that regard and then with regard to animal health.

We continue to see animal health as a strategic part of this business. If you look at the growth of that business delivers its best in class within the animal health space.

It's accretive to the overall position for Merck and we are and investing in it and.

I think it is positioned to continue to show very strong growth both through the existing products that has but also through a very good portfolio of pipeline products, which is leveraging the synergies we have with the morel function. We have on the human health side, So as we sit here.

Looking forward I continue to see animal health as a core part of our strategy and.

And as we've said we always are looking at our portfolio, but everything I see tells me that this is something we will maintain and grow because we are the most advantaged owner and my mind.

Rob Davis: So as we look at 2025 and beyond and into the 2030 timeframe, it really is to continue to focus first and foremost on investing in the best science, whether it comes from inside the company or outside the company, to execute on the pipeline we have. We have a lot of great near-term, late-stage launches coming. We've got Isla Travir.

Great.

Next question please.

Absolutely. Thank you Sir your next question will come from the line of Mr. Andrew Baum from Citi. Sir Your line is now line go ahead. Please.

Thank you a question on his last day.

Roger Wood co.

Tom and debt.

Cabot's aggravated with not the write downs from continental.

Rob Davis: We've got our V114, the entire pneumococcal franchise that we're building. We have, obviously, a whole host of opportunities in oncology, which I'm sure Dean and others would be happy to comment on, looking at both what we can do to extend the breadth of Keytruda's reach to the number of patients it serves, as well as its efficacy through combinations, as well as broadening into other oncology fields and broader mechanisms, which we have.

Fixed dose combination and the treatment setting.

Aside from the capsid inhibitor and that doesn't seem to be a whole lot of other auctions.

With that fresh pair of eyes on the Dean's leadership.

Should we assume that the status quo remains intact.

And as I look at appetizer. There is a combination may be interesting and then secondly, perhaps you could comment on whether in the prep setting.

Bridge appetite you can bridge and latch refer to explore different delivery formulations, including very low.

Rob Davis: So that will continue to be where we will focus our efforts. As we look at that, we realize, though, we will need to continue to do business development to augment that, and we are committed to that. So that is really the way we look.

That running separate trial.

Yes, so thank you for that question.

I'll just make some comments that will sort of frame.

Rob Davis: But as we started to highlight, even at the JPMorgan conference, I think people underappreciate what we have as growth opportunities as we start to move into that 2028 and beyond timeframe. Clearly, we have a real opportunity to continue to grow between now and then with Keytruda, but I think we will actually have an opportunity to grow beyond then through all of the things I mentioned. So, more of the same from that regard.

One might want to think about is <unk>.

And one way to think about it is is with the land that we believe that this can be a foundational medicine, both and prep and and treatment.

And the favorable atrophy.

Nice PK dosing schedule route of administration resistant profile tissue levels concomitant <unk>.

<unk> and so the question and relationship to treatment is I've laid out what we're doing once daily once weekly, but if this.

Rob Davis: And then with regard to animal health, we continue to see animal health as a strategic part of this business. If you look at the growth that business delivers, it's best in class within the animal health space. It's accretive to the overall position for Merck, and we are investing in it, and I think it is positioned to continue to show very strong growth, both through the existing products it has, but also through a very good portfolio of pipeline products, which is leveraging the synergies we have with the MRL function we have on the human health side.

And the molecule is a foundational as we believe it is.

This is something that could combine with many different mechanisms and many different molecules and can just tell you that that that integrates inhibitors, which is cabot <unk> that can important class.

And class, that's actually very dear to Merck.

And so that needs to be looked at carefully and then land cap.

Which you allude to.

That's a new mechanism.

Rob Davis: So, as we sit here, you know, looking forward, I continue to see animal health as a core part of our strategy, and as we've said, you know, we always are looking at our portfolio, but everything I see tells me that this is something we will maintain and grow because we are the most advantaged owner in my mind. Great.

And we believe that as larger rare as a foundational medicine.

Should we should look at the full array of carbon combinations that can be achieved because we believe it's foundational and we believe that that foundation can provide lots of benefit for many different patient.

Lara: Next question, please, Laura. Absolutely. Thank you, sir. Your next question will come from the line of Mr. Andrew Baum from Citi. So, your line is now live.

And we should look at all combinations possible that would allow us to prove that and to show that.

Dean Y. Li: Go ahead. Thank you. A question on Islatrovir, please? Roger was quite determined that Cabotegravir was not the right dancing partner for a fixed dose combination in the treatment setting.

Great next question please.

Thank you Sir your next question will come from the line of Mr. Kevin Brian. Your line is now line of go ahead Sir.

Thanks for taking the question.

Gratz again, Ken on a remarkable career and best wishes and that future and congratulations Rob as well and the new role and responsibilities and best of luck.

Dean Y. Li: But aside from the capsid inhibitor, there doesn't seem to be a whole lot of other options. With a fresh pair of eyes under Dean's leadership, should we assume that the status quo remains intact, or whether another look at Cabotegravir as a combination may be interesting? And then secondly, perhaps you could comment on whether in the pre-clinical setting you can bridge Cabotegravir and Islatrovir to explore different delivery formulations, including very long acting, without running separate trials.

Just maybe a two part question Rob I was just wondering if you can provide your perspective on the share repurchase outlook for 2021, obviously you have the.

$8 billion to $9 billion dividend coming in from Oregon on maybe how aggressive are you going to be on that front.

And then just a question for Dean.

440 <unk> two.

Building on Ken's comment regarding and <unk>.

Dean Y. Li: Yeah, so thank you for that question. I'll just make some comments that will sort of frame how one might want to think about his Latrevere, and one way to think about it is through the lens that we believe that this can be a foundational medicine both in preparation and in treatment. And the favorable attributes you've recognized are PK, dosing schedule, route of administration, resistant profile, tissue levels, and combination. www.globalonenessproject.org. The molecule is as foundational as we believe it is. This is something that could combine with many different mechanisms and many different molecules.

Important contribution from this drug and the Covid paradigm was wondering if you guys already have some of that initial phase two data and house. Thank you.

And maybe I'll go first and then turn it over to Dean. Thanks for the question Terence and thank you for the congratulatory comments.

As you look at share repurchase.

As we've been saying we continue to prioritize.

Business developments.

As where we want to go obviously first and foremost it's about funding our internal R&D efforts and funding.

Capacity expansion efforts, we have underway from a capital perspective, but really beyond that.

As we've talked we would like to see business development and so we have been holding back on share repurchase for that purpose, but what we've also been clear to say is.

