Q3 2021 Merck & Co Inc Earnings Call

Grace Lacra: Good morning. My name is Grace Lacra, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Merck & Co. Q3 Sales and Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is green Slacker and I'll be your conference operator today at this time I would like to welcome everyone to the American Cold Q3 sales and earnings conference call. All lines have been placed on mute to prevent any background right.

Grace Lacra: 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 star then the number one on your telephone keypad. To withdraw your question, press the pound key. Thank you. I would like to turn the call over to Peter Dannenbaum, Vice President of Investor Relations. Thank you.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question. During this time simply press Star then the number one on your telephone keypad until we draw a question press the pound key. Thank you I would now like to turn the call over to Peter dining Baum, Vice President of Investor Relations Sir.

Peter Dannenbaum: Thank you, Grace, and good morning. Welcome to Merck's third quarter 2021 conference call. Speaking on today's call will be Rob Davis, our Chief Executive Officer, Frank Clyburn, President of Human Health, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee, President of Merck Research Labs. Before we get started, I would like to point out a few things. You will see that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items.

Thank you Grace and good morning, welcome to Merck's third quarter 2021 conference call speaking on today's call will be Rob Davis, Our Chief Executive Officer, Frank Library precedent of Human Health, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee President of Mercury Research Labs.

Before we get started I'd like to point out a few items you will see that we have items in our GAAP results such as acquisition related charges restructuring costs and certain other items you should note that we have excluded these from our non-GAAP results and provide a reconciliation in our press release.

Peter Dannenbaum: You should note that we have excluded these from our non-GAAP results and provided a reconciliation in our press release. I would like to remind you that some of the statements that we make today may be considered forward-looking statements within the meaning of the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

I would like to remind you that some of the statements that we make today may be considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995, such statements are made based on the current beliefs of 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 risks and uncertainties. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Our FTC filings, including Item 1A in the 2020-10-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.

If our underlying assumptions prove inaccurate or uncertainties materialize actual.

Results may differ materially from those set forth in the forward looking statements.

Our SEC filings, including item one a in the 2020 10-K identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected in any of our forward looking statements made this morning, Merck undertakes no obligation to publicly update any forward looking statements.

Peter Dannenbaum: Merck undertakes no obligation to publicly update any forward-looking statements. During today's call, a slide presentation will accompany our speakers' prepared remarks. The presentation, today's earnings release, as well as our SEC filings are all posted to the investor relations section of Merck's website. With that, I'd like to turn the call over to Rob.

During today's call a slide presentation will accompany our speaker's prepared remarks, the presentation today's earnings release as well as our SEC filings are all posted to the Investor Relations section of <unk> website.

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

Rob Davis: Thanks, Peter. Good morning, everyone. And thank you for joining today's call. I'm very pleased to report significant progress across our key growth and strategic priorities in Merck's first four quarters as a more agile and focused science-driven company. We have strong momentum in our business, and we acted on a significant business development opportunity consistent with our strategy and executed commercially to drive strong performance this quarter. We're also working with diligence and urgency, which is reflected in the speed with which we were able to bring forward our investigational COVID-19 antiviral, molnupiravir, and to rapidly file for emergency use authorization with the FDA.

Thanks, Peter Good morning, everyone and thank you for joining today's call.

I am very pleased to report significant progress across our key growth and strategic priorities and Merck's first full quarter as a more agile and focused science driven company we.

We have strong momentum in our business we've achieved notable clinical milestones.

<unk> on our significant business development opportunities consistent with our strategy and executed commercially to drive strong performance this quarter.

We're also working with diligence and urgency which is reflected in the speed with which we were able to bring forward. Our investigational COVID-19, antiviral won't appear here and to rapidly file for emergency use authorization with yesterday.

Rob Davis: It's an exciting time at Merck, and we are determined to build on our recent successes as we pursue our mission to deliver innovations that save and improve lives and as we seek to create long-term value for both our patients and our shareholders. Dean will speak to the significant pipeline advancements we're making in a minute.

It's an exciting time at Merck and we are determined to build on our recent successes as we pursue our mission to deliver innovations that save and improve lives and as we seek to create long term value for both our patients and our shareholders.

Dean will speak to the significant pipeline advancements, we're making in a minute.

Rob Davis: I first want to congratulate him and our research colleagues, as well as our partners at Ridgeback Biotherapeutics, on the meaningful clinical results we recently reported regarding the development of monocular. Since the onset of the pandemic, Merck has sought out opportunities to apply its scientific expertise in the global fight against COVID-19. And we are very pleased to now be in a position to make a meaningful difference. As you are aware, at a planned interim analysis of our phase 3 trial in at-risk, non-hospitalized adult patients with mild to moderate COVID-19, doxazosin will appear to reduce the risk of hospitalization or death by approximately 50% compared with placebo. Based on these results, and in consultation with the FDA, we stopped our trial early.

But I first want to congratulate him and our research colleagues as well as our partners at <unk> bio therapeutics on the meaningful clinical results. We recently reported regarding the development of mall peer group.

From the onset of the pandemic.

Merck has sought out opportunities to apply our scientific expertise in the global fight against COVID-19.

And we are very pleased to now be in a position to make a meaningful difference.

As you are aware at a planned interim analysis of our phase III trial and at risk non hospitalized adult patients with mild to moderate COVID-19.

<unk> reduced the risk of hospitalization or death by approximately 50% compared with placebo.

Based on these results and in consultation with the FDA. We stopped our trial early we are now working with the FDA as the agency reviews, our EUA application and we look forward to next month's Advisory Committee discussion.

Rob Davis: We are now working with the FDA as the agency reviews our EUA application, and we look forward to next month's Advisory Committee discussion. I'm pleased with the progress we're making to meet supply and purchase commitments with numerous governments and healthcare systems around the world and with the success of our effort to rapidly build supply. I'm also proud that we will be positioned to provide access to patients around the world through voluntary license agreements, tiered pricing based on country affordability, and through our agreement with the Medicines Patent Pool.

I am pleased with the progress, we're making to ensure supply and purchase commitments with numerous governments and health care systems around the world.

And with the success of our effort to rapidly build supply.

I'm also proud that we will be positioned to provide access to patients around the world through voluntary license agreements tiered pricing based on country affordability and through our agreement with the medicines patent pool.

We've also taken a meaningful step towards augmenting our pipeline through business development, a key strategic priority.

The announced acquisition of <unk> is a perfect example of our effort to identify and bring them the strongest external science to supplement our own work.

Rob Davis: We've also taken a meaningful step towards augmenting our pipeline through business development, a key strategic priority. The announced acquisition of Acceleron is a perfect example of our effort to identify and bring in the strongest external scientists. To supplement our own work, Acceleron's lead product candidate, Tatercept, has the potential to become foundational as an add-on therapy in the treatment of pulmonary arterial hypertension, where there is a strong need for a new agent that can potentially address the underlying illness and not just the symptoms of this disease.

<unk> lead product candidate <unk> has the potential to become foundational as an add on therapy in the treatment of pulmonary arterial hypertension, where there is a strong need for new agent that can potentially address the underlying illness and not just the symptoms of this grievous disease.

We look forward to the completion of our tender offer in the near future and to receiving the necessary regulatory approvals that will permit us to close the transaction.

With its multibillion dollar peak sales potential and.

In commercial exclusivity well into the next decade.

So Todd Herceptin contributed meaningful revenue growth in the computer Hello elderly period.

Rob Davis: We look forward to the completion of our tender offer in the near future and to receiving the necessary regulatory approvals that will permit us to close the transaction, with its multi-billion dollar peak sales potential and commercial exclusivity well into the next decade. Tatterstep can contribute to meaningful revenue growth in the contributed LOE period. An important attribute of this and potential future targets. Dean and I will continue to work with our team to identify additional scientifically compelling business development opportunities, and we will also continue to pursue a robust and growing internal partnership.

An important attribute of this and potential future targets.

And I will continue to work with our team to identify additional scientifically compelling business development opportunities, while also continuing to pursue a robust and growing internal pipeline.

Our business performed exceptionally well this quarter and the team continues to display superior and focused execution.

We achieved very strong commercial and financial results with meaningful growth across our oncology vaccines and animal health businesses and even greater growth in earnings.

As expected Gardasil sales were particularly robust as we benefited from a sharp improvement in manufacturing output and availability of more doses to help address ongoing strong underlying demand.

Rob Davis: Our business performed exceptionally well this quarter, and the team continues to display superior and focused execution. We achieved very strong commercial and financial results with meaningful growth across our oncology, vaccines, and animal health businesses, and even greater growth in earnings. As expected, Gardasil sales were particularly robust, as we benefited from a sharp improvement in manufacturing output and availability of more doses to help address ongoing strong underlying demand. We are confident that the momentum we are seeing will continue through the end of the year, setting us up for continued growth over the next several years. We remain focused on our efforts to transform the way we work by evolving our operating model to be leaner, nimbler, and more digitally enabled.

We are confident that the momentum we are seeing will continue through the end of the year setting us up for continued growth over the next several years.

We remain focused on our efforts to transform the way we work.

By evolving our operating model to be leaner and Nimbler and more digitally enabled.

My leadership team is fully aligned behind the need for Merck to work with more speed.

<unk> and agility across all aspects of our business. We must stay ahead of the evolving external environment to ensure we are able to make the significant investments required to deliver future innovations that will address unmet medical needs across the globe.

In doing so we aim to deliver important medicines and vaccines to patients.

While continuing to drive long term sustainable growth.

And value creation for all of our stakeholders.

Finally, I want to highlight the recent publication of Merck's, environmental social and governance progress report.

Access to health.

Rob Davis: My leadership team is fully aligned behind the need for Merck to work with more speed, urgency, and agility across all aspects of our business. We must stay ahead of the evolving external environment to ensure we are able to make the significant investments required to deliver future innovations that will address unmet medical needs across the globe. In doing so, we aim to deliver important medicines and vaccines to patients, and will continue to drive long-term sustainable growth and Value Creation for all of our stakeholders.

Our employees, including their health and safety as well as engagement and diversity.

Environmental sustainability and ethics and values.

These ESG efforts are grounded in the core values that have always guided our mission and support our business strategy. We look forward to providing ongoing updates on these important efforts.

With that I will pass it to Frank to review the details behind our human health performance.

Thanks, Rob good morning.

As Rob highlighted the momentum in our human health business continued in the third quarter, and we achieved 17% growth excluding the impact of foreign exchange.

We have continued to invest with urgency and patient activation programs that improve patient awareness and encourage more normal levels of physician office visits.

Rob Davis: Finally, I want to highlight the recent publication of Merck's Environmental, Social, and Governance Progress. This year's report highlights important updates on metrics and goals around our four ESG priority areas, which include access to health, our employees, including their health and safety, as well as engagement and diversity, environmental sustainability, and ethics and Value.

