Q1 2023 Merck & Co Inc Earnings Call
Thank you for standing by welcome to the Merck and company Q1 sales and earnings conference call. At this time all participants are in a listen only mode until the question answer session of today's conference at that time to ask a question press Star one on your phone and record your name at the prompt this call is being <unk>.
Recorded if you have any objections you may disconnect at this time.
I'd now like to turn the call over to Mr. Peter Danon Baum, Vice President Investor Relations, Sir you may begin.
Thank you and good morning, welcome to Merck's first quarter 2023 conference call speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Dinah 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 <unk>.
All such as acquisition related charges restructuring costs and certain other items you should note that we've excluded these from our non-GAAP results and provide a reconciliation in our press release I would like to remind you that some of the statements that we make today may be considered forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995, such statements are made.
Just on the current beliefs of Merck's management and are subject to significant risks and uncertainties, if our underlying assumptions prove inaccurate or uncertainties materialize actual results may differ materially from those set forth in the forward looking statements, our SEC filings, including item one a in the 2022 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. These slides along with the earnings release, today's prepared remarks, and our SEC filings or all posted to the Investor Relations section of Merck's 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. We began 2023 with significant advancements across key areas of our pipeline and with continued strong performance of our key growth drivers I remain very pleased with the consistency and excellence of our teams execution and I'm confident that our strategy is leading to sustainable success.
Yes.
We remain grounded in our shared purpose to bring forward bold science to deliver solutions, which address serious unmet medical needs and importantly, save and improve lives around the world.
Our priorities remain consistent.
Focusing on our science led strategy, we intend to bring forward important innovation from our internal discovery pipeline.
And via strategic business development targeted at accessing the most compelling and complimentary external science.
Leveraging our best in class clinical development capabilities.
We aim to sustain the momentum in our pipeline in 2023 and beyond and we're confident that this will lead to strong commercial and financial performance as well as value creation for patients and shareholders over the long term.
Speaking of accessing important external innovation.
We're very pleased with our announced acquisition of Prometheus Biosciences for.
<unk> brings us a potential best in class novel treatments that could transform the standard of care for patients suffering from ulcerative colitis, and crohn's disease, potentially debilitating conditions as well as a broader pipeline and a technology platform that enables a precision medicine approach.
It accelerates our presence in immunology increases the diversity of our pipeline and brings us a potentially significant revenue growth driver through the next decade.
This transaction is also another example of Burke acting decisively when science and value align.
Turning now to our first quarter results.
We delivered very significant underlying growth, excluding the expected year over year decline in lugubrious sales.
This reflects continued fundamental strength and momentum across our key growth drivers, particularly in oncology and vaccines.
Results reinforce our confidence in the robust demand for innovative portfolio and in our outlook for the remainder of 2023, which Caroline will speak to in a moment.
Moving to our research organization, we've made significant advancements.
Cardiovascular we shared the remarkable work of our research colleagues at the American College of Cardiology Conference in March the.
The strength of the data from the phase III stellar trial studying so Todd herceptin pulmonary arterial hypertension reinforces our belief in this important new mechanisms potential to change the treatment paradigm for patients.
In addition impressive results from the phase two trial studying our oil piece GSK nine inhibitor suggests that this could be a globally accessible treatment option for patients in need of LDL cholesterol reduction.
The successes, we are achieving across our cardiovascular pipeline have created excitement across our company and our belief that Merck will build on its strong legacy of bringing forth breakthrough therapies for the benefit of patients suffering from cardiovascular disease and that these programs will contribute significantly to our long term growth.
In oncology, we were pleased to share the positive topline results from keynote 671, which showed a significant improvement and event free survival in certain patients with early stage non small cell lung cancer and we look forward to potential approval. Later this year. In addition, we're working with our partner Madonna.
To rapidly expand our efforts to study the combination of Keytruda with an individualized neo antigen therapy, which we previously referred to as a personalized cancer vaccine therapy.
Adds about melanoma and potential additional tumor types.
I'm very encouraged by the substantial progress we've made across our broad pipeline.
We're now working on a greater number of late stage programs across more therapeutic areas and modalities than at anytime in recent years.
In summary, we've begun 2023 with scientific commercial and operational momentum and expect strong full year growth across both our human and animal health businesses.
I'm proud of the progress we've made but has always recognized the need to move with speed and urgency to do even more I want to thank our global team for their steadfast dedication as we build a sustainable innovation engine that will deliver value for patients and shareholders well into the next decade with that I'll turn the call over to Carolina.
Thank you Rob good morning, as Rob highlighted we are off to a strong start to the year, we spoke box underlying performance across our key growth pillars. These.
These results further demonstrate that our focus on science and innovation at the core of that strategy is working.
Our success is enabled by the excellent execution of our team of dedicated colleagues who want to live.
Our important medicines and vaccines to people and animals across the globe.
We remain very confident in our ability to continue to deliver in the short term, while we make disciplined investments to maximize long term value for patients.
This.
Now turning to our first quarter results.
Total company revenues were $14 $5 billion.