Dean Y. Li: I can just tell you that integrase inhibitors, which is cabotagravir, that's an important class. It's an important class that's actually very dear to Merck. And so that needs to be looked at carefully. And then lencapravir, which you allude to, that's a new mechanism. And we believe that islatravir, as a foundational medicine, we should look at the full array of combinations that can be achieved. Because we believe it's foundational, and we believe that that foundation can provide lots of benefit for many different patients, and we should look at all combinations possible that would allow us to prove that and to show that. Great. Next question, please, Lara. Thank you, sir. Your next question will come from the line of Mr. Terence Flynn. Your line is now live. Go ahead, sir.

We're not looking to just grow cash to grow cash and we're not looking to drive up our credit rating. So over time, if we don't find those opportunities to utilize the cash for business development. Eventually we will return it to shareholders.

And Thats on an ongoing basis, and then you asked explicitly about the 8% to $9 billion.

And the potential dividend, we're getting coming from.

And the midnight dividend from the Oregon on spin.

With that similar answer our goal would first and foremost be business development, but we also will look if we don't have those opportunities to return that to shareholders and we will be able to make those determinations as we get closer to late second quarter and into the second half of <unk>.

<unk> 2021.

Yes in terms of the.

$44 82.

<unk> <unk> phase II slashed III trial it has.

Different interim analysis.

Critical component of the phase two different interim analysis is to sort of establish dose.

Lara: Great. Thanks for taking the question. Congratulations again, Ken, on a remarkable career and best wishes in the future.

And at this point, we have not we've taken a look at all the data that is available to us in relationship to that phase III.

Unknown Attendee: And congratulations, Rob, as well, on your new role and responsibilities. And best of luck. I just, maybe, a two-part question. Rob, I was just wondering if you could provide your perspective on the share repurchase outlook for 2021. Obviously, you have the eight to nine billion dividend coming in from Organon. Maybe how aggressive are you going to be on that front?

Great. Thank you Sarah next question please.

Thank you Sir our next question will come from the line of Mr. Chris Schott from Jpmorgan. Your line is now line go ahead Paul.

Great. Thanks for the questions and congrats as well to both Ken and Rob I.

I just had a two part question on capital deployment and Biz Dev, It's obviously been a big focus and remains a big focus the organization should we think about any pauses or slowdown and activities specific and so you think about larger transactions given the leadership transitions that are occurring and the organization and then on BD I guess all else equal would you buy.

Rob Davis: And then just a question for Dean on MK 4482, building on Ken's comment regarding, you know, an important contribution from this drug in the COVID paradigm, was wondering if you guys already have some of that initial phase two data in house. Thank you. Hey, maybe I'll go first and then turn it over to Dean.

<unk> be towards a series of smaller transactions versus a larger one that brings multiple assets do we think about issues of ease of execution integration et cetera, I know youre, probably looking at everything, but if you had a choice which direction with the organization Lee and thanks, so much.

Rob Davis: Thanks for the question, Terence, and thank you for the congratulatory comments. As you look at share repurchase, you know, as we've been saying, we continue to prioritize business development as where we want to go. Obviously, first and foremost, it's about funding our internal R&D efforts and funding the capacity expansion efforts we have underway from a capital perspective. But really, beyond that, you know, as we've talked, we would like to see business development. And so we have been holding back on share purchases for that purpose.

So let me just start by saying that.

The purpose behind this CEO transition is not to slow Merck down in any respect.

The senior team and Rob.

And the responsibility and the autonomy going forward.

Evaluate the situation of the company faces and to make the right decisions to position. This company for long term growth, so I wouldn't read into the transition.

Rob Davis: But what we've also been clear to say is that, you know, we're not looking to just grow cash to grow cash, and we're not looking to drive up our credit rating. So over time, if we don't find those opportunities to utilize the cash for business development, eventually, we will return it to shareholders. And that's, [inaudible] Yeah, in terms of the 4482 question, it's a phase two slash three trial, and it has different interim analysis.

And there would be any hesitation at all about taking steps that we believe are the right step for the company's long term success and with that I'll turn it over to Rob.

Appreciate that and and Chris to your question about our preferred.

The.

Composition of the business development, we continue to prefer to look for smaller opportunities, where we can find great science earlier and its life and bring it into Merck Research Labs, and then capitalize on that and we believe.

Rob Davis: The critical component of the phase two different interim analysis is to sort of establish dose. And at this point, we have not fully taken a look at all of the data that is available to us in relationship to that phase.

<unk> competitive advantage and differentiation to those assets.

Thats focal point continues to be where we will look.

We've said many times in the past.

We're agnostic to therapeutic area, we will be driven by science science will take us to the areas to look but likewise, we've been clear to say, we're not foreclosed to larger and larger scale deals.

Dean Y. Li: Great. Thank you, Terence. Next question, please. Thank you, sir. Your next question will come from the line of Mr. Chris Schott from J.P. Morgan. Sir, your line is now live.

Looking at the size more in terms of disruption and complexity than in dollar terms, we obviously recognize the need to continue to augment the pipeline to augment our revenue potential and so we're looking at those as well.

Rob Davis: Go ahead. Thanks for the questions, and congratulations as well to both Ken and Rob. I just had a two-part question on capital deployment and business development. It's obviously been a big focus and remains a big focus of the organization. Should we think about any pauses or slowdown in activities, specifically as we think about larger transactions given the leadership transitions that are occurring in the organization? And then on BD, I guess, all else equal, would your bias be towards a series of smaller transactions versus a larger one that brings multiple assets?

But one thing that remains completely.

System as we do not prefer and do not see a transformative deal driven mainly by synergies as a way forward. It will continue to be science led science based and.

And driven by where we see an opportunity to bring differential value.

Thank you Chris next question please.

Thank you Sir your next question will come from the line of MS. Louise Chen from Cantor. Your line is now line go ahead.

Rob Davis: So we think about issues of ease of execution, integration, etc. I know you're probably looking at everything, but if you had a choice, which direction would the organization lean toward? Thanks so much.

Hi, Thanks for taking my questions here, so Rob what about your experience and skills that make you the right fit from aware Mark is and its journey right now and then Dean when you look into your pipeline. Currently is there that you think could take the place of Keytruda. Thank you.

Rob Davis: So let me just start by saying that the purpose behind this CEO transition is not to slow Merck down in any way. The senior team and Rob have the responsibility and the autonomy going forward to evaluate the situation that this company faces and to make the right decisions to position this company for long-term growth. So I wouldn't read into the transition that there would be any hesitation at all about taking steps that we believe are the right steps for this company's long-term success. And with that, I'll turn it over to Rob. Yeah, I appreciate that.

Great. Thanks for the question if you look back at it.

My career and what I've done I've spent my whole career dedicated to health care into the pharmaceutical industry.

And the time I began at Eli Lilly and <unk> spent nearly 15 years before moving onto to Baxter and sold a different view of the business running.

Running the diversified med tech side of that company before coming to Merck. So I have a broad base of experience and the industry and a lens that is really seeing it from different views and I think that is always important to challenge.

