Q1 2022 Merck & Co Inc Earnings Call

Good morning, My name is Ryan and I'll be your conference operator today at this time I would like to welcome everyone to Denmark, Intel Q1 sales and earnings conference call.

Grace Lacra: My name is Grace Lacra and I will be your conference operator today.

You may now all disconnect.

All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there'll 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. Please press the pound key.

Grace Lacra: At this time, I would like to welcome everyone to the Merck & Co Q1 Sales and Earnings Conference Call.

I would now like to turn the call over to Peter then in Bunk Vice President of Investor Relations. Please go ahead.

Thank you Grace and good morning, welcome to Merck's first quarter 2022 conference call speaking on today's call will be Rob Davis, President and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee President of Merck Research Labs before we get started I'd like to point out a few items.

Grace Lacra: All lines have been placed on mute to prevent any background noise.

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 items from our non-GAAP results and provide 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 US Private Securities Litigation Reform Act with 1995, such statements are made based on the current beliefs of Merck's management and are subject to significant risks and uncertainties.

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 2021 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. 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 Relations section of <unk> website with that I'd like to turn the call over to Rob.

Grace Lacra: And after the speaker's remarks, there will be a question and answer session.

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

Grace Lacra: If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad.

Grace Lacra: And to withdraw your question, please press the pound key.

Before I get started let me take a moment to speak about the ongoing crisis in Ukraine.

Grace Lacra: Thank you.

We are hopeful for an immediate and peaceful resolution to the Russian invasion of the country.

And we support the Ukrainian people and stand with them and recognize what a terrible tragedies. This represents.

Merck is making every effort to protect the health and safety of our employees and to ensure a central medicines and vaccines continue to reach patients.

In addition, we are dedicating meaningful resources to address the humanitarian crisis in the country through multiple channels.

Turning to our business, we continue to deliver across our key strategic priorities in the first quarter.

We're sustaining the strong business momentum, we delivered in 2021 with robust top and bottom line growth.

We've also achieved significant clinical advancements across our research pipeline and.

Successfully integrated excel wrong.

Now moving to our results.

Grace Lacra: I would like to turn the call over to Peter Denenbaum, Vice President of Investor Relations.

We've had a strong start to 2022, achieving very strong top and bottom line growth.

Grace Lacra: Please go ahead.

Commercially we continue to execute well across a broad set of key growth drivers, most notably Keytruda gardasil and animal health.

Peter Denenbaum: Thank you, Grace, and good morning.

Our performance reflects robust underlying demand for our de risked innovative portfolio and reinforces the importance of our science led strategy.

Peter Denenbaum: Welcome to Merck's first quarter 2022 conference call.

Well Gabriel our COVID-19, antiviral treatment was a significant contributor as well, but even excluding these sales our topline growth was still a very healthy 19% versus last year.

Peter Denenbaum: Speaking on today's call will be Rob Davis, President and Chief Executive Officer.

I'll, let Jeff Rio we've celebrated broad global access and it is now established as an important tool for patients and health care providers to address the ongoing pandemic.

Since receiving emergency use authorization in December we've delivered approximately six 4 million courses to more than 30 countries.

The success, we are achieving is reflected in our updated 2022 guidance, which demonstrates our expectation for another year of strong growth and overall business momentum.

One college business is benefiting from the continued rollout of new and important indications, including in earlier lines of therapy.

Global demand for Gartner still remains strong.

And growth will benefit from increased supply as a result of this.

Significant investments were making to expand manufacturing capacity in our animal health business remains positioned to grow at above market rates.

Longer term, we remain confident in our ability to deliver strong revenue growth and operating margin expansion through 2025.

We're preparing for the post <unk> period, but continuing to strengthen the levers we have and building upon them in order to deliver long term growth.

In oncology, we remain committed to building on the foundational position that we have achieved with Keytruda and we aim to expand our presence in this key therapeutic area and to establish an enduring leadership position.

In addition, we will continue to maximize the opportunities we see for our durable growth drivers such as Gardasil, our pneumococcal portfolio in animal health through our proven commercial execution.

Beyond our existing portfolio business development remains a key priority.

We remain highly focused in our pursuit of the best external innovation and it will be appropriately aggressive when great science and value line.

We have a strong track record of business development, but we know we need to do more and we believe we are well positioned to quickly deploy capital towards the right strategic assets as they present themselves.

And finally, we will continue to advance our broad pipeline across key therapeutic areas in order to deliver medically important innovations for patients.

We've taken important steps to provide increased transparency into the opportunities, we see in our portfolio and our business, including through two recent investor event.

Earlier. This month, we provided a detailed description of our growing cardiovascular portfolio and pipeline.

That Merck, we're focusing our efforts where the needs are greatest.

We have the best opportunity to positively impact patients lives, including in heart failure.

Culinary arterial hypertension thrombosis and atherosclerosis.

We've made significant advancements across our pipeline and believe our broad differentiated portfolio can have a meaningful impact on patients' lives with at least eight potential new approvals by 2030.

We're confident that these important innovations have the potential to be meaningful growth drivers for Merck well into the next decade.

And in February we hosted our inaugural ESG event, which highlighted our activities in our four priority areas of access to help employees environmental sustainability and ethics and values.

Our ESG efforts are grounded in our company.

And we look forward to building on Merck's legacy of operating responsibly going forward.

Before I close I'd like to take a moment to recognize Dr. Roy Baynes, who has announced his retirement after eight years at Merck.

ROI has been instrumental in helping us become a leading oncology company, particularly through his leadership in the development of Keytruda.

We wish all the best in his future endeavors and were confident that he leaves behind an outstanding team and program.

Im pleased to report the Doctor Elliott bar was appointed to succeed ROI early.

We have not only has deep experience having served in several research capacities throughout his more than two decades of Merck.

But also has an unwavering commitment to patients consistent with merck's purpose to save and improve lives.

In summary, we began 2022 with strong operational momentum and I want to express my sincere thanks to our employees worldwide for their continued focus and commitment we remain confident.

Confident in our fundamental strategy, our growth prospects and in our ability to deliver significant benefits for patients and value to shareholders well into the future.

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

Thank you Rob good morning.

Peter Denenbaum: Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee, President of Merck Research Labs.

Peter Denenbaum: Before we get started, I'd like to point out a few items.

As Rob highlighted we have had a very strong start to 2022 with exceptional performance in both revenues and earnings.

These results further demonstrate that our focus on science and innovation.

Cool.

Okay.

Enabled by excellent execution of our dedicated colleagues across the globe.

And it brings value for patients customers and investors.

Total company revenues were $16 $9 billion, an increase of 50%.

Peter Denenbaum: You will see that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items.

<unk> contributed $3 $2 billion in revenue.

Excluding that the base business.

<unk> delivered very strong growth of 19%.

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

Peter Denenbaum: You should note that we have excluded these items from our non-GAAP results and provide a reconciliation in our press release.

Peter Denenbaum: 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 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 human health business continued its strong momentum.

Peter Denenbaum: Our SEC filings, including Item 1A and the 2021 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.

You can look at the human health business grew 21% driven primarily by all key pillars.

The reduced impact of the pandemic.

Yeah.

Our animal health business.

Market performance with sales, increasing 9% driven by growth across both companion animal and livestock segment.

Now turning to the first quarter performance of our key brands.

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

In oncology Keytruda grew 27% to $4 8 billion.

Reflecting continued robust global demand.

The expansion into new indications.

In the U S. Keytruda continues to demonstrate strong growth across all key achievements and is benefiting from recent launches in early stage cancers.

Rooting triple negative breast renal cell carcinoma and.

In melanoma.

Keytruda is currently approved to treat <unk>.

Patients in earlier stage cancers, and we are excited about the potential opportunity to expand into adjuvant lung cancer based on the encouraging data from keynote <unk> 91.

We continue to be confident that Keytruda provides box clinical data combined with physician familiarity and experience with the product support expanding today and patient benefit in early stage disease.

In the metastatic setting keytruda continues to maintain its leadership position in non small cell lung cancer, capturing eight Apple 10 eligible new patient.

Outside the U S. Keytruda growth continues to be driven by lung cancer and the ongoing launches in head and neck cancer and renal cell carcinoma.

Because it remains the market leading PARP inhibitor.

License revenue grew 20% driven by uptake in metastatic breast cancer.

We are also excited by the expanded opportunity in early stage breast cancer. Following the recent FDA approval based on the Olympiad study.

Peter Denenbaum: During today's call, a slide presentation will accompany our speakers' prepared remarks.

Peter Denenbaum: The presentation, today's earnings release, as well as our FEC filings, are all posted to the Investor Relations section of Merck's website.

We look forward to potentially reaching a broad prostate population based on the propel study.

Lymphoma Alliance revenue also had very strong growth driven by uptake following the launch of the peanuts.

One in advanced renal cell carcinoma, and keynote <unk> seven five in metastatic endometrial cancer, whether youre seeing encouraging new patient share trends across each of these tumor types.

Lindsay growth also benefited from increased demand and have parts of cellular carcinoma in China and certain onetime items.

We are also excited by the launch of <unk> for patients with Dutton CHL associated cumin.

<unk> continues to generate strong interest amongst scientific leaders providers.

Yes.

Although still early in its launch really Rachel.

Uptake, providing a treatment option to the significant unmet need for these patients.

We are working to potentially extend its reach to broader RCC indications in the future.

Our vaccines portfolio again delivered excellent performance led by Gardasil, which increased 60% to $1 $5 billion.

Outside the U S significant growth was driven by strong underlying demand across key geographies, particularly China as well as increased supply.

In the U S sales increased due to the timing of CDC purchases.

Global demand for Gardasil remains robust supported by strong clinical and real world data as well as efforts to increase the recognition of <unk> as a vaccine that can help prevent certain HPV related cancers in both females and males.

You know hospital acute care portfolio.

<unk> sales grew 20% driven by the ongoing recovery in surgical procedures during the quarter and continued strong leadership of the neuromuscular blockade reversal agent class.

Our animal health business delivered another quarter of robust growth with sales increasing 9%.

Animal sales increased 13% driven by global demand in parasiticide, including the perfecto line of products as well as vaccines.

Livestock sales increased 7% due to higher demand in ruminants and poultry.

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

Gross margin was 77% a decrease of five nine percentage points, driven primarily by higher <unk> sales.

As a reminder, we share profit from the gift equally with our partner <unk> Bank, which is reflected within cost of sales.

<unk> gross margin percentage.