Excluding the impacts from <unk> and foreign exchange the business delivered very strong underlying growth of 15%.
The remainder of my revenue comments will be on an ex exchange basis.
Our human health business continued its strong momentum.
Excluding the definitely our growth was 18% driven by oncology and vaccines.
Our animal health business also delivered solid performance with sales, increasing 5% driven by growth across both livestock and companion animal products.
Now turning to the first quarter performance of our key brands.
In oncology Keytruda grew 24% to $5 $8 billion driven by by soft global demand for metastatic indications.
One is increased utilization driven by approvals in early stage cancers.
In the U S keytruda growth across all key tumor types and continues to benefit from uptake in earlier stage cancers, including triple negative breast cancer. It's one of the things Seth and types of renal cell carcinoma and melanoma.
We continue to anticipate gradual uptake from keynote <unk> 91 in earlier stage lung cancer as we are working with the medical community to increase adjuvant treatment rates for diagnose patients receiving surgery.
We along with others are also working to improve upon the low level of lung cancer screening and follow up through diagnosis, which we anticipate will increase over time.
We are encouraged by the positive feedback we've received thus far.
Furthermore, we are excited by the potential to bring an additional treatment option to patients. Following the positive results of the keynote 671 study.
Together these studies position us well to extend our leadership in non small cell lung cancer.
We also look forward to providing a new treatment option to such an adult patients with bladder cancer. Following the recent approval of keynote 869.
Outside the U S. Keytruda continues to maintain its leadership in non small cell lung cancer growth was driven by uptake in metastatic renal cell carcinoma, and certain types of head and neck cancer as well as in earlier stage cancers, including certain types of high risk early stage triple.
Negative breast cancer, which continues to launch in additional markets.
<unk> remains the market, leading PARP inhibitor.
<unk> revenue grew 8% primarily due to increased demand in key European markets in certain patients with ovarian cancer.
Len FEMA Alliance revenue grew 5% due to increased uptake in the treatment of certain patients with advanced renal cell carcinoma in key European markets.
Our vaccines portfolio delivered excellent growth led by Gardasil, which grew 43% to $2 billion.
Performance was driven by strong demand in major ex U S markets, particularly China as well as increased supply.
Growth also benefited from an acceleration of shipments to China from the second half to the first half of the year to ensure the availability of product to meet heightened demand. Following the approval of the expanded indication of Gardasil nine for girls and women, 9% to 45 years of age.
Vaccine sales also benefited from the increasing demand for vaccine Ivan following the ongoing pediatric launch, particularly in the U S.
In our hospital acute care portfolio <unk> sales grew 27% driven by an increase in market share among your muscular blockade reversal agents.
Our animal health business delivered another good quarter with sales, increasing 5%, reflecting strong demand across our livestock portfolio, particularly in ruminant and poultry products as well as strategic pricing actions.
I will now walk you through the remainder of our pans out and my comments will be on a non-GAAP basis.
Gross margin was 76, 9% an increase of six one percentage points due to favorable product mix, which reflects the benefit from the lower sales of la definitely yes.
Operating expenses increased to $6 $7 billion, reflecting $1 4 billion of charges related to the acquisition of imago and our license and collaboration agreements with collude.
Excluding these charges operating expenses grew 12% driven by increased investments to support our key growth drivers and pipeline.
Other income was $17 million.
Our tax rate was 24%, reflecting the unfavorable impacts from the in market transaction for which no tax benefit was recognized.
Taken together, we earned $1 40 per share, which includes a 52 cent impact from charges related to the acquisition of imago and our agreement with collude.
Turning now to our 2023 non-GAAP guidance.
Continued operational strength of our business enables us to raise and narrow our full year revenue guidance. We now project revenues to be between 57, seven and $58.9 billion.
Including approximately $1 billion from looking for yet.
We expect strong underlying revenue growth of 8% to 10% offset by the decline in look embryos and an approximate two percentage point negative impact from foreign exchange using mid April rates.
Our gross margin is still expected to be approximately 77%.
We have narrowed the estimated range of operating expenses to be between $23, three and $24 $1 billion.
As a reminder, this range includes $1 $4 billion of upfront research and development expenses related to the acquisition of the Mako and our agreement with collude.
This guidance does not assume the proposed acquisition of Prometheus or any additional significant potential business development transactions.
Other income is anticipated to be approximately $250 million.
We continue to assume a full year tax rate between 17, and 18% and approximately 2.55 billion shares outstanding.
Taken together, we are increasing and narrowing our expected EPS range to $6 88 to $7.
This range includes the negative impact from foreign exchange of approximately four percentage points using mid April rates.
It is important to note that this guidance does not include the impact of the proposed acquisition of Prometheus, which is expected to close in the third quarter of this year.
We expect the transaction will result in a onetime charge that will increase research and development expense of approximately $10 $3 billion.
Approximately $4 per share.
The impact of this charge will be reflected in both our GAAP and non-GAAP results.
In addition, ongoing investment to advance the pipeline assets as well as the cost of financing will negatively impact EPS by approximately 25 cents in the first 12 months following close.