Rob Davis: And Chris, to your question about, you know, our preferred composition of business development, we continue to prefer to look for smaller opportunities where we can find great science earlier in its life and bring it into Merck Research Labs and then capitalize on that, and we believe it brings competitive advantage and differentiation to those assets. So that focal point continues to be where we will look. As we've said many times in the past, we are agnostic to the therapeutic area. We will be driven by science. Science will take us to the areas to look for them.

Our internal thinking to make sure we have and external focus and that we are looking externally, but as we look forward while scientific innovation will continue to be the core of who we are and I believe is our best path to succeed and a world where youre going to face increasing margin pressure. We also have to marry with that.

Side by side, our continuing focus on how do we evolve the business to make it more nimble to make it simplified and really more focused such that we can drive ever greater efficiency and productivity not in terms of reducing spend rather the opposite we're going to invest and this business to grow but we have to find.

Rob Davis: But likewise, we've been clear to say we're not foreclosed to larger-scale deals, always looking at the size more in terms of its disruption and complexity than in dollar terms. We obviously recognize the need to continue to augment the pipeline to augment our revenue potential. So we're looking at those as well. But one thing that remains completely consistent is we do not prefer and do not see a transformative deal driven mainly by synergies as a way forward.

Way to make every dollar we invest more productive so that we get are greater than the dollar of output and that is really where our focus is going to be on how do we leverage new technologies new capabilities to do that and then how do we think about broadening our view long term as you think about not only the drug but we have to focus increasingly on the outcomes from our medicine.

The value, we demonstrate and how we ensure affordable access and so those are the core of what we're looking at and my experience broadly and the industry and being a part of the leadership team here at Merck has positioned me to I believe.

Rob Davis: It will continue to be science-led, science-based, and driven by where we see an opportunity to bring differential values. Thank you, Chris. Next question, please, Laura. Thank you, sir. Your next question will come from the line of Miss Louise Chen from Canter. Your line is now live.

And do that.

So let me grab the other part of that question and.

If you don't mind I would just sort of.

Rob Davis: Go ahead. Hi, thanks for taking my questions here. So, Rob, what about your experience and skill set make you the right fit for where Merck is on its journey right now? And then Dean, when you look into your pipeline currently, is there anything there that you think could take the place of Keytruda? Thank you. Yeah, great.

And make the four point.

The first is immuno oncology has essentially revolutionized all of cancer biology, and medicine and a quick weighted could point that out is if one reads. The book Emperor All analogies, one looks at and lets say.

And this is outdated because the whole impact of immuno oncology.

Rob Davis: Thanks for the question. You know, if you look back at my career and what I've done, I've spent my whole career dedicated to healthcare and the pharmaceutical industry. And the time I began at Eli Lilly, where I spent nearly 15 years before moving on to Baxter and selling a different view of the business, running the diversified med tech side of that company before coming to Merck. So I have a broad base of experience in the industry. And a lens that has really seen it from different views.

And there and the driver free this rab evolution has been temporarily and.

And just so that we're very clear we continue to want to expand indications by tumor type and.

And by stage of cancer, we want and deepen responses with combinations that spanned agents within the announced immuno modular toy mechanisms, which the internal pipeline is focused on and agents with direct tumor killing mechanisms that we have largely done through BD and we want to extend the value and access of <unk> to patients.

Rob Davis: And I think it is always important to challenge our internal thinking to make sure we have an external focus and that we are looking externally. But, you know, as we look forward, scientific innovation will continue to be the core of who we are, and I believe it is our best path to succeed in a world where you're going to face increasing margin pressure. We also have to marry that side by side with a continuing focus on how we evolve the business to make it more nimble, to make it simplified and really more focused such that we can drive ever greater efficiency and productivity, not in terms of reducing spend, but rather the opposite.

Blue Route of administration dosing regimens combination co formulation and Biomarkers So thats.

Tayo Pembroke and cancer. So the question that you ask is do I have anything and my pipeline that has reshaped a whole field right now that I can see.

I do not have one and our pipeline and this is an important point that we should mention we should remember that we were not in cancer and I'll allowed us the chance to make a huge impact on cancer transformative cancer transformative and.

Rob Davis: And then how do we think about broadening our view long term as we think about not only the drug, but we have to focus increasingly on the outcomes from our medicine, the value we demonstrate, and how we ensure affordable access. So those are the cores of what we're looking at. And my experience broadly in the industry and being a part of the leadership team here at Merck have positioned me to do that. Now, let me grab the other part of that question. And if you don't mind, I would just sort of make four points.

Packed and one of the reasons why.

Rob and Ken and Roger for that matter has always talked about therapeutic agnostic. It is because we do not know that we have the foresight to know where that next revolution and where that next transformation occurs.

Dean Y. Li: The first is, immuno-oncology has essentially revolutionized all of cancer biology and medicine, and a quick way to point that out is, if one reads the book, Emperor of All Maladies, one looks at it and says, This is outdated because the whole impact of immuno-oncology is not. And the driver for this revolution has been temporalism. And just so that we're very clear, we continue to want to expand indications by tumor type. [inaudible] Root of Administration, Dosing Regimens, Combinations, Coformulations, and Biomarkers. Ayo Pembroe Inc. So the question that you ask is, do I have anything in my pipeline that has reshaped a whole field right now that I can see? I do not have one in our pipeline.

Could that be and my pipeline, yes could it be and the pipeline of others.

Yes, but do we have it right now defined whether it be and euro whether it would be and.

And.

Cardiovascular whether it be and metabolism I would say that in general the whole field has not seen the whole pharmaceutical field has not seen something equivalent to keytruda, our Pembroke at this point and time throughout the industry.

Great. Thanks, Luis next question please.

Thank you and your next question will come from the line of David Risinger from Morgan Stanley. Your line is now line go ahead. Please.

And.

Yes.

Thanks, very much and I wanted to add my congratulations to Ken and Rob as well.

So my question is could you discuss the opportunity for weekly combination HIV treatment, including your internal.

Dean Y. Li: And this is an important point that we should mention. We should remember that we were not in cancer and I.O. allowed us the chance to make a huge impact on cancer, a transformative impact. And one of the reasons why Rob and Ken and Roger, for that matter, have always talked about therapeutic agnosticism is that we do not know that we have the foresight to know where that next revolution and where that next transformation will occur.

Assets for a combination regimen and how you are assessing and seeing the opportunity to move that forward.

Vs pursue and external partnership opportunity to bring forward a weekly combination treatment regimen and thank you.

<unk>.

Yes, I'll take a first shot at that this is dean.

Dean Y. Li: So could that be in my pipeline? Yes. Could it be in the pipeline of others? Yes, but do we have it right now defined, whether it be a neuro, whether it be cardiovascular, whether it be metabolism? I would say that, in general, the whole pharmaceutical field has not seen anything equivalent to Keytruda or Pembroke at this point in time.

Fundamentally.