Gross margin. This quarter also reflects the favorable impact of product mix offset by higher manufacturing costs.

Operating expenses increased 7% to four $8 billion as we continue to prudently invest behind our growth drivers and pipeline.

Other expense was approximately $140 million.

Our tax rate was 14%.

Taken together, we earned $2 14 per share.

Turning now to our 2022 non-GAAP guidance.

As a reminder, at the request of the SEC.

Companies in our industry, including Al has made changes to non-GAAP reporting.

We will no longer exclude significant expenses for upfront and milestone payments related to collaboration and licensing agreements as well as transactions accounted for Aspen.

Tradition from non-GAAP results.

As a result, $1 $7 billion of R&D charges, primarily related to the acquisition of Pantheon are now included in our recast 2021 non-GAAP results.

This increased R&D expenses by $1 $7 billion and decreased non-GAAP EPS of <unk> 65.

There was no impact to the first quarters of 2021 and 2022.

Our 2022 guidance does not assume any significant transactions that would have previously been excluded from non-GAAP .

This could change in the future quarters, if we execute business development, which is a strategic priority.

The underlying strength of our business enables us to raise and narrow our full year guidance.

We now expect revenues to be between $56, nine and $58 $1 billion, representing growth of 17% to 19% or 11% to 12%, excluding <unk> and the impact from foreign exchange.

The projected impact from foreign exchange includes an incremental headwind of approximately $200 million using mid April rates.

Resulting in a full year negative impact of just over 2%.

We are increasing our gross margin expectation to between 74 and 74, 5%.

We expect operating expenses of 23 to $21 $3 billion.

At the midpoint. This is consistent with what was implied by our prior guidance.

We expect other expense of approximately $350 million.

We assume a full year tax rate between 13, five and 14, 5% due to an increase in estimated U S taxes to be paid on foreign income.

We assume 253 billion shares outstanding.

Taken together, we have increased our expected EPS range to $7 24 to.

To $7 six.

Representing pull through of the operational strength from our key pillars and operating expense leverage.

In part by a slight reduction in the top end upon the get Breo sales assumption the increase in our tax rate and an incremental 1% headwind from foreign exchange using mid April rates.

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

Just one look at <unk>, we are narrowing the range of our full year guidance.

<unk> billion dollars.

$5 $5 billion.

We have entered into supply and purchase agreement for approximately 10 million courses of therapy.

Since authorization, we delivered $6 4 million courses of therapy, including $5 million in the first quarter.

We expect approximately half of the remaining full year revenues from <unk> in the second quarter.

We continue to expect strong annual growth got itself, especially in ex U S markets, including China.

Finally, as a reminder, our other revenue line contains several items, including supply itself to organ on which we began recording upon the completion of the spin off last year and to Johnson <unk> Johnson Covid vaccine.

Also include Dave.

Revenue hedge and royalties.

Other revenue in first quarter also benefited from approximately $100 million in receipts related to out licensing agreement.

Our capital allocation priorities remain unchanged.

We will continue to prioritize investments in our business and pipeline to drive near and long term growth.

We will continue to be appropriately aggressive in augmenting our internal pipeline.

Business development, and we intend to pursue additional value enhancing opportunities.

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 we.

We remain very confident in the growth of our business driven by the global demand for our innovative medicines and vaccines.

We are in a position of financial and operational strength.

And our continued execution will enable us to deliver value to patients and our shareholders went into the future.

Peter Denenbaum: With that, I'd like to turn the call over to Ron.

I'd now like to turn the call over to Dee.

Thank you Carolyn it.

Ron: Thanks, Peter.

It is good to be here to provide an update on our progress.

In the first quarter, we continued to demonstrate progress in our pipeline.

Ron: Good morning and thank you for joining today's call.

Ron: Before I get started, let me take a moment to speak about the ongoing crisis in Ukraine.

Ron: Turning to our business, we continue to deliver across our key strategic priorities in the first quarter.

Ron: We are hopeful for an immediate and peaceful resolution to the Russian invasion of the country.

Ron: We're sustaining the strong business momentum we delivered in 2021 with robust top and bottom line growth.

We made advances across multiple therapeutic areas, including oncology and both advance and earlier stages of cancer as well as in cardiovascular disease and vaccines.

Ron: And we support the Ukrainian people and stand with them and recognize what a terrible tragedy this represents.

Ron: We've also achieved significant clinical advancements across our research pipeline and successfully integrated Excel.

Ron: Merck is making every effort to protect the health and safety of our employees and to ensure essential medicines and vaccines continue to reach patients.

Ron: In addition, we are dedicating meaningful resources to address the humanitarian crisis in the country through multiple channels.

Ron: Now moving to our results.

I will also provide an update on the Gabriel.

In oncology, we continue to build upon our strong position and execute on our strategy to expand.

Ben and extend benefits to patients and diversify our imprint on cancer.

This past quarter, we achieved milestones in several tumor types as well as different stages of disease.

Notably we continue to expand our treatment impact in earlier stages of disease, where we now have six approval from the FDA for Katrina and one for a new partner.

At the European Society for medical oncology virtual plenary session last month.

Data from the keynote 91, or <unk> trial evaluating <unk> for the adjuvant treatment of patients with stage <unk> non small cell lung cancer. Following surgical resection represents per were presented.

But an interim analysis keytruda has significantly improved disease free survival in all comers one of the studies dual primary endpoints.

Ron: We've had a strong start to 2022, achieving very strong top and bottom line growth. Commercially, we continue to execute well across a broad set of key growth drivers, most notably Katrina, Gardasil, and animal health.

Ron: Our performance reflects robust underlying demand for our DRISC-innovative portfolio and reinforces the importance of our science-led strategy. But Gabrielle, our COVID-19 antiviral treatment was a significant contributor as well.

Ron: But even excluding these sales, our top line growth was still a very healthy 19% versus last year.

Ron: On the Gabriel, we've accelerated broad global access, and it's now established as an important tool for patients and health care providers to address the ongoing pandemic.

Ron: Since receiving emergency use authorization in December, we've delivered approximately 6.4 million courses to more than 30 countries.

Ron: The success we are achieving is reflected in our updated 2022 guidance, which demonstrates our expectation for another year of strong growth and overall business momentum.

Trial will continue to analyze the other dual primary endpoint of disease free survival in patients, whose tumors express high levels of PDL, one which did not meet statistical significance at the time of the planned interim analysis.

The latest data provide a strong signal for the benefit of Keytruda in the adjuvant treatment study.

Ron: Our oncology business is benefiting from the continued rollout of new and important indications. Including in earlier lines of therapy.

Ron: Global demand for Gardasil remains strong.

Ron: And growth will benefit from increased supply as a result of the significant investments we are making to expand manufacturing capacity and our animal health business remains positioned to grow at above market rates.

Ron: Longer term, we remain confident in our ability to deliver strong revenue growth and operating margin expansion through 2025.

Additional ongoing studies in earlier stages of non small cell lung cancer include.

671, which is evaluating neo adjuvant and adjuvant therapy for patients with respect to both 238 and freebies.

<unk>, seven which is studying thermoplastic body radiotherapy with or without the trudeau and adults with unresectable stage, one or two of the disease.

Dan Healing 12, where we are studying keytruda in combination with one part of the phase III disease.

Following the approval of Keytruda for the adjuvant treatment of patients 12 years and older.

Ron: We're preparing for the post-Katruda LOE period by continuing to strengthen the levers we have and building upon them in order to deliver long-term growth.

With stage <unk> or to see melanoma following complete resection based on keynote <unk> one.

We announced that at a pre specified interim analysis. The study also met its secondary endpoints of.

The cost of phase III survival and showed continued improvement in our recurrence free survival compared to placebo.

Data from keynote <unk> reinforces the evidence for Keytruda.

Adjuvant therapy for appropriate patients with stage <unk> following surgery.

Help prevent recurrence of disease.

Now similarly can be earlier stage studies, along with Astrazeneca, We announced <unk> was approved by the FDA for the adjuvant treatment of patients with Germline BRCA mutations with her two negative high risk early breast cancer.

Previously treated with chemotherapy either before or after surgery based on the Olympiad study.

Further.

Women's cancer, we received FDA approval for Keytruda for the treatment of patients with microsatellite instability high or mismatch repair sufficient advanced endometrial carcinoma based on new data for keynote 168.

This approval is a fourth gynecologic cancer approval for Keytruda and marked the fifth approval derived from the keynote 158 trial and innovative trial designed to evaluate the use of predictive tumor biomarkers in patients receiving keytruda for advanced solid tumor.

Next the prostate cancer, along with Astrazeneca positive results were presented at the American Society of clinical oncology genital urinary cancers symposium for the propel trial evaluating <unk> combination with Apple rather known as a first line treatment for patients with metastatic.

<unk> castrate resistant prostate cancer women without mutations and a group of ophthalmologists in combination with therapy.

And a planned interim analysis results showed an improvement in radiographic progression free survival versus the standard of care.

Early results also showed a trend towards improved overall survival.

The trial will continue to express a key secondary endpoint and we plan to engage with health authorities to discuss the findings with the aim of bringing this important option to appropriate patients.

Prostate cancer represents a significant unmet need and we are continually gaining important insights into the biology of the tumor.

We are seeing on making impact for patients with late stage disease.

Last month, we announced the discontinuation of the <unk> 10 study evaluating the combination of Keytruda and <unk> for the treatment of metastatic castrate resistant prostate cancer.

On an interim analysis. The study showed no evidence of superiority to <unk> with respect to overall survival and radiographic progression free survival.

Our attention in metastatic castrate resistant prostate cancer now shifts to keynote <unk>. One study exploring the combination of Keytruda in chemotherapy and 641, which is evaluating the combination of Keytruda and <unk>.

<unk>.

Outside of the United States, we continued to deliver on our regulatory strategy.

Notable actions include a positive <unk> opinion for cervical.

Hi.

Early stage breast cancer in Europe , and approvals for the combination regimen of Katrina, plus one bema for advanced renal cell carcinoma and <unk>.

And finally to coincide with Opco in early June we are planning to host an investor event in Chicago.

At our recent cardiovascular investor event, we showcased our growing portfolio of programs targeting a range of conditions, including <unk>.

Sclerosis heart failure pulmonary arterial hypertension and thrombosis.

Following the completion of our acquisition of accelerating pharma, we are making strong progress in advancing the development of the powder set a potential first in class valuable activin receptor tied to a fusion protein.