<unk> screening and vaccination rates.

These actions will ended benefiting patient health also meaningfully benefited are largely physician administered portfolio in the quarter.

In the United States, we are encouraged that wellness visits and surgical procedures remain at mostly normal levels.

Rob Davis: These ESG efforts are grounded in the core values that have always guided our mission and supported our business strategy. We look forward to providing ongoing updates on these important, With that, I will pass it to Frank to review the details behind our human health. Thanks, Rob.

And oncology, while screening rates and diagnosis continue to improve we are unfortunately still below pre COVID-19 levels and this is impacting new patient starts.

Outside of the United States, our business performance remained strong despite lingering impacts from the pandemic in certain markets.

Frank Clyburn: Good morning. As Rob highlighted, the momentum in our human health business continued in the third quarter, and we achieved 17% growth, excluding the impact of foreign exchange. We have continued to invest with urgency in patient activation programs that improve patient awareness and encourage more normal levels of physician office visits, oncology screenings, and vaccination rates. These actions, while aimed at benefiting patient health, also meaningfully benefited our largely physician-administered portfolio in the quarter. In the United States, we are encouraged that wellness visits and surgical procedures remain at mostly normal levels.

Now turning to the third quarter performance of our key brands My comments will be on an ex exchange basis.

In oncology Keytruda sales grew 21% to $4 $5 billion, reflecting continued robust global demand.

In the United States Keytruda continues to demonstrate durable momentum across all key tumors, including growth from our recent launches such as keynote 522, and neo adjuvant adjuvant triple negative breast cancer.

<unk> is continuing to extend its very strong overall Io class leadership.

Frank Clyburn: In oncology, while screening rates and diagnosis continue to improve, they are unfortunately still below pre-COVID levels, and this is impacting new patient recruitment. Outside of the United States, our business performance remains strong, despite lingering impacts from the pandemic in certain markets. Now turning to the third quarter performance of our key brands. My comments will be on an ex-exchange basis.

Improving new and total patient market share.

Contributor continues to maintain its leadership position in lung cancer, capturing eight out of 10 eligible new patients. Despite continued competition.

Outside of lung key tumors contributing to growth include renal cell carcinoma, triple negative breast MSI high esophageal and head and neck.

We're also excited by the recent approval and upcoming launch of keynote <unk> 826, which is the first anti PD one combination approved as a first line treatment of cervical cancer.

Frank Clyburn: In Oncology, Keytruda sales grew 21% to $4.5 billion, reflecting continued robust global demand. In the United States, Keytruda continues to demonstrate durable momentum across all key tumors, including growth from our recent launches such as Keynote 522 and neoadjuvant triple negative breast cancer. Kutrudia is continuing to extend its very strong overall I.O.

Outside of the United States Keytruda growth continues to be driven by lung cancer indications and the ongoing launches in head and neck and renal cell carcinoma.

We are continuing to see the opportunity to expand our reach into earlier lines of therapy materialize.

We're very excited about the potential upcoming adjuvant launches of keynote $5 64 in renal cell carcinoma, and keynote <unk> 716 in melanoma.

Frank Clyburn: class leadership, improving new and total patient market share. Contruda continues to maintain its leadership position in lung cancer, capturing 8 out of 10 eligible new patients despite continued competition. Outside of lung cancer, key tumors contributing to growth include renal cell carcinoma, triple negative breast, MSI high, esophageal, and head and neck.

In fact in the United States, we expect over half of Keytruda as growth to come from indications in early stage treatment settings through 2025 and to represent roughly 30% of total contributed sales by that time.

<unk> sales grew 25% and it remains the leading PARP inhibitor <unk>.

Frank Clyburn: We're also excited by the recent approval and upcoming launch of Keynote 826, which is the first anti-PD-1 combination approved as a first-line treatment for cervical cancer. Outside of the United States, growth continues to be driven by lung cancer indications and the ongoing launches in head and neck and renal cell carcinoma. We are continuing to see the opportunity to expand our reach into earlier lines of therapy materialize. We are very excited about the potential upcoming adjuvant launches of Keynote 564 in renal cell carcinoma and Keynote 716 in melanoma.

Growth was driven by our breast cancer indication and continued uptake of the most recent indications, including ovarian prostate and we look forward to the potential launch next year and a broader prostate population based on the propel trial.

<unk> sales grew 30%.

In the United States growth was driven by renal cell carcinoma and endometrial cancer.

We've seen very encouraging early trends from the launch of keynote $5 81 in first line renal cell carcinoma.

Outside the United States growth is reflective of the increased demand following an R&D listing in China in March of this year.

Frank Clyburn: In fact, in the United States, we expect over half of protrudus growth to come from indications in early stage treatment settings through 2025 and to represent roughly 30% of total protrudus sales by that time. Lymparza sales grew 25%, and it remains the leading PARP inhibitor. Growth was driven by our breast cancer indication and continued uptake of the most recent indications, including ovarian prostate, and we look forward to the potential launch next year in a broader prostate population based on the PROPEL trial. Lembeema sales grew 30%. In the United States, growth was driven by renal cell carcinoma and endometrial cancer.

We're also excited by the recent approval well and Greg for patients with certain DHL associated tumors.

We've received very positive feedback from scientific leaders providers and patients about the benefits of Wella rig, which is off to a promising start and we are hopeful to extend the reach of Wella Reg to broader RCC indications in the future.

Our vaccines portfolio continued to deliver strong growth from Gardasil, which grew 63% to $2 billion and has grown 35% year to date.

In the United States the increase in year over year growth was primarily driven by the timing of CDC purchases, which helped us overcome a below normal back to school season.

Frank Clyburn: We've seen very encouraging early trends from the launch of Keno 581 in first-line renal cell carcinoma. Outside the United States, growth is reflective of increased demand following NRDL's listing in China in March of this year. We're also excited by the recent approval of Wellireg for patients with certain VHL-associated tumors. We've received very positive feedback from scientific leaders, providers, and patients about the benefits of Wellyreg, which is off to a promising start, and we are hopeful to extend the reach of Wellyreg to broader RCC indications in the future.

Underlying demand for Gardasil remains strong and we are seeing some benefits from recovery of missed doses due to the pandemic.

Outside the United States growth was largely driven by strong <unk> demand in China, as well as increased supply and our ability to reallocate doses.

In our hospital acute care portfolio <unk> sales grew 15% driven by our ability to capture increased market share within the growing neural muscular blockade reversal class.

Frank Clyburn: Our vaccines portfolio continued to deliver strong growth from Gardasil, which grew 63% to $2 billion and has grown 35% year to date. In the United States, the increase in year-over-year growth was primarily driven by the timing of CDC purchases, which helped us overcome a below-normal back-to-school season. Underlying demand for Gardasil remains strong, and we are seeing some benefits from recovery of missed doses due to the pandemic. Outside of the United States, growth was largely driven by strong underlying demand in China, as well as increased supply and our ability to reallocate doses. In our hospital acute care portfolio, Brion sales grew 15% driven by our ability to capture increased market share within the growing neuromuscular blockade reversal class. Turning to our outlook,

Turning to our outlook.

The robust underlying demand for our products paired with our continued excellent commercial execution gives us confidence in the outlook for our business.

Mark has shown increased urgency and agility across our organization that has resulted in improvements that will enable meaningful future growth.

One guard. So we continue to expect robust ex U S demand and increased supply to drive fourth quarter performance.

We expect to see more normal seasonality for gardasil with the third quarter, reflecting the highest sales.

Our teams have been working to ensure we have the right processes in place to appropriately allocate doses to areas of increased demand, particularly as COVID-19 variance continue to impact certain geographies.

These dynamics will drive very strong year over year growth for Gardasil in the fourth quarter, driven by ex U S markets such as China.

Frank Clyburn: The robust underlying demand for our products, paired with our continued excellent commercial execution, gives us confidence in the outlook for our business. Merck has shown increased urgency and agility across our organization that has resulted in improvements that will enable meaningful future growth. On Gardasville, we continue to expect robust XUS demand and increased supply to drive fourth quarter performance. We expect to see more normal seasonality for Gardasil, with the third quarter reflecting the highest levels of sales.

Given global HPV vaccination levels remain low we continue to believe long term growth opportunity for Gardasil remains significant.

In oncology, we are encouraged by our strong performance throughout the pandemic with new launches more than offsetting the headwinds seen from reduced new patient starts.

We remain confident in the underlying demand for our broad and innovative portfolio, including Katrina Lim parser aniline bema, and we'd expect to drive sustained growth across key tumor types and in earlier stages of disease.

Frank Clyburn: Our teams have been working to ensure we have the right processes in place to appropriately allocate doses to areas of increased demand, particularly as COVID variants continue to impact certain geographies. These dynamics will drive very strong year-over-year growth for Gardasil in the fourth quarter, driven by non-U.S. markets such as China. Given global HPV vaccination levels remain low, we continue to believe the long-term growth opportunity for Gardasil remains significant. In oncology, we are encouraged by our strong performance throughout the pandemic, with new launches more than offsetting the headwinds seen from reduced new patient starts.

Next let me provide a few comments on the outlook for a moment peer of the year.

As Rob mentioned, we are very excited about the potential to offer the first oral treatment option to at risk adults with mild to moderate COVID-19 in an effort to help combat the pandemic.

Merck is committed to providing widespread access to manav year over year globally and is implementing a tiered pricing approach based on world Bank country income criteria.

We have announced a number of supply and purchase commitments to date and we continue to have discussions on similar agreements with customers around the world.

Frank Clyburn: We remain confident in the underlying demand for a broad and innovative portfolio, including Keytruda, Lymparza, and Lymvema, and we expect to drive sustained growth across key tumor types and in earlier stages of disease. Next, let me provide a few comments on the outlook for Mama Piravir. As Rob mentioned, we are very excited about the potential to offer the first oral treatment option to at-risk adults with mild to moderate COVID-19 in an effort to help combat the pandemic.

We are also encouraged by the recent unanimous vote by the Advisory Committee on immunization practices.

Upon adoption as a final recommendation by the CDC. This sequence would offer patients the broadest coverage with a strong immune response against their own types responsible for about two thirds of invasive pneumococcal disease cases in adults.

As we think about our pneumococcal portfolio more broadly we are excited about the potential opportunity for vacuum vans in the pediatric setting which represents a larger market segment.

Frank Clyburn: Merck is committed to providing widespread access to monopyramide globally and is implementing a tiered pricing approach based on World Bank country income criteria. We have announced a number of supply and purchase commitments to date, and we continue to have discussions on similar agreements with customers around the world. We are also encouraged by the recent unanimous vote by the Advisory Committee on Immunization Practices. Upon adoption as a final recommendation by the CDC, this sequence would offer patients the broadest coverage with a strong immune response against serotypes responsible for about two-thirds of invasive pneumococcal disease cases in adults.