And doing a stepwise right, we're doing it and prep and we're debating a treatment and we're trying to demonstrate to ourselves and to others that this is what we think that this is a really important medicine and so we're stepwise doing Q day, Q week, but I do agree with you we have to think about what.

Dean Y. Li: Thanks, Louise. Next question, please. Thank you, sir. Your next question will come from the line of David Weisinger from Morgan Stanley. So your line is now live. Go ahead. Yes, thanks very much.

What's really going to be important for patient.

And their their access to the medicine, and so and less frequent dosing will be important and that less frequent dosing will be important for both treatment and pulp and Kraft and both of them are places that.

Dean Y. Li: And I wanted to add my congratulations to Ken and Rob as well. So my question is, could you discuss the opportunity for weekly combination HIV treatment, including your internal assets for a combination regimen and how you are assessing and seeing the opportunity to move that forward versus pursuing an external partnership opportunity to bring forward a weekly combination treatment regimen? Thank you. Yeah, I'll take a first shot at that. This is Dean.

And that Merck needs to explore fully to create that full suite of options as we build the story voice latch with there, but Mike did you want to make some comments.

Thank you for the question, Dave I think.

A couple of things just to add to what Dean said I think first and foremost is lots of it is the best partner across a whole range of different mechanisms of action and we think.

Dean Y. Li: Fundamentally, we're doing it stepwise, right? We're doing it in preparation, and we're doing a treatment, and we're trying to demonstrate to ourselves and to others that this is what we think it is, that this is a really important medicine. And so we're stepwise doing Q day, Q week. But I do agree with you.

A lot of value and we do think the market will ultimately evolve to a longer acting format, we see up to a majority of the HIV market ultimately being in and the locking long acting format and so weekly would be the starting place and then we look even further out.

Dean Y. Li: We have to think about what's really going to be important for patients and their access to the medicine. And so, less frequent dosing will be important. And that less frequent dosing will be important for both treatment and for practice. And both of them are places that Merck needs to explore fully to create that full suite of options as we build the story for Islatchever. But Mike, did you want to make some comments?

And the treatment space and the prep space I think what I would add is that we don't need necessarily a partner with this latter V or the prep space and so we think.

Through both in and oral route of administration and other forms of administration and we can go to long acting formats potentially even longer than a week initially and the prep space and so that's how we're looking at the market.

Mike Nally: Yeah, Dave, thank you for the question. You know, I think a couple of things just to add to what Dean said. I think, first and foremost, Islatchever is the best partner across a whole range of different mechanisms of action.

Great. Thank you.

Next question please.

Thank you Sir your next question will come from the line of MS. Dana waiver from SBB Leerink. Your line is now line go ahead Paul.

Mike Nally: And we think, you know, it'll add a lot of value. And we do think the market will ultimately evolve to a longer acting format. You know, we see, up to a majority of the HIV market ultimately being in a long acting format. And so weekly would be the starting place.

Thank you for the question and congratulations from me all around.

And I wonder talking about BD and oncology and contribute I always had a couple of negative trial readouts from competitors.

Mike Nally: And then we'd look even further out in the treatment space. You know, in the PrEP space. I think what I would add is that we don't necessarily need a partner with Islatchever in the PrEP space. And so we think they're, you know, through both an oral route of administration and other forms of administration; we can go to long acting formats, potentially even longer than a week, you know, initially in the PrEP space.

And TGF beta and oncologic viruses approaches I Wonder if you could update us on your current perspective on the path forward for us and that's the early Io assets.

Mark has acquired in recent years, including <unk> and immune design.

Yes, let me take a stab at that so sort of separated how one might think about the Io space and related September iliza, Matt and especially related to solid tumors and.

Mike Nally: And so that's how we're looking at the market. Thank you. Next question, please. Thank you, sir. Your next question will come from the line of Ms. Daina Graybosch from SCB Lyrinc. Ma'am, your line is now live.

And so when you look at our internal pipeline.

And we speak about having over 25 mechanisms and the clinic and.

And Youre aware of free immune modulator mechanism, Gary advancing into phase III.

And they have the opportunity to be co formulated our ticket or lag free or <unk>. Four we also showed IL four.

Dean Y. Li: Go ahead. Thank you for the question, and congratulations from me all around. I wonder, talking about BD and oncology in Keytruda, we've had a couple of negative trial readouts from competitors on TGF-beta and oncolytic virus approaches. I wonder if you could update us on your current perspective on the path forward for some of the early I.O. assets Merck has acquired in recent years, including Telos, Virolytics, and Immune Design. Yeah, let me take a stab at that. So I've sort of separated how one might think about the IO space and related to pembrolizumab, and especially related to solid tumors.

And the other sort of thing that I would also emphasize that.

The word sometimes overused, but it's caught orthogonal, but I simply say that keytruda when mixed with tumor, killing mechanisms or standard of care and mechanisms by chemo surgery and potentially radiation.

There seems to be enhancement and because of that.

That that Creek.

Possibility for us from a business development standpoint, and that business development, you saw with ACI and a Z, but we are excited with <unk> and with the Liv one ADC the V loss with the war one ADC because essentially.

Dean Y. Li: And so when you look at our internal pipeline, we speak about having over 25 mechanisms in the clinic, and you're aware that three immune modulatory mechanisms are advancing into phase three, and they have the opportunity to be co-formulated. Our TIGIF, our LAG-3, our CTLA-4, we also showed IOPS. The other sort of thing that I would also emphasize is that, you know, the word is sometimes overused, but it's called orthogonal.

We're confident that <unk> plus chemo works really well, we're first in class best in class and transformative impact class and loans and so.

And vivo and those are adcs, where youre essentially developing a chemotherapy, that's a little bit more precise but our interest is past that I would call your attention to peloton, which is essentially targeting and oncogenic nodal pathway and we.

Dean Y. Li: But I simply say that Kutruda, when mixed with tumor killing mechanisms or standard of care mechanisms, like chemo surgery and and potentially radiation there seems to be enhancement and because of that you know that that creates a possibility for us from a business development standpoint and that business development you saw with ACI and AZ but we are excited with CIGEN with the LIV1 ADC the VELOS with the ROR1 ADC because essentially they're they're we're confident that tembro plus chemo works really well right we're first in class best in class and transformative in class in lung and so CIGEN, VELOS those are ADCs where you're essentially developing a chemotherapy that's a little bit more precise but our interest is past that I would call your attention to Peloton which is essentially targeting an oncogenic nodal pathway and we would hope that that not only can we advance that Peloton with a potential 2021 filing but we're also interested in looking at that HIF2-alpha in relationship to Pembrolizumab but I also want to emphasize that that's focusing on on Keytruda as a foundational medicine that can combine with many internal and external aspects. I would just end by simply saying we are in an advantage situation.

And would hope that that not only can we advance at peloton with a potential 2021 filing but we're also interested and looking at that hit two alpha and relationship to Pembina and laser Matt.

