Q3 2024 Merck & Co Inc Earnings Call
Speaker Change: Thank you for standing by. Welcome to the American Company Q3 Field and Ernings Conference call. At this time, I'll put a spent turn on the Lucinald mode into the question and 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.
Speaker Change: This call is being recorded if you have an objection to me disconnect at this time. I will now return the call of Mr. Peter Dannenbaum, Senior Vice President and Vester Relations, so you may begin.
Peter Dannenbaum: Thank you, Shirley and good morning, everyone. Welcome to Mark's third quarter 2020-4 conference call. Speaking on today's call, we'll be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee, President of Mercury Search Labs.
Peter Dannenbaum: Before we get started, I'd like to point out that we have items in our gap results such as acquisition related charges, restructuring costs, and certain other items, and that we have excluded these from our non-gap results. There is a reconciliation in our press release.
Peter Dannenbaum: I will also 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 U.S. private securities litigation reform act of 1995. Such statements are may based on the current beliefs of Merch Management and our subject of significant risks and uncertainties.
Peter Dannenbaum: If our underlying assumptions prove inaccurate or uncertainties materialized, actual results may differ materialially from those set forth in the forward-looking statements.
Peter Dannenbaum: RCC finally is including item 1A in the 2023 10K, identify certain risk factors in cautionary statements that could cause the company's actual results to different materialy from those projected in any of our forward-looking statements made this morning. Merck undertakes no obligation to publicly update any forward-looking statements.
Speaker Change: During today's call a slide presentation will accompany our speakers prepare remarks. These slides along with the earnings release, today's prepare remarks and our SEC filings are all posted to the investor relation section of Merck's website. With that, I'd like to turn the call over to Rob.
Rob Davis: Thanks Peter, good morning and thank you for joining today's call.
Rob Davis: At Merck, we're confronting some of the world's most challenging and mathematical needs with innovative science and differentiated solutions.
Rob Davis: and we're delivering on our key strategic priorities.
Rob Davis: The strong progress we're making across our business increases the confidence I have in our ability to achieve long-term success and create sustainable value for both patients and shareholders.
Rob Davis: We're launching important new products.
Rob Davis: The Sol for unnot matter for needs and which has significant commercial potential.
Rob Davis: We're advancing novel clinical programs across a pipeline of diversified therapeutic areas and modalities.
Rob Davis: and we're adding to our internal research and development efforts through evaluating business development transactions.
Rob Davis: As a result, Merch is moving toward a future with a much more diversified portfolio.
Rob Davis: Our Phase 3 pipelines has nearly tripled over the past three plus years, the more than 20 unique assets. This will fuel a substantial set of new medicine and vaccine launches over the next five years. In fact, approximately equal to what we've launched over the past 10 years.
Rob Davis: and we believe the majority have blocked us to a plus potential.
Rob Davis: We've improved long-term visibility and are intensely focused on ensuring strong clinical execution across our diversified set of pipeline opportunities and future growth drivers.
Rob Davis: As always, we remain science-driven and patient focused as we work to bring these medicines and vaccines to those who need them most.
Rob Davis: Turning to our third quarter results, commercial execution is a top priority and we're highly focused on delivering in the near term. The strength of our overall portfolio puts us on track to achieve strong, for your growth.
Rob Davis: For the poor, the revenues increased 4% or 7% on a constant currency basis.
Rob Davis: A results benefited from increased usage of Kitura globally.
Rob Davis: contributions from new launches including Windrabeer and Cab Axib and strong growth in our animal health business.
Rob Davis: Please, with the launch performance of Windrower, which is consistent with our high expectations, and remain confident in the long-term opportunity it represents, the patience and the milk.
Rob Davis: As anticipated, results also reflected a decline in Gartacill sales year over year, notably however, which you've strong double-digit growth for Gartacill in almost every major region outside of China.
Rob Davis: In China, consistent with the expectations we discussed on our prior earnings call, we shipped the last to our commercialization partner, Jurfei, and we expect forthcoursions will be at a similar level to the third quarter.
Rob Davis: Overall, Channel Immentories of Garda Still have decreased, which is directly encouraging while inventory at Jurfay remains above historical levels.
Rob Davis: We are highly focused on this market and are making progress with your faith to increase promotional resources and patient education efforts.
Rob Davis: We expect these efforts to translate to increase patient activation in demand, but as we've said, this will take time.
Rob Davis: Taking a step back, we'll proudly the role the Guard of Sills playing and helping prevent certain HPV related cancers.
