Q3 2022 Merck & Co Inc Earnings Call
Ladies and gentlemen, thank you for standing by good morning, My name is Leo West and I will be your conference moderator today.
At this time I would like to welcome everyone to the Merck and company Q3 sales and earnings conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you wish to ask a question. Please press one then zero on your telephone keypad.
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I would now like to turn the conference over to Peter Tennenbaum, Vice President of Investor Relations. Please go ahead.
Thank you and good morning, welcome to Merck's third 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 <unk> President of Merck Research Labs.
Before we get started I'd like to point out a few items you will see that we have items in our GAAP results such as acquisition related charges restructuring costs and certain other items you should note that we've excluded these from our non-GAAP results can 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 U S. Private Securities Litigation Reform Act of 1095, 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 section of <unk> website.
With that I'd like to turn the call over to Rob.
Thanks, Peter Good morning, and thank you for joining today's call. Our strong performance. This quarter reflects sustained momentum across our key growth drivers and steady progress in our pipeline, we are well positioned to successfully close out the year and we look forward to building on this momentum in 2023 and beyond.
We are delivering across our strategic priorities and executing well scientifically operationally and commercially.
As a result, our pipeline is advancing our business is healthy our growth pillars are intact and our financial performance is strong we remain keenly focused on sustaining this success by driving continued growth and delivering long term value to patients and shareholders.
With that let's turn first to our results.
We're pleased to report exceptional revenue and underlying earnings growth again this quarter.
We continue to see robust demand for our innovative human and animal health portfolios, including for products such as Keytruda Gardasil.
<unk> and <unk>.
Our updated guidance reflects our expectation of truly standout full year growth.
Moving to our research organization, we've made considerable progress across multiple therapeutic areas.
In cardiovascular the topline results of the stellar phase III trial evaluating <unk> in patients with pulmonary arterial hypertension achieved successful outcomes across both the primary and almost every secondary endpoint.
Suggesting the potential to transform the treatment of patients suffering from this devastating disease.
I am proud of the way our research organization has moved swiftly following last year's acquisition of <unk>.
Along to advance or terrorists ups development.
We're continuing to advance other programs across a broad cardiovascular pipeline, including our factor <unk> inhibitor, which recently received an FDA fast track designation for patients with end stage renal disease.
Turning to oncology, we presented encouraging results at ESMO across our broad portfolio and promising pipeline.
Long term survival data reinforces the durable benefits of Keytruda and when part of the for certain patients.
We remain enthusiastic about the potential of Keytruda in earlier stages of cancer as well as in combination with other agents.
In vaccines, we launched vaccine advanced in the pediatric setting and are progressing our phase III trial of <unk> in adults and important component of our population specific approach to invasive pneumococcal disease and part of our broader efforts to provide strong protection to both infants and adults.
And finally in HIV. We are pleased that there is a path forward for us Walter drill clinical trials in the treatment setting.
We remain committed to helping address unmet needs in both treatment and prevention.
Moving to our efforts around sustainability.
We continue to execute on our priorities further demonstrating our long standing commitment to delivering value to society, which in turn creates value for shareholders.
In August we published our annual ESG progress report, which provides a comprehensive review of our sustainability strategy initiatives underway and progress against our goals.
Insistent with our mission, we're focused on access to health, ensuring that our inventions reach as many patients as possible.
To enable access.
Committed to responsibly discovery and manufacturing, our medicines and vaccines to bringing our best ideas for through the empowerment of our talented and diverse employees and to always operating with strong ethics and values.
Some of our initiatives include a commitment to providing $91 5 million doses of HPV vaccines and <unk> supported countries.
Dancing, our goal to achieve carbon neutrality by 2025.
And supporting projects and partnerships and our priority areas through the issuance of an inaugural $1 billion sustainability bond.
Our approach to sustainability helped to propel and enable our business strategy in ways that align with our operating priorities.
This makes us a better company and global citizen, creating value for society and for shareholders.
Yesterday evening, we also announced that Ken Frazier will be retiring from his role as chairman of <unk> Board of directors at the end of November .
I know I speak on behalf of the entire company and our board in expressing our deepest appreciation for Ken.
Principal leadership respect for science.
Passion for engaging with employees everywhere.
Commitment to patients and health equity.
<unk> contributions to communities around the world.
Speaking personally I.
I am deeply grateful for the inspiration Mentorship and support Tenda has provided to me.
Moving ahead I look forward to working with the board in my new role as chairman as we continued to build on Ken's legacy and drive towards our purpose of using leading edge science to save and improve lives globally on.
I am confident that we have the fundamental building blocks in place to achieve sustainable growth and value creation.
This is exemplified by our talented team of scientists and our colleagues all around the world who are dedicated to discovering developing and delivering life changing medicines and vaccines.