But I also want to emphasize that that focusing on on keytruda as a foundational medicine that can combine with many internal and external assets I would just and by simply saying we are in a advantage situation and the advantage situation is that.

If you are developing a drug and cancer and your biotech company you must ask what youre.

Molecule will do in relationship to IL, and if youre going to look for a partner youre going to look for a partner who can give you that quickness that speed and that rigor.

Advance that and so when we say that we have 1400 trials, including more than 950 combinations and more than 90 Registrational trials.

We're mining.

Myself that that most of those combinations or in combinations with other assets from other companies. So it allows us to do BD non.

Dean Y. Li: The advantage situation is that if you are developing a drug for cancer and you're a biotech company, you must ask what your, (inaudible) Thank you, Daina. Next question, please, Lara. Thank you, sir. Your next question will come from the line of Mr. Umer Raffat from Evercore ISI. Sir, your line is now live.

And that simply by looking at Powerpoint decks, but by actually getting our hands wet with the agents of other company.

And.

Thank you Dana next question please.

Thank you Sir your next question will come from the line of Mr. Nomura <unk> from Evercore ISI. Your line is now line go ahead. Please.

Dean Y. Li: Go ahead. Hi, thanks so much for taking my question and my congratulations to Rob as well. I wanted to focus on the COVID antiviral. And my question is, is it fair to assume that the first upcoming trial is the hospitalized trial, and the time from symptoms to study enrollment is a little more loose in the hospitalized trial versus non-hospitalized? So should we assume that the setting in the hospital is more difficult?

Hi, Thanks, so much for taking my question and my congratulations to Rob as well I wanted to focus on the Covid and MRO and my question is is it fair to assume that the first upcoming trial is the hospitalized trial.

And the time from symptoms to study enrollment is a little more loose in the hospitalized trial versus non hospitalized. So should we assume that hospitalized setting is more difficult and could you also update us on your progress for attempting to characterize in vitro activity against the new variant. Thank you.

Dean Y. Li: And could you also update us on your progress in attempting to characterize in vitro activity against the new variants? Thank you. Yeah, so let me take both of those questions.

Yes, So let me take both of those questions. The first thing is we're advancing it in bulk.

Dean Y. Li: The first thing is that we're advancing it in bulk. We think it's important to do it in both, and so there's no distinction between hospitalized or non-hospitalized patients.

And.

We think it's important to do it in bulk.

And so there is no distinction between Hospitalize R. R.

Non hospitalized patients, we think we need to advance it for both beef.

Dean Y. Li: We think we need to advance it for both because we believe that this will affect the viral replication and viral load. In terms of the other question, let me just make sure, the other question was about the variant. We need to do those experiments, but the mechanism by which Monu-Piravir works... We would predict that it would work for all the variants.

We believe that this will effect.

The viral application and and viral load.

In terms of the other question.

Let me just make sure. The other question was variant and the variant.

We need to do those experiments, but the mechanism by which <unk> works.

And would make it very we would predict that it would work for all the variant and I would remind everyone that <unk> doesn't just work.

Dean Y. Li: I would remind everyone that monu-pure doesn't just work against coronavirus. It works for many RNA viruses and many respiratory RNA viruses. So the variance difference within a SARS-CoV-2 is there's variation, but that variation is much smaller than the variation that you see with, You know, whole different classes of RNA viruses.

Corona viruses it works for many RNA viruses and many respire Tory RNA viruses, so that so the variance difference within it.

Sars Covid two is theirs.

And there's variation, but that variation is much smaller than the variation that you see with.

And whole different classes from RNA viruses, but to answer your question, specifically, we need to test that.

Dean Y. Li: But to answer your question specifically, we need to test that, to prove that. But every expectation is that the variant would be taken care of by Monu-Piravir based on its mechanism of action. Thank you, Umer. Next question, please. Thank you. So your next question will come from the line of Steve Scala from Cowen. So your line is now live. Go ahead.

And that but every expectation is that the variance would be taken care of by ammonia pair of <unk> based on mechanism of action.

Thank you and our next question please.

Thank you Sir your next question will come from the line of Steve Scala from Cowen <unk> Co. Your line is now line go ahead. Please.

Thank you and let me add my congratulations to Rob and thanks to Ken for your many contributions Ken I think two of your more significant contributions to Merck.

Unknown Attendee: Thank you, and let me add my congratulations to Rob and thanks to Ken for your many contributions. Ken, I think two of your more significant contributions to Merck were guiding it through the Vioxx litigation and buying Shearing Plow. The industry once again finds itself dealing with CV risk of oral arthritis drugs, and you don't prefer big deals. On the former, what observations would you make on Vioxx 15 years later, particularly since I believe it's back on the market?

And we're guiding it through the <unk> litigation and buying Schering plough. The industry. Once again finds itself dealing with CV risk of oral arthritis, scribes and you don't prefer big deals on.

On the former what observations would you make on <unk> 15 years later.

Particularly since I believe it's back on the market.

And why do you not prefer big deals when it was perhaps your biggest contribution thank you.

Unknown Attendee: And why do you not prefer big deals when it is perhaps your biggest contribution? Thank you. So thank you for giving me the opportunity to reflect here. Let me start by saying that for a company like Merck, you have to stand strong on your heritage, and people see this as a litigation defense, but I think for every one of us inside the company, it was really about articulating to an audience, particularly in that case, jurors, what this company really stood for. And I thought we won repeatedly because we were able to remind people of the importance of what we do for the world and the integrity by which we do it.

So thank you for giving me the opportunity for retrospective Pierre let me start by saying I think if there's one lesson that I learned from biopsy.

It is that for a company like Merck you have to stand strong on your heritage and people see the effect of litigation defense, but I think for every one of us inside the company. It was really about articulating two and audience, particularly in that case jurors.

This company really stood for and I thought we won repeatedly because we were able to remind people of the important from what we do for the world and the integrity by which we do it.

Unknown Attendee: I won't go into any more details about the decision to withdraw the drug, but it was also based largely on this company's sense of what was in the best interest for patients based on what we knew at that time. On the issue around Sharon Plow, this company was in a very different situation at that time, relative to its pipeline and relative to its growth prospects. And that deal was done at a time when, frankly, we saw an opportunity in the market based on where the valuations of companies were.

So I won't go into any more details about the decision to withdraw the drug but it was also based largely on this company.

And the best interest for patients based on what we knew at that time.

The issue around Schering plough.

This company wasn't a very different situation at that time relative to its pipeline relative to its growth prospects.

And that deal was done at a time, where frankly, we saw.

And opportunity and the market based on where.

The valuations of companies, where we saw that as an opportunity that was appropriate from Merck back in 2009, and the reality of the world is none of US were really smart enough to know that among the assets. We were acquiring with <unk>. So I would like to take a bow, but that's a classic example of and now the fallacy.