To conclude there is continued momentum in our business driven by demand and strong commercial execution and we are well positioned as we move through the end of the year.

The growth in the third quarter underscores our confidence in the underlying strength of our business and global demand for innovative medicines and vaccines and we look forward to driving that growth long into the future.

With that I'll turn the call over to Carolina.

Thank you Frank good morning Al.

King <unk> exceptional financial performance in the third quarter.

We are making in our strong portfolio and pipeline as well as some business development are helping us deliver outstanding near term performance.

Frank Clyburn: As we think about our pneumococcal portfolio more broadly, we're excited about the potential opportunity for vacuvance in the pediatric setting, which represents a larger market segment. To conclude, there is continued momentum in our business, driven by demand and strong commercial execution, and we are well positioned as we move through the end of the year. The growth in the third quarter underscores our confidence in the underlying strength of our business and global demand for innovative medicines and vaccines, and we look forward to driving that growth long into the future. With that, I'll turn the call over to Caroline.

All such positioning us to continue to deliver important innovations and long term value to patients and <unk>.

Okay now.

Now turning to our third quarter results.

Total company revenues were $13 $2 billion, an increase of 20% or 19%, excluding the positive impact of foreign exchange.

The remainder of my comments will be on an ex exchange basis.

As Frank highlighted our human health business achieved increasing momentum growing 17%.

Caroline Litchfield: Thank you, Frank. Good morning.

Our animal health business also delivered robust growth with sales, increasing 14% driven by strong global demand are cost plus.

Caroline Litchfield: Our team drove exceptional financial performance in the third quarter. The investments we are making in our strong portfolio and pipeline, as well as in business development, are helping us deliver outstanding near-term performance, while also positioning us to continue to deliver important innovations and long-term value to patients and shareholders. Now turning to our third quarter results. Total company revenues were $13.2 billion, an increase of 20% or 19% excluding the positive impact of foreign exchange. The remainder of my comments will be on an ex-exchange basis.

Both companion animal and livestock.

In animal sales increased 18% driven by global demand in parasiticide, including the perfect line of products as well as companion animal vaccines.

Livestock sales increased 12%, reflecting strong global demand for ruminant and poultry products.

Our animal health intelligence product.

I will now walk you through the remainder of our P&L and my comments will be on a non-GAAP basis.

Caroline Litchfield: As Frank highlighted, our human health business achieved improving momentum, growing 17%. Our animal health business also delivered robust growth, with sales increasing 14%, driven by strong global demand across both companion animals and livestock. Companion animal sales increased 18%, driven by global demand for parasiticides, including the Bruvecto line of products, as well as companion animal vaccines. Livestock sales increased 12%, reflecting strong global demand for ruminant and poultry products, including our animal health intelligence products.

Gross margin was 76, 8% an increase of three percentage points, reflecting the favorable effect of product mix, partially offset by higher manufacturing costs.

Operating expenses increased 11% to four $7 billion.

With Jason by investments in our key growth pillars, particularly in support of return to care activities.

In our early and late stage pipeline, including mono per event.

Other expense increased by approximately $200 million, reflecting highest pension settlement cost.

Caroline Litchfield: I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis. Gross margin was 76.8%, an increase of 0.3 percentage points, reflecting the favorable effect of product mix, partially offset by higher manufacturing costs. Operating expenses increased 11% to $4.7 billion. This was driven by investment in our key growth pillars, particularly in support of return-to-care activities and in our early and late-stage pipeline, including monopirafib. Other expenses increased by approximately $200 million, reflecting higher pension settlement costs.

The effective tax rate was 13% a decrease of one four percentage points driven by discrete items.

Taken together, we earned $1 75 per share an increase of 26%.

Turning now to our 2021 non-GAAP guidance.

While the pandemic continues to impact many regions around the world health systems and patients have largely adapted.

This trend will continue.

Our guidance assumes the external transaction will close during the fourth quarter subject to the successful completion of the tender offer and regulatory approval.

Caroline Litchfield: The effective tax rate was 13%, a decrease of 1.4 percentage points driven by discrete items. Taken together, we earned $1.75 per share, an increase of 26%. Turning now to our 2021 Non-Gap Guidance. While the pandemic continues to impact many regions around the world, health systems and patients have largely adapted, and we assume this trend will continue.

And does not include potential sales or earnings from these tariffs.

The underlying strength of our business enables us to narrow and raised our expected revenue range to 40, Stephane Paul to $47 $9 billion.

Presenting growth, 14% to 15%, including a positive impact from foreign exchange.

But the one 5% using mid October rates.

Caroline Litchfield: Our guidance assumes the Acceleron transaction will close during the fourth quarter, subject to the successful completion of the tender offer and regulatory approval, and does not include potential sales or earnings from MonuPirafair. The underlying strength of our business enables us to narrow and raise our expected revenue range to $47.4 to $47.9 billion, representing growth of 14 to 15%, including a positive impact from foreign exchange of approximately 1.5% using mid-October rates Our gross margin is expected to be approximately 76.5%.

Our gross margin is expected to be approximately 76, 5%.

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

In other income and expense we expect expense.

$450 million.

We expect our full year tax rate to be between 14% and 14, 5%.

We have seen two 5 billion shares outstanding.

Taken together, we are raising and narrowing our EPS range to $5 65 to $5 70.

Reflecting significant growth of 25% to 26%.

Caroline Litchfield: We continue to expect operating expenses to grow at a high single-digit rate. In other income and expense, we expect expenses of approximately $450 million. We expect our full-year tax rate to be between 14% and 14.5%. We assume 2.54 billion shares outstanding. Taken together, we are raising and narrowing our EPS range to $5.65 to $5.70, reflecting significant growth of 25-26%. This range includes a positive impact from foreign exchange of approximately 2% using mid-October rates.

This range includes the positive impact from foreign exchange of approximately 2% using mid October rates.

As you consider your models there are a few areas to focus on.

Starting with <unk> revenue we.

The global opportunity to be approximately $5 billion to $7 billion through 2022, including $5 to $1 billion expected to be realized this year.

<unk> emergency use authorization in December.

As a reminder, we will share any profit equally with our partner reach back.

Caroline Litchfield: As you consider your models, there are a few areas to focus on. Starting with monoperovir revenue, we expect the global opportunity to be approximately $5 to $7 billion through 2022, including $0.5 to $1 billion expected to be realized this year. This assumes emergency use authorization in December.

That is responsible for recording global revenues and costs.

We will reflect the cost it shifts within cost of sales.

The data so we have had excellent momentum driven by strong demand and benefit from the step function increase in supply we are achieving this year.

First quarter sales will be lower than the first quarter due to normal seasonality and timing effects.

Caroline Litchfield: As a reminder, we will share any profits equally with our partner RIDGID. Merck is responsible for recording global revenues and costs and will reflect the profit share within the cost of sale. For Gardasil, we have had excellent momentum, driven by strong demand and benefits from the step function increase in supply we are achieving this year. Fourth quarter sales will be lower than the third quarter due to normal seasonality and timing effects.

We expect the growth in the quarter to remain very robust.

Animal health has had exceptional growth in the first three quarters of the year driven impart by the pandemic effect on pet adoption and spending.

In the fourth quarter, we will anniversary that effect and we expect a more normalized year over year growth rate as a result.

Our operating margin in the third quarter benefited from very strong revenue performance, including the normal seasonality of our vaccine business.

Caroline Litchfield: However, we expect the growth in the quarter to remain very robust. Animal health has had exceptional growth in the first three quarters of the year, driven in part by the pandemic effect on pet adoption and pet spending. In the fourth quarter, we will anniversary that effect, and we expect a more normalized year-over-year growth rate as a result. Our operating margin in the third quarter benefited from very strong revenue performance, including the normal seasonality of our vaccine business. As we move through the fourth quarter, we expect operating margins to normalize due to this seasonality and phasing of spend.

As we move through the fourth quarter, we expect operating margins can normalize due to seasonality and phasing of spend.

More broadly as we look out to 2024.

<unk> confident in our revenue potential and continue to believe it's underappreciated.

And we remain on track to achieve our 2024 operating margin target of greater than 42%.

Our capital allocation priorities remain unchanged.

Caroline Litchfield: More broadly, as we look out to 2024, we remain confident in our revenue potential and continue to believe it is underappreciated, and we remain on track to achieve our 2024 operating margin target of greater than 42%. Our capital allocation priorities remain unchanged. We will continue to invest in the business to drive the many significant near and long-term growth opportunities we see in our de-risked portfolio and rich pipeline. We will also continue to execute on our business development strategy, including our announced acquisition of Acceleron.

We'll continue to invest in the business to drive the many significant mid and long term growth opportunities, we see in our Davis portfolio and rich pipeline.

We also continued to execute on our business development strategy, including our announced acquisition of et cetera.

We will pursue additional value enhancing and strategic business development opportunities and we retain significant balance sheet capacity to do size.

We remain committed to the dividend with the goal of increasing it over time.

To the extent, we have excess cash we will return it to shareholders through share repurchases.

Caroline Litchfield: We will pursue additional value-enhancing and strategic business development opportunities, and we retain significant balance sheet capacity to do so. We remain committed to the dividend, with the goal of increasing it over time. To the extent we have excess cash, we will return it to shareholders through share repurchases. To conclude, Merck continues to make exceptional progress on its commitment to drive growth and value for patients and shareholders. We remain in a position of financial and operational strength which will enable us to deliver on that promise now and well into the future. Thank you.

To conclude.

<unk> continues to make exceptional progress on its commitment to drive growth and value for patients and shareholders.

Remain in a position of financial and operational strength, which will enable us to deliver on that promise now and well into the future with that I'd now like to turn the call over to Dave. Thank.

Thank you Caroline good morning, everyone. It is a pleasure to be here to provide a summary of progress made since our last quarter call.

I will provide an update on our oral anti viral candidate long nuclear bill.

I'd like to propose accelerant acquisition spotlight. Some recent progress with <unk> and finished with this analysis of notable regulatory milestones and clinical updates from across the pipeline.

Dean Y. Li: Thank you, Caroline. Good morning, everyone. It is a pleasure to be here to provide a summary of progress made since our last quarterly call. I will provide an update on our Oral Anti-Viral Candidate Moni Thiravir, highlight the proposed Acceleron Xquisition, spotlight some recent progress with Elantra Vera, and finish with a synopsis of notable regulatory milestones and clinical updates from across the pipeline. The need for additional treatment options remains key in combating the COVID-19 pandemic.

The need for additional treatment options remains key and combating the COVID-19 pandemic.

Interim analysis from move out our phase III study evaluating long you pay a fair and accurate non hospitalized patients with mild to moderate COVID-19 showed an approximately 50% reduction in the risk of hospitalization or death compared to placebo.

Of note through day 29, no deaths were reported in patients who received <unk> monotherapy compared to APAC on placebo.

This is the first oral anti virals for our respiratory virus.