We recently completed enrollment for the stellar trial ahead of schedule.

Through the first of four ongoing phase III studies evaluating the powder stuff.

This progress reflects enthusiasm from investigators regarding this novel investigational mechanism.

For the first time, the 2022 American Heart Association American College of Cardiology, and Heart failure Society of America guideline for the management of heart failure included or Cubo, which we collaborate on with our partner Bayer.

A class two the recommendation for the treatment of stage C heart failure with reduced ejection fraction.

<unk> highlights.

Some of FTC, such as for Cubo and the potential benefits of stimulated valuable Guan late sideways and increasing cyclic GMP.

Based on evidence from the pioneering Victoria trial.

Or to vote at the first drug specifically studied and approved for patients with worsening heart failure and the only drug.

Commended in the new guidelines for these patients.

Our ongoing Victor study is designed to expand on the evidence to date are evaluating for cubo in patients with chronic heart failure and reduced ejection fraction, who have not experienced a recent worsening heart failure event.

Merck is uniquely positioned to meaningfully impact the treatment of patients with cardiovascular disease.

At least a potential approval by 2030, including for Cubo and stable heart failure as well as our pipeline of candidates, including payout soluble <unk> cyclase stimulator factor 11 inhibitor and Anoro PCF canine inhibitor.

Next the COVID-19, and La <unk>.

As the pandemic evolved there continues to be regional surges in infection rates with the emergence of new COVID-19, very well.

Some of these spreads are resistant to specific monoclonal antibody regimens.

You are able to abate some vaccine protection, highlighting the importance of attracting and availability of anti viral option.

At the recent European Congress of clinical microbiology, and infectious diseases, we presented phase III virology outcomes data for move outs.

To the growing body of evidence for the anti viral properties of <unk>.

The Panorama trial evaluating novel anti viral for early treatment, which is being sponsored by the University of Oxford and funded by the UK government and the move ahead trial evaluating <unk> for post exposure prophylaxis.

<unk> ongoing.

We are working collaboratively with the European Medicines agency to provide additional data from these trials in order to secure an approval.

We remain confident in the safety and efficacy of <unk> in appropriate patients.

Ron: In oncology, we remain committed to building on the foundational position that we have achieved with Petruda, and we aim to expand our presence in this key therapeutic area and to establish an enduring leadership position.

Particular, we believe it's low propensity for drug drug interactions makes it an important option for patients.

Next on our Pneumococcal program.

Ron: In addition, we'll continue to maximize the opportunities we see for our durable growth drivers, such as Gardasil, our pneumococcal portfolio, and animal health through our proven commercial expertise.

Ron: Beyond our existing portfolio, business development remains a key priority.

Earlier this month, the FDA extended the <unk> date for the supplemental biologics license application for vaccine or.

Our 15 valent conjugate pneumococcal.

Co vaccine in infants and children with July one 2022 the.

The agency requested additional analyses of data, which we provided importantly, no new studies were requested.

Also in our Pneumococcal program, we received breakthrough therapy designation for <unk> 106.

<unk> PCV that is designed to target serotypes responsible for approximately 80% of the residual invasive disease in the older adult population and includes eight unique serotypes not in currently licensed vaccine.

We look forward to providing future updates.

Ron: We remain highly focused in our pursuit of the best external innovation and will be appropriately aggressive when great science and value align. We have a strong track record of business development, but we know we need to do more and we believe we are well positioned to quickly deploy capital towards the right strategic assets as they present themselves.

Ron: And finally, we'll continue to advance our broad pipeline across key therapeutic areas in order to deliver medically important innovations to patients.

Ron: We've taken important steps to provide increased transparency into the opportunities we see in our portfolio and our business, including through two recent investor-driven, Earlier this month, we provided a detailed description of our growing cardiovascular portfolio and pipeline.

Ron: At Merck, we're focusing our efforts where the needs are greatest, and where we have the best opportunity to positively impact patients' lives, including heart failure, Pulmonary Arterial Hypertension, Thrombosis, and Atherosclerosis. We've made significant advancements across our CV pipeline and believe our broad, differentiated portfolio can have meaningful impacts on patients' lives with at least eight potential new approvals by 2030.

In closing I would like to thank <unk> for his many contributions to Merck over the past eight years.

Ron: We're confident that these important innovations have the potential to be meaningful growth drivers for Merck well into the next decade.

Ron: And in February, we hosted our inaugural ESG event, which highlighted our activities in our four priority areas of access to health, employees, environmental sustainability, and ethics and values.

As we build upon his legacy I'm constantly reminded avoids bid with them and teaching and I'm grateful to work with a remarkable team is trained and metro.

One of those <unk> of course, it's early a bar.

Hello, He has experience and commitment to merck's purpose of saving and improving lives makes him the ideal leader of our global clinical development program.

<unk> has a wealth of experience holding leadership roles across an array of therapeutic areas. During his 27 years at Merck, including vaccine infectious disease and oncology.

I look forward to continuing to partner with Elliott to build upon merck's legacy of innovation and breakthrough science.

Ron: Our ESG efforts are grounded in our company values, and we look forward to building on Merck's legacy of operating responsibly going forward.

Now back to Peter.

Thank you Dean Grace if you could please begin the Q&A and we request that analysts limit themselves to one question each to date to get to as many analysts as possible. Thank you.

Ron: Before I close, I'd like to take a moment to recognize Dr. Roy Bains, who has announced his retirement after 8 years of, Roy has been instrumental in helping Merck become a leading oncology company, particularly through his leadership and the development of Petruda. We wish Roy the best in his future endeavors and we're confident that he leaves behind an outstanding team and program.

Yes.

To ask a question you will need to press Star then the number one or a telephone keypad again for the question you May Press Star one.

Ron: I'm pleased to report that Dr. Eliav Barr was appointed to succeed Roy. Eliav not only has deep experience, having served in several research capacities throughout his more than two decades at Merck, but also has an unwavering commitment to patients consistent with Merck's purpose to save and improve lives.

Ron: In summary, we've begun 2022 with strong operational momentum, and I want to express my sincere thanks to our employees worldwide for their continued focus and commitment.

Ron: We remain confident in our fundamental strategy.

Ron: Our growth prospects and in our ability to deliver significant benefits for patients and value to shareholders well into the future.

Your first question comes from the line of Carter Gould from Barclays. Your line is open.

Hi, good morning, Thanks for taking our questions that are on for Carter.

We wanted to ask about Cartersville, if you could talk about any impact you're seeing in China.

From a demand perspective or disruptions to manufacturing in that context should we think about cadence should we think about cadence over the year being notably different than years past, there's just a lot of different costumes in place. So any color there would be helpful. Thank you.

Carter. This is Caroline thank you very much for the question.

Caroline: With that, I'll turn the call over to Caroline.

It is still continues to be a great growth drivers corrupt company globally, including China.

I think to China, we saw strong performance in the quarter and we expect continued strong performance as we go through this year.

We have.

Significant demand in China, and as there are flat as a result of Covid and potentially lockdowns in one part of the country. We have the ability to ensure that we're supplying Morris to guide to suicide.

Two other parts of the country, so with that for not anticipating a significant impact to olive garden still performance in China as a result of what we're seeing in Shanghai at this moment in time, I think pertains to our supply chain. Our company has a very robust supply chain and we have plan a.

Plan B, if there are any interruptions in the supply chain. So we again have no concerns for the reliability of our supply chain, but we remain vigilant and focused on the situation at time.

Thank you Carter next question please Greg.

Caroline: Thank you, Rob.

Thank you next up we have Mohit Bansal from Wells Fargo. Your line is open.

Caroline: Good morning.

Great. Thanks for taking my question and congrats on the quarter.

Caroline: As Rob highlighted, we have had a very strong start to 2022, with exceptional performance in both revenues and earnings. These results further demonstrate that our focus on science and innovation... Enabled by excellent execution of our dedicated colleagues across the globe, it's delivering value for patients, customers, and investors. Total company revenues were $15.9 billion, an increase of 50%.

Caroline: LeGabrieux contributed $3.2 billion in revenue.

Caroline: Excluding LeGuevreaux, the base business delivered very strong growth of 19%. The remainder of my comments will be on an ex-exchange basis.

Caroline: Our human health business continues its strong momentum.

One question you are getting a lot is how do you feel about potential challenge from a comp data.

Caroline: Excluding LeGabrieux, the Human Health Business Group, 21% Driven primarily by our key pillars, as well as the reduced impact of the pandemic.

Caroline: Our animal health business also delivered above-market performance. Driven by growth across both companion animals and livestock segments.

Caroline: Now turning to the first quarter performance of our key brand.

Caroline: In Oncology, In The U.S. Intruder continues to demonstrate strong growth across all, and is benefiting from recent launches in earlier stage Canada, including triple negative breast, renal cell carcinoma, and melanoma.

Caroline: Teruza is currently approved to treat five indications in earlier stage cancer. We are excited about the potential of... Based on the encouraging data, continue to be In the Metastatic Set, continues to maintain its leadership position in non-small cell lung, Capturing 8 out of 10 eligible new...

Caroline: Outside the U.S, and the ongoing launches in head and neck cancer and renal cell carcinoma.

Caroline: Limpata remains the market-leading party.

And then London digit combo.

Potentially looking better than Keytruda in first line PD Lone high lung cancer do you see besides immediate track, especially looking at the phase two data from that competitor.

Thank you.

Alright. Thank you for that question. So I just wanted <unk>.

Caroline: Our Alliance Revenue Group...

Caroline: Driven by uptake in metastatic breast, We are also excited by the expanded...

Caroline: Appearance of Williams College President Charles Schamble, Further, we look forward to potentially...

Besides the question focuses on the addition of another checkpoint inhibitor ticket on top of a PD one and this is the strategy to sort of deepen the response to PD, one and PDL. One I think it will be very important to see that data and look at the contribution of components and really where we have any could you.

Caroline: Broad cross-state population based on the PROPEL study.

Caroline: Lenzima Alliance Revenue also had very strong growth, driven by uptake following the launches of Keynote 581 in Advanced Renal Cell Custody.

Caroline: Keynote 775 in Metastatic Endometrial Cancer, where we are seeing encouraging new patient share trends across each of these tumor types.

Caroline: Lenzima growth also benefited from increased demand in hepatocellular carcinoma in China.

Caroline: We are also excited by the launch of WellyRig for patients with certain VHL-associated, Welly Rec continues to generate strong interest among scientific leaders, providers, and or vote still early in the Relireg has had strong uptake, providing a treatment option to the significant unmet, We are working to potentially extend...