Unknown Attendee: We saw that as an opportunity that was appropriate for Merck back in 2009. And the reality of the world is, none of us were really smart enough to know that among the assets we were acquiring was Pembroke-Elizabeth. So I would like to take a bow, but that's a classic example of a narrative fallacy when people say, "Wow, look at a great deal you did."

And when people say Wow look at a great deal you did.

Unknown Attendee: I think the one thing that we learned from that deal is that when we bought that company, we actually had our eye on Organon and the work that was being done in the basic research labs at Organon. And so we knew that we were buying a company that not only gave us an opportunity for cost synergy but gave us an opportunity for growth based on the quality of the science. And so, you know, at the end of the day, the problem with large transactions, and I think if you look at the history of this industry, is that they are really difficult for our research organizations to respond to and recover from. And so that's the main reason I oppose those mergers is because I think they're highly disruptive.

I think the one thing that we learned from that deal is that when we bought that company, we actually had our eye on organ on and the work that was being done and the basic research labs, and Oregon on and so we knew that we were buying a company that not only gave us an opportunity for cost synergies, but gave us and opportunity for growth based on the quality of.

Of the five.

And so.

And of the day the problem with large transactions and I think if you look at the history of this industry.

They are really difficult for our research organizations to respond to and recover from and so that's the main reason I oppose foot those mergers is because I think the highly disruptive and then at the end of the day when you get through your cost synergies you still either have a pipeline or you don't.

Unknown Attendee: And then at the end of the day, when you get through your cost synergies, you still either have a pipeline, or you don't. And what we're focusing on right now is developing that pipeline. So thanks for those questions. Thank you, Steve. I realize it's nine o'clock.

And what we're focusing on right now is developing that pipeline. So thanks for the question. Thanks.

Steve I realize it's nine o'clock, we're prepared to continue on with some additional questions and next question. Please.

Peter Dannenbaum: We're prepared to continue on with some additional questions. The next question, please. Thank you, sir. Your next question will come from the line of Mr. Naveen Jacob from UBS. Your line is now live, sir. Go ahead.

Your next question will come from the line of Mr. Navin Jacob from UBS. Your line is now likely go ahead Tom.

Rob Davis: Hi, thank you very much for taking my questions. I'll add my congratulations to the course as well, to both Ken and Rob. Rob, if I may ask about Organon, please. In the past, Merck has suggested that there are some pipeline assets that could furnish the Organon spin-off. I'm wondering if there's any more color to add as to what those assets may be, just to help us with trying to model out what revenues could look like for the next few years. Thanks for the question, Naveen.

Alright, Thank you very much for taking my questions I'll add.

And congrats to the course as well to both Ken and Rob.

Rob if I may ask about organon. Please in the past Merck has suggested that there are some.

Pipeline assets.

That could furnish the organon spin off.

Wondering if there's any more color to add as to what those assets may be.

Just to help us with trying to model out what revenues could look like.

For the next few years.

Rob Davis: As you look at Organon and the assets that will make up that spin, the key growth drivers that sit within that business are, first and foremost, the women's health business. The new business that we have is anchored by Nexplanon, which we continue to believe is going to be a blockbuster drug. It has patent protection for several years.

Yes. Thanks for the question to me and so as you look at Oregon on and the assets that will make up that.

That.

And that's been the key growth drivers that sit within that business is first and foremost the women's health business anchored by Nexplanon, which we continue to believe is going to be a blockbuster drug. It has patent protection for several years.

Rob Davis: It is growing globally, and as you look at the need for contraception, it continues to fill a very important niche. So that is a core area of growth. And then, obviously, surrounding that is the broader women's health business, including our fertility drugs and other drugs. So that business is the core growth driver. If you could dissect within Merck and look at that business, excluding the impact of the loss of exclusivity of some key franchises, that business has been growing and will continue to grow.

It is growing globally and as you look at the need for oral contraception and continues to fill in and very important niche. So that is a core area of growth and then obviously surrounded surrounding that as the broader.

Women's health business, including our fertility drugs and other drugs. So that business is the core growth driver and if you if you could dissect within Merck and look at that business, excluding the impact of the loss of exclusivity of some key franchises that has been growing and will continue to grow so really what is accelerating the growth will be further.

Rob Davis: So really, what is accelerating the growth will be further focus and investment in that. And then you layer upon that the biosimilars business, which is really a burgeoning business, very small now, but will grow very fast and will contribute meaningfully to the growth. So between those two pieces of Organon, they will comprise, I think, as we get over the next four or five years, they're going to be 30 to 40 percent of the total revenue of the company. The reason why the business has been declining over the last couple of years is really twofold. One, it is mainly the loss of exclusivity. Most recently, we're experiencing the loss of new brains. Before that, we had Zetya Vitorin.

Our focus and investment and that and then you layer upon that the Biosimilars business, which is.

Really a burgeoning business very small amount, but will grow very fast.

And we will contribute meaningfully to the gross so between those two pieces of organ on they will comprise I think as we get out over the next four or five years theyre going to be 30, 40 plus percent of the of the total revenue the company why the business has been declining over the last couple of years is really twofold. One it is mainly loss of exclusivity.

Recently, we're experiencing the loss of Neuberger, Inc.

Before that we had valued by torn and so we've been hit by those low <unk> as we look forward. They really don't have those those should start to sunset as we get through 2021. So it is really going to allow those businesses, which had been good businesses to start to shine and then they will accelerate that growth through focus and investing.

Rob Davis: So we've been hit by those LOEs. But as we look forward, they really don't have them. Those should start to sunset as we get through 2021. So it is really going to allow those businesses, which have been good businesses, to start to shine. And then they will accelerate that growth through focus and investment, and more of a core formulation strategy and a business development strategy to augment those assets over the long term. So I do think they will continue to look at the assets and ask how they can extend them. How can they broaden them?

Net and more of a co formulation strategy and our business development strategy to augment those assets long term. So I do think they will continue to look at the assets and ask how can they extend them how can they broaden them, but thats really the focal point there are no real key R&D programs being transferred over its more of.

Rob Davis: But that's really the focal point. There are no real key R&D programs being transferred over. It's more of how they will focus on those strategies moving forward across those growth businesses with the LOEs out of the base. Great. Thank you, Naveen.

And how they will focus on those strategies moving forward across those growth businesses with the low use out of the base right.

Great. Thank you and the very next question. Please.

Rob Davis: Next question, please. Thank you. So your next question will come from the line of Mr. Greg Gilbert from Trurist. Sir, your line is now live. Go ahead, please. Thanks, and congrats, gentlemen.

Thank you Sir our next question will come from the line of Mr. Gregg Gilbert from CLSA. Your line is now lines go ahead. Please.

Thanks, and congrats gentlemen.