I am very confident in the short and long term outlook of our company and I look forward to continuing to show progress as we move into the future with that I'll turn the call over to Carolyn.
Thank you Rob Good morning, 2022 continues to be a year with excellent performance for our business.
This quarter, we again achieved exceptional revenue and underlying earnings growth driven by demand for our innovative portfolio.
These results reinforce our commitment to our science led strategy enabled by the flawless execution of our dedicated colleagues across the globe.
We are confident in our ability to continue to deliver in the short term, while we make disciplined investments to maximize long term value.
<unk> and shareholders.
Total company revenues with $15 billion, an increase of 14%.
Excluding the gasoline business delivered strong growth of 10%.
Underlying growth was four percentage points higher given the growing headwinds from foreign exchange.
The remainder of my revenue comments will be on an ex exchange basis.
Our human health business continued its momentum with growth of 19%.
15%, excluding look equities driven by strength across our key pillars.
Our animal health business delivered a solid quarter as sales increased 4% in both our companion animal and livestock product.
Now turning to the third quarter performance about key Brad.
In oncology Keytruda grew 26% to five.
$5 $4 billion, driven by strong global demand as well as continued expansion into new indications.
In the U S keytruda across all key tumor types and continues to benefit from uptake in early stage cancers, including triple negative breast cancer as well as in certain types of renal cell carcinoma.
Omar.
Intervening earlier in kind of the progression provides the potential for better patient outcomes, which is why we remain excited by the impact of Keytruda is having on patient with these early stage cancer.
Notably that continues to be very strong demand in neo adjuvant adjuvant hybrid early stage triple negative breast cancer.
A testament to the profound effects keytruda is having with patients with aggressive B C.
In the metastatic setting keytruda with maintaining its leadership position in non small cell lung cancer.
Outside the U S. Keytruda growth continues to be driven by uptake in non small cell lung cancer head and neck cancer and renal cell carcinoma.
Recently approved early stage indications, including certain types of high risk early stage triple negative breast cancer and renal cell carcinoma are off to a strong start following launches in key European market earlier this year.
<unk> maintained its leadership of the pumpkin haver to Clos.
Our online revenue grew 23% driven by continued demand in certain patients with high risk early stage breast cancer based on the Olympiad study.
The outlook for impulsive remain strong and if approved we are confident in the potential to reach patients with metastatic castration resistant prostate cancer based on the propel study.
Lindsay Alliance revenue grew 11% a strong demand in the U S driven by continued uptake in advanced renal cell carcinoma, and endometrial cancer with.
It was partially offset by shipment timing in China.
Lastly, Randy records, performing consistent with our expectation, providing a treatment option to the significant unmet need of patients with access and CHL associated achievement.
Our vaccines portfolio achieved excellent growth led by <unk>, which increased 20% to $3 billion.
Growth is being driven by strong underlying demand in ex U S market, particularly China.
Recently received approval from China's National Medical products administration.
And the use of Gardasil nine adults and women, 9% to 45 years of age which will further expand our opportunity in this important market.
Growth in the U S due to timing of CDC purchases, which will negatively impact fourth quarter sales.
We are confident in our ability to drive sustainable growth a dog itself, given its proven effectiveness and preventing certain types of HPV related cancers and other diseases.
Local indianization levels remain low which provides us a tremendous opportunity to benefit to more patients.
And we have invested aggressively in manufacturing capacity, which positions us well to supply to demand, we expect to see now and over the long term.
In our hospital acute care portfolio Raytheon sales grew 22% driven by an increase in market share among neuromuscular blockade with vessels aged.
And an increase in surgical procedures.
As mentioned earlier animal health sales increased 4% livestock sales increased due to poultry product aluminum technology solution.
Companion animal sales growth was driven by the perfecto line of products, partially offset by supply challenges.
Z.
Gross margin was 77% an increase of two percentage points.
Collecting favorable product mix and foreign exchange, partially offset by the impact of lower margin, let's get breo and supply sales.
Operating expenses were $6 billion, which includes $690 million of payments related discussing collaboration and licensing agreement.
Excluding these payments operating expenses grew 17% driven by increased investments to support our key growth drivers and pipeline.
Other expense was approximately $100 million, which reflects the lower pension expense compared to last year.
Our tax rate was 13, 6%.
Taken together, we had $1 85 per share, which includes 22 sets of charges related to significant collaboration and licensing agreement.
Excluding these charges, we had exceptional underlying growth.
Turning now to our 2022 non-GAAP guidance.
The continued operational strength of that business enables us to raise and narrow our full year revenue guidance. We now expect revenue to be between $58, five and $59 billion, including look definitely yourself, a five two to $5 $4 billion.
Our increased revenue guidance range represents growth of 20, 21%.
The projected impacts from foreign exchange includes an incremental headwind of nearly 1% using mid October rates, we saw.
