Q4 2022 Merck & Co Inc Earnings Call
Welcome to the Merck and company Q4 sales and things conference call.
At this time all participants are on a listen only mode until the question and answer session of today's conference call.
That time to ask a question press star one on your phone and record your name and the problems. This call is being recorded if you have any objections you may disconnect. At this time I would now like to turn the call over to Mr. Peter Tannenbaum, Vice President Investor Relations, Sir you may begin.
Yeah.
Thank you and good morning, welcome to Merck's fourth quarter 2022 conference call speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Lee 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 have excluded these from our non-GAAP results and provide a reconciliation in our press release.
I'd like to remind you that some of the statements that we make today may be considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995, such statements are made based on the current beliefs of Merck's management and are subject to significant risks and uncertainties.
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 and slide presentation will accompany our speaker's prepared remarks, the presentation today's earnings release as well as our SEC filings or 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.
2022 was an exceptional year for Merck.
Our science led strategy is working and I couldn't be more proud of what our team has delivered right typically commercially and operationally.
We're focusing on what matters and keeping the patient at the center of everything we do.
We made significant progress in 2022, advancing our broad pipeline with important internal success complemented by a portfolio of strategic acquisitions collaborations and partnerships.
Please move with speed and urgency to drive strong progress.
We've provided increased transparency into several long term opportunities.
For Gardasil, four our cardiovascular pipeline and more recently from newer assets to leverage our leadership position in oncology.
We enter 2023 with even greater confidence that we're creating a sustainable engine that will bring forth innovation and generate value for both patients and shareholders over the long term.
Turning first to our results.
It's performing extremely well the growth we've experienced in 2022 reflects the sustained track record of fundamental strength.
<unk> key growth pillars.
We began the year with confidence that will maintain the strong underlying growth after taking into account the significant impact embryo. During the height of the pandemic last year and are pleased to reflect this in our 2023 initial guidance.
Importantly, our pipeline is advancing with significant progress across several late stage programs.
In oncology, we have expansive research efforts, including our ambition to move treatments into earlier stage settings, where there was a higher potential for more favorable longer term outcomes for patients.
In December along with our partner Madonna, we were pleased to announce highly encouraging phase II results for a personalized mrna therapeutic cancer vaccines in combination with keytruda in the treatment of adjuvant melanoma.
We're excited by the potential that this combination may have for patients across a range of tumor types.
Last week, we were pleased to receive FDA approval for Keytruda for the treatment of certain patients with early stage non small cell lung cancer.
Resection, and platinum based chemotherapy, which Caroline and Dean will speak to.
And cardiovascular we're exploring candidates across a broad range of diseases and have made substantial progress from just one year ago.
At the American College of Cardiology Conference, we will present data from the stellar trial evaluating tso tighter steps in pulmonary arterial hypertension.
Phase II trial of N. K 0616 are all PCF canine inhibitor and we will also host an investor event to discuss these programs.
In vaccines, Instituto Bhutan time in Brazil, with whom we are collaborating for vaccine development reported very encouraging topline results for their candidate for the prevention of dengue.
These data will inform future development of our dengue vaccine the 181 and our efforts to address this critical public health challenge.
Finally through our business development efforts, we brought in four programs, which will have phase III trial starts in 2023, and which have the opportunity to contribute meaningful growth during the latter half of this decade and into the next.
We were following our disciplined approach to business development.
Act, when scientific opportunity and value alone.
We have more to do but I feel very good about the progress we've made in 2022 and we believe that all of these efforts will lead to real benefits for patients and in turn for shareholders.
We entered 2023 with confidence in the innovation engine in your building and our ability to deliver sustainable value for patients well into the next decade, we will continue to execute on our Derisked assets and act with urgency to advance the rollout pipeline we.
We're doing all of this with an approach to sustainability that is closely aligned to our overall business strategy.
I'm very confident in the short and long term outlook of our company.
Look forward to providing future updates with that I will turn the call over to Carolyn.
Thank you Rob good morning.
As Rob noted 2022 was an exceptional year for our company.
Delivered excellent top line growth of 22%.
And by strength across our key pillars of oncology vaccines and hospital as well as the significant contribution from the definitely yes.
Our animal health business.
Operational growth, which was offset by foreign exchange.
These results are a testament to the profound impact our medicines and vaccines are having on patients globally.
Which are enabled by our dedicated team.
Executing with excellence to deliver these important innovation.
We have confidence in the health of that business and do that outlook for continued strong underlying growth.
Now turning to our fourth quarter results.
Total company revenues were $13 $8 billion, an increase of 2%.
Excluding the impact of foreign exchange.
Strong operational growth of 8%.
The remainder with my revenue comments will be on an ex exchange basis.
Our human health and animal health businesses continued slow growth.
<unk>, 9% and 6% respectively.
Now turning to fourth quarter performance of our key brands.
In oncology Keytruda grew 26% to five $5 billion driven by strong global demand in line indication as well as continued global expansion from new approvals.