Maybe to partner for the newer guys and the newer role and what are some modalities you'd like to enhance or add to MRO and Rob I realize this decision has been made on animal health at least for now and your comments are obviously in line with what <unk> been saying for a few years.

Dean Y. Li: Dean, what are some modalities you'd like to enhance or add to MRL? And Rob, I realize this decision has been made on animal health, at least for now. Your comments are obviously in line with what Ken has been saying for a few years. And I certainly get that Merck's investing in that business and that it's performing well, but how do you bridge the gap between how helpful it is to Merck versus how valuable it would be if it stood alone and traded at 35 times earnings or more?

And I, certainly get that Merck is investing and that business and that it's performing well, but how do you bridge. The gap between how helpful is to Merck versus how valuable it would be if it stood alone and traded at 35 times earnings or more I realized thats one moment in time, but it's not like these peers are just all of a sudden trading and a high multiple and are likely to change.

Dean Y. Li: I realize that's one moment in time, but it's not like these peers are just all of a sudden trading at a high multiple and are likely to change. So, again, understand why it's helpful to Merck, but how do you bridge the gap to why it's not better served and better valued elsewhere? Thank you.

Again understand why it is helpful to Merck.

But how do you bridge the gap to why it's.

Not better served.

And better valued elsewhere. Thank you.

I'll take that first question.

Dean Y. Li: I'll say two or three things. The first thing is modalities are important. They're platforms. It's critical that we focus on products, but if you don't have the right platforms, it makes it more difficult for you to move quickly.

Ill.

Say two or three things the first thing is.

Modalities are important the platform it is.

Critical that we focus on products, but if you don't have the right platforms.

And it makes it more difficult for you to move quickly.

In terms of platforms that we are building currently clearer.

Dean Y. Li: In terms of platforms that we are building currently, clearly, we're a company that's really well known for our chemistry. And over the last few years, we've become increasingly a more biologics company with Keytruda. And so our continued evolution to use that from antibodies to bispecific immune engagers to trinkets, protein engineering. Those fields are going to be very important. And as we build biologics, it will also help us in the relationship between chemistry and biologics, especially with target therapy.

Clearly, we're a company that's really well known for our chemistry and over the last few years, we've become increasingly more biologics company with Keytruda and.

So our continued evolution to use that from antibodies to buy specific immune engaged <unk> to shrink its gene and.

Protein engineering.

Those fields are going to be very important and as we build biologics. It will also help us and relationship to the space between chemistry, and biologics, especially with targeted therapy. So that's a very important place but.

Dean Y. Li: So that's very important. What I would also say is that I kind of group them into the nucleic acids, whether you talk about mRNA or sRNA or gene delivery systems, those that group together we have to take a look at.

But I would also say is that.

Kind of group them and the nucleic acid, whether you talk about mrna our FRE and a R. R gene delivery systems and those that group, we have to take a look at.

Dean Y. Li: But one can't willy nilly decide, I want this platform, because I'm really interested in the platform because it's neat and cool. One has to say, what am I going to do with that platform? What is the product? How am I going to drive it from discovery to development? To registration?

But one can't Willy Nilly decide I want this platform because I'm really interested and the platform that it's neat and cool one has to say what am I going to do with that platform. What does the product how long and we're going to drive it from discovery to development to registration. So we look at modalities and we look at what is moving.

Dean Y. Li: So we look at modalities, and we look at what is moving throughout the whole landscape, but we don't get enamored specifically with a platform by itself. Okay, Rob. Okay, great. And to the question on animal health. So, you know, obviously, I would start by saying we look at this objectively. So you should not assume that there is some form of philosophical, you know, opposition to thinking about animal health differently. It comes from an objective analysis of what we think creates the greatest long-term value for Merck shareholders.

Throughout the whole landscape, but we don't get enamored specifically on a platform by itself.

Okay. Okay.

Okay, great and to the question on <unk>.

Animal health so.

And we obviously.

I would start by saying we look at this objective with so you should not assume that there is some form of <unk>.

Philosophical opposition to thinking about animal health differently. It as it comes from and objective analysis of what we think creates the greatest long term value.

For the Merck shareholder and and Thats. Our focus is long term value creation as I look at the animal health business and and.

Dean Y. Li: And that's our focus, long-term value creation. As I look at the animal health business, and if you really decompose what's happened and why we feel like we're the rightful owner of this asset, you have to start to question where the growth is coming from in that business and what would happen outside of Merck. I would start with the fact that we do see meaningful synergies coming from our collaboration with Merck Research Labs.

And if you really decompose what's happened and why we feel like we're the rightful owner for this asset.

You have to start to challenge, where is the growth coming from and that business and what would have been outside of Merck.

I would start with the fact that we do see meaningful synergies coming from.

The collaboration with Merck Research Labs, as I mentioned, a big portion of the growth, we're going to see and animal health long term is coming from new products and those new products are in many instances coming on the companion animal space through.

Dean Y. Li: As I mentioned, a big portion of the growth we're going to see in animal health long term is coming from new products. And those new products are, in many instances, coming into the companion animal space through products that they've discovered working with MRL and looking at the human health catalog. And there are also new products coming in vaccines, and obviously, we're the leader in vaccines on the human health side. We're a leader in vaccines on the animal health side.

And products that they discovered working with MRO and looking at the human health catalog and there are also new products coming and vaccines and obviously, we're the leader and vaccines on the humor and health side, we're a leader and vaccines on the animal health side, so across the pillars of our excellence Theres, a nice alignment from a synergy and that is driving that.

Rob Davis: So across the pillars of our excellence, there's a nice alignment of synergy, and that is driving their growth. It's not by accident that they are one of the fastest growing businesses in the animal health space. It's because of our ability to focus on innovation and leverage those synergies. And then, beyond that, I think you have to look at each company and the facts and take them one at a time. Just as an example, if you look back at when Pfizer spun out Zoetis, Zoetis was a low-margin business that had not been invested in. Pfizer effectively said as much. They made a decision because they weren't focused on spinning it out.

Our growth there is not.

Line accident that they are one of the fastest growing businesses and the animal health space, It's because of our ability to focus on innovation and leverage those synergies and then beyond that I think you have to look at each company and the facts.

And take them one at a time. So just maybe one example, if you look back and when Pfizer spun out and <unk>.

The way this was a low margin business that had not been invested in Pfizer effectively said as much.

And they made a decision because they werent focused to spin it out that allow that company to bring focus and investment and margin expansion.

Rob Davis: That allowed that company to bring focus and investment and margin expansion that has allowed that multiple to really take off. We already have in our own animal health business a high margin business where we're focused and invested. So there's not a big margin lift opportunity.

And has allowed that multiple to really take off we already have and our own and health business.

A high margin business, where we're focused and invested so there is not a big margin lift opportunity and there is not frankly, a big growth acceleration opportunity because I believe we fully invest to drive both the margin and the growth today. So I think as you're thinking in that regard also you have to look at it and then you have to ask what does the cough.