Talk to me in a full year negative impact of approximately 4%.
Excluding foreign exchange and definitely we expect growth of approximately 16%.
We are maintaining our gross margin expectation of between 74 and 74, 5%.
We are increasing and narrowing our operating expense projection to 21, three to $21 $7 billion, principally driven by a $250 million payment related to the recent exercise of that option to jointly develop a personalized cancer vaccine as thoughts about ongoing.
Operating with Mcdonough.
As a reminder, our guidance does not assume additional significant potential business development transaction.
We continue to assume other expense of approximately $500 million.
We expect our full year tax rate to be approximately 14%.
We assume 254 billion shares outstanding.
Taken together, we have increased and narrowed our expected EPS range to $7 32 to.
To $7 37, an increase of five cents at the midpoint.
Operational momentum in that business once it led to an approximately 20% increase in our guidance.
Uh huh.
Being partially offset by the option payments and Madonna and an incremental headwind from foreign exchange of nearly 1% using mid October rates.
Our guidance reflects confidence in the underlying strength of our business.
Continued to demonstrate strong momentum and expect durable underlying demand across our key pillars, including Keytruda Gardasil and animal health.
As you consider your models there are a few items to keep in mind.
While we actively manage foreign exchange through our revenue hedging program. It continues to be a headwind to growth.
<unk> products with a larger portion of international revenues such as in our animal health business.
The hedging program to mitigate the impact of foreign exchange and.
And to the extent, we continue to see foreign exchange headwinds recorded at a product level, we will see a benefit in other revenue.
In addition, other revenue increase the supply sales to organ on.
As you saw in our results Pneumovax 23 is experiencing pressure, particularly in the U S. If the market continues to shift towards new adult pneumococcal conjugate vaccine.
We remain committed to our capital allocation priority.
We will continue to prioritize investments in our pipeline and the business to drive near and long term growth across our portfolio.
We have made significant progress across our pipeline, which dean will speak to that has the potential to drive sustainable revenue growth.
We are augmenting our pipeline, but feeling the best external science through value enhancing business development.
We believe investing to realize the promise of these products.
We continue to consider the full breadth of the business development landscape, we have ample balance sheet capacity and we will act only when science and value of life.
Should meaningful business development, not materialized and depending on the pipeline of potential transaction, we will opportunistically buy back shares.
We remain committed to our dividend with the goal of increasing it over time.
To conclude as we.
We finished the year, we remain confident in the continued growth of our business.
Global demand for our innovative medicines and vaccines remain strong and we continue to demonstrate the operational momentum and commercial execution that will enable us to deliver value to patients and.
Shareholders, now and well into the future.
With that I'd now like to turn the call over to Dean.
Thank you Caroline it's my pleasure to provide an update on our progress since the second quarter call.
We are growing momentum in our pipeline across therapeutic areas across modality across stages of development across the spectrum of internal programs established partnerships and a recent business development opportunities.
In cardiology, we are making strong headway in pulmonary arterial hypertension as well as our PCM canine and factor 11 program.
In vaccines, we are moving with rigor and speed to build on the backs you ran up the approval and establish a suite of tailored pneumococcal vaccine.
In oncology, we are expanding our portfolio and partnerships with Oregon, Keelan and most recently Margarita.
This progress strengthens my confidence in the pipeline and reinforces to me the opportunity presented by several candidates poised to positively impact patients lives.
As Rob noted, we see significant opportunity to make an impact in cardiovascular disease.
Earlier this month, we announced topline results from the phase III stellar trial evaluating <unk> for the treatment of pulmonary arterial hypertension.
The Patterson added to currently approved standard of care had a profound effect.
On the primary efficacy outcome measure of improvement in six minute walk distance from baseline at 24 weeks.
Of note eight.
Eight out of nine secondary efficacy outcome measures achieved statistical significance, including the outcome measure a proportion of participants achieving multicomponent improvement and the outcome measure of time to death or the first occurrence of a clinical worsening event.
We look forward to sharing the results with regulatory authorities and plan.
The findings at a scientific Congress in 2023.
The data from the stellar trial is an important milestone as we work establish a beachhead in pulmonary arterial hypertension.
Looking ahead.
Xena trial is evaluating <unk> Patterson for morbidity and mortality and will enable assessment of the potential to reverse progression of disease.
And will be followed by the Hyperion trial, which is designed to evaluate whether administration of Patterson earlier in the course of P. H can help improve outcomes and delayed time to clinical worsening.
And we also have the phase II cadence trial, which is exploring the potential for Patterson and left heart failure.
In addition to the patterns that we are studying <unk> five $4 75, an investigational inhaled valuable Guadalupe cyclase stimulator designed to provide selective pulmonary arterial basal dilation with limited systemic exposure for the treatment of ph.