Demonstrate benefit based on robust clinical outcomes.

The first to show a meaningful five day window for therapeutic intervention after symptom onset.

Dean Y. Li: The term analysis from MOVE-OUT, our Phase 3 study evaluating monotherapy in at-risk, non-hospitalized patients with mild to moderate COVID-19 showed an approximately 50% reduction in the risk of hospitalization or death compared to placebo. Of note, through day 29, no deaths were reported in patients who received monotherivir compared to 8 deaths on placebo.

Based on these positive results and that the recommendation of the independent data monitoring committee and in consultation with the FDA recruitment into the study was stopped early.

In light of these findings and given the urgency to address the pandemic. Our teams worked tirelessly to submit a robust package to the FDA for EUA within 10 days of receipt of the data.

Look forward to discussing the EUA submission had an upcoming meeting of the anti microbial drugs Advisory Committee scheduled for November 30th and in the interim we continue to engage with the FDA to support its review.

Dean Y. Li: This is the first oral antiviral for a respiratory virus to demonstrate benefits based on robust clinical outcomes, and the first to show a meaningful five-day window for therapeutic intervention after symptoms on.

<unk> also been submitted to multiple regulatory agencies around the world.

I do wish to take a moment to thank the investigators patients and their families for their participation and the move out study.

Dean Y. Li: Based on these positive results, and at the recommendation of the Interpreting Data Monitoring Committee and in consultation with the FDA, recruitment into the study was stopped early. In light of these findings, and given the urgency to address the pandemic, our teams worked tirelessly to submit a robust package to the FDA for EUA within 10 days of receiving data. We look forward to discussing the EUA submission at an upcoming meeting of the Antimicrobial Drugs Advisory Committee scheduled for November 30th. And, in the interim, we continue to engage with the FDA to support its review. Applications have also been submitted to multiple regulatory agencies around the world.

I'm also grateful to our collaborators at Emory University, Razorback and Merck's internal teams for the incredible work done in conducting this program during a very challenging time.

Our comprehensive vaccination strategy remains the best sustainable means to confront the COVID-19 pandemic.

Timely intervention following symptom onset with an oral agent that can be self administered at home may provide an additional meaningful option for patients health care systems, and public health, which could make a significant and positive impact on the pandemic.

Based on available viral sequence data.

Nuclear showed consistent efficacy against the gamma Delta and new COVID-19 dairy.

As a reminder, we continue to actively recruit participants in the move ahead trial, which is evaluating the safety and efficacy of <unk> and preventing the spread of COVID-19 within households, as a post exposure prophylaxis with a planned readouts in the spring of 2022.

Dean Y. Li: I do wish to take a moment to thank the investigators, patients, and their families for their participation in the move-out study. I am also grateful to our collaborators at Emory University, Ridgeback, and Merck's internal teams for the incredible work done in conducting this program during a very challenging time. A comprehensive vaccination strategy remains the best sustainable means to confront this COVID-19 pandemic. Timely intervention following symptoms onset with an oral agent that can be self-administered at home may provide an additional meaningful option for patients, health care systems, and public health, which could make a significant and positive impact on the pandemic.

Now turning to the proposed accelerant ex acquisition.

Accelerant has an excellent scientific pedigree, which has yielded important treatment for anemia in adult patients with certain rare blood disorders.

Our lead clinical candidate that's hardest that has the potential to be a foundational asset as an add on therapy for the treatment of pulmonary arterial hypertension.

And provide a complementary addition to our growing cardiovascular pipeline.

As such.

Knowing the close of the deal our strategy would be to advance the wide ranging phase III clinical program.

Yes.

Dean Y. Li: Based on available viral sequence data, monucleovir showed consistent efficacy against the gamma, delta, and mu COVID-19 variants. As a reminder, we continue to actively recruit participants in the MOVE AHEAD trial, which is evaluating the safety and efficacy of monoferavir in preventing the spread of COVID-19 within households as a post-exposure prophylactic with a planned readout in the Now, turning to the proposed Acceleron acquisition.

Now onto the portfolio and pipeline starting with HIV.

We continue to generate clinical data that reinforces the foundational potential as a philosophy and HIV at.

At the European AIDS Conference in London. This week, we presented data from the Phase III study evaluating the robbery and has lots of there in previously untreated adults with HIV infections, which demonstrated continued maintenance of viral suppression through 144 weeks.

We also recently reported positive top line results from two pivotal trials evaluating a once daily oral regimen of <unk> and his long service and a switch setting in adults with HIV infection, who are very logically suppressed on other HIV therapy regimen at.

Dean Y. Li: Acceleron has an excellent scientific pedigree which has yielded important treatments for anemia in adult patients with certain rare blood disorders. Their lead clinical candidate, Cetarticel, has the potential to be a foundational asset as an add-on therapy for the treatment of pulmonary arterial hypertension. We provide a complementary addition to our growing cardiovascular pipeline. As such, following the close of the deal, our strategy would be to advance the wide-ranging Phase III clinical program. Now, on to the portfolio and pipeline, starting with HIV.

At 48 weeks, both trials met their primary efficacy endpoint for percentage of participants with levels of HIV RNA greater than or equal to 50 copies per milliliter, demonstrating comparable efficacy with those receiving the compared for anti retroviral therapy.

We plan to present these findings at upcoming medical Congress and incorporate that data into global regulatory submissions.

This week, we also announced the start of a phase II clinical study evaluating a once weekly oral combination of <unk> and Atlanta capital there and people are living with HIV, who are for logically suppressed on an anti retroviral therapy.

Dean Y. Li: We continue to generate clinical data that reinforces the foundational potential of this last review in HIV. At the European AIDS Conference in London this week, we presented data from a Phase 2 study evaluating darabarine and eslatavir in previously untreated adults with HIV infections, which demonstrated continued maintenance and viral suppression through 144 weeks. We also recently reported positive top-line results from two pivotal trials evaluating a once-daily oral regimen of darabarine and eslochevir in a switch setting in adults with HIV infections who are virologically suppressed on other HIV therapy regimens.

<unk> made great progress in our collaboration with Gilead and look forward to reporting our future development, including our long acting injectable co formulation.

Next on to vaccines that we received a positive opinion for vaccine events from the European Medicine Agency Committee for medicinal products for human use and individuals 18 years of age and older.

And more recently in the U S. The Cdc's ACI voted unanimously to provisionally recommend back inbound followed by Pneumovax as an option for pneumococcal vaccination and adults 65 years and older as well as for adults, aged 19 to 64 with certain underlying medical conditions with both patient populations.

<unk> being studied in our clinical trial.

Vaccine performance is multi dimensional and includes eliciting a strong immune response as well as providing coverage for important disease serotype.

Dean Y. Li: At 48 weeks, both trials met their primary efficacy endpoint for the percentage of participants with levels of HIV RNA greater than or equal to 50 copies per milliliter, demonstrating comparable efficacy with those receiving the Comparator Antiretroviral Therapy.

Our two dose regiment accomplishes the best of both by eliciting a robust immune response across the 15 serotypes in vaccine events, including serotype, three as well as providing the broadest serotype coverage among current pneumococcal vaccine options of which four that are unique to you about.

Furthermore, <unk> vaccine that is the most extensive clinical development program of the newly licensed PCV.

Dean Y. Li: We plan to present these findings at the upcoming Medical Congress and incorporate the data into global regulatory submissions. Next week, we also announce the start of a Phase II clinical study evaluating a once-weekly oral combination of bislochevir and lenacapavir in people living with HIV who are virologically suppressed on antiretroviral therapy. We have made great progress in our collaboration with Gilead and look forward to reporting on future developments, including our long-acting injectable co-formulation.

This includes completed or ongoing evaluations among those with certain chronic or an immune compromised conditions that increased susceptibility to and severity of pneumococcal disease.

We also announced positive topline results for Bax events from the pivotal new pad study evaluating immunogenicity safety and Tolerability in the pediatric setting and have submitted an application to the FDA.

Evidence indicates the incorporation of serotypes 22 F 33 up as well as strong immunogenicity against serotype three has the potential to play an important role in the prevention of pneumococcal disease in infants and children.

These three serotypes represented more than a quarter of all cases of invasive disease in children under the age of five we.

Dean Y. Li: Next, on to Vaccine Day. We received a positive opinion for vaccine events from the European Medicine Agency's Committee for Medicinal Products for Human Youth and Individuals 18 Years of Age and Older. More recently, in the U.S., the CDC's ACIP voted unanimously to provisionally recommend Baxubank followed by Pneumovax as an option for pneumococcal vaccination in adults 65 years and older, as well as for adults aged 19 to 64 with certain underlying medical conditions, with both patient populations being studied in our clinical trials.

We will present full results at an upcoming scientific Congress.

And finally, two oncology rich flow of data from our clinical development programs across tumor types continue.

We maintained momentum in the development of new treatment options for women's cancer with the approval of Keytruda, plus chemotherapy with or without bevacizumab for recurrent or metastatic cervical cancer based on data from keynote Tuesday.

This study showed a meaningful 36% reduction in the risk of death.

This is the first anti PD, one combination treatment option for patients in the first line setting and together with our industry, leading human papilloma virus vaccine Gardasil and Gardasil nine we are uniquely positioned to address certain unmet needs in cervical cancer with a focus on both prevention and.

Dean Y. Li: It includes eliciting a strong immune response as well as providing coverage for important disease serotypes. Our two-dose regimen accomplishes the best of both by eliciting a robust immune response across the 15 serotypes and vaccine events, including serotype 3, as well as providing the broadest serotype coverage among current pneumococcal vaccine options, of which four that are unique to pneumobats. Furthermore, VaccineFans has the most extensive clinical development program of the newly licensed PCV. This includes completed or ongoing evaluations among those with certain chronic or immune-compromised conditions that increase susceptibility to and severity of pneumococcal disease.

Treatment.

At ESMO in September we presented final results from keynote <unk> five study of Keytruda in combination with chemotherapy for advanced Triple negative breast cancer, which show the reduction in the risk of death by 27%.

<unk> is the poorly immuno oncology agent approved in metastatic triple negative breast cancer.

Along with additional data presented across endometrial and ovarian cancers reinforces the remarkable progress being made in our broad women's cancer portfolio.

We are also making inroads in new cancer types, including prostate cancer with.

With our partners at Astrazeneca, we announced positive results from the phase III propel study for the frontline treatment of metastatic castration resistant prostate cancer.

Dean Y. Li: We also announced positive top-line results for vaccine events from the PIVIDO New Ped Study evaluating immunogenicity, safety, and tolerability in the pediatric setting and have submitted an application to the FDA. Evidence indicates that serotypes 22F and 33F, as well as strong immunogenicity against serotype 3, have the potential to play an important role in the prevention of pneumococcal disease in infants and children.

This study demonstrated that <unk> in combination with Abbott retinal significantly delayed disease progression.