Rob Davis: There's a wide range of long-term growth opportunities around the world due to the tremendous remaining need to protect more individuals
Rob Davis: With less than 10% of a global eligible population vaccinated and meaningful opportunities to improve vaccination completion rates, gender neutral vaccination rates, little dog coverage and access in low and middle income markets.
Rob Davis: This includes in China, whether there is an attractive long-term opportunity given the significant number of females yet to be immunized, and the potential approval for males next year.
Rob Davis: Will highly focused on using our scale and strong capabilities to drive education in awareness of the benefits of HPV vaccination and to reach and protect more patients globally. As such, we remain confident in our goal of achieving greater than $11 billion of sales by 2030.
Rob Davis: Peringt our research efforts, we achieved important clinical and business development milestones this quarter.
Rob Davis: Starting with our clinical advancements in vaccines.
Rob Davis: We presented positive phase 2B3 results for closed roadmap, our investigational monoclonal antibody to the prevention of RSV and infants.
Rob Davis: Based on its differentiated profile and robust credible data, we believe this opportunity is under-appreciated.
Rob Davis: or moving swiftly to make this important prevention option available in the U.S. during the 25-26 RFV season.
Rob Davis: In New York, ACIP voted to expand vaccination recommendations for cat-vacatives to include adults ages 50 to 64.
Rob Davis: We'll please to bring cab access to the effectiveness in protecting against invasive pneumococcal disease to this new cohort of patients and this recommendation reinforces our competence in its blockbuster commercial potential.
Rob Davis: In oncology, it's been ten years since Katrina's first U.S. approval, and we remain highly focused on advancing standard of care and maintaining durable leadership and oncology.
Rob Davis: At Asmo, we presented the overall survival and long-term follow-up data for Katrina. And data also were shared for our innovative ADCs, underscoring our commitment to building a broad and diverse oncology pipeline.
Rob Davis: In infectious diseases, we share phase 2 data from our collaboration with Gillian, for the combination of once weekly or as lots of beer and lannic apivier for HIV treatment and treatment experience adults.
Rob Davis: This data represents just a portion of our broad HIV development efforts to further advance the field.
Rob Davis: In immunology, we share positive phase 2 maintenance data for investigational T01A candidate to Lisa Okibar and also to the colitis and Crohn's disease that adds to positive prior clinical results.
Rob Davis: Both our HIV and immunology programs address patient populations with significant remaining unmet need despite available therapies.
Rob Davis: Our investments in these fair future areas reflect our belief in the opportunity to deliver additional valuations and fortify our sustainable innovation engine for the long term.
Rob Davis: Regarding business development, we continue to leverage our scientific expertise to identify promising therapeutic targets that can further broaden and fortify our pipeline.
Rob Davis: This quarter required a novel investigational bicepsivic T-cellengager from Kiran, but potential applications in both oncology and immunology.
Rob Davis: Complementing our efforts in each of these areas of high-end met need.
Rob Davis: and we close the acquisitions of I-Bio and the Lanko Aquabusness.
Rob Davis: In summary, we remain highly focused on strong commercial and operational execution to enable access to our medicines and vaccines.
Rob Davis: We'll also continue to make strategic investments in our pipeline that work confident we'll lead to important innovations for patients and future growth drivers for our company.
Rob Davis: I want to again recognize the commitment and efforts of our team across the world. Based on our continued progress, I'm more confident in our longer term future today than I was a year ago, and I believe that Mark is even better positioned to deliver value to patients, shareholders, and to all of our stakeholders, long into the future.
Speaker Change: with that, I'll turn the call over to Caroline.
Caroline Litchfield: Thank you Rob, good morning. As Rob highlighted, we delivered another strong quarter. The fundamental of our business remain healthy, fueled by robust global demand throughout innovative portfolios.
Caroline Litchfield: This strong performance reinforces the conviction we have in our science-led strategy and in our outlook for continued growth
Caroline Litchfield: We remain confident in our ability to consistently deliver strong results in the short term while we make disciplined investments in leading edge science, which positions us to generate lasting value for patients, customers and shareholders.
Caroline Litchfield: Now turning to our third quarter results
Caroline Litchfield: Postal Company revenues were $16.7 billion, an increase of 4% or 7% excluding the impacts of foreign exchange.
Caroline Litchfield: The following revenue comments will be on an xx change basis.
Caroline Litchfield: Our Human Health Business sustained its momentum with sales increasing 8% primarily to a combined college E.
Caroline Litchfield: Aranimal Health Business also delivered strong performance, with sales growth of 11%.