We remain confident in the promise of our investigational portfolio to fundamentally change the treatment of pulmonary arterial hypertension.
Next I will let Gabriel.
Approximately $2 5 million people have now received law Gabriel for the treatment of COVID-19, and studies are continuing to show the impact of this oral treatment option is having on patients and on health care system.
Real World evidence of high risk older population conducted in Israel in Hong Kong found a reduction in hospitalization and death consistent with the phase III move out clinical trial.
Unsurprisingly the large study in the U K evaluating a broader highly vaccinated population conducted during the omicron error found no different than hospital hospitalization versus standard of care.
Nevertheless, there were important observations from certain secondary analysis, including quicker time to recovery and defense of alleviation as well as reduced physician visits.
Gabrielle continues to demonstrate a safety profile consistent with our findings and move outs.
The pandemic continues to evolve and vaccination rates still very substantially from country to country.
More recent variants such as Palmer bonds are generally associated with less severe disease.
The elderly and those with Comorbidities remain at high risk of poor outcomes.
Insights from real World Studies are important in this context as we try to understand how the Gabriel is being used and the potential benefit for various patient populations.
Gabrielle continues to be an important tool in the armamentarium to treat COVID-19, especially with uncertainty surrounding the emergence of new variants and continued global surgery.
In addition to COVID-19, we are now taking steps to harness the broad anti viral potential of Gabriel.
We have initiated a phase II trial evaluating its use in the.
The treatment of respiratory syncytial virus, and we'll provide further updates as they become available.
Shifting to our HIV portfolio.
Since last year sent back to the <unk> program, we have gained tremendous learning and insight through the evaluation of data.
Following consultation with the FDA. We are pleased we have a path for.
We initiated a new phase III clinical program evaluating a once daily oral combination of collaboration and a lower dose of its lack of air for the treatment of people with HIV one infection.
In addition, the phase III study with Gilead evaluating a weekly oral combination treatment regimen of a block of your Atlanta Cocklebur in adults with HIV, one infection, who are very logically suppressed.
Resuming with a lower dose of lost you there.
We continue to see significant potential in the nucleoside reverse transcriptase translocation inhibitor mechanism and remain committed to addressing the unmet need in both treatment and in prevention of HIV.
In the prep setting we are prioritizing and internal novel NRT Ti compounds for development.
Next to vaccine and specifically Gardasil nine.
As Caroline noted last month, the National Medical products administration in China expanded the authorization for Gardasil nine so.
Broader age range the authorization reinforces the strong clinical profile of Gardasil, nine and its effectiveness and preventing certain types of HPV related cancers and diseases.
In addition, we were pleased with the recent approval of Bax do van our 15 valent pneumococcal conjugate vaccine by the European Commission in the pediatric population.
This approval brings an important treatment option to vulnerable populations, including infants less than one year of age.
Typically experienced the highest rate of disease.
I would also like to touch on the recently announced collaboration with <unk> Therapeutics we.
We have made significant investments and gained important insights into the use of RNA technology the.
The compelling circular RNA platform that Gartner has developed allows us to explore the potential for a new generation of vaccines and therapeutics.
Turning to oncology.
Strong momentum continues in our oncology portfolio across tumor types and stages of disease.
Last month at the European Society for medical Oncology meeting, we showcased long term survival benefit data for <unk> in non small cell lung cancer, melanoma, and head and neck cancer as well as for the embargoes in ovarian cancer.
In addition, we presented data that continue to support the potential of Keytruda in earlier stage disease.
Our extensive research effort and treating in earlier stage settings reflect our ambition to treat cancer, where the potential of curing cancer may be high.
Also at ESMO in collaboration with CJ and Astellas first time data was presented from the phase one B Flashtube E V. One O three for keynote <unk> 869 cohort K trial.
<unk>.
<unk> demonstrated encouraging objective response rate as a first line treatment in patients with Unresectable locally advanced metastatic <unk> cancer, who are ineligible to receive cisplatin based chemotherapy.
They remain Ah ha.
High unmet medical need for new medicines for the treatment of locally advanced or metastatic bladder cancer and we look forward to the potential of this combination.
This quarter, we received priority review for <unk> in combination with abiraterone known as first line treatment for patients with metastatic castration resistant prostate cancer, regardless of their genetic mutational status based on the propel study.
The <unk> date has been set for the fourth quarter.
Outside of the U S. We continue to deliver on our oncology strategy.
A significant opportunity for us to help improve patient outcomes and address unmet need in Japan and in China.
We received four new approvals in Japan based on.
<unk> 52 for Keytruda in combination with chemotherapy and Neo adjuvant adjuvant high risks or at least stay triple negative breast cancer.
By six four for the adjuvant treatment of patients with renal cell carcinoma following surgery.
71, six for the adjuvant treatment of certain patients 12 years and older with completely resected stage <unk>.