Ireland of biomarker status.

And prices the first PARP inhibitor to demonstrate clinical benefit and radiographic progression free survival in combination with a new hormonal agent in this setting.

We are encouraged by this study and the potential to help the increasing number of men diagnosed with metastatic castration resistant prostate cancer.

Dean Y. Li: These three serotypes represent more than a quarter of all cases of invasive disease in children under the age of five. We will present the full results at an upcoming scientific conference. And finally, in oncology, the rich flow of data from our clinical development programs across tumor types continues. For example, we maintain momentum in the development of new treatment options for women's cancer with the approval of Keytruda Plus chemotherapy with or without Bevacizumab for recurrent or metastatic cervical cancer based on data from Keynote 826. This study showed a meaningful 36% reduction in the risk of death.

Results will be presented at an upcoming medical meeting and submitted to regulatory authorities globally.

Next two renal cell carcinoma risks, which represent.

An important area of expansion in August we received FDA approval for <unk>, a first in class <unk> two alpha inhibitor therapy for the treatment of adult patients with von Hippel Lindau disease, who require therapy for associated renal cell carcinoma central nervous system and angioplasty, almost our pancreatic neuroendocrine.

Tumors not requiring immediate surgery.

This approval provides us a beachhead as we evaluate <unk> potential and broader RCC indications and beyond.

Dean Y. Li: This is the first anti-PD-1 combination treatment option for patients in the first-line setting, and together with our industry-leading human papillomavirus vaccine Gardasil and Gardasil 9, we are uniquely positioned to address certain unmet needs in cervical cancer with a focus on both prevention and treatment. Truda is the only immuno-oncology agent approved in metastatic triple negative breast cancer. This, along with additional data presented across endometrial and ovarian cancers, reinforces the remarkable progress being made in our broad women's cancer portfolio.

Also in RCC in partnership with Asos. Following FDA priority review, we received approval for the combination of Keytruda lymphedema in the frontline setting based on results from our keynote <unk> one trial.

This brings forth and import new first line treatment option for patients with advanced RCC.

We are also rapidly expanding programs into earlier lines of therapy during.

During the quarter the FDA granted priority review for our application for Keytruda as an adjuvant therapy for patients with RCC at intermediate high or high risk of recurrence following nephrectomy or following effectively and resection metastatic lesion from the keynote 564 studies.

Dean Y. Li: We are also making inroads in new cancer tests, including prostate cancer. With our partners at AstraZeneca, we announced positive results from the Phase 3 COPAL study for the frontline treatment of metastatic castration-resistant prostate cancer. This study demonstrated that Lamparza, in combination with Abiretinol, significantly delayed disease progression regardless of biomarker status. PARS is the first PARC inhibitor to demonstrate clinical benefit in radiographic progression-free survival in combination with a new hormonal agent in this setting.

Additionally, we received priority review for Keytruda for the treatment of patients with surgically resected high risk stage III melanoma base.

Based on results from the keynote 796 study that showed an improvement in recurrence free survival compared to placebo.

Yes.

Both of these studies demonstrate the benefit of expanding the use of keytruda to earlier stages of disease.

Following us to extend treatment benefit and more patients sooner, we look forward to a decision on both studies by the end of the year to.

To conclude I am proud of the progress across our broad pipeline and look forward to pride, providing further updates on our scientific progress in the future now I'll turn the call back to Peter.

Dean Y. Li: We are encouraged by this study and the potential to help the increasing number of men diagnosed with metastatic, castration-resistant prostate cancer. Results will be presented at an upcoming medical meeting and submitted to regulatory authorities globally. Next, to renal cell carcinoma, which represents In August, we received FDA approval for Weller-Egg, a first-in-class HIF-2-alpha inhibitor therapy for the treatment of adult patients with von Hippel-Lindau disease who require therapy for associated renal cell carcinoma, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors, not requiring immediate surgery.

Thank you Dean Graves can you. Please start the Q&A portion of the call.

Admittedly the questioners to limit themselves to one question today too in order to get to as many different questions as possible.

Alright, so as a reminder to ask a question you will need to press Star then the number one on your telephone again that will be star then the number one.

First question comes from the line of Humira <unk> of Evercore ISI. Your line is open Sir.

The Marlin paper and the rest of the call. So I'll just ask on Keytruda in adjuvant lung instead.

You had an interim and does the stat plan allow for.

Hierarchy, where PD lone positives as first and do you expect the benefit to show in patients that did and did not get adjuvant chemo. Thank you very much.

Dean Y. Li: This approval provides us with a beachhead as we evaluate Weller Egg's potential in broader RCC indications and beyond. Also, in RCC, and in partnership with ASOD, following FDA priority review, we received approval for the combination of Keytruda and Lumbima in the frontline setting based on results from the Keynote 581 trial. This brings forth an important new first-line treatment option for patients with advanced RCC. We are also rapidly expanding programs into earlier lines of therapy.

Yes, thank you very much.

I appreciate the question first I just want to elevate for just a second we are excited by the emerging data the role of PD, one and PDL, one and the early treatment in adjuvant space.

For us we are gratified that in renal melanoma breast cancer is just this theory.

There appears to be great effect and these are cancers, where there are frequently employed metrics for early screening.

Dean Y. Li: During the quarter, the FDA granted priority review for our application for Keytruda as an adjuvant therapy for patients with RCC at intermediate high or high risk of occurring following nephrectomy or following nephrectomy and resection metastatic lesions from the keynote 564.

In relationship to lung, specifically, we enjoy a dominant position in lung cancer.

And in lung cancer, the treatment of bladder stage cancers, the predominant stage.

The data as you can.

Allude to from other companies indicate that.

In lung cancer, the PD, one PD lone class.

Dean Y. Li: Additionally, we received priority review for extruda for the treatment of patients with surgically-receptive high-risk stage 2 melanoma, based on results from the Keynote 716 study that showed an improvement in recurrence-free survival compared to placebo. Both of these studies demonstrate the benefit of expanding the use of Keytruda to earlier stages of disease, allowing us to extend treatment benefits to more patients. We look forward to decisions on both studies by the end of the year.

It could be effective in early in adjuvant.

Specific and relationship to then we have a number of early in adjuvant stage lung cancers and it was a numerator then the fly keynote 91 is also known as apparel trial.

91, <unk> is a collaborative study with the European organization for research and treatment of cancer and Merck as a collaborator in this trial. This is an event driven study and we are in active communication with your Capex together, we are awaiting data from the <unk> before the end of the year and I would hazard to guess at any <unk>.

Dean Y. Li: To conclude, I am proud of the progress across our broad pipeline and look forward to providing further updates on our scientific progress in the future. Now, I turn the call back to Peter. Thank you, Dean. Grace, can you please start the Q&A portion of the call? And I'd like to ask the questioners to limit themselves to one question today in order to get to as many different questions as possible.

Announcement from Merck would be announced at the beginning of the new year.

Great. Thank you next question please.

Next up we have been a gray box from SBB Leerink. Your line is open.

Hi.

Just maybe a two part question on longer period here and how you are moving forward.

First is there's been some concerns publicly about the Gi toxicity I Wonder if you could address the data you have that mix you're not concerned about that and then the second concern is maybe with resistance and I wonder how youre thinking about the future and combinations and whether that will be needed to prevent any resistance, maybe some low compliance.

Peter Dannenbaum: Alright, so as a reminder, to ask a question, you will need to press star then the number 1 on your telephone. Again, that will be star then the number 1. Your first question comes from the line of Umer Raffat of Evercore ISI. Your line is open.

Umer Raffat: Thank you very much. Yeah, thank you very much.

Two on the peer review.

Umer Raffat: I appreciate the question. First, I just want to emphasize for just a second that we are excited by the emerging data on the role of PD-1s and PD-L1s in the early treatment and adjuvant space. For us, we are gratified that in renal melanoma breast cancers just this year, there appears to be a great effect, and these are cancers where there are frequently employed methods for early screening. In relation to lungs, specifically, we enjoy a dominant position in lung cancer, and in lung cancer, the treatment at the latter stage is the predominant stage.

Yes. Thank you for that question this is dean.

Just to emphasize we are very confident in the safety profile of ammonia sales are based on.

Our preclinical and clinical data.

In relationship to the clinical data I think most people recognize that in the interim analysis, we had a profound reduction in hospitalization and death.

That compared to placebo and it was stopped early in.

Right.

The guidance of the DSM V and in consultation with the FDA and in that interim analysis. The enter the incidents of any adverse effect was comparable in both among peer bear in placebo.

And actually if you look there were tears.

Umer Raffat: The data, as you somewhat allude to from other companies, indicate that in lung cancer, the PD-1, PD-L1 class could be effective in early and adjuvant. In specific, in relation to, we have a number of early and adjuvant stage lung cancers, and that was enumerated in the slide. Keynote 91 is also known as the PEARLS trial. PEARLS is a collaborative study with the European Organization for Research and Treatment of Cancer, and Merck is a collaborator on this trial.

Subject to pneumonia peer peer group, who discontinued therapy.

Due to an adverse event compared to the placebo group.

In relationship to our confidence in the safety profile based on our extensive preclinical evaluation I think it's important to recognize that most of your peer of yours and your criticized analogue that functions by creating areas in Virginia genetic material of RNA viruses.

These new play side analogs are often used in many other anti viral treatments, including HIV and hepatitis.

And we have done a comprehensive non clinical program to characterize the safety profile of ammonia peer there. It's been written by other people that theres actually been written in the sort of scientific journals as well and we will be presenting all of this data I believe in and the outcome that the FDA will be.

Umer Raffat: This is an event-driven study, and we are in active communication with EORTC, and together, we are awaiting data from the IHU before the end of the year. And I would hazard to guess that any public announcement from Merck would be made at the beginning of the new year.

Holding but.

Probably the most important pieces of information is that.

Two distinct in vivo wrote an immunogenicity assay, commonly caused the big blue in the big <unk>, which are well characterized and considered to provide a robust measure of the ability of a drug or chemical to induce mutations in vivo and these studies, we're administering moaning peer group for longer and higher doses than those employed in the.

Umer Raffat: Great. Thank you, Umer. Next question, please. Thank you. Next up, we have Daina Graybosch from SDB Lyrics.

Daina Michelle Graybosch: Your line is open. Hi. Can I ask maybe a two-part question on Wolnopiravir and how you're moving forward? The first is that there have been some concerns publicly...

Human.

Clinical trial.

<unk> of the data from these studies indicate that loan your peer group is not mutagenic.

Or geno toxic in these in vivo mammalian system now we have shared these results throughout with the regulatory agencies worldwide and we will continue to provide additional data.

Daina Michelle Graybosch: Thank you. Next up, we have Daina Graybosch from SBB Lyrics. Your line is open.

Dean Y. Li: Yes, thank you for that question. This is Dean.

As this process continues.