In the U S. Keytruda grew across all key tumor types and continued to benefit from uptake in early stage cancers, including triple negative breast cancer as well as in certain types of renal cell carcinoma and melanoma.
Keytruda continues to have a profound impact on patients, including in earlier stage cancers, where there is greater potential for better outcomes.
Excited by the recent approval of keynote <unk> 91, which represents Keytruda Stefan syndication earliest stage cancers.
Early lung cancer detection and screening remain an important unmet need.
It is our ambition along with others to include lung cancer screening rates to levels similar to other tumor types, such as breast breast screening program to more routine.
While we are committed to addressing this unmet need we anticipate gradual uptick.
<unk> for this indication.
In the metastatic setting keytruda maintains its leadership position in non small cell lung cancer, which gives us confidence that we are well positioned positively impact patient setting.
Outside the U S. Keytruda provides continues to be driven by uptake in metastatic indications, including non small cell lung cancer as a niche cancer and renal cell carcinoma as well as the recent launches in earlier stage cancers, including certain types of high risk early stage triple net.
Breast cancer and renal.
<unk> carcinoma.
In part it maintains its leadership of the PARP inhibitor class.
License revenue grew 14% primarily due to continued demand in certain patients with high risk early stage breast cancer.
Ben Please.
License revenue grew 9% driven by increased uptake in the treatment of certain patients with advanced renal cell carcinoma and advanced endometrial cancer.
Lastly, while Iraq is performing in line with our expectations and we are proud to be impact. This is having an adult patient with satcom DHL associated cumin.
Our vaccine portfolio delivered growth with Dod is still increasing 6% to one 5 billion.
Driven by strong demand in major ex U S markets, particularly China.
In the U S south decreased primarily due to CDC put up to it.
Vaccines. So also benefited from the pediatric launch effectively bought which is off to an encouraging start with revenues also benefiting from invention stopping.
So acute care portfolio.
<unk> sales grew 7% driven by an increase in market share amongst your inbox scalable a page with Versal agents and an increase in surgical procedures.
Hospital acute care sales also benefited from the resupply for Baxter.
During the fourth quarter of 2022 blocks.
Our animal health business delivered another solid quarter with sales, increasing 6%, reflecting strategic cross sections and foggy place.
Livestock sales grew 12% driven by increased demand in three minutes and poultry products.
Companion animal sales were negatively impacted by supply challenges successes vaccines.
The reduction in fact visits in October which improved during the quarter.
I will now walk you through the remainder of our pans out and my comment was on a non-GAAP basis.
Gross margin was 75, 7% an increase of nine percentage points due to favorable product mix and foreign exchange.
Operating expenses increased 8% to $5 $7 billion, reflecting increased investments to support our portfolio and growing pipeline.
Other income was $86 million, reflecting the return on pension plan assets and capitalized interest is largely offset by net interest expense.
Our tax rate was 15, 6%.
Taken together earnings per share were $1 63.
Turning now throughout 2023 non-GAAP guidance.
The strength of our key pillars is expected to continue into this year right.
We project revenue to be between 57 to $58 7 billion.
Billions of dollars.
Including approximately $1 billion from looked at Gilead.
Excluding the negative impact of look at Toledo, and an approximate 2% negative impact from foreign exchange using mid January rates, we expect underlying revenue growth seven 7%.
Our gross margin is expected to be approximately <unk> <unk>.
77%.
Operating expenses are estimated to be between $23, one and $24 $1 billion, which includes $1 $4 billion of research and development expenses related to our acquisition of imago and the expansion of profitable operations biotech.
As a reminder, our guidance does not assume additional particularly for potential business development transactions.
Other income is anticipated to be approximately $250 million.
We assume a full year tax rate between 17, and 18% and approximately $2 five 5 million shares outstanding.
Taken together, we expect EPS of $6 80 to $6, 95%.
This range includes a negative impact from foreign exchange of approximately 4% using mid January rates.
Our guidance reflects confidence in the continued strong growth across oncology vaccines and animal health.
As you simply won't bottles that are a few items to keep in mind.
On revenues, we are confident in Alex and the team to drive growth and growth of soccer sale, particularly in international markets.
I believe utilization levels remain low which creates a tremendous opportunity to benefit more patients.
And we are improving supply, which positions us well to support the significant demand we are experiencing today and expect as the long term with respect seem to prevent HPV related taxes.
Although revenue is projected to decline significantly.
Primarily reflecting a smaller plants benefit from recognized hedges following the U S dollar strength last year, which resulted in an approximate 800 million and saw the benefit in 2022.
Other revenue also expected to be lower due to the inflation effects Pos manufacturing So Johnson <unk> Johnson.
On the rest of the P&L, we projected shift from other expense.
Net income, which is primarily attributable to an assumption that there will be no pension settlement costs as.
That's one that's an expectation of lower net interest expense and higher joint venture equity income.
This benefit is more than offset by an increase in the estimated tax rate due to the unfavorable impact of R&D capitalization provision.
Well as an approximate one percentage point impact related to a market.