Caroline Litchfield: Turning to the performance of our key brands, in oncology, Delta Fk Trude has grew 21% to $7.4 billion.
Caroline Litchfield: Global Gross was driven by increased uptake from earliest stage cancers and continued robust global demand from metastatic indications.
Caroline Litchfield: In the U.S., he true does grew across a broad range of tumulties.
Caroline Litchfield: In the early estate setting, the largest driver was increased use in respectable non-small cell lung cancer.
Caroline Litchfield: He drew this market leadership continues to grow as part of a treatment regimen in the perioperative setting, building on its existing leadership position as adjacent therapy.
Caroline Litchfield: In method static disease, we saw increased uptake in first line advance to your acelial cancer based on keynote A39.
Caroline Litchfield: Getruder Plus had says continues its leadership in new patient starts, outpacing Platinum Chemotherapy based regiments.
Caroline Litchfield: Outside the U.S., Ketude Gross was driven by increased uptake in earlier stage cancers, including high risk, early stage, triple negative breast cancer, as well as continuing demand from patients with metastatic disease.
Caroline Litchfield: Inflation-related pricing crisis, consistent with market practice in Argentina, also contributed to growth
Caroline Litchfield: Limparza Alliance Revenue Group 13% driven by increased global demand, Lenshema Alliance Revenue declined 4%. Due to the timing of shipment last year.
Caroline Litchfield: Wellyreg sells more than doubled to $139 million, driven by increased uptake in certain patients with previously treated advanced renal cell costanoma in the U.S.
Caroline Litchfield: In fact, scenes, guard-assil sales were $2.3 billion, a decrease of 10% driven by a decline in China.
Caroline Litchfield: In the US, South Ben fitted from CDC purchasing patterns, as well as Christ and demand. Outside the US, South increased by double digits in almost every region, driven by robust demand.
Caroline Litchfield: In Umer Cockles, Vex New Vance Sales increased 13%.
Caroline Litchfield: 239 million dollars, driven by ongoing launches in international markets.
Caroline Litchfield: We are also excited by the recent launch of Cap Vexive, which is off to an encouraging start.
Caroline Litchfield: In Cardiophascular, the launch of Windroth Air continues to gain momentum with global sales of $149 million.
Caroline Litchfield: In the U.S., we have seen steady progress in adding new patients. During the quarter, approximately 1,700 new patients received a prescription, bringing the total number of new patient prescriptions, the more than 3,700 since launch.
Caroline Litchfield: Based on our experience today, approximately 80% of those patients will receive commercial products.
Caroline Litchfield: Given this, and the approximate one-month timeframe to complete the steps to commence therapy, more than 2,600 new commercial patients have started treatments in the launch.
Caroline Litchfield: Reassaying physicians prescribed Windrotha to more of their patients and new physicians prescribed the product.
Caroline Litchfield: Through the end of September, nearly 800 physicians have written at least one prescription, with most prescribers coming from either large academic centres or larger private practices.
Caroline Litchfield: Physicians are continuing to prioritize the sickest patients who have already been receiving multiple PAH therapies.
Caroline Litchfield: We are also making important progress in enabling access. We have achieved coverage for approximately 60% of lives, nearly doubling the amount from last quarter.
Caroline Litchfield: Many players have established coverage policies consistent with the label or stellar study criteria
Caroline Litchfield: Outside the U.S., initial feedback from scientific leaders has been positive following the recent EU approval. We are pleased that the first patients in Germany have received a prescription for Wynh Raffat.
Caroline Litchfield: We look forward to securing reimbursement in other European countries, which typically takes 12 months, as well as launching in other international markets.
Caroline Litchfield: In summary, we are excited with the continued progress of the launch and look forward to positively impacting more patients with pulmonary arterial hypertension.
Caroline Litchfield: Our animal health business delivered strong growth, with sales increasing 11%
Caroline Litchfield: Companion Animal Sales Group 17%, Driven by Uptake from New Product Launches, including the long acting of Revector Injectable in Certain International Markets, as well as Price.
Caroline Litchfield: Li stock sales grew 7%, reflecting higher demand for poultry and fine products, the inclusion of sales from the recently acquired Acroport Folio from the Lanko, which closed in mid-July and price.
Speaker Change: I will now walk you through the remainder of our P&L and my comments will be on a non-gap basis
Speaker Change: Gross margin was 80.5% and increased of 3.5 percentage points driven by reduced royalty rates for the true-der and larger sale as well as favorable product mix.