To see melanoma.
On a Tuesday for Keytruda in combination with chemotherapy with or without <unk> in certain patients with advanced or recurrent cervical cancer.
The La Parrilla, we received approval in the EU and Japan for the adjuvant treatment for patients with certain types of high risk early stage breast cancer based on the Olympiad trial and in China at first line maintenance treatment for patients with advanced ovarian cancer.
Finally, we exercised our option to jointly develop the personalized cancer vaccine mrna or 157, RV $9 40, which our partner <unk> is currently evaluating <unk> in combination with Keytruda in a phase III study for patients with locally advanced and respective melanoma.
The primary objective of the phase II study is the efficacy of our personalized cancer vaccine plus keytruda versus Keytruda alone in a randomized study of early stage melanoma in the adjuvant setting.
We are energized to continue our collaboration with my Garner a pioneer in mrna vaccine technology.
To conclude their husbands substantive progress across our pipeline and I look forward to providing further updates on our progress in the future.
And now I will turn the call back to Peter.
Thank you Dean Leo will you. Please start the Q&A and I'd like to request in order to get to as many analysts as possible today that they limit themselves to one question. Please thank you.
Ladies and gentlemen, if you wish to ask a question. Please press one then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command. If you are using a speaker phone. Please pick up the handset before pressing the numbers. Once again, if you have a question.
You May press, one then zero at this time one moment. Please for our first question.
And our first question is from Chris Schott with J P. Morgan. Please go ahead.
Great. Thanks, So much I guess my question was on capital deployment I think you mentioned in the prepared remarks that if it doesn't materialize and based on the progression of the pipeline.
You consider repo at some point down the line, so I guess on that front.
How are you thinking about the overall business development landscape at this point and has your preference on or I guess action ability of kind of larger deals versus exceleron type tuck ins evolved at all as we've gone through this year I know, it's obviously, a big kind of point to a debate on the Merck story with just so just love to hear kind of latest thinking on you know kind of BD landscape.
And are we getting closer to a point, where maybe repo makes sense just given the cash that that seems to be kind of kind of accumulating at the company. Thank you.
Great Chris Thanks for the question and I'll ask Caroline to comment specifically on the share repurchase side of the question, but just to the BD landscape.
We continue to frankly see a portfolio of opportunities.
We're interested in and are continuing to look at so as we sit here today, our focus our urgency on business development has not changed we do see.
A list of potential places to play obviously, we got to bring them through to fruition, which we're working to do but that is our priority because we continue to believe the best thing. We can do for long term value creation is to invest in the sustainability of our business which is.
Investing in the pipeline of the future and both what we do internally and through BD. So that's our priority and I do see opportunities.
But.
We remain committed also to not hold cash so with that maybe I'll, let Caroline comment specifically on the share repurchase so Chris.
Capital allocation priorities are unchanged, we seek to provide a competitive return to our shareholders through both the dividend that we pay and we expect will go right as well as through share repurchases, while we balance the need to invest in our business.
In driving growth as well as in our business development strategy Thats, what pushed it outlined given where we are with our focus on business development, a desire to not create excess cash on the balance sheet, we will look opportunistically at share buybacks.
Based on our assessment of that beat the pipeline.
Great. Thank you Chris next question please.
Next question is from Dana Gray Bosh with S V. B Securities. Please go ahead.
Yeah, I Wonder if you could talk a little bit more about your novel Pneumococcal vaccine strategy be one six and one seven and how you think that will compete ultimately with competitor vaccines that and continue to increase and their stereotype M C.
This is dean I'll take that and thank you very much for the question. So.
The topline is I would just emphasize that our view is that more more serotype is not always better and one size does not fit all.
Our view and the view that I've had when I practice medicine in the right medicine or in this case the right vaccine.
For the right patient at the right time.
So when you look at facts, new vans, which is our 15 valent, which had young cord.
Responses for serotype, three but also 22 ethnic 33 yet.
If you look at that and you have to look at.
Uh huh.
D Neology of pneumococcal disease.
Disease, and it's a bimodal curve, we're really in the first two year end of life, especially in the first year of life is really important and then the adult section you'll realize that there's increasing at $45 50 565. So there are two buying mode O curve. If you also lay down the different serotypes the serotypes.
<unk> difference between the two so that's why we believe it's the right vaccine for the right patient at the right time now.
Now we have a pediatric D. One four that has AC IP, that's gone through and in terms of differentiation and relationship with Pediatrics, we don't have clear view.
Their vaccines, but we are very confident in our ability to give coverage in the first year and data to date might suggest that that is an important differentiation.
In a pediatric setting.
There is some questions in relationship to topline serotypes.
That's been sort of laid out there's been some discussion of six misfire types too substantial.
We can't really comment on that differentiation until we know exactly what's the archives and and and and what the real detail Dave.
David.