Now shifting to capital allocation.
IRT remains unchanged we.
We will continue to prioritize investments in our business to drive near and long term growth. We are excited about the significant progress our team has made to advance and augment our pipeline in 2022.
In 2023, we will continue to invest in opportunities that will address important unmet medical needs.
The next wave of growth for our company include.
Including the initiation of many late stage clinical trials across a broad set of novel end of it.
We remain committed throughout the it depends with the goal of increasing it over time.
We will continue to pick and choose the most compelling external science to evaluate Boston.
Shipment talk nice, having tunneled pipeline and will invest appropriately maximize the potential of that obviously programs.
Given the strength of our business and balance sheet.
With you and share repurchases, while ensuring we maintain ample capacity to pursue additional business development, which is the highest priority.
To conclude we.
And for 2022, a confident our ability to execute on the important opportunity we had to deliver innovation to patients and to spend with strong underlying close without business well into the future with that I would.
Now I'd like to turn the call over to Dave.
Thank you Caroline.
Today I will provide notable updates since our last earning call.
We continue to make significant advancements and achieve important regulatory milestones for <unk>.
Fourth quarter marks the end of a successful year with progress made across oncology vaccines infectious diseases and cardiology.
Let me start with oncology.
We remain committed to transforming the landscape of cancer therapy with an ongoing focus on treating earlier stages of disease.
We are pleased by the recent approval of Keytruda for the adjuvant treatment of adult patients with stage, one two or three a non small cell lung cancer following resection and platinum based chemotherapy based on the results of keynote <unk> 91.
This approval provides for the very first time and adjuvant immuno therapy option for this patient population with stage, one b disease, and regardless of PD lone status.
Beyond keynote <unk>, one we have additional ongoing studies in earlier stages of non small cell lung cancer, including <unk>.
<unk> 671, evaluating contributor with platinum doublet chemotherapy as Neo adjuvant, followed by adjuvant therapy, and Resectable stage 238, and <unk> disease.
867, evaluating keytruda in patients undergoing stereotactic body radiotherapy with Unresectable stage, one or two disease and T link Oh, one to studying keytruda in combination with <unk> in stage III disease.
These trials are all part of our broader effort to treat earlier stages of cancer and further improve patient outcomes across tumor types such as melanoma.
Together with more Ghana, we announced positive phase II results for the 940 mrna 4157 in combination with Keytruda for the adjuvant treatment of stage, three and four melanoma in patients with high risk of recurrence powering complete resection.
The combination demonstrated statistically significant and clinically meaningful improvement in recurrent free survival versus Keytruda alone.
This investigational personalized neo antigen therapy utilizes mrna technology, and it's specifically payload to target a unique mutational signature of each patients tumor.
We plan to discuss the results with regulatory.
And initiate phase III trials in multiple tumors this years.
Detailed results will be presented at an upcoming medical meeting.
We also announced positive results from the phase III keynote <unk> six trial evaluating keytruda in combination with chemotherapy.
This trial demonstrated an improvement in overall survival for the first line treatment of patients with advanced or Unresectable biliary tract cancer.
In addition, we announced positive topline results from the phase III keynote 859 trial evaluating keytruda in combination with chemotherapy, but first line treatment of patients with her two negative locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma.
In November we announced the acquisition of Imago Biosciences, which closed last month.
<unk> lead candidate, while Madame staff is a potentially first in class orally available lysine specific demethylase one inhibitor. It is currently being evaluated in multiple phase III clinical trials for the treatment of essential thrombocythemia myelofibrosis and polycythemia Vera.
The combined team is now focused on continuing to advance the ongoing clinical development program.
At the American Society of Hematology annual meeting data were presented from multiple pipeline candidates, including.
Bill or Matt or anti lag three antibody <unk>, the delta and antibody drug conjugate targeting <unk>, one and naphtha goodness are oral reversible non covalent <unk> inhibitor as well as keytruda.
Updated phase II data for bomber dance back in a central Thrombocythemia and advance in Myelofibrosis were also presented.
We continued to deliver on our regulatory strategy.
The European Union, along with our partner Astrazeneca, we announced the approval for <unk> in combination with abiraterone and prep yourself for the treatment of certain patients with metastatic castration resistant prostate cancer based on the results of the propel trial.
In China based on the results of keynote <unk> and keynote 394, we received approvals for Keytruda in Neo adjuvant adjuvant high risk early stage triple negative breast cancer, and <unk> carcinoma, respectively.
With our partners Astellas and <unk>, we announced the FDA has accepted supplemental biologics license application for Keytruda with Pac kit and antibody drug conjugate targeting <unk> four for the first line treatment of certain patients with locally advanced or metastatic urothelium cancer.
Who are not eligible to receive cisplatin containing chemotherapy.
Agency set a <unk> date of April 21, 2023 for each application.
Building on the clinical benefit observed with Keytruda in combination with chemotherapy and antibody drug conjugates, we are focused on augmenting our tissue targeting candidates.
Development.