As Rob noted we are very excited by Prometheus compelling science and confident that this transaction has the potential to create meaningful value for patients and shareholders.
Our guidance reflects our continued confidence in the underlying strength of our business driven by our key pillars in oncology vaccines and animal health.
As you consider your models there are a few items to keep in mind.
In the U S. Keytruda has achieved exceptional growth over the past several quarters driven by recent launches, particularly in early stage indications such as triple negative breast cancer.
While we continue to anticipate growth from these earlier stage indications.
Over a year growth rate is expected to moderate as we anniversary that very strong initial uptake.
Outside the U S. We continue to expect strong volume growth for Keytruda. However, pricing is an increasing headwind, particularly as we launch new indications in key European markets, which will temper ex U S growth.
Finally, we are confident in our ability to drive strong growth of Gardasil, particularly in international markets. We are well positioned to protect many more people from HPV related cancers, now and over the long term and given the strong global demand for the vaccine.
See an acceleration of growth for Gardasil in the full year 2023 relative to 2022, so not quite at the same level of growth achieved this quarter.
Now shifting to capital allocation, while we remain committed to our priority following the announcement to acquire Prometheus.
We will continue to prioritize investments in our business and growing pipeline to realize the value of the many near and long term opportunities we see.
We remain committed to our dividend and plan to increase it over time.
Business development remains a high priority and we maintain the ability we've seen a strong investment grade credit rating to pursue additional science driven value enhancing transactions going forward.
We will continue to execute a modest level of share repurchases this year.
To conclude we remain very confident in the outlook of our business driven by the global demand for our innovative medicines and vaccines.
We are in a position of financial and operational strength and have continued excellent execution will enable us to deliver value to patients and shareholders well into the future with that I'd now like to turn the call over to Zee.
Thank you Caroline.
Hello, everyone. Today I will provide notable updates since our last earning call starting with our progress in cardiovascular disease oncology and infectious disease and subsequently immunology with our recently announced acquisition of Prometheus.
As Rob mentioned earlier at the American College of Cardiology in conjunction with the World Congress of Cardiology meeting in New Orleans results from the phase three stellar trial evaluating <unk> for pulmonary arterial hypertension as well as data from the phase <unk> trial for our oral P. C. S canine inhibitor candidate NK.
0616 in development for the treatment of hypercholesterolemia or presented.
And the stellar studies.
It is up in combination with stable background therapy met its primary endpoint with a substantial improvement in six minute walk distance at 24 weeks compared to placebo in combination with background therapy with <unk>.
Trial also met eight out of nine secondary measures, including a compelling reduction in time to clinical worsening or death versus placebo.
These findings were published simultaneously in the New England Journal of Medicine.
We are working diligently to submit filings from the stellar data to regulatory agencies and at this time anticipate filing in the U S. In the third quarter of this year followed by the EU.
We are advancing the broad suite Patterson program, including the Hyperion Zenith Setaria and phase II cadence trials, which are actively recruiting.
Also at the ACC meeting detailed phase <unk> results for M. P. 0616 were presented showing a reduction of LDL cholesterol levels from 41 point to up to 69% versus placebo up to 90% of patients receiving M. T 0616 at the highest dose.
Study, we're able to reach their LDL C goal.
And oral PCF canine inhibitor could provide the opportunity for broad global access we are initiating multiple phase III studies, including in secondary prevention.
Intermediate to high risk primary prevention and for patients with heterozygous familial hypercholesterolemia in parallel we will conduct a cardiovascular outcomes trial.
We are making progress towards our goal of developing medicines that improve and extend the lives of patients with cardiovascular diseases and look forward to providing updates in the future.
Turning to oncology as I have mentioned previously a key area of focus and execution has been the development of treatments for early stages of cancer, where there remain significant unmet need.
We announced FDA acceptance of our application for Keytruda in combination with platinum doublet chemotherapy as neo adjuvant.
Claude by adjuvant therapy in patients with Resectable stage, 238, and three be non small cell lung cancer based on the findings to date from the keynote 671 study the.
The agency has set up to do for action date of October 16th and detailed findings will be presented at <unk> in June .
Together with the approval of Keytruda in the adjuvant setting for certain patients with non small cell lung cancer based on keynote <unk>. One the keynote 671 study builds on the wealth of data we have generated.
Relevant additional ongoing studies include keynote <unk> seven in Keeling, Oh, one too.
The comprehensive development program underscores our commitment to an area, where there is significant opportunity to improve patient outcomes importantly, it also reinforces the need for early detection through lung cancer screening.
At the American Association for Cancer Research annual meeting in collaboration with Merck Donna We announced detailed results from keynote <unk> two a phase <unk> study evaluating keytruda in combination with <unk> 94 zero also known as mrna 4157 and individualized.
Neo antigen therapy for the adjuvant treatment of stage, three and four melanoma in patients with high risk of disease occurrence following complete resection.
These results are the first to demonstrate improvement a recurrence free survival over adjuvant standard of care PD, one blockade in resected high risk melanoma and provide the first randomized evidence that an individualized neo antigen therapy has potential benefit.