Speaker Change: Operating expenses increased to $8.5 billion, including $2.2 billion of charges related to the acquisition of by-bio and a promising candidate from Cura.
Speaker Change: Excluding these charges, operating expenses grew 9%, reflecting strategic investments in support of our innovative early and late face pipeline and key growth drivers.
Speaker Change: Other income was $193 million, which includes a payment of $170 million from Diichi Sancio related to the collaborations for our tea selling gauge.
Our text rate of 21.9% includes an unfavorable impact from the eye bio and cure on transactions.
Speaker Change: Haken Together, earning for share will $1.57.
Speaker Change: Now turning to our 2024 non-gap guidance, the continued operational strength of our business has enabled us to narrow our full year revenue guidance.
Speaker Change: We now expect revenue to be between 63.6 and 64.1 billion dollars
This guidance range represents strong year-over-year growth of 6-7% including an approximate 3 percentage point negative impact from far-and-exchange using mid-October rates.
Speaker Change: A Gross Martina Sumption Remains Approximately 81%.
Speaker Change: We expect operating expenses to be between 27.8 and 28.3 billion dollars, which now includes the 750 million dollar one time charge related to the asset acquisition from Cura.
Speaker Change: As a reminder, our guidance does not assume additional significant potential business development transactions.
Speaker Change: Other expense is now expected to be approximately $100 million, including the benefit of the $120 million payment from DiYiChief.
Apholia Tech's rate is expected to be between 16 and 17 percent, which includes an unspathable impact related to the cure on transaction.
We assume approximately 2.54 billion shares outstanding.
Speaker Change: Taken Together, we expect EPS of $7.72, the $7.77. This range includes a negative impact from far-and-exchange of approximately 30 cents using mid-Octoq rate.
Recall our prior guidance range was $7.94 to $8.4
including the one-time charge of $750 million or 29 cents per share related to the asset acquisition from Kioron.
Speaker Change: and the 170 million dollars or five cent per share benefit from the payment from Diichi, a prior guidance range would have been $770 to $780 with a midpoint of $775.
Speaker Change: Therefore, our current guidance midpoint is unchanged.
Now, turning to capital allocation, where our strategy remains the same. We will prioritize investments in our business to drive near and long-term growth.
We will continue to invest in our key growth drivers and expansive pipeline of novel candidates, each of which has significant potential to address important unmett medical needs.
Speaker Change: We remain committed to our dividend with the goal of continuing to increase it over time.
Speaker Change: Adding compelling science through business development remains a priority and we are well positioned to pursue additional value enhancing transactions.
Speaker Change: We will continue to execute a modest level of sharing purchase.
To conclude, as we finish the year, we are confident in the momentum of our business, underpins by robust global demand for our innovative medicines and vaccines.
Our unwavering dedication to leverage compelling science, to save and improve the lives of the patients we serve, as put us in a position of financial and operational strengths.
Our commitment to bring forward important innovation will enable us to deliver value to patients, customers and shareholders well into the future. With that, I'd now like to turn the call over to Dean.
Thank you, Caroline. We have continued to execute on our strategy of diversifying in oncology and expanding into new therapeutic areas while also investing in novel modalities and technologies.
The third quarter was marked by several important clinical and regulatory milestones.
I will first cover infectious diseases, nan oncology and conclude with updates on the broader portfolio.
As Rob noted, last week ACIP voted to update the adult age-based Umer Carco vaccination guidelines, and recommend the use of cab-axis, or 21-valent Umer Carco conjugate vaccine for individuals, 50 years and older.
Speaker Change: Cadacet
Speaker Change: is specifically designed to cover stereotypes responsible for the majority.
of invasive NUMAL COCO disease and includes stereotypes responsible for approximately 84% of cases of IPD in adult 50 and older based on national level CDC data from 2018 to 2022.
Building on our company's proud legacy and infectious diseases.
Speaker Change: E-mail findings from a pivotal Phase 2B slash 3
Linnacle trial evaluating, Pleasured Robin Mab, and the next episode of The End of the World War II.
Our Investigation of Respire at Ourson Social Virus, preventative monoclonal antibody for the protection of infants entering their first R-SV season, were presented at ID Week.
Pleasure Obama, administered as a single dose immunization to healthy preterm and full-term infants, regardless of weight, met all trial and points with consistent results through both five months and six months time points.
The Incidence of Adverse Events and Series AEs were comparable between treatment and placebo groups with no treatment or RSV related death.
and Shown in the summary tables in the data press release.