We announced the expansion of our agreement with <unk> biotech with the addition of up to seven preclinical antibody drug conjugate.
The collaboration Leverages.
Technology with the potential to yield a new generation of candidates designed to precisely target and deliver a potent anti cancer agents to the tumor site.
This follows previously disclosed agreement for two clinical stage candidate, including MK 2870, and investigational Troak two targeting ADC, we're planning to advance into phase III trials this year.
We also expanded our collaboration with <unk> to include the discovery and development. The peptide drug conjugates. This technology potentially provides for improved permeability and drug selectivity and targeting tumor tissue.
Next to our vaccine portfolio, we were encouraged by the progress scientists and clinicians at the Instituto <unk> compound in Brazil made in developing a single dose dengue vaccine candidate for registration in Brazil.
We are collaborating with the team there to conduct a detailed analysis of these positive top line phase III results to determine next steps.
<unk> goal is to make the 181 available outside of Brazil for populations at risk for dengue.
As Caroline noted we are receiving positive feedback from the field regarding the recent launch of Vacs new event in the pediatric setting and remain confident in our population specific strategy for the prevention of pneumococcal disease.
Tax event offer strong protection, including in the first year of life.
Robust immunity across all shared and unique serotype.
This is important because the incidents of invasive pneumococcal disease is greatest in the first year of life for children.
Also we are on track and look forward to the phase III results from our V 116 program for the protection of adult this year.
We along with others in the industry are making a real impact in our goal to help reduce cancer incidents.
It was noteworthy that the American cancer Society has recently published annual report on cancer facts and trends.
The remarkable observation that there has been a 65% reduction in cervical cancer incidents and women 20 to 24 years old from 2012 to 2019.
It is this type of finding that further reinforces merck's commitment to bringing for treatment and prevention options to help patients with this devastating disease.
As part of this commitment we are encouraged by the role Gardasil continues to play in helping to prevent certain HPV related cervical cancers.
Turning to the broader portfolio with the continued impact of COVID-19 in China treatment options are urgently needed to help reduce the incidence of disease and burden on health care system.
We were pretty pleased the Gavriel was granted conditional marketing authorization by China's National Medical products administration in December for use in adult patients with mild to moderate COVID-19 infection and a high risk of progressing to sit there are cases.
I wish to reinforce something Rob mentioned, please mark your calendars for March six where we will present detailed findings of the phase III stellar trial evaluating <unk> in patients with pulmonary arterial hypertension and the phase II results for <unk> 0616, <unk> nine inhibitor.
At the American College of Cardiology in conjunction with the World Congress of Cardiology meeting in New Orleans, We will also host a live investor event to answer your question.
We look forward to bringing cantata study is an important treatment option to patients and are currently working towards submission of the data from the stellar trial. We are in discussions with the FDA about submission of the data on a rolling basis, which is likely to result in a potential approval in early 2024.
As we close out 2022, it is important to highlight that over the course of the year, we made strong progress across therapeutic areas modality stages of development and multiple business development transactions.
In oncology, we obtained several important regulatory approvals globally with Keytruda and then part of it.
Well as advanced a number of programs evaluating earlier stage cancer Regiment.
In vaccines.
We received an important approval in pediatrics vaccine event and in addition, we were granted expanded authorizations in China and active recommendations were reinstated in Japan for Gardasil.
In HIV, we resumed our clinical development program for its lack of air and finally in cardiovascular disease, we made significant progress across our pulmonary arterial hypertension and hypercholesterolemia program.
Taken together, we continue to deliver on our strategy of advancing promising candidates across multiple therapeutic areas. We have strong momentum across our pipeline and look forward to providing further updates on our progress in 2023.
And now I will turn the call back to Peter.
Thanks Gene Kelly, we're ready to take questions now we intend to end the call at nine sharp. This morning, so requested analysts limit themselves to one question. Please.
Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad you may withdraw your question at any time by pressing star. Two if you are using a speaker phone. Please pick up the handset before pressing confirmed once again, if you have a question.
You May press Star one.
One moment for our first question.
Our first question is from Carter Gould from Barclays Carter Your line is open.
Hi, Thank you for taking the question.
Maybe just you made some comments around sort of uptake in the adjuvant setting up after the most recent label update I can maybe just sort of set expectations. There and does that comment reflect any sort of assumptions around when we might see more mature data from the Pearl study potentially this year. Thank you.
Yeah. So I believe you are speaking about keynote <unk> nine one.
I just wanted to take a broad view and then the debut in the Tomorrow view. So I would just count that you know the American cancer Society 2023, you know its really remarkable they they suggest that for between 1991 in 2023, there's a massive reduction in lung cancer a 58%.
The 6% and Keytruda has been.
Critical in that story and now we're moving to early long. The label is broad it is regardless of PD L. One and it reflects reflects the clinical trial, where we demonstrated a 27% reduction.
We're pushing into these earlier lines with other trials, but I think.
For what we need to set for is two things we need to make it much more easier with scientific innovation.
Other means to get sub Q to get Keytruda and that's why we're very.