The FDA has granted this combination breakthrough therapy designation and the Europeans Medicines agency has awarded prime designation for high risk stage, three and four melanoma following complete resection.
Merck and Modena planned to initiate a phase III study in adjuvant melanoma, this year and rapidly expand to additional tumor types, including non small cell lung cancer.
Together with Astellas and season, we announced the Fda's accelerated approval of Keytruda in combination with afford a mab adult and antibody drug conjugate for the treatment of adults with locally advanced or metastatic euro filial carcinoma, who are not eligible for cisplatin containing came.
All therapy.
This accelerated approval followed priority review and is based on data from the keynote 869 trial.
This is an important advancement as this is the first U S approval of a regimen, combining an anti PD one therapy with an antibody drug conjugate to these patients.
The approval adds to the success of our foundational work evaluating keytruda in combination with chemotherapy and provides promising evidence for combining immunotherapy with tissue targeted anti cancer agents.
We are well positioned to build upon this work with a portfolio of next generation antibody drug conjugate through our collaboration with <unk> biotech play.
Planning is underway for an expansive global clinical development program and we look forward to initiating phase III trials for MK 2870, or <unk> targeting ADC as both monotherapy and in combination with Keytruda.
We also announced that the FDA has accepted our application for Keytruda in combination with chemotherapy for the first line treatment of patients with her two negative.
Locally advanced unresectable or metastatic gastric or gastroesophageal junction.
No carcinoma.
This filing is based on results from the phase III keynote <unk> five nine trial in which <unk> plus chemotherapy demonstrated a significant improvement in overall survival, reducing the risk of death by 22% compared to chemotherapy alone in these patients regardless of PD lone expression.
The agency has set up a <unk> action date of December 16. This provides us the opportunity to expand upon our approval for patients with her two positive disease based on keynote <unk> 811.
We recently announced positive data from the phase III NRG G Y 018 trial investigating keytruda in combination with chemotherapy for the first line treatment of patients with stage three to four or recurrent endometrial carcinoma.
This is an important advancement for women with endometrial cancer building on our approvals from keynote 146, 775 and 158.
Earlier this year the American Cancer Society 2023 annual report on cancer facts and trends noted that survival for uterine malignancies had not improved over the past four decades due to a lack of treatment advances we continue our work to provide better treatment options.
<unk> and women's cancer.
And finally, the treatment of metastatic castrate resistant prostate cancer remains a significant and growing unmet need and therefore, an area of ongoing commitment. We have gained important insights to date from our trials evaluating keytruda and Lindt bars are and are planning to initiate phase III studies of M. K five six.
Eight four a novel oral nonsteroidal inhibitor of Sip 11, a one from our collaboration with Orion by the end of this year.
Also with Astrazeneca, we look forward to the discussion regarding the propel study at the upcoming Oncologic drugs Advisory Committee meeting.
We are proud of the progress we are making and look forward to hosting an investor event at Astro in Chicago. Please.
Please mark your calendars for the evening of Monday June 5th where we will provide an update on our oncology strategy and development program.
Turning to the progress of our infectious disease program. We are now actively enrolling multiple new phase III studies for once daily with lots of <unk> in combination with the robbery and with Gilead have resumed the phase II study of an oral once weekly combination treatment regimen.
There's lots of Revere and Gilead learner cap of air we are committed to advancing the science to offer new treatment options for the treatment of HIV.
Gabriel we continued to prioritize global axis during surgeries of COVID-19 around the world, including in Japan, where the Ministry of Health Labor and welfare recently granted full approval for the treatment of COVID-19, we are proceeding with the evaluation of La Gavriel for the treatment of other viral respire Tory infections and.
We'll share more as studies read out.
Finally to our recently announced acquisition of Prometheus Prometheus offers a strong scientific pedigree with a candidate that has shown exciting potential in both ulcerative colitis and crohn's disease.
TNF like one eight is a novel target, which provides the potential opportunity to transform standard of care in a disease area, where current therapies are often inadequate and high unmet need remains.
<unk> anti <unk> antibody PRA zero to three as a potential first in class late stage clinical candidate with a unique dual mechanism of action, including anti inflammatory and anti fibrotic properties P.
We are a zero two threes phase II results in both ulcerative colitis, and Crohn's disease demonstrated strong efficacy.
Further at an interim analysis, the data and the biomarker positive subpopulation suggested even greater efficacy with patients more likely to achieve clinical remission.
By combining for me if he uses deep understanding of inflammatory bowel disease, and merck's deep expertise in developing and implementing biomarkers, we hope to usher in a new era in immunology, where patients are matched with the right therapy based on our precision medicine approach.
Prometheus as biobank of IBD specimens have yielded deep molecular insights that formed the foundation for the discovery of PRA 052, and we look forward to building on that knowledge to gain further insights, which will enable the identification and prioritization of additional targets.
In closing, we continue to make progress towards our goal of creating innovative medicines that will improve the outcomes for patients.
And now I will turn the call back to Peter.
Thank you Dean Michelle we're ready for Q&A.
Like to ask analysts.