In relationship to the adult market. This gives us great insight and great enthusiasm for <unk> six.
Our 'twenty one valent vaccine that that one is specifically targeted for the serotypes that are important for the adult so it's 21 veiling, but I would just emphasize that 11th serotypes in mid 'twenty. One valent for V. 116 is not shared by P. C. B 20, and the reason is that we're focused on the adult.
<unk> disease, and we are targeting 85% of residual invasive pneumococcal disease, and I would if I look at the vaccines that are.
In phase III, but also phase two or phase one with recent data I don't know that anyone else has a vaccine that's targeting 85% residual invasive pneumococcal disease. So more if not better one size does not fit all the right vaccine right patient on the right time.
Thank you David next question. Please leia.
Next day as Colin Bristow with UBS. Please go ahead.
Hey, good morning, and congrats on the result.
Right cool to smoke guard and so but you you talked about the sort of a one time impact with TTC purchase timing could you just quantify the level of impact that had and then I just wanted to touch base on the additional supply coming online in 'twenty 3.5 is this still on track and could you just specify where the supply is.
Coming from geographically thank you.
This is Caroline and I will I'll take a shot at answering your question. So Dod is still continues to be a very strong growth to drive the soft company and will be long into the future given to date only 9% of the world's eligible population effecting that you paid in terms of the quarterly results we saw.
Growth in the U S, which was largely driven by the CDC timing in the third quarter 'twenty 'twenty. One there was an approximate $125 million by incite see D. C. In the third quarter of 22 that was an approximate buying a $250 million.
So year over year that contributed to growth to the tune of approximately $120 million. We do expect the majority of that volume by the CDC in the third quarter to come out during the fourth quarter as we look at our opportunity to satisfy global Cmos.
<unk> and protect as many lives as we can going forward, we will be supported by the increased supply and capacity that we have coming on line commencing 2023, and we expect that that additional supply will come on line over the course of 'twenty, three four and five and Nashville, we read.
Very confident in our ability to protect more life to drive growth long into the future, including doubling the revenue of Scotch itself in the 2030 compared to where we were in 2021.
Great. Thank you Collyn next question. Please Leia next is Seamus Fernandez with Guggenheim. Please go ahead.
Oh, thanks, so much for the question so.
I really wanted to ask a question on so tighter theft and perhaps the.
Endpoints that surprised you the most the feedback that we're getting from thought leaders is that the benefit on clinical worsening actually coming as early as it did was it was a genuine surprise in and suggest upside just wondering Jim where you fit in that a point of discussion.
And you know, perhaps what youre looking forward to in some of the earlier stage clinical studies horse to tighter stuff. Thanks.
Thank you very much for that question. So yes, we gave top line results.
We're moving with with B to present, those data to regulatory authorities route.
But just to step back I, just wanted to remind at least myself and everyone.
And others that we were drawn to the set of patterns that mechanism because it was a unique mechanism of action to rebalance active in any BMP signaling.
The other mechanisms of action could largely be viewed as days of inventory and we have a very strong program and trying to make them the best bet vivo dilatory.
Medicine, but the mechanism of action you would expect of course the pattern you would expect it would potentially re program.
Jody will respond and envious.
May be disease modifying.
We are we are excited about the results.
We know that there was a profound effect on on.
Six minute walk, but as you emphasize time to clinical worsening. These multi components are all really important and they came in a clinically meaningful and statistically significant. So we are hopeful that we can potentially reshape the treatment of P. H I.
I would emphasize that you know we talk about Hyperion zenith thank hate it.
But the level of interest that I have in this program as I would point US also through superior, which is the follow on program and the reason why that was is really important for me is given the results that I've seen a very.
Very much want that.
The individuals who are on the stellar trial have the opportunity to get into superior, which is an open label.
Trial.
The the effects that we see.
That will be reported in a in a meeting likely in 2023 are ones, where we must make sure that those individuals who were recruited goodfellow.
Have continued.
Access to the Patterson.
How important we think the results are.
Thank you Seamus next question please.
Next is Steve Scala with Cowen. Please go ahead.
Thank you Rob.
Rob, but you've been CEO for 16 months and now you're going to be chairman, what do you view as your greatest accomplishments. During this time and what had been the greatest disappointments.
Given the comments you made when you took over or we might have expected more to be done more quickly to build the pipeline, especially since merck's pipeline is the second smallest and global pharma.
Do you think this is a fair assertion and if so why havent things change more quickly. Thank you.
Thanks for the question you know obviously, it's been it's been a fast six months.
I'd say, what I'm most proud of.
What are the organization has come together as one team and really brought more focus.
The business, obviously the spin off.
Oregon on with what I think was very successful has given us more simple structures more focused that I feel very good about.
Our progress on business development, obviously, the fact that we move so quickly with axon and then you've heard water just really exceptional results coming out of the store study.