Eager to push our sub Q parallelism that with high around the basin to phase three of this year, but we also need to do a lot to improve adherence to establish guidelines, which currently we only have 6% or so of <unk>.
Individuals actually who should be screened being screened in the United States.
So I think with that you know we.
Have work to do in relationship to really taking this important advance and making it broadly available to us.
Two individuals who should be getting screened screened so a quarter maybe I can just.
Add on a little bit about the commercial opportunity as Dean said this will be.
A slower ramp because we have to drive more people to get.
Diagnosed early so that we can get them to procure they need but just to give you. Some sizing of this if you looked at 2023, there are about 230000 people.
Who were diagnosed with lung cancer.
In the U S and the majority of the group was not diagnosed until they want the metastatic setting. So if you think about it from.
From a minority perspective, we would estimate about 120000 people in the early stage setting of which only a corridor.
Have resection or will have surgery and be in the stage. One b Q3, a which is what our label indicates so youre looking at about 30000 patients who would be the addressable population.
Then obviously of that group historically only about half of those patients have gone on to receive treatment in the form of chemotherapy or Io. So that's obviously something we hope to change them.
As we go forward because we think the outcome will show that if you are resected you should pursue keytruda.
<unk>.
In that setting and that's our goal over time, not only to drive more patients in that setting.
Segment, but obviously the more people we can get diagnosed early.
Proving that has studied the naturally we will expand the population over time. So we see this as a meaningful opportunity long term, but it's going to take us time to ramp as we work to change the.
Paradigm that existed in the past.
Thank you Carter next question. Please Kelly.
Our next question is going to come from Andrew Baum from Citi Andrew.
Yeah.
Hi, Thank you.
Couple of questions could you. Please address the demands of much business to collect.
Whole associated with the Keytruda L. O E post 2028, Alternatively, instead, just fill the exit growth rate and focus less on finding revenues to plug the hole or do you think about your BD strategy and perhaps quickly Dean could you just give us some guidance on the timing for the PFS analysis in the PD L.
Hi, greater than 50 casual from key life Zero-zero three should we expect it in the next 12 months I know the total PFS read for the whole trial is somewhat 24. It strikes me you may have in a separate geneticist for that greater than 50 sub group. Thank you.
Great well, maybe Andrew I'll start I'll start off with North Carolina, or do you want to jump in but to give you a sense. Obviously, we haven't given specific guidance to the to the low period, but just to ground everyone on the facts.
And our expectation that we'll lose exclusivity in the United States in 2028 and in China in 2028 lesions and in Europe in 2030 and in Japan in 2032, So obviously by shorthand, we refer to 28, but the reality of it is over most of the markets.
Contribute increasingly is becoming.
Our global product, it's spread out, but as we look at where we sit today.
I would say we feel good about the progress we've made we're confident that we're on a path to sustainable growth into the next decade, obviously, we have more work to do but I would just.
Pointing you to a few proof points to support that first of all as we've talked about in the last 18 months, we've made meaningful progress.
Our cardiovascular pipeline, we have eight potential approvals between 2025 and 2030, obviously the center piece of that is <unk> and what we're seeing from the stellar data, which really was just quite phenomenal. If you look at that we expect those products to that portfolio of opportunity on an unrealistic adjusted basis to be in.
Excess of $10 billion as you approach the mid 2000 <unk>.
We recently discussed the fact that through the business development deals. We've done is brought in new assets apart from Keytruda apart from one.
With bema and while the rug.
Themselves. These new mechanisms I would point you to things like Orion and the Margot those products along with what we see in the ADC space as a portfolio. We think themselves have the potential for $10 billion or more of revenue as you get into the early to mid 2000 <unk>. So today, we sit there with the.
Patients that we are starting to make meaningful progress and that excludes all of the work we're doing to bring incremental value to patients on Keytruda. Obviously is greatest Keytruda is it's still only has an overall response rate and you know averaging around 30% we need to deepen.
I'd better response, we're looking to do that through combinations.
And through other means to find ways to improve on Keytruda, we're looking to continue to expand into new tumor types.
As well and clearly move into earlier lines of therapy, where we believe we can start to move to a point that we can actually give people an extension of life and hopefully someday get to a point that we talk about cancer with chronic disease not a fatal diseases. Obviously, we have more to do there.
But that is the aspiration and we have a lot of efforts underway to do that through what we're doing in I O I O combinations Io <unk> combinations with our subcutaneous.
Hum offering and then obviously, we're very excited recently about the deal we did with Madonna, who the personalized cancer vaccine, which was really a therapeutic.
We think in combination with Keytruda, while we're studying in first in melanoma. Obviously, we believe has the potential to move into broader tumors. So that in of itself gives us a lot of confidence and we're doing similar activities with one partner with lumpy Amendment, obviously well already gets in its early days. So if you look at the total of that and I haven't even gotten into our vaccines portfolio.
And what we see as excitement there.