The limit themselves to one question today, we'd like to complete the call by the top of the hour. Thank you.
Thank you.
Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad. He may withdraw your question at any time by pressing star two.
If you are using a speaker phone please pick up on the handset before pressing the numbers.
Once again, if you have a question you May press Star one one moment. Please for the first question.
Parents, playing with Morgan Stanley You May go ahead Sir.
Hi, This is Robert <unk> on for Terence Thanks for taking my question.
You and your partner Mcdonough are conducting a phase one basket trial of a P. C. V can you elaborate on the design of the trial and if you have any of the data in house at this point. Thanks.
Yeah. Thank you. This is dean I, probably want to just focus really on the phase threes that were advancing in melanoma and liked.
Likely and others. There is a basket trial, that's going through to look at the extent of the tumors that have joined sort of keytruda plus a personalized.
Our individualized new antigen therapy will work I can just give you a general sense.
We have a little bit of a roadmap as to where immune sensitive tumors are and we would likely prioritize those in our basket trial right.
Great. Thank you next question please.
Thank you our next caller is Seamus Fernandez with Guggenheim You May go ahead.
Oh, great. Thanks, so much for the question. So my question is actually on the Cologne bio opportunity deemed just hoping if you could update us I believe previously.
It was stated that we may see some longer term data.
Later this year, just hoping to see if that is still the case or if the competitive dynamics have kind of changed that commitment.
Maybe if you could just help us understand your enthusiasm for that particular product and where you feel it would be likely differentiated from.
From other products in the category. Thanks, so much.
I'll just answer by the competitive dynamics make us more enthusiastic to push our programs harder and faster we will be.
Uh huh.
Providing data from from the data that we have in a series of cancers at Azgul on June 5th we'll have our investor, but it will also be in the ESCO.
<unk> I I believe already accepted for oral presentation, there as well so we're very interested in that and we're also very interested in the fact that.
As we know the first evidence of anti PD, one with an antibody drug conjugate in our collaboration with <unk>.
<unk>.
Has has shown good effect and we we postulate that that may be a broader impact not just with one ADC or one indication, but more broadly through multiple antibody drug conjugate and therefore, our interest in advancing not just the trop two ADC, but many other adcs.
You haven't provided data as of this point.
Okay next question please.
Thank you Luisa Hector from Bahrenburg you May go ahead.
Oh, hi, Thank you for taking my question I Wonder if you could give us an update on Keytruda. Your how it's looking in the adjuvant lung setting and relative positioning against your competitor.
How any subcutaneous formulation.
That might change that.
From the competitor or or you and when might we have thoughts phase III ratio on your new format of the subcutaneous thank Keith.
Let me just grab the question about the early stage lung you know as we've talked the earlier stages are really important and we've already seen it in triple negative breast cancer, we've seen it in RCC, we've seen that in melanoma and I think the aperture of being able to do it in lung is going to be substantial again.
For our keynote 671, which is the first perioperative troudt analysis statistically significant and clinically meaningful improvement in E. S. S and statistically significant improvement in pathologic complete response, those will be presented in in June as well I would also emphasize that event free survival.
And overall survival are the primary endpoint of our study and most competitors do not have OS as a primary endpoint I would also emphasize that this is also in the setting where we a perioperative, but we also have adjuvant as well so we provide a broad treatment choice.
In relationship to moving forward in the earlier stage in all earlier stage, where there'd be long triple negative RCC melanoma, I think we increasingly important to provide innovation that allows patient.
To have quote unquote more normal the ability to stay on these treatment long term there are different profile than a metastatic patient and so we believe that giving other routes of administration will be important and we're advancing a.
Our sub Q pember, Elysium, Abbott, especially with hyaluronidase, because that gives us an ability to do both a Q3 weeks and importantly also allows us to do a Q six weeks because that frequency I think will be very important for patients.
Luisa I might just add from a commercial perspective.
Early stage launch along with keynote one on one is off to a good start we're actually seeing good uptake as you know the challenge here is that the overall screening rates are lower so it is going to be a slower.
Climb than what we saw for instance, where we had been seeing with triple negative breast cancer, but as we sit here today, the launch is going well and as we look forward and hopefully once we.
With the potential approval from keynote <unk>, one will be the only company that has both the adjuvant and neo adjuvant offerings as.
As well as obviously the leadership position in the metastatic setting so as we sit here today, we continue to see this as a meaningful opportunity and long term, we will continue to drive growth for us in long, but obviously, we got to get that going to do that in the adjuvant setting from a metastatic perspective, we're continuing to them too.
Hold our leadership position.
Thank you Luis next question please.
Chris Shea Bitani with Goldman Sachs. You May go ahead Sir.
Great. Thank you for some type of shift certainly a broad scope of potential not just from the stellar results, but in earlier and later line you have high periodic zenith can you remind us if there is potential for interim readouts and if so potentially what timeline and relatedly. What are you thinking about in terms of your overall sort of P. H P. A H.
Strategy, you have assets now with Prometheus as well that have potential to be used in the systemic sclerosis ILD population a lot of opportunity. If you can just help frame some strategic thinking.