Our brand, but we are also advancing in non small cell lung cancer and small cell lung cancer. So the field will have to sort of see as the data evolves how much this ticket add to PD one in the lung space, but I do want to make a broader sort of comment which is you will see movement in ticket. There was recently moved.

Caroline: Our vaccines portfolio again delivered excellent performance, led by Gardasil, which increased...

Caroline: Outside the U.S., significant growth was driven by strong underlying demand across key geopolitical sectors.

Caroline: In the U.S., sales increased due to the timing of the pandemic.

Caroline: Global demand for Gardasil remains robust, supported by strong clinical and real-world data. As well as efforts to increase the recognition of Gardasil as a vaccine that can help prevent certain HPV related diseases.

Caroline: In our Hospital Acute Care Portfolio, Viridian Sales Group...

Caroline: The Convention of Scottish Local Authorities, Continued strong leadership of the neuromuscular blockade reversal agent class.

Caroline: Turning now to our 2022 Non-Gap Guide.

Caroline: Animal Health, Delivered another quarter of robust growth, companion animal sales increased Driven by Global Demand in Parasiticide, I will now walk you through the remainder of our P&L and my comments will be on a non-GATT gross margin was 70.7% A Decrease of 5.9% Driven primarily by higher liquorice reo sales. As a reminder, we share profits from Logevrio equally with our partner Ridgeback, which is reflected in.., and Reduces Our Gross Margin.

Caroline: As a reminder, at the request of the FDIC.., https://www.youtube.com, We will no longer exclude significant expenses for upfront and milestone payments related to collaborations and licensing of... As well as transactions accounted for as assets at, Non-Gap Results As a result, $1.7 billion of R&D charges, primarily related to the acquisition of Penn, are now included in our recast.

Caroline: Gross margin this quarter also reflects the favourable impact of product... Operating expenses increased, $4.8 billion as we continue to prudently invest behind our growth drivers and pipe, Other expense was approximately $140 million.

Caroline: One Non-Gap Result, This increased R&D expense by $1.7 billion and decreased non-GAP EPS by $65 billion.

Caroline: Taken together, we earned $2.14 per share.

Caroline: There was no impact to the first quarter.

Caroline: Unknown, Our 2022 guidance does not assume any, Inc.

<unk> and <unk>.

PD, one and <unk>, four and PD, one and lag three.

What you what you recognized as each of those combinations what they do is if you were able to show a benefit of the additional agent.

Caroline: So this could change in the future quarters if we execute business development, which is a strategic priority.

Caroline: The underlying strength of our business enables us to raise and narrow our full-year guidance. We now expect resume, $78.1 billion dollars, representing growth of $17.5 billion, or 11 to 12. The projected impact from foreign exchange includes an incremental headwind of approximately $200 million using mid-April rates.

Caroline: The Convention of Scottish Local Authorities, We are increasing our growth margin expectations.

Caroline: 74% and 74.5%.

Caroline: We expect operating expenses of $20.3 to $21.3 million.

It doesn't have as broad of an impact as one has many different tumors and so one of the things that I think is important to highlight is our strategy is not to just be invested and lag three not to be just invested in CLO for not to be just invested in Q pichet put to be invested in all three.

To focus them in specific tumor types.

Great. Thank you next question please Greg.

Caroline: What was implied by our prior date?

Caroline: We expect other expense of approximately $350 million.

Thank you next up we have Seamus Fernandez from Guggenheim. Your line is open.

Caroline: We assume a full year tax rate between $13.5 and $14.5 billion.

Caroline: To an increase in estimated U.S. tax, Page 1 of 9, We assume 2.53 billion shares outstanding.

Caroline: Taken together, we have increased our expected EPS rate, $7.00 Representing pull through of the operational strength from, and Operating Expense Leverage, offset in part by a slight reduction in the top end of our LeGabrieux cell.

Oh, great. Thanks for the question so.

Caroline: Foreign Exchange, If you consider your models, there are a few areas to focus on.

Caroline: First On Lookout, We are narrowing the range of our full year diet.

Caroline: $5.5 billion, We have entered into supply and purchase, for approximately 10 million courses of therapy.

Just really wanted to focus in on the tighter staffed in the six minute walk test.

As the primary endpoint.

Just if you guys can just help us understand what is being done in the clinical trial.

Caroline: Authorization we delivered 6.4 million courses of therapy, We expect approximately half of the remaining full-year revenue from LeGabrieux.

Caroline: Continue to expect strong annual growth for gardeners.

To really manage closely.

Risks that sort of a subjective endpoint represents.

Or is your confidence that the magnitude of the difference that you saw in the phase two.

We will comfortably cover.

The challenge is the six minute walk test that we've seen in some other studies given given some placebo responses that that raised levels of concern. So just love to get your thoughts there. Thanks so much.

Yes.

Caroline: Specially in Ex-U.S. Markets.

So much for that question and relationships to Pat as Pat So just to reemphasize, we have three different trials all driving towards somewhat different outcomes. The six minute walk which is the stellar trial. There's also time to clinical worsening and then Theres also have you been harder outcomes past that and as you.

Caroline: Finally, as a reminder, our other revenue line contains several items including supply sales to Organon, which we began recording upon the, Johnson & Johnson for its COVID vaccine.

Caroline: Also included are our Revenue Hedge and Royalty Fund.

Caroline: Other revenue in first quarter also benefited from approximately $100 million in receipts relating to outliers.

Point out each one of those is sort of ratcheting up what's the powder.

Can do in relationship to the first one which is stellar which is related to what you said the six minute walk test.

We saw actually quite impressive data in relationship to the phase III, we have very committed patient groups as well as sites, who are very well trained in how to do these trials.

And in the Phase two was what was really nice data and the fundamental issue is that we are confident that many of those same sites that were involved with the phase two RMB above with the phase three so I think we're confident we'll see what that data is but the best predictor.

How well we can manage to those trials is really the best the best indicator is the phase III and we're using there are many of the same sites and the investigators so we have great confidence in them.

Great. Thank you Seamus next question please.

Thank you next we have Chris Schott from J P. Morgan.

Great. Thanks, so much for the question I may just a two parter around kind of corporate structure I guess first business development landscape I know you talked about the <unk> priority.

Caroline: Our capital allocation priorities remain, First, we will continue to prioritize investments in our business and pipeline to drive near and long-term growth. We will continue to be appropriately aggressive in augmenting our internal pipeline through strategic business development, and we intend to continue to do so in the coming years.

Caroline: The goal of increasing it over time.

Caroline: Since we have excess cash... We will return it to shareholders through share- He remains very...

Caroline: Driven by the global demand for our innovative medicines and vaccines.

Caroline: We are in a position of financial and operational.., and I'll continue...

Another quarter of weak equity market performance and the biotech side are.

Are you seeing any change in willingness on the part of some of the targets to engage or any resets and valuations that could enable some of these business development kind of activities to move forward.

And then Rob just a kind of a tangential.

Tangential question on that is broadly across the pharma group I think we've been seeing asset divestitures of non traditional pharma businesses.

No you viewed animal health is more core to the company, but have your thoughts evolved at all I guess as your time as CEO and when you look at your implied kind of core form of valuation given where some of the animal health multiples trade, so tiny and incremental perspective, there would be appreciated. Thanks.

Caroline: With that, I'd now like to turn the call over to...

Chris Thanks for the questions on the BD landscape question.

The short answer is we are not seeing a fundamental shift in seller expectations.

As of this point.

I think as time continues if we see the market reset to become more permanent and more importantly, if the IPO market continues to be challenged for biotech companies.

That might change over time as companies come to become more cash constrained. There are some smaller players that do have cash challenges. So I think that's where you could see.

The movement first but fundamentally we've not seen a change in the landscape yet we'll have to continue to watch with regards to the animal health business.

Our view continues to be that the animal health business. As you said is core to.

The company, it's core to our strategy as part of our as part of a growth driver for the company.

As we've always said we looked at this regularly we.

Always we're challenging ourselves to ask what is the long term value creation opportunity of this business in our hands relative to what would it be outside of the company and on a long term view. We continue to believe it is best in our hands, that's part of the company but.

Situation evolved we obviously will continue to be objective and how we analyze that but.

We do not look at the short term.

Arbitrage opportunity for us it's more about the long term value creation and that has not changed as of now.

Thanks, Chris next question. Please grace.

Karen: Thank you, Karen.

Thank you next up we have Chris Shaw with Tony from Goldman Sachs. Your line is open.

Karen: It is good to be here to provide an update on our.

Thank you and good morning, if I could ask a question on Keytruda.

Karen: Thank you for joining us today.

Karen: We will continue to demonstrate progress in our, Made Advances Across Multiple Therapeutic Areas, including Oncology, in both As well as in cardiovascular, will also provide an update.

Karen: In oncology, we continue to build upon our strong physician, © The Bulletproof Executive 2013 and Xtend Benefits.

Karen: © The Bulletproof Executive 2013, In the past quarter, we achieved milestones in several tumor types as well as different stages of disease.

Strength, particularly out of the U S. This quarter, if you could help us with some of the underpinnings, there and relatedly longer term 2025, I think you've framed how keytruda. Your objective is to have I guess the wording changed slightly you were previously looking for 30% coming from adjuvant with your focus framed around the U S.

Reading it correctly you brought in the framework here to now think about it as 25% on a global basis, maybe update us on where you feel you are in terms of making progress towards achieving those objectives of the adjuvant revenue contribution. Thank you. Yes. So of course this is Rob maybe I'll take the first part of the question then Caroline.

Karen: We continue to expand our treatment impact in earlier stages of the COVID-19 pandemic, where we now have six approvals from the FDA, five for Keytruda and one for Limpard.

Karen: European Society for Medical Oncology Virtual Plenary Session, Data from the Keynote 91 or PERL.

Can jump in for the second part.

On the strength of the growth, we're seeing in the United States.

This is really a testament to what we've been talking about all along which is as we continue to rollout new indications.

We are continuing to to see our share grows.

As the leading Io agents.

Karen: Evaluating protruder from the adjuvant treatment.

Karen: Page 1B to 3A non-small cell line, Following surgical resection or for the for war.

Karen: At an interim analysis, Katrina significantly improved.

And importantly, I would highlight that the growth we saw among other things in the quarter continuation of our position in renal cell carcinoma continuation of the growth, we're seeing in head and neck.

Karen: One of the study's dual primary.