We feel like we've made a lot of progress we have more to do but that's why you hear me talk more about how do we build a sustainable engine to drive growth well into the next decade and that really should be a focus point because I'm confident if we do that well the low we have keytruda will take care of itself.
Yeah. So there was a question on our ticket program Katrina plus digit just to remind everyone. We have nine ongoing trials, we have five phase III is in fact it.
Just recently in December we opened up.
Key by 10, which is phase III and in her early melanoma in relationship to key Vibe, Oh, three which I think is the question we added the TPS greater than 50% as an endpoint. These are event driven.
And as the events are drive to specifically in clinically meaningful data, we'll announce it appropriately.
Thank you Andrew next question. Please Kelly.
Our next question comes from Evan Sugarman from BMO. Your line is open.
Hi, guys. Thank you so much for taking the question I would love you to talk to what might make M. K 2870, better trop two targeting ADC versus those that we assume from Gilead in Ashland. Daiichi also do you still believe that it's too difficult to combine an ADC plus io in a fixed dose combination. Thank you.
Yeah. So let me just just state you know I will be starting a whole series of phase III trials. This year I I really appreciate your question.
For me the critical thing is whether it be in ADC or whether it be a rasp inhibitor in.
In solid tumors, especially as you want to advance them in solid tumors, where Io has been important the combination benefit of the two becomes really important so we're very well.
We're very excited to be pushing for arch folk to ADP I can get into the details of the molecules and the linkage in the payloads in the cars, but really the better sort of thing is I believe that this year, we will be presenting our phase II studies and at the end of the day that that'll be the most convincing data.
To provide to you as to why we think we have an important play.
Play with our trop two ADC, but it's also the play of that Trop two ADC in relationship to adding it to an I O agent. We think that is an important consideration.
<unk> when thinking about any cancer, killing mechanism in solid tumors.
Great. Thank you Kevin next question. Please Kelly.
Yeah.
Our next question comes from Louise Chen from Cantor Luis Your line is open hi, Thanks for taking my question here. So wanted to know how you're thinking about your phase III trial design for your oral P. C. S P&I and how will that design really highlight the competitive advantages of your path.
Thank you.
Thank you very much. So so first I don't want to get ahead too much of our March six investor meeting where world peace showing.
The data that we have in relationship to the oral P. C. S. Canine answered Patrick I will just sort of emphasize what we're trying to accomplish and what we're trying to accomplish is we are trying to accomplish the most potent LDL lowering oral pill.
For lowering cholesterol.
There should be no cold chain, there should be very little need to interact with the health care system, which makes it reach.
It's very easy and very accessible not just in the U S, but globally and we need to do it at a price point of what I would call a branded oral medicine would be not at in order to maximize the access and relationships are phase III. There is a general sort of view of how that is.
One is you would drive it because LDL lowering is such a such a clean biomarker. So so that's something but one would also have to at the same time drive towards outcomes, which is also going to be important. So our phase III trial design is is informed by what the hit.
Three of the field has been and what the Fda's regulatory sort of.
Outline comes in for others.
Great. Thank you Luis next question please.
Our next question comes from Tim Anderson from Wolfe Research 10 year line is open.
Thank you if I could ask you a question on V 940, the cancer vaccine.
What tumor types outside of melanoma do you already have any positive human data.
Even if those are earlier stage.
And if you don't have any human data in non melanoma tumor types can you talk about.
The animal data.
I'm trying to obviously think about what phase III trials, you may be starting in 2023.
That product thank you.
Thank you very much so you're speaking about the wonderful partnership that we have with Moderne are in in the personalized cancer vaccine I just want to preface everything what we've released is topline data.
In melanoma that data will be presented sometime in the near term, where we present the data that we have.
For melanoma.
And we have work to do to move that into phase III. So light.
Have a lot of work to do just in melanoma.
Not going to speak ahead of what human data, we have outside of that but I would say two things that I was really important one as one can watch which of the tumors have have sensitivity to an immune approach and one can watch about the clinical development with with Keytruda to sort of map out where you would.
Think about doing that.
The second issue that I would emphasize is that when we're talking about an I O I O strategy, which often people speak about I view this personalized neo antigen therapy as an Io Io strategy with Keytruda and the reason I want to emphasize that there is a view that we are beginning to develop that.
Io Io strategies may be especially useful in early cancer stages, and you see that in our interest in in our combination projects related to checkpoint inhibitors, but also in relationship to our personalized neo antigen therapies.
And so we think that that's around that we are going to advance and the critical component for us to be able to advance that is to advance keytruda as a monotherapy in those indications because it creates a base for us to actually do these clinical trials.
Great. Thank you Tim next question. Please Kelly.
Our next question comes.
From Bank of America, Jeff Your line is open.
Great. Good morning, guys. Thanks for the question.
Being on sub Q future, Doug could you talk about the cadence of data this year and what you are ultimately looking for from a risk benefit perspective, you know as.
As you evaluate different technologies and Rob I wasn't sure where this program ramps and kind of your strategic priorities across Io. Thank you.
So thank you very much for that question you know I think it's on will be when we talk about starting 10 to 15.