Yeah, I would just focus on the pulmonary artery hypertension, I would kind of keep that a little bit distinct from other forms of lung disease. Once a primary vascular. The other one is could say primary parenchymal, so I kind of separate diseases, like IPF and interstitial lung disease from scleroderma and scleroderma.
As distinct from those like Humira carry hypertension Youre right. We believe that the Patterson will be important we are pushing forward with that so to start with a stellar we have seen at Hyperion. There are interim analysis, but I don't actually want to sort of lay out many of them are event driven.
Dizziness as you well know is really in a more advanced.
Situation in Hyperion is really trying to get it more in the frontline. We also believe that it will potentially reshape how people think about the treatment.
H largely people have thought about basal dilatation or dark dilation I think this mechanism is active in signaling inhibitor with the mechanism that it has which remodels the tissue.
Will reshape the field and in reshaping it it will potentially reshape the dynamics of the VISO dilatory pathways and that's why we're so excited with our in the Hell with FCC program MK 50, 475, because we think that could be a very important.
Combination agent with other vendors have a dilatory mechanisms that already.
Proved as well as in combination with a sort of Patterson.
Great. Thank you Chris next question please.
Thank you, Chris Schott with J P. Morgan you May go ahead.
Hi, this is harder calling in for Chris Schott.
One question on the BD front so.
What are you thinking about the progress that you guys have had in the internal pipeline and then now you have a familiar steel.
Is there a priority or a bias when you consider that.
Built in there from either early or later stage deals or from you know therapeutic areas oncology C V or maybe some emerging therapeutic area in your portfolio.
Yeah No I appreciate the question so obviously.
Our view of this is really unchanged despite.
What you've seen US do both recently and to the fact you made the point you made were seeing good progress in our internal pipeline. It starts with asking the question where do we see the most compelling science, but we think we can use to make a difference for an unmet need and it has a strategic fit and where we see value in line and that's where we move.
As we sit here today, we continue to believe there are opportunities for us to continue to do business development, we are very Oh.
I would say pleased with the progress of the internal pipeline and as you look about the therapeutic areas, where we have been adding.
You know, obviously areas, where you continue to see great science happening oncology, there's a lot of science in oncology immunology.
And we've seen in cardiovascular so what's been driving us to the therapeutic areas, who has been the scientific opportunity we've seen and as we think about early versus late it really will depend on the confidence of the scientific team has in the particular opportunity. So we don't target one versus the other although I will tell you we continue to not bill.
Leave the going after you know commercialized assets just for the sake of revenue is not our strategy. We're focused on building the pipeline.
Both near and long term and we do deals across the full spectrum, we talk about the acquisitions.
In the phase II phase III area, but we don't talk a lot about the fact, we're doing a lot of calm collaborations and the other licensing deals in their early phase. So we really look at the total phase of development and are and always will be driven by the pipeline. If it brings with it a commercial opportunities great.
But it always will have to have a pipeline element for us to want to go there.
Great. Thank you next question please.
Thank you Carter Gould with Barclays. You May go ahead.
Good morning, Thanks for taking the question I guess for Robyn.
What's your kind of thoughts on sort of the proposed legislation and how that potentially changes how you think about launching drugs in Europe and I guess also I guess the read through to how a potential business development as well and as you think about the timing of the revenue.
Potentially shorter.
Exclusivity parents and your thoughts on that front would be helpful. Thank you yeah. So if you look at what we're doing.
You just put out obviously the high level message is overall on balance we are concerned that it continues to put innovation at a disadvantage in Europe and puts Europe at a competitive disadvantage as we think about where to invest our dollars and where to bring.
New products.
Now that said on balance there were elements of what we propose that actually.
We support their elements that we think need to be changed on this side of the support quarterly the fact that they have made some efforts to simplify and modernize the regulatory framework, which has the potential to accelerate approvals that was very much in its something the industry push for and we feel good about that as you point out the area that balances out there.
It is very concerning is the fact that they have reduced the data exclusivity period.
Made it largely contingent upon youre launching in across the member states, whether or not youre doing comparative studies and whether or not you have launches. So we need to understand that we're going to continue to try to make sure people understand the implications that can have as we think about where we would launch products and that's work we will.
Do we have a couple of years probably before this is.
Put into place. So we have time to do the negotiation you know as I sit here today I wouldn't say that I see specific implications to our business development strategy.
It's more of just the general theme of what is a push against innovation that concerns us because Europe's an important market, giving access to our medicines to the people in the European Union is important we want to be there. We just have to make sure it's sustainable from a business perspective.
Thank you Carter next question.
Thank you Tim Anderson with Wolfe Research you May go ahead Sir.
Thank you I have a question on Gardasil and China. So the GSA contract from your Chinese distributor published a couple of months ago shows really big purchase orders consistently for the next few years and it kind of trails off in declines and if interpreted literally it could suggest it was kind of a bolus effect.
Going on where growth isn't linear because up for a while then it contracts as you've worked through warehouses patience is that how we should think about the longer term uptake of gardasil in that particular market that it might not be linear. Thank you.