Karen: The trial will continue to analyze the other dual primary, Umer's expressed high levels of PD-L1, which did not meet statistical significance at the time, The latest data provide a strong signal for the benefit of... Notes 671, is evaluating neoadjuvant therapies for patients with refectable 2, 3A, 4A, 5A, 6A, 7A, 8B, 867 which is studying stereotactic body radio, Keeling 12, where we are studying Katruda in combination with Lampard.

Karen: Following the approval of Katruda for the Agilent, Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, We announce that at a pre-specified interim announcement...

Karen: The study also met at secondary endpoints of distinct metastases.

Karen: This slide shows continued improvement in recurrence-free survival compared to placebo.

Karen: Adjuvant Therapy for Appropriate Patients with Stage 2, Help Prevent Recurrence of Disease, Along with AstraZeneca, we announced that Pfizer was approved by the FDA.

Karen: © The Bulletproof Executive 2013, http://www.braeprus.com either before or after, Further, in women's cancer, we received FDA approval for Keytruda for the treatment, with Microsatellite Instability High or Mismatch Repair.

Karen: Advanced Endometrial, based on new data for Keynote 168.

Karen: Now this approval is the fourth gynecologic cancer approval for Keytruda and marks the fifth approval derived from the Keynote 158 trial, an innovative trial designed to evaluate the use of predictive tumor biomarkers in patients receiving Keytruda for advanced solid tumors.

And <unk>, obviously being a first line treatment.

Karen: Next, the process.

Karen: Positive results were presented at the American Society for Clinical Oncology. Genitourinary, The Propel Trial, evaluating Lampard. Combination with Everett, Women Without Mutations and a Group of Homologous Recombinational Surgeons, The results showed an improvement in radiographic progression-free survival.

Karen: Early results also show that, I will continue to address this key secondary © The Bulletproof Executive 2013, Prostate Cancer Rep.

Karen: For insights into the biology of the tumor, we are.

Karen: And last, we announce the discontinuation of...

In the metastatic setting as well as not having adjuvant therapy as well when you covered pretty much the waterfront of RCC and we have the opportunity to continue to grow there, but the stand frankly for the quarter.

Karen: Evaluating the Combination of Ketruda and Lempar.

Karen: Cream at the Metastatic Castrate-Resistant Prostate Cancer.

Karen: At an interim.

Karen: Study shows no evidence of superiority to aberratin melanin.

Karen: Back to overall survival and radiography.

Karen: U.S. Centers for Disease Control and Prevention.

Karen: This is progress.

Karen: Out of the United States, continue to deliver on our regulatory, Notable actions include positive CHMP opinions for cervical cancer, and Approvals by the Combination Regiment of Katruda Plus One BEMA for Advanced Renal Cell, And finally, To Coincide With Apple.

Karen: These are the investigators regarding this novel.

Karen: Early June, we are planning to host an investment.., at our recent cardiovascular... Alpharetical Routes, Following the completion of our acquisition of Accelerant Farms... We are making strong progress in advancing the development of the Pattern, First-in-Class Valuable Active-In-Receptor Type 2A, Recently completed enrollment for the CELER trial.

Karen: For the first time, the 2022 American Heart Association, American College of Cardiology, Heart Failure Society of America, Guidelines for the Management of Harvest.

Karen: Cellar is a first of four ongoing phase 3 studies evaluating...

Karen: We collaborate on with our partner.

And I think really important to understand as triple negative breast cancer, both in the metastatic setting.

Karen: Class II-D Recommendation for the Treatment of Stage 2 Diarrhea.

Karen: Our failure would reduce, Guideline Highlights Mechanism of SGC such as PerCubo, and the potential benefits of stimulating soluble guanylate, Based on evidence from the Pioneering Victoria.

Karen: CUBO is the first drug specifically studied.., worsening heart failure and the only © The Bulletproof Executive 2013, Our ongoing Victor study is designed to expand on the evidence, by evaluating for QBO.

Karen: Chronic Heart Failure, Merck & Co Inc. is a non-profit, non-profit, non-profit, non-profit, non-profit, With at least 8 potential approvals by 2030, including... COVID-19 and Liggett, As the pandemic evolved...

Karen: Monoclonal Antibody Reg, If you're able to vague some vaccine protection, highlight it.

Karen: European Congress of Clinical Microbiology, Presented Phase 3 Virology Outcomes Data from MOOC.

Karen: Paranormic Trials Evaluating Novel Antivirals for Proven, Sponsored by the University of Iowa.

Karen: Head Trial Evaluating LeGabrielle for Post-Exposure Procurement, We are working collaboratively with the European Medic... We remain... Safety and Efficacy of LaGavrille in a Pro, We believe its low propensity for drug-drug interaction makes it an important option for, Next, on our Umocopter.

<unk> been setting we are seeing incredible growth in that space.

Karen: Earlier this month, the FDA extended the producer...

Karen: One of those mentees, of course, is Eliav Barr.

Karen: Supplemental Biologics License Application for Back, 15 Valence Conjugate Umococcal Valence, We requested additional analyses of data which we provided.

Karen: Eliav's experience, Merck's purpose of saving and improving lives makes him the ideal leader of our global clinical development.

Karen: Importantly, no new studies were recorded.

Karen: I'll leave her to well...

Karen: Also in our new MoCAP.

Karen: All of these companies have been building leadership roles across an array of therapeutic areas during his 27 years at Merck, including vaccine, infectious disease, and oncology.

Karen: Breakthrough Therapy Designation for B11, Designed to target serotypes responsible for, Thank you all very much.

Dean: I look forward to continuing to partner with Eliav to build upon Merck's legacy of innovation and breakthrough science.

And it's something that we feel very proud of because I think we're going to have a meaningful difference there.

Karen: All over Adele.

Karen: 8 Unique Serotypes Not Incurable, We look forward to providing you with more information.

Karen: In closing, I would like to thank Lloyd Bains for his many contributions to Merck over the past eight years.

Karen: We build on his legacy.

Karen: Constantly reminded of Roy's business wisdom.

Original highlight that is both if you look at the adjuvant opportunity there and the growth, we're getting as well as I mentioned, an adjuvant in RCC.

Karen: I am grateful to work with a remarkable team.

I think it just reinforces what we see as the future, which is the growth contribution from the earlier lines of therapy.

Long term, but with that maybe Caroline can be specific to some of the guidance we provided.

To Rob's point, we are extremely excited about the opportunities we have for adjuvant and the impact that that has on patients. We initially shared that we expected 50 defense growth come from adjuvant, representing 30% of the U S business, we have now extended that to say 50%.

Growth will come from adjuvant, representing 25% of global business in the year 2025 and to Rob's point earlier.

<unk> introduction into the earlier stage cancers with five indications now and Keytruda are putting us on a very good cost impact.

Great. Thank you Chris next question. Please grace.

Dean: Thank you, Dean.

Thank you next we have Omar Saad from Evercore ISI. Your line is open.

Grace: Grace, if you could please begin the Q&A.

Hi, guys. Thanks for taking my question, maybe let me touch upon them all up here real quick.

Grace: And we request that analysts limit themselves to one question each today to get to as many analysts as possible.

The total utilization to date is about 200000 courses through mid April and it looks like at least based on third party datasets that the Pfizer regimens getting used eight to 10 X more than one appear here.

I guess my question is if only a couple of hundred thousand courses have been used through mid April and $3 1 million courses were contracted the U S is there any recourse for us to return a chunk of these courses back and I'm asking because some of these sales have been recorded in the P&L I just want to make sure they're permanent sales.

Yeah, I'll, let Caroline maybe address this.

Grace: Thank you.

For the question.

Grace: To ask a question, you will need to press star, then the number 1 on your telephone keypad.

Grace: Again, for the question, you may press star 1.

Let me start with crowd of Mommy paresthesia free on the impact that it can have on the world and it has impacts to the comments that Jim made given its importance, especially in patients that have truck to truck interactions. The data that we have access to suggest that we have actually had utilization by 500.

Carter Gould: Your first question comes from the line of Carter Gould from Barclays, your line is open.

Carter Gould: Hi, good morning.

Carter Gould: Thanks for taking our questions.

Thousand patients globally at this stage.

We have shipped $6 4 million pool stays as of now those shipments represent expectations for utilization over a period of time and we're actually seeing extremely strong utilization, especially in ex U S market, but the statistics you quote are actually with us.

And some of the markets, we have a very strong market share. So as we sit here today, we've guided on the five to $5 5 billion based on the contracts that we have in hand, and we are confident in that in our financials.

Great. Thank you next question please.

Thank you and next we have Dana great Bostrom SVP Leerink. Your line is open.

Adiraan: This is Adiraan for Carter.

Hi, Thank you for your question. The question I have another one on Keytruda at an early stage.

Just talk to how the success of.

Tivo plus chemotherapy in neo adjuvant lung cancer.

As your expectations or strategy for the early stage opportunities in lung cancer, and then any other tumor.

Thank you very much for that question and relationship to sort of just earlier stage.

In lung cancer I think it's really important that emphasize there is there is a series of different ways to approach. It one is neo adjuvant and adjuvant when as adjuvant and I just think all of these signals jet to demonstrate throughout a variety of different.

Studies, just the impact that PD ones can have so our point of view of it is it shouldnt change our strategy. It should just make our strategy pretty comprehensive.

The mental thing is we have a keynote <unk> 91, which is in the adjuvant. So thats post surgery, and that's usually given by a metal medical oncologists.

Disease free survival was positive in all comers, regardless of PD L. One.

There was a trend for TPS greater than 50%, but not statistically significant and OLED. It was a favorable trend regardless of PD L. One so wont be letting that data mature as we continue to discuss with the FDA, but didnt going to your point, it's not just 91 as keynote <unk> seven one.

It's 867 key linked 12, it's all in the earlier stage, so our desire to really push that earlier stage is going to be.

If anything our commitment towards that is even greater the one thing I would just add in relationships with some of the comments that Caroline and Ralph made is that I think it is very important but think about melanoma renal cell carcinoma, and triple negative breast cancer.

At least my experience being in the hospital.

There is a concept that really looking at that earlier stage I think uptake may be sort of built in the medical system, I think all of us, including us and other companies as well as patient advocacy and medical centers are going to have to require a diligent investments to really really.

<unk> is the important scientific impacts of Keytruda and PD, one and PDL, one and the early launch phase.

Great. Thank you Dana next question please.

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

Thank you I just like to thank Roy for all the contributions that insight to say that he is the.