Very feel very proud about.
But I would say also just overall the way our team has continued to just execute execute really flawlessly scientifically operationally commercially I couldn't be prouder of what everyone's doing we've come together and we're really delivering for all of those things I would say I'm very proud about on the pipeline itself.
So we think we're making a lot of progress you know the fact that some of you.
Year ago, no one even gave us credit for having a cardiovascular pipeline and today, we talked about this.
By the 24% to 20 kind of timeframe, where it could be as many as eight new approvals through driving revenue that could be in excess of $10 billion by the mid 2000 thirty's across the whole suite of assets. Some developed internally and obviously some book brought into business development like what we did with excel on so.
I feel very good about that.
We are making in vaccines, what we're seeing I think vacuum advance is <unk>.
Underappreciated this notion that dean laid out of really having a <unk>.
Spoke approach, where we were able to cover more of the surcharge that cause disease, whether it be in infants and then selectively in differently. Those in adults. We think that's a real game changer, our growing pipeline neuroscience immunology I could go on and on and the strength of we're continuing to have been adding to our <unk>.
<unk> pipeline so.
Do I think we have everything we need no, but do I think we've made great progress in a year I actually think we have and it gives me confidence that we.
We're going to continue to continue to drive progress. The fact that we did three important business development deals this quarter alone.
Spanning.
<unk> technologies into a circular RNA technologies personalized cancer vaccines, and then more traditional oncology agents.
I really novel mechanism those all are adding to the future promise we have in this company. So I actually feel very good about that boarded more to do but.
Confidence in what we've done so far.
Next question. Please Leia next is Mara Goldstein with Mizuho. Please go ahead.
Great.
Excuse me. Thanks, so much for the question I wanted to ask him about the cardiovascular business actually since it was just mentioned and you know given the pending applications for said, it's a tighter set where you feel that that organization from a commercial perspective needs to go are you right sized to be able to launch and maximize.
So pat or something in the near term.
Yes, maybe I can start.
If you look at if you go back in history, Merck has actually had a strong history and legacy in cardiovascular and a lot of that.
If you will the muscle memory is still exists in our organization. So I'm very confident that we have what it takes but more importantly, we are already out there right now in ph we have adapted.
We'd have roku, though so we have people calling on these doctors recall what drove us to think about Exceleron was what we saw in our pipeline, but also what we saw commercially through that experience. So we do have the capabilities.
And also the other thing I'd point out is this is a little different than the way you used to think about the world. This is in many cases a lot of these drugs are still specialty drugs.
Theyre not necessarily true traditional primary care drugs of what we've seen in the past.
I think we're very well positioned so I have no worries about our confidence and ability to deliver this commercially we've got it in the past and we'll do it again.
Great. Thank you Matt next question. Please next Umar robot with Evercore. Please go ahead.
Thanks for taking my question I wanted to touch up on oncology trials two of them in particular, there's a ongoing sub Q keytruda trial versus IV I, just I was curious to gauge your confidence in that and if it's reasonable to assume that the vast majority of the franchise could get switched to sub Q and also this keytruda plus <unk> 12 B trial.
I'm curious if the early experience implies such a combination of feasible or not thank you.
I'll take it.
A shot at both of those questions.
I would just emphasize that there is a continuing move early cancer throughout the field, but especially at Marc you've talked about the approvals that we have in the early stage both Portland.
And Katrina and this recent Mark Mcdonough collaboration is to extend that.
Essentially an Io Io combination initially in melanoma, but with the possibility to extend deepen and extend throughout other tumor types in different stages.
So given that the critical thing for patients, especially in the early stage is to be able to have really excellent access to our medicines and there is a need for scientific innovation.
That is why we're advancing the <unk> program.
And and we are confident that that will not only be important and successful, but it will be really critical as we move into early age because the ability cannot be.
A link to an infusion center it wont be a quarter or so so we are confident in our strategy of moving into early stage and it is linked.
Scientific innovation required to improve access and relationship with the Ras program I have said previously that the Ras program of all of our all of those who are advancing will require a combination and the ability to move those programs such that you can have a dose.
And in an ability to combine with other medicines is employed we.
We have early data with our RAF inhibitor and many of the attributes that we think are required for that.
We are on.
The cards are looking like.
They they could positively reflect on our K Ras program, but we will share that data both in monotherapy and in combination with member Iliza math at an appropriate time, when when we present that at.
And Congress.
To the specific question of the conversion.
Too early to get into the specifics of that but I would say generally we do see this as bringing meaningful patient benefit.
Our quality of life as you move, especially in the earlier stages of cancer to be able to deliver the drug subcutaneously. We think is both innovative and will bring real value to the patient. So that is part of the strategy as we look at the totality of how is it that we continue to deliver for patients as we extend our franchise. So that's something we're looking at.