Just so if you look at the GSA contract, it's important to understand that the.
Levels put in that contract are minimums and in fact, we have shown in our history has been that actually we have supplied well over the minimum so I wouldnt interpret that as the literal a forecast of the business in China, because theres opportunities with the expanded age cohorts as we continue to drive penetration.
<unk> and what is still a large unmet population there is opportunities to do better than what's in the contract and if history is an indicator of the future. We would expect to see that move forward. So I would not interpret that as implying a decline in <unk>.
Gardasil and trying to over the coming years journey thing I was at it from a research perspective, we remain focused on studies in China to support gender neutral vaccination, which could be a great opportunity to protect more lives and provide growth into the future.
Great. Thank you Tim next question please.
Evans senior men with BMO capital markets you May go ahead.
Hi, This is Michael Hoffman on for Evan we wanted to ask with the tariffs have phase III data.
<unk> steel and novel assets like the oral piece GSK nine does the team now think that this will be enough to grow through the Keytruda L O.
Yeah.
Yeah.
I'll take the question of and obviously I would start by saying we feel very good about the progress we've made in a very short period of time. So if you look at the the.
Our opportunity to be in a situation to have sustainable growth well into the into the next decade, we feel like we've made significant progress whether it's as you pointed out the deal with axon, they're on and then I would add the broad.
Strong internal pipeline, we havent cardiovascular, but as you know we've indicated has eight potential launches in the 24 to 28 time frame, which has the potential to generate more than $10 billion as we move into the mid 20 <unk>. We've talked about the fact from an oncology perspective, if you look at what we have from an ADC portfolio.
What are the small molecules, we brought in through business development, excluding anything from the individualized neo antigen therapy.
Formally what we used to call the personalized cancer vaccine with Madonna So that's not even counted.
We see greater than $10 billion of opportunity in those assets.
That same timeframe. So as we sit here today, we've made a lot of progress I don't want to predict too I think we're in a position to to grow or not we're not giving specific guidance, but I would say I feel given the rate of progress we've made.
Such a short period of time and give them. The timetable we have in our resources going forward and the progress the Dean is driving with us with his team in our in our labs.
I am no longer focusing on 2028 Ah I am looking at how do we have sustainable growth well into the next decade, great. Thank you next question. Please.
Andrew Baum with Citi. You May go ahead Sir.
Thank you question for Dean could you talk to the plans coffee vascular outcome trial for oral sex canine and particularly about how you balance some of the historic data supporting the idea that median trial are treatment duration is closely tied to efficacy and the poor.
<unk>, well, probably dosed for two shorter time, suggesting that you need to have a longer trial classes on the other hand, the impacts of the I L. E. K two returns at least in the Medicare population in the U S. Thank you.
Thank you very much for that question first of all I just want to emphasize that.
There were.
In active discussions with regulatory agencies in relationship to our program as we design the phase III trial. So that we put out there. The second point I would just emphasize is there is an evolving view that Ah I think the field is.
Coming to grips with it's not just that LDL is an excellent biomarker. It's not just said Pcs canine is an excellent.
Pathway. It is the fact that our our 0616 interdict exactly in the same place as some of the antibodies. So how one interpret that and how one thinks about biomarker data in that setting I think it will be an evolving discussion.
With the regulatory agencies and the second question that you point out is is the historic in the previous.
I think you're referring to the fact that there is a view that if those studies with the antibodies had gone out a little bit longer but they would have had a more profound impact in terms of in terms of outcomes. Those are things that we are speaking to the regulatory agencies as they think about the difference between a biomarker.
Her and the outcomes trial, but I do I would echo your point of view, which is one doesn't wanted one doesn't want to go too short that that one risks.
The full maximum impact that you can have.
On the label, but that that as you said needs to be balanced with whatever the IRA looks like how.
How many years from now so those are the balances, but your observation about the other trials is one that we observe as well and my general thinking is we should try to maximize the impact that we have on patients because whatever that label is that labor will stay forever.
Thank you Andrew next question please.
Mara Goldstein with Mizuho you May go ahead.
Oh, great. Thanks, so much for taking the question I wanted to also ask a question on the the personalized cancer vaccine with Madonna I'm coming out of a C. R.
The response rate for the monotherapy arm of Keytruda arm seemed low relative to some of the sort of historical comparisons and I'm wondering if you could speak to that particularly in light of what we have seen you know four other.
Other therapeutics that are being tested against a keytruda monotherapy.
Paradise.
Yeah. So let me just to state that.
It's always something that we do and everyone else does which is this cross trial comparison between companies, but also within companies and their own agent. What I will say is that some of the issues that have been discussed was September Elysium lab monotherapy arm performed comparably to Keno 054.
And the high risk subgroups, which is three C and D and those where were also included in the keynote <unk> four two and in general the keynote 92 had more advanced disease than those in keynote <unk>. Four so there is a way for us to sort of probability is given the same.
<unk> stage, so we're very comfortable with the timber lizabeth monotherapy arm in the trial that Merck and murdering I proceeded with I just want to just reemphasize that this to US is an important development scientifically. This is really the first time that I can recall seeing the impact.