The question is on your factor 11 monoclonal.

Given your background in cardiology and I am sure.

Actually with Hemostasis Steve.

It's clearly been a number of indications where the delek.

Unsuccessful compared to warfarin for both efficacy and safety.

Potentially speaking to different underlying mechanisms.

Thrombosis in the different indications as I'm thinking about E system thinking about mechanical heart valves.

What you know about factor 11 biology.

The intrinsic pathway nature of the inhibition.

Indications would you actively avoid or be somewhat cautious about taking.

That's factual evidence habit to intubate yours or someone else's.

Yes, So let me just step back for just a moment.

The benefit risk of whether its platelets or coagulation factors in terms of clotting, it's something thats actually very topical in the news I would just emphasize.

Years for probably a decade or more aspirin has been just everywhere and recently people realize the benefit risk one has to be very careful.

There has been a major change in the guidelines so that that impacts how I think about it the other sort of thing that impacted if you look at factor 11th the fundamental advantage of that is that you can get blockage of the coagulation cascade.

By genetics very little impact in relationship to adverse effect.

And so for me the critical thing is to prove that as quickly as possible. So we immediately go where is the problem with thrombosis and bleeding is both impacted there and so that's why we ran to end stage renal disease, but I could see in the future.

And Apple devices.

One of my favorite sort of things has left ventricular assist device I think those will continue to need to be monitored in the future. So that's a place where the risk of bleeding and the risk of thrombosis is really high where we have chosen to be a little bit careful is sample broader sort of things such as atrial fibrillation.

And the risk of a relationship to stroke, because we look at the factor 10 is very effective there are bleeding complications, but to make a safety argument for it you're talking about a very very large trials. So we're racing to places where the benefit risk of thrombosis.

And quality and bleeding.

Where that differential would make something like a factor 11 have the biggest impact.

Thank you Andrew next question please.

Thank you next we have Louise Chen from Cantor Your line is open.

Hi, Thanks for taking my question I wanted to ask you about your pneumococcal conjugate vaccine and how you think you're more targeted approach will be a competitive advantage versus the one size fits all that we're seeing now.

And is there any precedence to what youre doing with E. One six and one seven and maybe just lastly, how would you make that message clear to physicians since if everything goes as planned youll have several pcbs on the market. Thank you.

Yeah. So first of all we need to get the data to demonstrate that we have an advantage in the different patient populations, but I think you point out a really important point, which is essentially what we're trying to do it for lack of a better word were you want to call. It precision targeted vaccination right. So the fundamental thing is the one.

One four as adult approved and we're driving towards the pediatric approval for the 15 valent.

And so you know.

That will be in the pediatric population and the V. One six where we have a breakthrough.

Designation, we're trying to demonstrate that we can target 85% of the residual serotypes and I would just sit there and say it would be eight unique serotypes involved.

In relationship to all of the different currently approved ones and I think that patient population.

I reflect a little bit about COVID-19 , but it's that that older population that especially as has the risk factors, who really want to make sure that that that whole population that adult population is covered and so I do think the fundamental thing is we'll have to have the data.

But our concept is the adults have a different set of serotypes and they need to be protected and we'll have to get the data to demonstrate that but I think if we can demonstrate the uptake will be quite good.

Thank you Luis next question please.

Thank you next we have Mara Goldstein from Mizuho. Your line is open.

Thanks for taking the question.

Okay, maybe we can return for a second back to the question of novel targets.

In combination with Keytruda and maybe if you could just give us a very high level, perhaps rationale for which targets.

Looking at them, which indications and I'm, referring to here, obviously, two things like ticket Blackberry Iot.

And the like.

Alright, So let me just sort of separate so we always talk about expand deepen and extend it and when we talk about deep and we're trying to get a deeper response with PD ones. In there. There was a series of things that we do with what I'd call non I O agents, which is chemotherapy.

We're doing stuff with many other people as well as ourselves with Adcs are Ras programs are advancing so we think that that sort of combination. There is two large precedent throughout our portfolio already and they will continue to be and that's also true with.

The Muslim caused us the specific question I think youre driving to is combinations of Io with I O agents, Yeah, and lastly, <unk> antigen. So at least in our minds, we do recognize that there.

There was a demonstration of lag three adding to PD, one in melanoma and I think thats, an important signal for us where we've focused our efforts at block III is in MSS CRC. So we know that PD ones worked in MSI high and no one's really been able to crack MFS.

CRC. So that's very important and also in classic Hodgkin's I would say in relationship to <unk>. Four there was recent data with HCC I would make a comment that I think would make some of the people from Merck Smile, a little bit we were the ones, who actually did the study with PD, one and <unk> four in relationship to love.

And we could not show a clear contribution of components of CPI for over PD. One so that is not a place that we think is an important place for patients and that is not a place that we're going because we have we did this study to demonstrate that where we think there could be as clearly other piece.

Recently released HBC, we're focused in for example in renal cell carcinoma, and then PD one and our.

Our initial focus is in non small cell lung cancer and also small cell lung cancer and we're advancing.

A series of trials in that so I hope that gave a comprehensive view of lab <unk> trailing four antigen in relationship to Iot for other checkpoint inhibitors, such as <unk> 27 or in relationship to cytokine I think the data that we're doing in earlier stages will have to play out for us to be able to add.

Answer that more completely.

Great. Thank you Mary I think we have time for one more question and Rob will have a few closing comments.

Thank you. Your last question comes from the line of Colin Bristow from UBS. Your line is open.

Hey, good morning, Congrats on the quarter and also wanted to say all the best ROI.

Adiraan: We wanted to ask about Gardasil.

Great working with you and also congrats to Elliot. So I just wanted to piggyback on <unk> question could you, maybe just give us a little more detail on how you expect that.

Got it to a supply increase.

And then maybe just help us into what is the supply demand mismatch right. Now you know some of your prior comments suggested that.

May not be such but I know you said supply has been.

Initially the past couple of years, so we'd love to get some expanded thoughts there. Thanks.

Thank you for the question this is Caroline.

Adiraan: If you could talk about any impacts you're seeing in China, either from a demand perspective or disruptions to manufacturing.

Let me start first with the supply demand there is significant demand for Gardasil. This Ken the proofing <unk> vaccine in the H P. C area has only reached today, 9% of global eligible population. So there is significant runway ahead of us to protect.

Adiraan: And in that context, should we think about cadence or should we think about cadence over the year being notably different than years past?

Designs and to drive growth for Mac. Indeed, we stated that we expect the revenue in the 2030 to be double the $5 7 billion. We achieved in 2021. So we have significant opportunity ahead of us.

Adiraan: There's just a lot of different crossings in place.

Adiraan: So any color there would be helpful.

In order to achieve that opportunity. We are building new facilities that will be coming online from 'twenty to 'twenty three four and five so we are going to have a step up in the level of supply to the market that will happen over that period specific than two this year we will.

Adiraan: Thank you.

Caroline: Carter, this is Caroline.

See a continuation of the supply into the market as we did in 2021, albeit not quite at the same desktop that we achieved in 2021. So we remain really confident in our ability to drive strong growth for <unk> both in 2022.

Caroline: Thank you very much for the question.

To come.

Great. Thank you Rob.

Just wanted to say thank you for your time and your interest today and I just want to conclude by again thanking the Merck team globally for their focus and commitment and really driving the results you've heard about today, but in continuing to ensure we keep the purpose of the company and front and center, which is to deliver for patients.

Caroline: Gardasil continues to be a great growth driver for our company, globally, including China.

Caroline: Specific to China, we saw strong performance in the quarter and we expect continued strong performance as we go through this year. We have, Significant demand in China.

Caroline: And as there are flares as a result of COVID and potentially lockdowns in one part of the country, we have the ability to ensure that we're supplying more of the Gardasil doses to other parts of the country.

Caroline: So we're therefore not anticipating a significant impact to our Gardasil performance in China as a result of what we're seeing in Shanghai at this moment in time.

Caroline: As it pertains to our supply chain, our company has a very robust supply chain, and we have plan A and plan B if there are any interruptions in the supply chain.

Caroline: So we again have no concerns for the reliability of our supply chain, but we remain vigilant and focused on the situation at hand.

Caroline: Thank you, Carter.

Grace: Next question, please, Grace.

Grace: Thank you.

Mohit Bansal: Next up we have Mohit Bansal from Wells Fargo.

Mohit Bansal: Your line is open.

Hopefully you get the sense, we are very confident in the business momentum, we have and I'd like to say as well, we are feeling better and better about the evolution of our pipeline.

Today, we're starting to expand we're doing all of the things we need to do we have more to do but we're making great progress and that's why I have such confidence confidence in the sustainability of our business long term. So we look forward to continuing to share. These results with you to deliver for the patients that count on us and in turn bring value to the shareholders. So with that I'd say thank you.

Mohit Bansal: Great, thanks for taking my question and congrats on the quarter.

Mohit Bansal: So one question we are getting a lot is how do you feel about a potential challenge from a competitor or for PD-L1 and TIGIT combo potentially looking better than KITUDA and first-line PD-L1 high lung cancer?

Mohit Bansal: Do you see this as a major threat, especially looking at the phase two data from that competitor, TIGIT?

Mohit Bansal: Thank you.

Unknown Executive: Hi, thank you for that question.

Unknown Executive: So, you know, I just want to emphasize the question focuses on the addition of another checkpoint inhibitor digit on top of a PD-1 and this is a strategy to sort of deepen the response of PD-1s and PD-L1s.

Unknown Executive: I think it'll be very important to see that data and look at the contribution of components.

Unknown Executive: And really, we have a PIDGET program, but we're also advancing a non-small cell lung cancer and small cell lung cancer.

Seamus Fernandez: Your line is open.

Unknown Executive: So the field will have to sort of see as the data evolves, how much does PIDGET add to PD-1 in the lung space?

Seamus Fernandez: Oh, great.

Unknown Executive: But I do want to make a broader sort of comment, which is, you'll see movement in PIDGET.

Seamus Fernandez: Thanks for the question.

Unknown Executive: There was recently movement in, you know, PD-1s in CTLA-4 and PD-1s in LAG-3.

Seamus Fernandez: So just really wanted to focus in on the TATRCEPT and the six-minute walk test as the primary endpoint.

Unknown Executive: What you recognize is each of those combinations, what they do is, if you're able to show a benefit of the additional agent, it doesn't have as broad of an impact as PD-1 has in many different tumors.