More details as we get further down the road great. Thanks next question. Please.
This is mohit bansal with Wells Fargo. Please go ahead.
Great. Thanks for taking my question and are staying on the data set.
Especially with the kidney studies, so we spoke to a doctor and he was very excited about the study given that there are no approved therapies in the subset of patients you Ugly Doctor.
Could you help us frame expectations for this study because lot of these endpoints are very similar to stellar. So would you expect a similar level of efficacy of bogs would be good given there is no standard of care there. Thank you.
Yeah. So let me just speak to we looked at both or.
Both here at <unk> and I would just also emphasize our inherent value Borgwarner late side places the same.
Same sort of general sense, which is we're going to drive it and PPA age, but when you look at the mechanism of action you ask yourself is there other places that you can affect diseases that arent pulmonary arterial hypertension, but diseases, where you have pulmonary hypertension, such a diet.
Heart failure or for example in lung disease.
Our expectation is that we wanted to explore whether the cat or step and its unique mechanism of rebalancing.
Hum certain molecular pathways could also be applied to those patients who have diastolic heart failure and pulmonary hypertension.
And given the impact that your carriers that have that we've seen already with P. A H that gives us a little bit more confidence that that mechanism may be applicable to those people with diastolic heart failure.
Equivalent is as we moved our in house valuable Iguana Lakeside, We're sorry your conference will end in five minutes.
O N P. H, we're also evaluating whether that molecule could also be used in those patients with lung disease, who have pulmonary hypertension.
The result gave us more confidence that the next step.
Great. Thank you next question. Please Leah can we flew in that club.
Yeah, we have an excellent Christian Chabot Tani with Goldman Sachs.
One moment here.
And you May go ahead, Chris.
Thank you to follow on Steve's question.
Rob in terms of the response about what you're most proud about you talk about the successful implications of spinning off the Oregon on business and having the organization have a little bit of a simpler structure in focus I want to juxtapose. The question of the animal health business.
Talk a little bit about your views. These days in terms of how that fits our capital allocation priorities, whether you envision a potential for that to be a strategic step that you would consider to perhaps separate that business. Thank you.
Chris Thanks for the question.
As we said in the past we are always looking at the portfolio. We were always asking what is the best structure to develop and generate long term value for our business and for our shareholders.
With that.
View, we continue to believe that the animal health business is a key growth driver for us It brings a lot of synergies frankly.
Frankly in both directions, and obviously they are benefiting from their ability to access the science on the human side, we're benefiting from the value they bring and in some cases frankly on the vaccine side some of their manufacturing technologies or actually bring brought over into the human health side. So we do see synergies in these two businesses we continue to believe.
Our ability to invest for ways to optimize the opportunity in animal health is there I think we've demonstrated that through the capital we've deployed and that capital is paying off and I don't believe that business would have the capital to grow if it wasn't part of Merck. So it's benefiting from what we can bring to them we're benefiting from.
What it brings to us and as we continue to see it as a strategic asset so no plans to look at spending.
Thanks, Chris next question please.
Our next.
Question is from Luisa Hector with Baron Berg. Please go ahead.
Hello, Thanks for taking my question, maybe a little bit more on its Latvia.
Given your confidence you continued development can you just.
Say any more about.
The impact the drugs, having on lymphocytes at the lower dose.
Many of you were able to move forward to the regulator is happy is that is there some level of lymphocyte reduction.
Regulator will accept.
And how should we think about the risk of resistance development with a lower dose and when when might we see some phase III data. Thank you.
Thank you very much for that question so.
Just want to emphasize that there's lots of air is one molecule in our suite of N R. A T T I molecule.
And as you mentioned, we are very interested in the importance of this.
This body of molecules in mechanism, both for the craft setting and for the treatment study.
And it has.
The possibility of really transforming the longer acting.
Hey.
Specifically to your question, we have a large range of clinical data as many people who are sorry. Your conference will end in one minute.
I'm sorry, excuse me the leader of our conference will continue past nine a M.
We are attempting to make sure that happened Sir okay.
Okay. Thank you were prepared to go a few extra minutes.
And so we have we have a plethora of clinical data. We are very confident that the 0.25 milligrams will be affected we are confident that the effects on lymphocytes and 84.
T cells will be comparable to any standard anti viral and so that's in the that's in the queue day. We're also very interested in moving to the Q week with our partner Gilead and hopefully that will begin to get posted more but we're focusing on amending the protocol.
And the dosing regimen under the guidance of the FDA and I also wanted to ask one side that we're in.
<unk> to be committed on the queue Mark oil I mean, just think 12 healthy year 12 pills a year for patients who are at high risk to take the crap. We have 10-K 80 527. It is a different molecule in our suite of not cannot TPI and we're confident.
We're sorry, I'm conferences, ending now please hang up.