Speaker Change: Has RoboMap Immunization is being studied across mild, moderate, and severe RSV disease and points.
Importantly, Chris Roblemab, significantly reduced the incidence of R-SV, the primary endpoint, and hospitalizations associated with R-SV infections through five months by more than 84% the secondary endpoint.
Speaker Change: It was also observed that Chris Roblemab reduced R-speed lower respiratory infections by more than 90% through 5 months, the tertiary endpoint.
Speaker Change: Audit of Results, we're also presented from an interim analysis in a separate phase of study, evaluating the safety and efficacy of Cuis RoboMab versus PalazzoMab in infants and children at increased risk for severe RSV disease.
Speaker Change: If approved, Clas Robimab will be the first and only immunization designed to provide infants with direct rapid and durable protection for the full six months R's V season with the convenience of one dose regardless of weight for month of birth.
Speaker Change: Also at ID Week, Posit Data were presented from the Phase 2 study of the combination of his launch of the Atlantic Apothecary, Gillijage HIV1, Capsid, inhibitor.
Speaker Change: As a once weekly oral treatment option for people living with HIV, the 48 week result, built on the positive 24 week data previously presented.
Speaker Change: These findings reinforce the strength of our HIV pipeline as we evaluate both of them promising candidates in preventative and treatment settings.
Speaker Change: Next, Philan College.
Katrina continues to raise the bar in treating earlier stages of disease.
Speaker Change: In the earlier stage setting, Katruda is the only PD1 or PDL1 today to receive FDA provost for nine indications and is the only one to demonstrate a significant overall survival benefit in four earlier stage settings.
Nonsmothel Lung Cancer, Reno Cell Carsonoma, Cerrochal Cancer, and Triple Negative Breast Cancer.
and as Caroline spoke to, we continue to see strong patient impacts.
Contrude of Base Regiment have demonstrated positive results across 13 pivotal trials in eight tumor types. We look forward to building on the data in the earlier stage setting.
We recently announced positive top line results for the keynote 689 trial, evaluating Katrina as a period-operative treatment for patients newly diagnosed with stage 3 or 4A, recited locally advanced head-in-next Wayne Missile, Carson Elma.
The trial met its primary endpoint of event free survival and demonstrated an improvement in major pathological response.
Speaker Change: A Q Secondary Endpoint.
Speaker Change: This is the first
Positive Trial to show a statistically significant benefit of Neo-Ajjvint, plus Ag event, Anti-PD1 treatment for newly diagnosed patients with resected, locally advanced, had a neck, squamous cell, carcinoma in 20 years.
Speaker Change: Results will be submitted to regulatory authorities and if approved would mark the tenth indication of a
On the regulatory front, we received FDA approval for extruder and combination with Pometruxa and Platinum chemotherapy for the first line treatment of adult patients with unrespected vote advanced or metastatic malignant plural Mesotheliooma based on results from the keynote 483 study.
Speaker Change: This brings the number of distinct FDA-approved indications for Katrina to 41.
Speaker Change: European Commission approved three-c捕-a-based regiments which include
Speaker Change: In combination with Pfizer's Patsup, a Nectin IV targeting antibody drug conjugate for the first line treatment of adult patients with unresectable or metastatic urethelial carcinoma based on the keynote A39 study.
In combination with Carve Platten and Paxot Paxot Taxo for the first line treatment of primary advanced or recurrent and a metronocarsanoma.
Speaker Change: Anne, [inaudible]
and combination with chemo-radio therapy.
for the treatment of Figo 2014 stage 3-4A locally advanced cervical cancer in adult who have not received prior definitive therapy based on keynote 8-6-8.
Contruder was also approved by the Japanese Ministry of Health for three indications.
In combination with Pfizer's Patsup, a Necton 4 targeting antibody drug conjugate, for the first line treatment of adult patients with radically unrespected about your ethereal carcinoma based on the keynote A39 study.
For patients with radically unresectable, yourethelial carcinoma who are not eligible for any platinum-containing chemotherapy.
Jason Keynote, O5-2
as well as in combination with chemotherapy as Neal Ag event treatment, then continued as Monotherapy as an Ag event therapy for patients with non-small cell lung cancer based on findings from Keynote 671.
At the European Society for Medical and College of Congress, three presentations for Katrina were showcased during presidential symposium sessions.
These include over-off survival data from the keynote 522 trial in high-risk early stage triple negative breast cancer
Overall survival data from the keynote A18 trial, in patients with newly diagnosed high-risk, locally advanced cervical cancer.
and 10-year follow-up over-all survival data from the keynote 006 trial, showing the long-term benefit over at the LumaMab in patients with advanced melanoma.