Great. Thank you Dan our next question please.

Dean Y. Li: I would just emphasize we are very confident in the safety profile of ammonia purifier based on our preclinical and clinical data. In relationship to the clinical data, I think most people recognize that in the interim analysis, We had a profound reduction in hospitalization and death or death compared to placebo and it was stopped early in, The guidance of the DSMB and in consultation with the FDA, and in that interim analysis, the incidence of any adverse effect was comparable in both monoperivir and placebo, and actually, if you look, there were fewer subjects in the monoperivir group who discontinued therapy due to an adverse event compared to the placebo group.

Thank you next up we have Andrew Baum from Citi. Your line is open.

Thank you and a question for Frank come multi per se just in relation to supply it.

It strikes me given some of the published improvements in manufacturing and depth four gram per patient dose.

$20 million looks like a very conservative estimate given particularly the inclusion of third parties, what could be achieved given the dosing and the API.

I'd like to comment please on where you think the <unk>.

'twenty two.

Real supply could be and then secondly, perhaps you could just comment on the appetite of muck to use direct to consumer advertising promotion on multi pay that I understand that promotion and advertising is allowed under any UA, if you could confirm or deny that would be great.

Dean Y. Li: In relation to our confidence in the safety profile based on our extensive preclinical evaluation, I think it's important to recognize that monoperivir is a nucleoside analog that functions by creating errors in the genetic material of RNA viruses. These nucleoside analogs are often used in many other antiviral treatments, including HIV and hepatitis.

Thank you.

Yes, Andrew this is Brian so a couple of things.

Dean Y. Li: And we have done a comprehensive non-clinical program to characterize the safety profile of monocular barrier. It's been written by other people. There's actually been written about them in sort of scientific journals as well. And we will be presenting all of this data, I believe, in the outcome that the FDA will be holding. But probably the most important pieces of information is that, you know, in two distinct in vivo rotin mutagenicity assays, commonly called the Big Blue and the Big A, which are well characterized and considered to provide a robust measure of the ability of a drug or chemical to induce mutations in vivo, in these studies, we're administering monupiravir for longer and higher doses than those employed in the human The totality of the data from these studies indicate that monupiravir is not mutagenic or genotoxic in these in vivo mammalian systems.

I want to highlight is.

First we have.

A line of sight, we will produce $10 million of courses this year Andrew in 2021.

And as we have mentioned that we have.

Line of sight, and we will at a minimum double that in 2022, so to your question.

We're going to do everything we can to increase the supply for this product. In addition, we have voluntary license partners you have seen and we also have a number of partners that we're working with to provide global supply. So rest assured Andrew we're going to try to do everything on the supply front.

On direct to consumer I think it's a little bit early for us on that.

Have not made a decision around that were really focused on doing everything we can to see.

Dean Y. Li: Now, we have shared these results throughout with regulatory agencies worldwide and will continue to provide additional data as this process progresses. Great. Thank you, Daina. Next question, please.

Sign up agreements with governments to get the product available globally.

We will be providing additional information as we go forward, we'll monitor peer here, but this is our number one priority for the company and it's something that we're really looking forward to trying to help address the pandemic going forward. Andrew This is Rob and I just wanted to mature because as I listen to your question I think for <unk>, but just to emphasize it.

Andrew S. Baum: Thank you. Next up, we have Andrew Baum from Citi. Your line is open.

Andrew S. Baum: Thank you. Questions for Frank on Mole Nupur there. Just in relation to supply, it strikes me, given some of the published improvements in Manassas,

As others on the phone.

Arne catching the $20 million or will save more than doubling what we can do next year that is merck's production, we are not including any of those numbers voluntary license partners in India, nor any one who the medicines patent pool signs up so obviously global production of enrollment period here will be significantly more next year, we're just split.

Andrew S. Baum: 20 million looks like a very conservative estimate given, particularly the inclusion of third parties what could be achieved given the dosing and the API. I'd like you to comment, please, on where you think the 2022 real supply could be. And then second, perhaps you could just comment on the appetite of Merck for using direct-to-consumer advertising or other promotion on Molnupiravir. I understand that promotion and advertising is allowed under an EUA. If you could confirm or deny that, that would be great. Thank you. Yeah, Andrew. This is Frank.

To what volumes, we will produce within Merck.

Greg Let me just add one thing because I recognize that this this question is also somewhat linked to the other question and it relates to how we think about ammonia pair very scientifically and the pandemic phase and there was going to be an endemic phase and potentially there could be other phases. After.

Frank Clyburn: So a couple of things that I want to highlight are, First, we have a line of sight. And we will produce 10 million courses this year, Andrew, in 2021. And as we have mentioned, we have a line of sight, and we will, at a minimum, double that in 2022. So to your question, we're going to do everything we can to increase the supply for this product. In addition, we have voluntary license partners, as you have seen, and we also have a number of partners that we're working with to provide global supply. So rest assured, Andrew; we're going to try to do everything on the supply front. On direct-to-consumer, I think it's a little bit early for us on that. We have not made a decision about that yet.

With that but for the pandemic phase.

I just want to emphasize we have to move out trial and then we'll have to see the potential in the move ahead to see whether we both have a treatment and prophylaxis in the endemic phase when the pandemic somewhat receipts, it's highly likely that Sars COVID-19 two will be come in and done that infection.

And we all have to recognize and it's related to the previous question. During this phase there will be a large reservoir of individuals across the globe with high copy number fireeye viruses and many of these individuals that may lead to a constant brewing a bay area.

This question of resistance becomes very important it is important to emphasize that pneumonia has an extremely high barrier to resistance.

It has broad efficacy across all service Kobe, two variance to date and in our preclinical studies and preclinical studies of others. It not only has a broad efficacy across Sars COVID-19, two variance, but a broad variety of RNA viruses.

Frank Clyburn: We are really focused on doing everything we can to sign agreements with governments, get the product available globally, and we'll be providing additional information as we go forward. I don't want to appear here, but this is our number one priority for the company, and it's something that we're really looking forward to trying to help address the pandemic going forward. Andrew, this is Rob, and I just want to make sure, because as I listened to your question, and I think Frank hit it, but just to emphasize, in case others on the phone aren't catching this, the 20 million are saying more than doubling what we can do next year.

And probably the broadest and then other than all other current mechanisms that we now being developed I should emphasize this high barrier to resistance is critically important both on the pandemic and the endemic phase as has been highlighted.

And I need to emphasize for this reason, we prioritize pneumonia peer abroad over our other programs, including in the Toronto protease inhibitor, given the Paramount importance, we place on ensuring the highest barrier to resistance given where we are in the world right now.

Great. Thank you Andrew next question please Greg.

Thank you first Max we have Carter Gould from Barclays. Your line is open hey, guys.

Good morning, Thanks for taking the question Unsurprisingly I'm going to focus on <unk>, two I guess, maybe for Frank and Carolyn.

Frank Clyburn: That is Merck's production. We are not including in any of those numbers the eight voluntary licensed partners in India, nor anyone who the medicines patent pool signs up. So obviously global production of Molnupiravir will be significantly more next year. We're just speaking to what volume we will produce within Merck. Let me just add one thing, because I recognize that this question is also somewhat linked to the other question, and it relates to how we think about monu-peri-vera scientifically in the pandemic phase, and there's going to be an endemic phase, and potentially there could be other phases after that, but for the pandemic phase, I just want to emphasize we have the move-out trial, and then we'll have to see the potential in the move ahead to see whether we both have a tree treatment and a prophylaxis.

I'm, just trying to understand exactly kind of what's baked into that guidance in terms of whats.

Being distributed for for next year.

Between kind of your supply crossing that with.

To your point, these supplying sort of low and middle income countries with to the MPP.

Acknowledged that there is going to be tiered pricing, but it seems like you would still be coming far short of distributing your full capacity. So any color on that front would be helpful.

Yes, Carter this is Frank I'll start and Sam Caroline wants to add anything so.

Functions and I. Appreciate this is a very fluid situation, we do assume an early use authorization in December this year.

Frank Clyburn: In the endemic phase, when the pandemic somewhat recedes, it's highly likely that SARS-CoV-2 will become an endemic, And we all have to recognize, and it's related to the previous question, during this phase there will be a large reservoir of individuals. Transcribed by https://otter.ai, It has broad efficacy across all SARS-CoV-2 variants to date, and in our preclinical studies and preclinical studies of others, it not only has a broad efficacy across SARS-CoV-2 variants, but a broad variety of RNA viruses, and probably the broadest than all other current mechanisms that we know being developed, should emphasize, this high barrier to resistance is critically important, both in the pandemic and the endemic phase, as has been highlighted.

And we are including the contracts that we already have in place as well as those that are underway.

We are comfortable with that 5% to $7 billion range through 'twenty two.

And just to reemphasize the numbers based on the agreements and sign those in line of sight and others and have high probability of execution couple of other things as we've mentioned.

Rob reiterated we will produce 10 million courses of therapy by the end of 'twenty, one and are committed to at least doubling that in 'twenty two.

Our focus initially.

It is important that it's on treatment with COVID-19.

And you mentioned the broad global access, which does come with global tiered pricing around the world and that's an important aspect that the pricing will be tiered based on affordability measures.

If our post exposure prophylaxis trial is successful as Dean was highlighting with an expected readout in spring there is potential upside to these estimates.

Frank Clyburn: And I need to emphasize, for this reason, we prioritize monifero over our other programs, including an internal protease inhibitor, given the paramount importance we place on ensuring the highest barrier to resistance, given where we are in the world right now.

Furthermore, throughout 2022, we do not assume to your question all of the suppliers use as such we have the ability to fulfill additional demand. We also do assume that there will be other oral anti virals and the market and we'll have to see how that unfolds and.

We will look forward to provide you some additional detail and clarity as we learn more over the next couple of months.

Rob Davis: Great. Thank you, Andrew. Next question, please, Grace.

Great. Thank you Carter next question. Please grace.

Carter Lewis Gould: Next, we have Carter Gould from Barclays. Your line is open.

Thank you next we have Steve Scala from Cowen Your line is open.

Carter Lewis Gould: Hey guys, good morning. Thanks for taking the question. Unsurprisingly, I'm going to focus on Roland Griswold, too.

Thank you.

Merck views its competitive position in pneumococcal vaccines as strong, but ACI P did not appear to agree viewing the cost benefit of the 20 valent as superior even when assuming.

Frank Clyburn: I guess maybe for Frank and Caroline, you know, I'm just trying to understand exactly kind of what's baked into that guidance in terms of what's being distributed for next year. Yeah, Carter, this is Frank. I'll start and see if Caroline wants to add anything. So in our assumptions, and I appreciate this is a very fluid situation, we do assume an early use authorization in December this year, and we are including the contracts that we already have in place, as well as those that are underway.

It was ineffective against serotype, three so where does Merck think ACI Pete aired and how does Merck change that narrative. Thank you.