Seamus Fernandez: If you guys could just help us understand what is being done in the clinical trial to really manage closely the risk that sort of a subjective endpoint represents, or is your confidence that the magnitude of the difference that you saw in the phase two will comfortably cover the challenges of the six-minute walk test that we've seen in some other studies given some placebo responses that raise levels of concern?

Unknown Executive: And so one of the things that I think is important to highlight is, our strategy is not to just be invested in LAG-3, not to be just invested in CTLA-4, not to be just invested in PIDGET, but to be invested in all three and to focus them in specific tumor types.

Seamus Fernandez: So just love to get your thoughts there.

Mohit Bansal: Great.

Seamus Fernandez: Thanks so much.

Mohit Bansal: Thank you, Mohit.

Unknown Executive: Yeah, so thank you so much for that question in relationship to status that so, you know, just to reemphasize, we have three different trials, all driving towards somewhat different outcomes, the six minute walk, which is the stellar trial, there's also time for clinical worsening.

Grace: Next question, please, Grace.

Unknown Executive: And then there's also even harder outcomes.

Grace: Thank you, next up we have Chris Shibutani from Goldman Sachs, your line is open.

Grace: Thank you.

Unknown Executive: © 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension, In relationship to the first one, which is stellar, which is related to what you said, the six-minute walk test, you know, we saw actually quite impressive data in relationship to the phase two.

Chris Shibutani: Thank you.

Have a great day.

Seamus Fernandez: Next up we have Seamus Fernandez from Guggenheim.

Unknown Executive: We have very committed patient groups as well as sites who are very well trained in how to do these trials.

Chris Shibutani: Good morning.

Unknown Executive: And the phase two was, you know, was really nice data.

Chris Shibutani: If I could ask questions on Keytruda, the strength, particularly out of the US this quarter, if you could help us with some of the underpinnings there.

Yeah.

Unknown Executive: And the fundamental issue is that we are confident that many of those same sites that were involved with the phase two are involved with the phase three.

Chris Shibutani: And relatedly, longer term 2025, I think you framed how Keytruda, your objective is to have, I guess the wording changed slightly.

Thank you so much for the centers. This concludes today's conference call. Thank all for joining you may now disconnect.

Operator: Thank you so much, presenters.

Unknown Executive: So I think, you know, we're confident.

Chris Shibutani: You were previously looking for 30% coming from adjuvant with your focus framed around the US.

Operator: This concludes today's conference call.

Unknown Executive: We'll see what that data is.

Chris Shibutani: If I'm reading it correctly, you've broadened the framework here to now think about it as 25% on a global basis.

Unknown Executive: But the best predictor of how well we can manage those trials is really the best indicator is the phase two.

Chris Shibutani: Maybe update us on where you feel you are in terms of making progress towards achieving those objectives of the adjuvant revenue contribution.

Unknown Executive: And we're using very many of the same sites and the investigators.

Chris Shibutani: Thank you.

Unknown Executive: So we have great confidence.

Rob: Yeah.

Seamus Fernandez: Great.

Rob: So, Chris, this is Rob.

Seamus Fernandez: Thank you, Seamus.

Rob: Maybe I'll take the first part of the question, then Caroline can jump in for the second part.

[music].

Grace: Next question, please, Grace.

Rob: You know, on the strength of the growth we're seeing in the United States, this is really a testament to what we've been talking about all along, which is as we continue to roll out new indications, We are continuing to see our share grow as, As a leading I.O.

Grace: Thank you.

Rob: agent and importantly I would highlight that the growth we saw among other things in the quarter, continuation of our position in renal cell carcinoma, continuation of the growth we're seeing in head and neck. In RCC obviously being a first line treatment in the metastatic setting as well as not having adjuvant therapy as well. We've covered pretty much the waterfront of RCC and we have the opportunity to continue to grow there.

Chris Schott: Next we have Chris Schott from J.P. Market.

Rob: But the standout frankly for the quarter and it's I think really important to understand is triple negative breast cancer both in the metastatic setting and in the adjuvant setting.

Chris Schott: Great.

Rob: We are seeing incredible growth in that space and it's something that we feel very proud of because I think we're going to have a meaningful difference there.

Chris Schott: Thanks so much for the question.

Rob: My reason to highlight that is both if you look at the adjuvant opportunity there and the growth we're getting as well as what I mentioned in adjuvant RCC.

Chris Schott: I'm just a two-parter around kind of corporate structure.

Rob: I think it just reinforces what we see as the future which is the growth contribution from the earlier lines of therapy long term.

Chris Schott: I guess first, business development landscape, I know you talked about this as a priority.

Caroline: But with that maybe Caroline can be specific to some of the guidance we've provided.

Chris Schott: I guess it's been another kind of quarter of week equity market performance on the biotech side.

Caroline: To Rob's point we are extremely excited about the opportunities we have for adjuvant and the impact that that has on patients. We initially shared that we expected 50% of our growth to come from adjuvant representing 30% of the U.S. business.

Chris Schott: So I guess, are you seeing any change in willingness on the part of some of the targets to engage or any resets and valuations that could enable some of these business development kind of activities to move forward?

Caroline: We have now extended that to say 50% of the growth will come from adjuvant representing 25% of our global business in the year 2025 and to Rob's point our early introductions into the earlier stage cancers with five indications now in Keytruda are putting us on a very good course to have this, Great.

Chris Schott: And then Rob, just a kind of a tangential question on that is, broadly across the pharma group, I think we've been seeing asset divestitures of non-traditional pharma businesses.

Chris Shibutani: Thank you, Chris.

Chris Schott: I know you've viewed animal health as more core to the company, but have your thoughts evolved at all, I guess, as your time as CEO and when you look at your implied kind of core pharma valuation, given where some of the animal health multiples trade?

Grace: Next question, please.

Chris Schott: So to any incremental perspective there, it would be appreciated.

Grace: Great.

Chris Schott: Thanks.

Grace: Thank you.

Chris Schott: That's great.

Umer Raffat: Next we have Umer Raffat from Evercore Eyes Eye.

Chris Schott: Chris, thanks for the questions.

Umer Raffat: Your line is open.

Unknown Executive: On the VD landscape question, the short answer is, we are not seeing a fundamental shift in seller expectations as of this point.

Umer Raffat: Hi guys, thanks for taking my question.

Unknown Executive: You know, I think as time continues, if we see the market reset to become more permanent, and more importantly, if the IPO market continues to be challenged for biotech companies, that might change over time as companies become more cash constrained.

Umer Raffat: Maybe let me touch up on Malno-Perevier real quick.

Unknown Executive: There are some smaller players that do have cash challenges.

Umer Raffat: I think the total utilization to date is about 200,000 courses through mid-April, and it looks like, at least based on third-party data sets, that the Pfizer regimen is getting used 8 to 10x more than Malno-Perevier.

Unknown Executive: So I think that's where you could see the movement first.

Umer Raffat: So I guess my question is, if only a couple hundred thousand courses have been used through mid-April, and 3.1 million courses were contracted to the U.S., is there any recourse for U.S. to return a chunk of these courses back?

No.

Unknown Executive: But fundamentally, we've not seen a change in the landscape yet.

Umer Raffat: And I'm asking because some of these sales have been recorded in P&L.

[music].

Unknown Executive: We'll have to continue to watch.

Umer Raffat: I just want to make sure they're permanent sales.

Unknown Executive: With regards to the animal health business, you know, our view continues to be that the animal health business, as you said, is core to the company.

Caroline: Yeah, I'll let Caroline maybe address this.

Unknown Executive: It's core to our strategy as part of a growth driver for the company.

Umer Raffat: So, Umer, thanks for the question.

Unknown Executive: But as we've always said, we look at this regularly.

Unknown Executive: First, let me start with, proud of monipirafine, look every only impact that it can have on the world.

Unknown Executive: We always are challenging ourselves to ask, what is the long term value creation opportunity of this business in our hands, relative to what would it be outside the company?

Unknown Executive: And it has impact for the comments that Dean made, given its importance, especially in patients that have drug-to-drug interaction.

Unknown Executive: And on a long term view, we continue to believe it is best in our hands as part of the company.

Unknown Executive: The data that we have access to suggests that we have actually had utilization by 500,000 patients globally at this stage. We have shipped 6.4 million courses as of now.

Unknown Executive: But if that situation evolves, we obviously will continue to be objective in how we analyze that.

Unknown Executive: Those shipments represent expectations for utilization over a period of time.

Unknown Executive: But we do not look at the short term arbitrage opportunity for us. It's more about the long term value creation.

Unknown Executive: We're actually seeing extremely strong utilization, especially in ex-U.S. markets, where the statistics you quote are actually reversed in some of the markets.

Unknown Executive: And that has not changed as of now.

Unknown Executive: We have a very strong market share.

Chris Schott: Thanks, Chris.

Unknown Executive: So as we sit here today, we've guided on the 5 to 5.5 billion based on the contracts that we have in hand, and we are confident in that in our finances.

Grace: Next question, please, Grace.

Umer Raffat: Great.

Umer Raffat: Thank you, Umer.

Grace: Next question, please.

Grace: Thank you.

Daina Graybosch: Next we have Daina Graybosch from SVP Littering.

Daina Graybosch: Your line is open.

Daina Graybosch: Hi, thank you for the question.

Daina Graybosch: I have another one on Keytruda and early-stage.

Daina Graybosch: Can you please talk to how the success of Opdivo plus chemotherapy and neoadjuvant lung cancer changes your expectations or strategy for the early-stage opportunities in lung cancer and in any other tumors?

Unknown Executive: Yeah, thank you very much for that question.

Unknown Executive: In relationship to sort of just earlier stage and, Lung Cancer.

Unknown Executive: I think it's really important.

Unknown Executive: Emphasize there's there's a series of different ways to approach it.

Unknown Executive: One is neoadjuvant adjuvant.

Unknown Executive: Page 10 of 10, The fundamental thing is we have Keynote 91, which is in the adjuvant, so that's post-surgery, and that's usually given by a medical oncologist, you know, that, Disease-free survival was positive in all comers, regardless of PD-L1.

Unknown Executive: There was a trend to TPS greater than 50% but not statistically significant, and OS, it was a favorable trend regardless of PDL.

Unknown Executive: So we'll be letting that data mature as we continue to discuss with the FDA.

Unknown Executive: But going to your point, it's not just Keynote 91, it's Keynote 671, it's Keynote 867, it's Keylink 12.

Unknown Executive: It's all in the earlier stage.