Speaker Change: And finally in oncology, we continue to advance our increasingly diverse pipeline, including our efforts to evaluate the potential of new combination regiments to improve patient outcomes.
Earlier this month, we announced a clinical development collaboration with X-Alexis for their investigation on Tyrosine, Kiney's inhibitor, Zantel Lidonette, which will be evaluated in combination with
Speaker Change: Katrina for the treatment of patients with head and neck, squamous cell carcinoma, and with, well-a-reg, for the treatment of patients with renal cell carcinoma.
In collaboration with Daiti Sankil, we initiated ID-8-long O2-a-phase 3-trial evaluating a finnith map, the Rucks to Can, a B-7-H-3 directed antibody drug conjugate for the treatment of patients with a relaxed, Malsail Long Cancer.
Speaker Change: We also expanded our agreement to evaluate the combination of IDXD with MK6070, an investigation of Delta-like ligand-3 targeting T-celline Dager.
Evidence from Clinical Studies for each candidate provides strong rationale for evaluating this combination regiment.
Next to our broader portfolio. As Caroline mentioned, we were pleased to receive approval from the European Commission for Windrub beer, expanding the reach of this treatment option, which we believe has a potential to transform the treatment journey for patients suffering from pulmonary arterial hypertension.
In immunology, 50 week efficacy and safety data for two-league, so key bars are investigation or humanized monoclonal antibody directed to tumor necrosis factor like cytokine 1A.
Speaker Change: from the Phase 2 Artemis UC and Apollo CD studies in ulcerative colitis and Crohn's disease were presented at the United European Gastroenterology Week Congress.
The results reinforce the potential of Tuli Soke Park to help patients achieve long-term clinical remission. The Phase Retrials continue to actively enroll patients.
Speaker Change: Finally, an ophthalmology soon after completing our acquisition of I-Bile.
We initiated the Phase 2B-3 Brunella trial for MK 3000 in Investigation on Tetravalent, Tricepus of the Canterbody that acts as an agonist of the wingless related integration site signaling pathway.
Being evaluated for the treatment of diabetic macular edema.
We are executing on a one pipeline approach, augmenting and complementing our internal programs through business development.
Recently, we completed the acquisition of CN201, a novel C-D-3 CD-19 T-Selengager now known as MK1045 from Kira and Biofarmaceutical.
MK1045 has shown to significantly deplete B-cell levels with potential applications in B-cell malignancies and autoimmune diseases.
As with our previous acquisitions, we plan to seamlessly advance clinical development with rigor and speed.
In closing, during the quarter, we saw a regular cadence of late-phase pipeline advancements, including regulatory milestones and data readouts. We continue to make progress across therapeutic areas, and I look forward to providing further updates on our programs in 2025.
Speaker Change: And now, I turn the call back to Peter.
Thank you Dean. Surely we're now ready for Q&A. If the analysts today could limit themselves to one question it would be appreciated so we can get as many analysts on the call as possible. Thank you very much.
Speaker Change: Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. You may withdraw your question by pressing star 2. If you're using a speakerphone, please pick up the handset before pressing the numbers.
Once again, if you have a question, you may press star 1. And one moment, please, for our first question.
Our first question comes from Trung Huynh with UBS. Your line is open. You may ask your question.
Thanks for taking my question. Just on Gardasil, given the inventory levels remain elevated, you've noted this declining demand. How should we think about dynamics as we head into 2025 given that increase in promotional activity, but that's balanced by the inventory work down?
Will you take time, or do you have any colour on when we'll see an inflection to that returning growth? Thank you.
Great. Thanks for the question. You know, obviously, we're very focused on Gardasil and China, but maybe just to step back for a second, we continue to be very proud of the contribution that Gardasil is making for patients and people around the world to really address
and hopefully eliminate long-term cervical cancer as well as other HPV-related cancers. So that important work will continue. And importantly, as we commented in our prepared remarks,
Speaker Change: While China did decline, and I'll speak to China in a second, overall, we saw strong double-digit growth in really nearly every other region around the world, which is showing the progress we're making, and which is why we continue to have such confidence in the long-term potential for this. But as it relates to China specifically...
And as we think about 2025, I don't want to give specific guidance because obviously we're still working through our 2025 plan, but what I would say...