<unk> three.
Clinical trials just in oncology. This sub Q program is a critical component to that and we will be starting those phase III. This year, what are we seeking to achieve I've talked about the early cancer space early cancer space I think it's really important just from a medical standpoint of where we can Intel.
Jack really the outcomes of.
Both patients we can markedly improve that if you are going to go in the early space, whether it's neo adjuvant and adjuvant.
From my clinical training working with lung cancer doctors, an oncologist or ability to limit the need for individuals to constantly come to infusion centers.
It is very important.
And we need to have the scientific innovation to do that.
In doing that we have to think carefully about how do we get as much optionality Q3 weeks to six weeks in that sub two regimen and that's what we're trying to drive to and our phase III trials.
Rob did you want to answer anything else.
I appreciate the question, Jeff I think <unk> covered it well this is a very important part of our overall strategy.
As we think about moving into earlier lines of therapy, and then to drive convenience and access for.
For patients, which is very important so it's meaningful in the terminals and pursue.
As fast as we can.
Thanks, Jeff next question. Please Kelly.
Next question comes from Mohit Bansal from Wells Fargo.
Yes.
Great. Thank you very much for taking my question.
I think I have a big picture question regarding Io Io combinations and the development strategy there because the common criticism is that many of these big phase III studies lets talking with.
After less than robust phase two data.
And that's why they failed to show benefit in phase III I mean looking at your data in phase II single arm data.
Can you just help us understand what gives you confidence that this is the right strategy to move forward.
And we didn't need to be back here to do some kind of phase two.
Trial, where you are you have some related control. Thank you.
Yeah. Thank you very much.
Just emphasize that as a general rule the way that I have begun to develop my view of Io Io strategies is that Io Io strategies are very important to pursue I think that Io Io strategies.
No other therapies that kill cancers, maybe especially important in the metastatic, but I'll I'll strategies in the early stage could be quite impactful and so as I've. Just said you know we have advanced our Io Io strategy.
Advance it with <unk> four and lag three so another component part that I would just say is I don't know that there's one single addition to keytruda that will have the breadth of keytruda. So we've been a little bit selective there and I think the movement of Io Io not just in the metastatic stage space, but especially.
Really in the early space will become important and the ability to do that requires your first io that Io Io to be approved in the early space and that is why we are so excited about moving into earlier stage spaces with keytruda because that allows us to execute in an Io Io.
Strategy in early stage cancers.
Thanks, Matt next question. Please Kelly.
Our next question comes from Chris Schott from J P. Morgan Chris Your line is open.
Thanks, very much I think you mentioned that Youre looking to review share repo and it does seem like maybe Rob some of your recent business development combat Cherry has been skewed towards smaller deals or collaborations. So ill just put into context, what you view as an appropriate level of leverage for Merck and should we be thinking about kind of cash generation beyond that level.
Or was it just maybe going towards repo going going forward and I could just slip in a really quick second one just to help me on FX I think you were talking about 2% headwind most of your peers aren't seeing much given the recent weakening of the dollar are there any currencies that stand out we should be keeping in mind there. Thanks so much.
So Chris this is Caroline first to talk to share repurchase as we stated previously it sounds going as a company to deploy our cash first and foremost behind the business opportunities we have within the company as well as augment that with business development we have.
Tons on the share repurchase program, given the strength of our business and our balance sheet, but will be ensuring we have ample capacity to pursue business development, which is the highest priority and is our best to generate growth and value creation, we have.
How do you see that we are receiving and we will continue to destock and hope to have news that we'll be sharing in future. So priority remains.
Invest in the business, but to the extent there is excess cash we will return that to shareholders Tracy.
Share buybacks.
We will maintain an appropriate message from the company. We are very comfortable operating at expected rates and we are at and we would expect to sustain that kind of level as we get a full read.
On the foreign exchange perspective in 2022 we were extremely successful as a company in blunting the impact of foreign exchange, we saw revenue hedging program.
Proximately, 6% on the top line, 10% on the bottom line, but with our effective hedging program.
Which for <unk>.
<unk> on the other revenue line of approximately $800 million.
I can take the impact of 4% on the top and 4% on the offense.
As you rightly noted because we look at 2023.
The underlying impact of foreign exchange to be around one percentage point on the top and the bottom line what is impacting the guidance that we gave Ben is we obviously don't expect a significant hedge gains in 2023, which means.
Is that the overall impact from foreign exchange year over year, it's expected to be 2% on the top 10, 4% on the powertrain.
Great. Thank.
Thank you Chris next question. Please Kelly.
Our next question comes from parents Flynn from Morgan Stanley parents. Your line is open great.
Great. Thanks, so much for taking the questions. I know you guys typically don't give product level guidance Caroline but I was wondering if you can speak at a high level about your vaccine franchise. This year, obviously, you have new capacity coming on for Gardasil.
But you also talked about the pediatric opportunity for <unk>, new van So just wondering how we should think about those this year and then one follow up for Dean answer Tatter Sept, I know you're talking to the FDA. Now are you still confident that that single trial will be sufficient for approval or is there a possibility you could need data from the other on.