<unk> of our personalized individualized neo antigen therapy, or a personalized cancer vaccine that has that profound have a readout in a phase two so we're excited to advance it to phase III for melanoma and to spool up other trials in phase III.
As we look to see how far we can how far we can push the strategy.
Thank you Matt next question please.
From a rapid with Evercore you May go ahead.
Hi, guys being on ticket, we know the doublet arm was not going to meet the PFS. So by extension. The triplet may have a shot at meeting PFS. On my question is what is your confidence in getting to at least a 20% benefit or so on PFS and if that plays out do you just wait for phase III do you speak to regulators like what happens next considering it's a second line trial.
So you know I would just emphasize that the that I think you're just speaking about the phase two trial in those phase II trials do provide us a sort of views of how to think about.
The five five phase III trials that we have ongoing I will just say that those five phase III trials are going to be the thing that the FDA looks at that that's what they're going to look at.
And we're advancing those and we're advancing them not just in metastatic situations have a series of them in lung, but I also just want to emphasize something that I've said previously it relates to what people have said about keynote <unk> 271. It relates to the question about individualized neo antigen therapy and it will.
Relate here, when we think about I O strategies, especially I O plus Io strategies increasingly our eyes are turning into the earlier stages of diseases. Both because it's very important for patients. It's a time, where we can really interdict early but we also think that that's an important place for us to relocate on all.
Our assets that Io Io in that earlier stage.
Thank you Omer next question please.
Dana Great Bosh with SBB Securities You May go ahead.
Alright. Thanks for the question are related to the previous two and your answer Deane.
Early stage melanoma, it looks like youre going to be pursuing two phase III combinations in parallel adding on your kitchen, IBO and adding onto individualized neo antigen therapy I Wonder if you could talk to why you are taking to large shots on goal in the same indication and should we expect a similar strategy generally and for these two.
Specifically in other early stage indications.
Yeah. So I would just step back for just a moment our ability to go into earlier stage cancers, where just unlocked maybe a couple of years ago right and in order to do combinations. It's very important that your base molecule actually has an impact.
And because that allows you to do contribution of components. So we're very comfortable moving our Io Io strategies are in earlier stages. We are doing it as as you said, both for Pembroke antigen and as well as temporary plus the individualized neo antigen therapy well.
Very confident that the desire of patients to be there is.
Is substantial and our ability to recruit and do important trials. There is is it's also important I would also say that as you see more readouts of earlier stage cancer or any of our assets, whether it would be <unk>, whether it be in ADC or whether it be a keytruda it will be.
Likely that we will we will target a multiple combinations in those spaces.
Great. Thank you Dana we're gonna trying to get to two more questions. Please.
Thank you Colin Bristow with UBS you May go ahead Sir.
Hi, This is <unk> on for Colin Thanks for taking our questions and congrats on the quarter.
Another question on the Keytruda OE.
Oh, how much of a protective stretchy in terms of the exclusivity to the.
Subcutaneous formulation off of Keytruda with afford you. Thank you.
Yeah.
I appreciate the question as we look at the subcutaneous formulation and where that can be utilized obviously its focus more where we have monotherapy as we looked at earlier lines of therapy. So as we continue to advance our adjuvant and neo adjuvant strategy across multiple tumor types, and then where we are combining keytruda.
With small molecules based on what we see as we look out we would expect about half of what we have is keytruda would be addressable through the subcutaneous route based on that definition of those those areas.
Great. Thank you final question. Please.
Thank you Trung Hill with Credit Suisse. You May go ahead.
Hi, guys, just a quick one I'm, giving you a renewed interest in immunology I just wanted to ask about Jeff of picks and GSK recently bought a product with a similar mechanism of action for around $2 billion.
They had described peak sales in the single billion dollar range. So perhaps can you just give us an update of where it gets a pixel is post the C. O L. A that you have and.
What's your expectations for this opportunity.
Yeah, I'll start with that so as you recall Geoff a picks and we had positive phase III trials, we had the C. O L. The crawl has nothing to do with.
The safety or or really any major concern that would require another clinical trial. The focus was on the.
The way that the analysis was done in the way that.
<unk> costs were counted.
We have submitted additional analysis and we'll be submitting additional analysis to the FDA in the first half of this 2023 in general I believe that the timing is on submission of all of that data generally speaking the FDA then readjusted CRA all in.
Hum.
Within six months, we have it already approved in Japan, and Switzerland, and as you said there is a renewed interest given the recent transaction and I don't know if Caroline would you like to answer that so I would just add that today. This is a population that is very under served one in 10 people here in the United States.
Have chronic cough, so it's a market that will need to be built but should we be successful with all work with the FDA. We look forward to bringing forward an auction that will be beneficial to patients and will drive revenue for our company.
Great. Thank you Trung and thank you all for your very good questions. Today, we look forward to hearing from you in our engagement with you in the future. Thanks a lot.
Thank you. This concludes today's conference call you May go ahead and disconnect at this time.