Rob Davis: And there's not, frankly, a big growth acceleration opportunity because I believe we fully invest to drive both the margin and the growth today. So I think as you think in that regard, also, you have to look at it. And then you have to ask, what is the contribution to Merck?

Attribute to Merck, it's accretive to our growth, it's accretive to cash flow, it's and annuity like business.

Rob Davis: It's a creative way to grow our growth, it's a creative way to cash flow, it's an annuity-like business, that allows diversification away from the human health business, which we know is important. And, and it's one where, as we look forward, we continue to believe long-term value will be created. So that's just a few of the points that I would make.

And that allows us diversification away from the human health business, which we know is important and and it's one where as we look forward. We continue to believe long term value will be created so thats just a few of the.

And the points that I would make and I would note we did where we saw a different set of facts as we did with consumer we will make the right decision, but we continue to believe keeping this business as part of Merck has the best long term value creator first and for our shareholders and Thats what drives our thinking Greg. Thank you, Greg we have time for one.

Rob Davis: And I would note, you know, we did where we saw a different set of facts; as we did with consumers, we will make the right decision. But we continue to believe keeping this business as part of Merck is the best long-term value creator first for our shareholders. And that's what drives our thinking.

Rob Davis: Great. Thank you, Greg. We have time for one more question. Thank you, sir. Your next question will come from the line of Ms. Mara Goldstein from Mizzou Hill. Ma'am, your line is now live. Go ahead.

More questions.

Thank you Sir your next question will come from the line of MS. Mara Goldstein from Mizuho Ma'am. Your line is now line go ahead, please great and thanks, so much for fitting me and so.

Great. Thanks so much for fitting me in. So, Rob, I just have a question for you, and that is, with the benefit of having occupied the CFO seat, what are you looking for from that position once you have transitioned to your new role as CEO? And, if I could also just ask, with the incremental bump in the operating margin guidance post-spinout, does that change the upper end of the aspirational dividend payout ratio as well?

I just have a question for you and that is with the benefit of having occupying occupy and CFO seat.

What are you looking for from that position. Once you have translated transition to euro and new role as CEO and if I could also just ask with the incremental bump and that.

Operating margin guidance post spin out does that change the upper end of the aspirational dividend payout ratio as well.

Yes, so on the first question with regard to.

Yeah, so on the first question, with regard to the next CFO of the company, you know, what I would expect from that person, and what I think is an important role that the CFO can play, is that, obviously, first and foremost, you have to be a strong fiduciary. For the company, you have to focus and make sure that the controls are in place, compliance is met, and that the company is meeting its reporting responsibilities. That's kind of table stakes and expected.

The next CFO of the company.

What I would expect from that person and what I think is an important role that the CFO and play is to obviously first and foremost you have to be a strong fiduciary for.

For the company you have to focus and make sure that the controls are in place. The compliance is met and that the company is meeting its reporting responsibilities, that's kind of table Stakes and expected what differentiates the CFO and my perspective is the ability to partner with the business to find solutions on how to grow strategically and as I mentioned and the early.

What differentiates a CFO, in my perspective, is the ability to partner with the business to find solutions on how to grow strategically. And as I mentioned in the earlier comments, we're going to be investing for growth. But we know that there's going to be pressure, there's a pressure on margins, the world is transforming around us; we're going to have to find ways to drive productivity, to get more from every dollar we invest.

And your comments were going to be investing for growth, but we know that there's going to be pressure on.

On margins the world is transforming around us, we're going to have to find ways to drive productivity.

And every dollar we invest more from the dollar and I think that's an important area, where our CFO can help the one thing that being CFO allow me to do I said at the crossroads between each of the divisions and it.

And I think that's an important area where a CFO can help. The one thing that being CFO allowed me to do, I sat at the crossroads between each of the divisions, and it allowed me to see the whole company and start to look at Merck as an integrated whole, and to start to look at how we can challenge and drive optimization at the seams that sit between the divisions, because, frankly, those are always where, if you will, the corporate tax is paid.

Allow me to see the whole company and to start to look at Merck as an integrated whole and to start to look to how can we challenge and drive optimization at the seams that sit between the divisions because frankly those are always where the corporate tax is paid and the more you can eliminate those inefficiencies and more productive.

And efficient and you can go and I believe that's where the.

Our CFO should do on your question around the margin expansion it does not change.

Our view of the dividend payout ratio.

We're still shooting for that 47% to 50% range.

And the more you can eliminate those inefficiencies, the more productive and efficient you can be. And I believe that's what a CFO should do. On your question about the margin expansion, you know, it does not change our view of the dividend payout ratio. We're still shooting for that 47 to 50% range.

And obviously, we're looking at that both.

Both now and but even more importantly, as we think post spin and then we'll continue to reassess that as we go but right now that is continues to be our long term goal.

We would we would shoot for.

Thank you mayor Ken do you have some closing remarks, thanks, Peter as you've heard.

We are executing on our clinical and commercial priority, while making the necessary changes and our business model and importantly, investing and opportunities for future growth for the short and intermediate and longer term I am confident that if we continue to follow this strategy and with new leadership charged with cash.

And obviously, we're looking at that both now, but even more importantly, as we think post-spin. And then we'll continue to reassess that as we go, but right now, that continues to be our long-term goal that we would shoot for. Thank you, Mara. Ken, do you have any closing remarks? Thanks, Peter. As you've heard, we are executing on our clinical and commercial priorities while making the necessary changes to our business model and, importantly, investing in opportunities for future growth in the short, intermediate, and longer term.

A fresh look at how we operate our business and our strategic opportunity and Cha.

And also with taking the right actions from Merck going forward that.

And that the company will be positioned to continue to deliver important value for patients and shareholders and the future. It's been a privilege working and this job for 10 years and.

I'm confident that if we continue to follow this strategy and, with new leadership, charged with taking a fresh look at how we operate our business and our strategic opportunities, and charged also with taking the right actions for Merck going forward.

Pleased to be handing it over to Rob and the senior team at this time and I want to thank you for joining us and for your continuing interest and support I Hope you have and healthy and happy to EPS.

Thank you all.

Thank you Sir Thank you so much present, and then again and thank you everyone for participating. This concludes today's conference you may now disconnect.

That the company will be positioned to continue to deliver important value to patients and shareholders in the future. It's been a privilege working in this job for 10 years. I'm pleased to be handing it over to Rob and the senior team at this time. And I want to thank you for joining us and for your continuing interest in supporting us. I hope you have a healthy and happy New Year. Thank you all.

And have a long meeting.

And and.

And then.

Net.

[music].

And.

And.

Non.

And.

And.

[music].

The momentum in the deal.

[music].

Thank you, sir. 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. Thank you for watching!

Yes.

And we.

[music].

Yes.

Yes.

And.

[music].

And.

And then.

And.

Moving.