Unknown Executive: So our desire to really push that earlier stage is going to be.

Unknown Executive: If anything, our commitment towards that is even greater.

Unknown Executive: The one thing I would just add in relationship to some of the comments that Caroline and Rob, is that I think it's very important to think about melanoma, renal cell carcinoma, and triple negative breast cancer, where at least my experience being in the hospital, there's a there's a concept of really looking at that earlier stage.

Unknown Executive: I think uptake may be sort of built in the medical I think all of us, including us and other companies, as well as patient advocacies and medical centers, are going to have to require diligent investment to really, really maximize the important scientific impacts of Keytruda and PD-1s and PD-L1s in the early, Great.

Daina Graybosch: Thank you, Dana.

Grace: Next question, please.

Grace: Great.

Grace: Thank you.

Andrew Baum: Next we have Andrew Baum from Citi.

Andrew Baum: Your line is open.

Andrew Baum: Thank you.

Andrew Baum: I'd just like to thank Roy for all the contributions and insights over the years.

Andrew Baum: The question is on your Factor XI monoclonal.

Andrew Baum: Given your background in cardiology, and I'm sure you have some familiarity with the hemostasis theme, there's clearly been a number of indications where the DOACs were unsuccessful compared to Warfarin for both efficacy and safety, potentially speaking to different underlying mechanisms for thrombosis and the different indications.

Andrew Baum: So I'm thinking about ESUS, I'm thinking about mechanical heart valves.

Andrew Baum: Given what you know about Factor XI biology and the intrinsic pathway nature of the inhibition, what indications would you actively avoid or be somewhat cautious about taking?

Andrew Baum: a factor 11 inhibitor into be it yours or someone else's.

Unknown Executive: Yeah, so let me just step back for just a moment that the benefit risk of whether it's platelet or coagulation factors in terms of clotting is something that's actually very topical in the news, I would just emphasize, you know, for years, probably a decade or more, you know, aspirin has been just everywhere.

Unknown Executive: And recently, people realize the benefit risk, one has to be very careful, There has been a major change in the guidelines.

Unknown Executive: So that impacts how I.

Unknown Executive: The other sort of thing that I impact is, if you look at Factor XI, the fundamental advantage of that is that you can get blockage of the coagulation cascade with, by genetics, very little impact in relationship to adverse effects.

Unknown Executive: And so for me, the critical thing is to prove that as quickly as possible.

Unknown Executive: So we immediately go, where is the problem where thrombosis and bleeding is both impacted?

Unknown Executive: And so that's why we ran to end stage renal disease.

Unknown Executive: But I could see in the future, you know, mechanical devices, you know, one of my favorite sort of things is left ventricular assist device.

Unknown Executive: I think those will continue to need to be monitored in the future.

Unknown Executive: So that's a place where the risk of bleeding and the risk of thrombosis is really high.

Unknown Executive: Where we have chosen to be a little bit careful is, for example, broader sort of things such as atrial fibrillation and the risk relationship to stroke.

Unknown Executive: Because we look at the factor 10 as very effective.

Unknown Executive: There are bleeding complications, but, you know, to make a safety argument for it, you're talking about a very, very large risk.

Unknown Executive: So we are racing to places where the benefit risk of thrombosis and clotting and bleeding, where that differential would make something like a factor 11 have the big, Thank you, Andrew.

Andrew Baum: Next question, please.

Grace: Thank you.

Grace: Next we have Louise Chen from Cancer.

Louise Chen: Your line is open.

Louise Chen: Hi, thanks for taking my question.

Louise Chen: I wanted to ask you about your pneumococcal conjugate vaccine and how you think your more targeted approach will be a competitive advantage versus the one-size-fits-all that we're seeing now.

Louise Chen: And is there any precedence to what you're doing with V116 and 117?

Louise Chen: And maybe just lastly, how will you make that message clear to physicians since if everything goes as planned, you'll have several PCVs on the market?

Louise Chen: Thank you.

Unknown Executive: Yeah, first of all, we need to get the data to demonstrate that we have an advantage in the different patient populations.

Unknown Executive: But I think you point out a really important point, which is essentially what we're trying to do is, For lack of a better word, we're, you know, you want to call it precision-targeted vaccination, right?

Unknown Executive: So the fundamental thing is, B.1.1.4 is adult-approved, and we're driving towards a pediatric approval for the 15-valent, and so, you know, that will be in the pediatric population.

Unknown Executive: In the V116 where we have a breakthrough designation, we're trying to demonstrate that we can target 85% of the residual serotypes and you know I would just sit there and say it would be eight unique serotypes in relationship to all the different currently approved ones, And I think that patient population, you know, I reflect a little bit about COVID, but it's that older population that especially has risk factors who really want to make sure that that whole population, that adult population is covered.

Unknown Executive: And so I do think the, you know, the fundamental thing is we'll have to have the data, but our concept is the adult have a different set of stereotypes and they need to be protected and we'll have to get the data to demonstrate that but I think if we can demonstrate it the uptake will be quite, Thank you, Louise.

Louise Chen: Next question, please.

Grace: Thank you.

Mara Goldstein: Next we have Mara Goldstein from Mizuho.

Mara Goldstein: Your line is open.

Mara Goldstein: Thanks for taking the question.

Mara Goldstein: I'm just hoping maybe we can return for a second back to the question of novel targets in combination with Keytruda.

Mara Goldstein: And maybe if you could just give us a very high level, perhaps, rationale for which targets you're looking at and which indications.

Mara Goldstein: And I'm referring here, obviously, to things like TIGIT, LAG-3, ILT-3, and the like.

Unknown Executive: Alright, so let me just sort of separate.

Unknown Executive: So we always talk about expand, deepen, and extend.

Unknown Executive: And when we talk about deepen, we're trying to get a deeper response with PD-1s.

Unknown Executive: And there, there's a series of things that we do with what I call non-IO agents, which is chemotherapy.

Unknown Executive: We're doing stuff with many other people as well as ourselves with ADCs, there are RAS programs that are advanced, So, we think that that sort of combination, there's large precedence throughout our portfolio already, and there will continue to be.

Unknown Executive: And, you know, that's also true with Lempima and Lombardi.

Unknown Executive: The specific question I think you're driving to is combinations of IO with IO agents in LAG-3, CTLA-4, and PIDGET.

Unknown Executive: So, at least in our minds, we do recognize that there was demonstration of LAG-3 adding to PD-1 in melanoma.

Unknown Executive: And I think that's an important signal for us.

Unknown Executive: Where we focused our efforts at LAG-3 is in MSS-CRC.

Unknown Executive: So, we know that PD-1s work in MSI-HI, and no one's really been able to crack MSS-CRC, so that's very important, and also in classic Hodgkin's.

Unknown Executive: I would say in relationship to CTLA-4, there was recent data with HCC.

Unknown Executive: I would make a comment that I think would make some of the people from Merck smile a little bit.

Unknown Executive: You know, we were the ones who actually did the study with PD-1 and CTLA-4 in relationship to LUNG.

Unknown Executive: And we could not show a clear contribution of component of CTLA-4 over PD-1.

Unknown Executive: So that is not a place that we think is an important place for patients, and that is not a place that we're going, because we have, we did the study to demonstrate that.

Unknown Executive: Where we think there could be is, clearly other people have recently released HDC, we're focused in, for example, in renal cell carcinoma.

Unknown Executive: And then PD-1 and Digit, our initial focus is in non-small cell lung cancer, and also small cell lung cancer, and we're advancing.

Unknown Executive: I hope that gave a comprehensive view of Lab 3, CTLA-4, and TIGIT in relationship to IL-T4, other checkpoint inhibitors such as CD27, or in relationship to cytokines.

Unknown Executive: I think the data that we're doing in earlier stages will have to play out for us to be able to answer that more clearly.

Mara Goldstein: Great.

Mara Goldstein: Thank you, Mara.

Grace: I think we have time for one more question and Rob will have a few closing comments.

Grace: I think your last question comes from the line of Colin Brestow from UBS.

Colin Brestow: Your line is open.

Colin Brestow: Hey, good morning.

Colin Brestow: Congrats on the quarter.

Colin Brestow: And also wanted to say all the best to Roy.

Colin Brestow: It's been really great working with you.

Colin Brestow: And also congrats to Elliot.

Colin Brestow: So I just wanted to piggyback on a Gardasil question.

Colin Brestow: Could you maybe just give us a little more detail on how you expect the Gardasil supply to increase?

Colin Brestow: And then maybe just help us think through what is the supply demand mismatch right now?

Colin Brestow: Some of your prior comments suggested that there may not be such, but I know you said supply has been an issue over the past sort of couple of years.

Colin Brestow: So we'd love to get some expanded thoughts there.

Colin Brestow: Thanks.

Caroline: Thank you for the question.

Caroline: This is Caroline.

Caroline: So let me start first with the supply demand.

Caroline: There is significant demand for Gardasil.

Caroline: This cancer-preventing vaccine in the HPV area has only reached today 9% of the global eligible population. So there is significant runway ahead of us to protect lives and to drive growth for Merck.

Caroline: Indeed, we've stated that we expect the revenue in the year 2030 to be double the $5.7 billion we achieved, So we have significant opportunity ahead of us.

Caroline: In order to achieve that opportunity, we are building new facilities that will be coming online from 2023 for insight. So we're going to have a step up in the level of supply to the market that will happen over that period. Specific then to this year, we will see a continuation of the supply into the market as we did in 2021, albeit not quite at the same step up that we achieved in 2021.

Caroline: So we remain really confident in our ability to drive strong growth for Gardasil both in 2022 and the year to come.

Colin Brestow: Great.

Colin Brestow: Thank you, Colin.

Rob: Rob?

Rob: Well, just let me say thank you for your time and your interest today.

Rob: And I'd just like to conclude by, again, thanking the Merck team globally, for their focus and commitment, and really in driving the results you've heard about today, but in continuing to ensure we keep the purpose of the company front and center, which is to deliver for patients.

Rob: Hopefully you get the sense we are very confident in the business momentum we have, and I'd like to say as well, we are feeling better and better about the evolution of our pipeline, and I think you've heard today, we're starting to expand, we're doing all of the things we need to do. We have more to do, but we're making great progress, and that's why I have such confidence in the sustainability of our business long term.

Rob: So we look forward to continuing to share these results with you, to deliver for the patients that count on us, and in turn bring value to the shareholders.

Operator: So with that, I'd say thank you and have a great day.