Speaker Change: And as we had highlighted before, this is happening a little bit earlier than we originally expected, but we had always expected that over time, as we worked through the bolus, we would see the female opportunity decline, and then hopefully seeing growth come with bringing the male opportunity, which we would expect to see with approval.
Assuming it comes next year. So that's how we see it progressing. So as we think about 2025, we see China really in the $2 to $3 billion range as far as an opportunity for 2025 and for the next several years.
with the opportunity and mails.
really being the growth driver. And at that level,
We would expect, for overall Merck, that you're going to continue to see, based on the portfolio we have, solid growth. So, I think that's...
Just important to kind of frame where we're seeing things, but understanding we're focused on this, we're bringing our efforts to drive demand, and we're going to make progress. We are making progress, but it's going to take some time.
Great. Thanks, Trung. Next question, please, Shirley.
Thank you. Our next question comes from Vamil Dvan with Guggenheim Securities. Your line is open. You may ask your question.
Hi, good morning. This is Edward Antrovamo from Guggenheim. Just on WinRevere, what are you seeing in terms of safety since it's been rolled out commercially? Any sense of how many patients are on the low dose versus the high dose? And then an estimate of what percent of patients need to have their dose reduced or stopped due to the safety issues? Thank you.
Yeah, I'll maybe let Dean start. From the safety issue, we haven't had any profound or important signals at all in relationship to the patients.
Speaker Change: that we've been serving. So that has not been an issue.
to date in the patients that have gotten Wimber Bear.
but more broadly. Yeah, so, you know, just to give you a sense of what we're seeing in the marketplaces, we said in the prepared comments, we are seeing the sickest patients being predominantly about 80% of the patients we have today. So those would be people on triple therapy. And as we're looking at...
Speaker Change: as we're still bringing a lot of people on to therapy. Remember that when a patient starts therapy, they start on a single vial, and then they would transition either to maintaining on single or going to double, depending on their weight over time. So we expect to see, as we saw with Stellar,
Speaker Change: That you would end up with about two-thirds
Speaker Change: of patients would be on the single vial and about one-third of patients on the double vial. Right now there's a little bit more skewed towards single but we expect it still to get there over time. And importantly on your broader question Dean gave one sense about where we see safety. I think the best real-world statement around safety, we're seeing very strong adherence and really seeing less discontinuations.
Than we expected so the anecdotal information we're getting from the marketplace as far as the real world experience I would say is said that safety is not an issue
Speaker Change: Great. Shirley, next question please.
Thank you. Our next question comes from Louise Chen with Cantor. You may ask your question. Hi. Thanks for taking my question. I wanted to ask you about your outlook for 2025, what the major puts and takes are, and when do you plan to get that guidance? Thank you.
Yeah, I'll turn it over to Caroline for that.
So Louise, we plan to give our guidance with the fourth quarter earnings as we ordinarily do, but if I give you a sense of the overall pushes and pulls.
If I start with 2024, it's been a really strong year for our company. As we've noticed, we expect to deliver 6 to 7% growth.
While we're investing in and really driving our pipeline and have delivered strong underlying operating margin improvement, as we look to 2025, we expect solid growth for our business.
Speaker Change: And the key opportunities that we have is the continued impact for Keytruda, especially in earlier stage cancers, but the tumor types we would call out would be early stage non-small cell lung cancer. We've got great opportunity in women's cancers, including early stage triple negative breast.
but also endometrial and cervical cancer, and of course bladder cancer is a real opportunity for growth.
We are confident where we are with Welligregg and the opportunities there to continue to see strong performance and impact for patients. And of course we have the recent and upcoming launches. That includes WinRiver, where we have high expectations for growth.
It includes cap faxes, where we expect to get a majority share over time, and it also includes the opportunity for the launch of Cles Rovamab in RSV ahead of the 25-26 season.
And as we noted, animal health is a strong contributor to growth, and we expect that to continue into next year.
We have a few headwinds. One is the expiration of our agreement with J&J for the immunology products Remicade and Symphony. And as Rob noted, we do expect sales of Gardasil in China to decline in 2025 compared with 2024.
However, all of that said, we're very confident in the opportunity to drive solid growth for our business in 2025 while we invest.
Fully behind our expansive pipeline, investing the commercial activities to ensure excellence in the marketplace and expect to deliver operating margin expansion.
Thanks, Louise. Next question, please.
Speaker Change: Thank you. Our next question comes from Chris Shibutani with Goldman Sachs. Your line is open. You may ask your question.