<unk> studies. Thank you.
Thank you for the question. So the guidance that we've provided for 2023 is underpinned by very strong revenue growth of 7% to 10% when you exclude the impact of like ethylene and foreign exchange.
Drivers of that go lives all our key pillars of oncology, while we expect continued impact for patients and growth driven portfolio of indications we have in keytruda and parts of it would be months vaccines. As you rightly noted driven by an acceleration expected in the <unk>.
Dodge a sale as we have new supply coming online as well as an acceleration in Opex, we advance performance, especially given the strong data we have for the pediatric setting.
And we expect continued growth strong growth in our animal health business.
Headwinds against that that we've talked about with <unk> with foreign exchange and an increased level of pricing.
Especially in Europe changes, the HFC that U K.
In Germany, but overall very confident in the underlying growth of our business and two oncology vaccines and animal health.
Yeah. So again March six clinical trial data for <unk> will be will be more fully discussed I think it will be very impactful data and I have no indication.
At this point that that we will need a readout from any other trial from a clinical standpoint.
To support our filing to the FDA or so Patterson.
Thank you Terrence next question. Please Kelly.
Our next question comes from Colin Bristow of UBS Colin Your line is open.
Hey, good morning, and thanks for taking the questions.
I guess I'll piggyback on a couple of the other picture, we've obviously seen some competitor data recently.
And then we have some phase III confirmatory readout. This year just what is your what is your level of enthusiasm this clause.
Hey.
And just what underpins that in terms of the data we've seen and then just second on Gardasil are you able to give any more granularity on the on the timing and levels of additional supply that will be coming online with respect to the new manufacturing facility.
Yes.
Yeah, well. Thank you for that question in relationship to T. J I mean, we're very competent term molecule as I've said, we have nine ongoing five phase III trials, you know pushing the boundaries of what <unk> can do or a PD. One can do with another Io agent has been something that's very important.
For the field and you know the way that I can simply answer your question about the confidence in the molecule is we just opened.
Additional key by study.
Phase III study.
In the earlier stages of cancer for this Io Io combination.
And for God's sake, we as you know has driven productivity in the existing manufacturing facility to be had and we have to use facilities coming online over the course of 'twenty three 'twenty four so it will be a progressive ramp, but I'll reiterate we're expecting an acceleration in alkali.
During 2020.
Great column next question. Please Kelly.
Okay.
Our next question comes from Omar Rocket from Evercore. Your line is open.
Guys. Thanks for taking my question. There was a story in New York Times last week, which mentions Merck has a patent of state of 180 patents on Keytruda and I'm curious since your turnkey only point should the earliest patent expiry date of 2028 can you speak to the types of patents encompassed in this 180 patent estate and is it reasonable to assume that your true patent estate on Keytruda goes well past two.
35, thank you.
Yeah. So I would just want to elevate the question a little bit.
The focus of what we're trying to do is we're trying to drive the concept.
Inhibition of of of of checkpoint inhibitors.
Can really have a profound effect throughout cancer, we are seeing all stages and all tumor types, we talk about expanded to different tissue types and stages deepening combination and extend with routes of delivery routes have been demonstration and frequency and these innovations are critically important to make sure that this lifesaving stood up.
Treatment is available and we we are confident in those innovations are providing providing benefit to patients.
And we have filed where appropriate intellectual property for it for that.
Thank you Omer last question. Please go ahead.
Our last question comes comes from Steve Scala from Cowen.
It is open. Thank you Novartis said yesterday that it believes the treatment of cardiovascular disease is moving towards Inc. Infrequently administered injectables as opposed to oracle's, citing very poor compliance with oracles. They probably have a good point because the Merck P. C. S canine could be associated with Gi issues and other issues.
Which may make oral delivering a challenge so I assume you disagree.
Is that because indeed your oral P. C. S. Canine is very well tolerated and clean or do you disagree for other reasons. Thank you.
You know, we'll be talking about the detailed data from the P. C. S. Canine, we believe that it's very clean, but I'll just step back and I say cardiologists, who trained in the late eighties and 1990 days because the ability to have an oral drug that lowered LDL cholesterol was impactful for the world.
Yes every oral drug regardless of of.
Of of what therapy. It is has a compliance sort of it's very important to maintain compliance.
What we're trying to do is to create the most potent LDL cholesterol lowering pill ever made.
Does not require does not require constant interactions with the health care system, we think that that that axis is actually one that is very important not just in the U S. But also globally and this is personally speaking.
As someone who practiced as early as late as recently as five years ago. If I had an oral P. C. S. Canine LDL lowering pill back then I would be prescribing it with the other three to four oral pills that I'm prescribing at an individual.
Thank you Steve and thank you everybody for your thoughtful questions. Please follow up with me and the IR team. If you have anything additional and we look forward to staying in touch take care.
Yeah.
That concludes today's call. Thank you for participating you may disconnect at this time.