First we're very confident in terms of our <unk> one plan for that event.

Two places that we're advancing in adults and pediatrics.

As you know the pediatric market and I'll, let Frank speak to it as is.

A quite robust market and we're.

Advancing our program, we have submitted to the FDA and we hope to hear back from them and in short order. So we're very focused in the pediatrics in relationship to the adult.

Frank Clyburn: So we are comfortable with that $5 to $7 billion range through 2022. And just to reemphasize, the number's based on the agreements in sign, those in line of sight, and others that have a high probability of execution.

Critical issue for us in relationship to the ABL is that we as I said in the prepared comments I think it's very important to give the best.

The best coverage in terms of serotypes.

Frank Clyburn: A couple of other things, as we've mentioned, and Rob reiterated, we will produce 10 million courses of therapy by the end of 21, and are committed to at least doubling that in 22. Our focus initially, or is important, is on treatment with COVID-19. And you mentioned broad global access, which does come with global tiered pricing around the world. And that's an important aspect, that the pricing will be tiered based on affordability measures.

Not just buy immunogenicity by actually studying clinical events, especially in those patients who are compromised or at risk or have some other.

Condition that might increase there.

Theyre susceptibility to have invasive pneumococcal disease, and we think that clinical data and the way that we've studied it in these patient populations directly we have not extrapolated from Immunogenicity. We've actually studied it is something that's critically important as one looks at the true.

Frank Clyburn: If our post-exposure prophylactic trial is successful, as Dean was highlighting, with an expected readout in spring, there is potential upside to these estimates. Furthermore, throughout 2022, we do not assume, for your question, all of the supplies used. As such, we have the ability to fulfill additional demand. We also assume that there will be other oral antivirals in the market, and we'll have to see how that unfolds. And we'll look forward to providing you with some additional detail and clarity as we learn more over the next couple months. Thank you, Carter. Next question, please, Grace.

I could see above vaccine.

Frank did you want to answer yes, the only thing I'll add is actually we were.

Very pleased that it was unanimous approval for the sequence of vacuum Vance and.

Pneumovax.

And we feel as though that the sequence offers patients really with the broadest coverage with strong immune responses against serotypes that are responsible for two thirds of pneumococcal disease in adults as well as.

The CIP did.

Highlight that the regiment was both cost effective and as well as cost saving and the 65 plus patient population.

Steve Scala: Thank you. Next, we have Steve Scala from Collins. Your line is open.

And then as you mentioned, we're also really excited about the opportunity for vacuum advance in the pediatric segment, which we believe is the larger market opportunity. So overall from our perspective, we feel really good about the UC ip's recommendation.

Steve Scala: Merck views its competitive position in pneumococcal vaccines as strong, but ACIP did not appear to agree, viewing the cost-benefit of the 20-valent as superior, even when assuming it was ineffective against serotype 3. So where does Merck think ACIP erred, and how does it change that narrative? Thank you.

Thank you Steve next question please Greg.

Thank you next we have Jeff Meacham from Bank of America. Your line is open.

Good morning, guys.

Thanks for the question.

You touched on a little bit.

Dean Y. Li: First, we're very confident of our B.1.1.4 vaccine ban. There's two places that we're advancing it. It's in adults and pediatrics. As you know, the pediatric market, and I'll let Frank speak to it, is a quite robust market, and we're, Thank you all for advancing our program. We have submitted to the FDA and we hope to hear back from them, http://TheBusinessProfessor.com In relationship to the adult, the critical issue for us in relationship to the adult is that we, as I said in the prepared comment, I think it's very important to give the best coverage in terms of serotypes, but not just by immunogenicity, by actually studying clinical events, especially in those patients who are compromised or at risk or have some other © 2012 University of Georgia College of Agricultural and Environmental Sciences U.S. Department of Agriculture, Food and Rural Affairs, And we think that clinical data and the way that we've studied it in these patient populations directly, we have not extrapolated from immunogenicity, we've actually studied it, is something that's critically important as one looks at the true efficacy of a vaccine.

Yeah.

You touched on a little bit.

With.

Yes.

First of all that.

I think the promotional lever versus the booster strategy or for buyback.

<unk> would you expect any more formal guidelines from CDC or other.

Alrighty.

About how might all new peer group fits into the algorithm. Thank you.

Yes.

Maybe Jeff I apologize you were you were.

Kind of durable <unk> I'll repeat what I think your question was and then you can clarify if I got it wrong I think your question was this is the first oral anti viral but obviously, we continue to have out there of vaccines that are important.

Really the first line and do we think there is any discussion on how this will fit into the regimen.

I think we can really comment on how advisory committees and the FDA or others. The CDC would look at that but what I will tell you from our perspective.

First and foremost people should be vaccinated continues to believe what we think is the right answer we see our therapy is something that is.

An important addition to the armamentarium and obviously there are places where people cannot get the vaccine or unfortunately, if people get vaccinated and have breakthrough virus. So there's definitely a need for this but it is in collaboration as a complement to the vaccine not in place of that Thats Our perspective, we'll let the governor.

Dean Y. Li: Frank, did you want, Yeah, the only thing I'll add is actually we were very pleased that it was unanimous approval for the sequence of vacuum vents and NumaVax, and we feel as though the sequence offers patients really the broadest coverage, with strong immune responses against serotypes that are responsible for two-thirds of pneumococcal disease in adults, as well as the ACIP did highlight that the regimen was both cost-effective And then, as Dean mentioned, we're also really excited about the opportunity for vacuum vans in the pediatric segment, which we believe is the larger market opportunity. So overall, from our perspective, we feel really good about the ACIP's recommendation. Thank you, Steve. Next question, please, Grace.

Speak to their own.

Great. Thank you Jeff next question. Please grace.

Thank you next we have Chris Schott from Jpmorgan. Your line is open.

Great. Thanks, so much for the question I'm trying to get my hands around Gardasil in the results in the quarter. So can you just clarify or quantify a little bit how much of the.

The $2 billion in sales this quarter was stocking versus underlying demand and maybe more broadly are we still in a position where demand is exceeding supply I guess on a global basis as we think about the recent capacity expansion and I guess Im trying get my hands around like will there be another step up in sales for this franchise as we look out to 2023 and beer.

And with that with the new facility coming online.

The capacity the efforts you've made so far kind of addressing most of the demand thats out there. Thanks so much.

Chris This is Caroline I'll start and I'll hand over to Frank So in the quarter. As you know we've had an exceptional quarter and that's driven by strong global demand and desktop Rehabbing supply. We also did benefit from CDC timing and that was approximately 125 million.

Geoffrey Meacham: Thank you. Next, we have Geoff Meacham from Bank of America. Your line is open.

Geoffrey Meacham: Thank you guys. Thanks for the questions. You touched on it a little bit. I want to start with, while you were doing the first poll, how do you expect it to play out commercially versus the booster strategy for the vaccines? Would you expect any more formal guidelines from CDC or other health authorities about how my Omniprover fits into the algorithm? I'll maybe try this.

Volume in the third quarter of this year and that contrast to a buy out actually in the third quarter of 2020. So here is the year, we feel we've benefited by approximately $118 million.

Geoffrey Meacham: Geoff, I apologize. You were kind of garbled. I'll repeat what I think your question was, and then you can clarify if I got it wrong. I think your question was, this is the first oral antiviral, but obviously we continue to have vaccines that are important as really the first line, and do we think there's any discussion on how this will fit into the regimen? http://www.cdc.gov.au Great. Thank you, Geoff. Next question, please, Grace.

To the results now in terms of how we see this going forward. We are very excited about the opportunity we see opportunities for increased supply.

Through 'twenty, two and beyond as we see the office capacity come online, but let me hand over to Frank to talk about the demand that we have.

Chris Schott: Thank you. Next, we have Chris Schott from J.P. Morgan. Your line is open.

Yes, Chris Thanks for the question a couple of other things I do want to highlight as you think about Florida still and this is something we've been.

Chris Schott: Thanks so much for the question. I'm just trying to get my hands around Gardasil and the results for the quarter.

Discussing for a while.

Both the near term results as you mentioned with the long term prospects first I want to highlight that only 9% of the we see as the eligible cohort globally has been vaccinated. So Chris I'll start there and say this we still have significant opportunity and if you think about markets such as China. If you think about.

Chris Schott: So can you just clarify or quantify a little bit how much of the $2 billion in sales this quarter was inventory versus underlying demand? And maybe more broadly, are we still in a position where demand is exceeding supply, I guess, on a global basis, as we think about the recent capacity expansion? And I guess I'm trying to get my hands around, like, will there be another step up in sales for this franchise as we look out to 2023? And beyond with the new facility coming online? Or is the capacity effort you've made so far kind of addressing most of the demand that's out there? Thanks so much.

The approval in Japan, if you think about the agenda neutral opportunities that we have in Europe as well as other age cohorts and adult men adult in the U S. Because we feel that there is significant.

<unk> for continued guarded so growth as you saw a step up in our supply we will continue to see that it would be a little bit more modest pace in next year, but rest assured as we bring on the two new bulk manufacturing facilities. In 23. This is why we feel that the long term growth prospects for Gardasil.

Caroline Litchfield: So Chris, this is Caroline. I'll start, and then I'll hand over to Frank.

Frank Clyburn: So in the quarter, as you know, we've had an exceptional quarter, and that's driven by strong global demand and the step up we have in supply. We also did benefit from CDC timing, and that was approximately $125 million of buy-in in the third quarter of this year. And that contrasts to a buy-out, actually, in the third quarter of 2020. So, year over year, we feel we've benefited by approximately $180 million. To the results.

<unk> are very significant.

Again, it will be a key growth driver for the company going forward.

Frank Clyburn: Now, in terms of how we see this going forward, we're very excited about the opportunity. We see opportunities for increased supply through 22 and beyond as we see the other capacity come online. But let me hand over to Frank to talk about the demand that we have. Yeah, Chris, thanks.

Frank Clyburn: Yeah, Chris, thanks for the question. A couple of other things I do want to highlight as we think about Gardasil, and this is something we've been discussing for a while, are both the near-term results, as you mentioned, but the long-term prospects. First, I want to highlight that only 9% of what we see as the eligible cohort globally has been vaccinated. So Chris, I'll start there and say that we still have a significant opportunity.

Okay.

I would start more high level do we continue to pursue additional business development. The answer is yes, it will be driven and so there's always been based on what we see is a compelling scientific opportunity, where we see signs addressing unmet need the strategically aligned with us and where we can bring value. So that is unchanged and as we.

Frank Clyburn: And if you think about markets such as China, if you think about the approval in Japan, if you think about the gender-neutral opportunities that we have in Europe, as well as other age cohorts in the mid-to-late adult in the US, we feel that there's a significant opportunity for continued Gardasil growth. As you saw a step up in our supply, we will continue to see that it will be a little bit more modest pace next year.

Look at capacity I would just say, we believe we have the firepower to do and frankly any deal.

It's out there that we would have.

Strategic interest in doing that.

The balance sheet will not be bright limiter for us we have very strong.

Frank Clyburn: But rest assured, as we bring on the two new bulk manufacturing facilities in 23. This is why we feel that the long-term growth prospects for Gardasil are very significant and will be a key growth driver for the company going forward. Thank you, Chris. Next question, please, Grace.

Balance sheet capacity I don't think we want to get into trying to.

Get specifics.

Some of your numbers, frankly, quite a bit off actually, but but I don't want to start.

Getting into those kind of specifics because it depends on the rating agencies. It depends on the target cash flow is coming from the targets so with that.

Timothy Minton Anderson: Thank you. Next up, we have Tim Anderson from Wolf Research. Your line is open.

I think the important messages.

Balance sheet capacity is not going to be late limiter for us.

Thank you Tim next question. Please grace.

Timothy Minton Anderson: Thank you. A question on additional M&A. So maybe for Rob, on the Acceleron investor call you held, I asked whether Merck would do more M&A, even if it meant taking a rating down Unknown Speaker And you were very frank in your answer, and you said yes, but the company has not been willing to kind of quantify what additional debt that would potentially, https://www.patreon.com And if it was something like a $30 billion cash deal, that could be I appreciate the question. I would start at a higher level.

Next up they have Seamus Hernandez from Gegenheimer line is open.

Great. Thanks for the quiet so just a quick one on the earlier stage pipeline.

I'm a little surprised you guys are presenting your first oral pcf's canine inhibitor and a late breaker at a J in two weeks, but it isn't included in your pipeline summary could you just help us understand why not just as a follow up to that when might we.

Hear more about the earlier stage pipeline.

Well, there's be at at and R&D a in 2022, what's the right time to start I guess, showing a little bit more of the earlier stage pipeline that Mark's been building over the last.

Rob Davis: Do we continue to pursue additional business development? The answer is yes. It will be driven, as it has always been, based on what we see as a compelling scientific opportunity, where we see science addressing an unmet need that is strategically aligned with us and where we can bring value. Some of your numbers, frankly, were quite a bit off, actually, but I don't want to start getting into those kinds of specifics because it depends on the rating agencies.

Three to four years by acquisition and then internally. Thanks.

Yeah. This is Rob Amendola, Dean just comment specifically on the oral sepia oral pcf's canine that I can do to comment on.

The additional transparency question and answer yes, specifically in relationship to the <unk> is always the American Heart Association. It is slipping into faith too.

Rob Davis: It depends on the target, the cash flows coming from the target. So with that, I think the important message is balance sheet capacity is not going to be a great limiter. Thank you, Tim. Next question, please, Grace. Next up, we have Seamus Fernandez.

And that's why we often in our pipeline leave it at.

<unk> too, but we're trying to Denver.

Demonstrate to increase transparency by showing something that's about to enter that the.

Seamus Fernandez: Next up, we have Seamus Fernandez from Guggenheim. Your line is open.

The the presentation at the American Heart Association I think we'll be well attended I think trying to create an oral tcf canine has been a holy Grail and the cardiovascular field for some time and has not been achieved and.

Seamus Fernandez: Just a quick one on the earlier stage pipeline. I'm a little surprised you guys are presenting your first oral PCSK9 inhibitor as a late breaker at AHA in two weeks, but it isn't included in your pipeline summary. Could you just help us understand why not?

And we believe we have achieved it.

Is it is about that product, but it's also about the ability of mark to do things that other people can't do and when one looks at how we've created that molecule. One let me ask yourself Wow, what is that capacity, what's that technology that allows them to do that for P. B S canine what other.

Dean Y. Li: And just as a follow-up to that, when might we hear more about the earlier stage pipeline? Will this be at an R&D day in 2022? What's the right time to start showing a little bit more of the earlier stage pipeline that Merck has been building over the last three to four years via acquisition and then internally? Thanks.

Target could they be doing as well.

Dean Y. Li: Yeah, this is Rob. Maybe I'll let Dean just comment specifically on the oral PCSK9, then I can give my comment on, you know, the additional transparency question. Yeah, specifically in relation to the oral PCSK9, it is going to the American Heart Association. It is flipping into phase two. And that's why we often in our pipeline leave it at phase two.

Yeah. So thank you Dean.

Being highlighted.

Returned our views of things moved from finished one into phase two that's when we'll start discussing here. So this is just in the process and I would highlight indeed and get into it but there's a lot we have other assets in the cargo spheres space that are also either have moved or are moving into phase. Two that's why we really see our cardiovascular pipeline as a growing area of <unk>.

Dean Y. Li: But we're trying to demonstrate increased transparency by showing something that's about to enter that. The presentation at the American Heart Association, I think, will be well attended. I think trying to create an oral What other targets could they be doing as well? Rob?

Ultimate and strength and why we were so excited about the complimentary nature that exceleron as to the pipeline and as you asked about the transparency.

Our intentions the next Jerry we'd like to highlight those cardiovascular because I can tell you I'm excited about what we have we got a lot going on but I don't think so appreciated.

Obviously, we would like to wait to see the Solon deal completed. So we can include their assets in that discussion.

Rob Davis: That's why we really see our cardiovascular pipeline as a growing area of excitement and strength and why we were so excited about the complementary nature that Acceleron is to that pipeline. And as you asked about the transparency, you know, our intention, the next area we'd like to highlight is cardiovascular because I can tell you, I'm excited about what we have. We've got a lot going on that I don't think is appreciated.

And that will calm as soon as we can figure out when that will happen either later this year or early next year.

On that I was very pleased with what we did when he gave added visibility towards HIV pipelines excitement, we have around us lots of beer.

That's a foundation will drive.

Oncology continues to have just multiple shots on goal, both with Keytruda and and a growing number of new mechanisms we've highlighted that in.

Rob Davis: And, you know, once we get past the cardiovascular space, I assume we'll start to talk about our CNS portfolio, because we also have a lot in the neurology space that I think is pretty exciting. So, you know, our view is to do it area by area as things start to move into the Phase II realm, and we'll bring it forward as quickly as I can, with cardiovascular being first once Acceleron is done.

Once we get past the cardiovascular.

Soon we will start to talk about our CNS portfolio. Because we also have a lot in when youre allergy space. So I think it's pretty exciting so.

Viewers to do it area by area as things start to move into the space too.

Realm, and we will bring it forward as quickly as I can with the cardiovascular opening first once acceleron is done.

Seamus Fernandez: Thank you, Seamus. It's a little past nine. I think we have time for one more question. Next question, please, Grace. All right, your last question comes from the line of Louise Chen from Cantor. Your line is open. Hi, thanks for taking my question here.

Thank you Seamus so it's a little past nine I think we have time for one more question.

Next question, please Grace alright.

Alright. Your last question comes from the lineup Luis China from can sorry, Caroline as I can.

Hi, Thanks for taking my question here. So there are several players China bring lower priced checkpoint inhibitors that market and do you believe that these discounted pricing strategies will have any traction why're why not thank you.

Louise Chen: All right, your last question comes from the line of Louise Chen from Cantor. Your line is open. Hi, thanks.

Louise Chen: And this is Frank, and I'll take that from a couple of different points. I know there's been discussion there, and I first want to make sure that oncology we see is really data-driven and the importance of strong clinical data, and I think you have seen that position us well, and also the wall of data that we've established with a product like Katrina. With, you know, 33 indications right now, and just the familiarity and the growth that we're seeing across so many different cancer types, as I was highlighting, we feel we're very well positioned.

And when was this is Frank and I'll take.

Picked up from a couple of different.

Angles I I know, there's been discussion there and I first want to make sure that.

We really continue to emphasize that oncology, we see is really data driven.

And the importance of strong clinical data and I think you have seen that position us well and also the wall of data that we've established with a product like keytruda.

33 indications right now and just the familiarity and the growth that we're seeing across so many different cancer types of is highlighting we feel we're very well positioned we also think that the regulatory horrible for new entrants increases with additional keytruda approvals.

Louise Chen: We also think that the regulatory hurdle for new entrants increases with additional Katrina approvals, and as physicians continue to gain experience, we think that also you would have to have a broader structural change would be required in the U.S. to adopt broadly.

And as physicians containment to gain experience. We think that also you would have to have a broader structural change would be required in the us to adopt broadly. So our view is will continue to monitor the competitive landscape as we always do but we feel very confident and contributing on our growth prospects going forward.

Frank Clyburn: So our view is we'll continue to monitor the competitive landscape as we always do, but we feel very confident and contributing to our growth prospects going forward. Thanks, Louise. Robbany Fargo, First, I want to thank and recognize our Merck employees across the globe for their hard work and dedication. With the pandemic, the way we've been able to execute really, I think, shows the best of who we are, and I couldn't be more proud across all elements of our business, clinically, commercially, and manufacturing. It's really phenomenal, so I do want to first recognize them because I think that's important.

<unk>.

Great. Thanks, Luis Rob any final.

Yeah, maybe just a couple of points.

First I want to thank and recognize or Merck employees across the globe for their hard work and dedication with the pandemic.

The way, we have been able to execute.

Really I think shows the best of who we are and I couldn't be more proud across all elements of our business clinically commercially manufacturing, it's really phenomenal. So I do want to first recognize them because I think that's important and hopefully once you turn from Nicole is.

This is an exciting time at Merck, we really have growing momentum and and I can tell you're drawing confidence that we have the ability to grow not only in the near term, but a growing portfolio of assets that sort of stuff to be sustainably be an important contributor to human health and to to continue to deliberate.

Rob Davis: We're a more focused company. We're a faster-going company. We're working with urgency to achieve our mission and deliver for our patients and shareholders, so hopefully that came through. I'm also quite pleased with the amount of progress we've made in a short period of time. You've heard today good developments across business development, good developments in delivering an incredibly strong quarter, moving fast with what we're doing with Molded Pure Beer, and great results coming with Vizalacha Beer in our broader oncology portfolio. So we're firing on all cylinders, and I'm confident and proud of where we are, and I thank you for your time.

Significant value for our shareholders, we're more focused company for a faster growing company, we're working with urgency to achieve our mission.

In order for patients and shareholders. So hopefully that came through and I'm also quite pleased with the amount of progress we've made in a short period of time.

For today, good developments across business development through developments in delivering an incredibly strong quarter moving fast with what we're doing is more of a pure beer great results coming to that there's lots of beer and our broader oncology portfolio. So we're firing on all cylinders.

Confident and proud of where we are and I. Thank you for for your time.

Rob Davis: Thank you very much. Thank you. This concludes today's conference call. Thank you all for joining us. You may now disconnect.

Thank you. Thank you very much.

Thank you that's that goes today's conference call. Thank them, often joining them and I'll disconnect.

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