Chris Shibutani: Thank you very much. The capital allocation opportunity is something that you have been very consistent about providing us updates. Given some of the push-pulls in the business, in particular vulnerability with Gardasil, I think you have capacity and you have also mentioned interest in certain areas, I would note, with obesity. Can you update us on where you are with your appetite, scale, therapeutic area, anything that would give us insight into your ability to use that as a lever to help perhaps offset some of this uncertainty tied to Gardasil? Thank you.
Speaker Change: Yeah, no, Chris, thanks for the question. You know, obviously, I feel very good about the business development we've done, including some of the transactions that Dean just highlighted in the prepared remarks.
Speaker Change: And we're going to continue to look to do more. So while we feel good about where we are, and actually, as I made a comment in the prepared remarks,
You know, we have more Phase III assets now than we had, we've more than tripled it from where we were three years ago, and with more than 20. So we have a lot there, but we need to add more, and we're looking across all therapeutic areas. Our approach remains where it's always been, which is we start with the science.
and where we see a scientific opportunity that addresses an unmet need.
Speaker Change: and where we think Merck can strategically play, if we see that aligned with value, we will act.
Speaker Change: As it relates to obesity, our goal and strategy there continues to be focusing on the second and third generation opportunities in that space. We've talked in the past.
Speaker Change: Thinking more of a focus on oral opportunities.
And those can be, in combination, focused on outcomes that go beyond just obesity but to actually medical outcomes. So we continue to look, but we're going to be disciplined, and if we don't see something where we think it makes sense from a value perspective and a strategy, we won't move. Beyond that, I would say you should continue to see us look in areas of oncology.
All the places where we're playing today are areas where we continue to look for opportunities down the road. From a capacity perspective, just to be clear, we continue to think we have capacity, frankly, to do pretty much anything of any size, but our focus area continues to be mainly in that $1 to $15 billion range.
Great. Thanks, Chris. Next question, please.
Speaker Change: Thank you. And this question comes from Daina Graybosch with Lee Rank Partners. Your line is open.
Yeah, can you talk a little bit more about the pneumococcal opportunity? What do you think is the incremental market size from the expansion down to age 50?
Speaker Change: And is there anything you're looking for in the MMWR language when they publish that recommendation that would drive more or less share to Cabaxi versus the competitors?
Yeah, maybe Dean, you want to start and we can jump in? Yeah, I mean, I think it was interesting to watch the ACIP, their balancing.
how to make the best recommendations.
And we should just remember, we have a 21-valent vaccine that gives 85% adult protection. That was very clear. And there is a competitor who has a 20-valent that has a 54%.
adult protection and I think that was very clear at the ACIP and I would just remind myself that previously when they thought about doing
Speaker Change: the 50 to 64 just with the 20 valent there was a decision not to proceed and I really do think that health economic data
Speaker Change: and the data that we showed for the 21 valent.
equity issues in relationship to a pneumococcal vaccination by lowering it to 50 to 64 and lowering it for everyone.
Speaker Change: But in terms of the dynamics in the market
Speaker Change: So in terms of the commercial opportunity we have, given the strength of the data that Dean has just shared, we feel very confident in our opportunity. And to remind in terms of the number of patients in the United States, there's around 120 million people over the age of 50.
Sixty million of those are in the 50 to 64.
Age group, which now, given the ACIP recommendation, provides a tremendous opportunity for us.
Speaker Change: to activate that patient cohort to go and get this vaccine, as well as the group that sit above the age of 65, given the strength of our data. So we are ready, we have supply, and we're looking forward to ensuring that we can protect as many people as possible.
Great. Thanks, Daina. Next question, please, Shirley.
Shirley: Thank you. And if a question comes from Chris Schott with J.P. Morgan, you may ask your question.
Chris Schott: Great, thanks very much. Just another one on Gardasil. Rob, I believe you said kind of a $2-3 billion per year opportunity for China over the next few years. Just a couple of quick ones there. First, what does that compare to where China is going to shake out from Merck this year?
And is that $2 to $3 billion number what was reflected in the $11 billion longer-term target? Thanks so much.
Yeah, so to give you just a sense of where we are, and we don't normally give product level guidance or specifics on a quarterly basis, but given the importance and focus on Gardasil, just to give you a sense of where we were with China, Gardasil, in the third quarter, it's about approximately $500 million
in the third quarter, and as we said, we would expect to ship about the same amount.
in the fourth quarter, so you should expect that the fourth quarter itself would also be in that $500 million range.
Chris Schott: And so that kind of gives you a sense of...
Chris Schott: of where we are, so as you look forward to 2025,
Chris Schott: Obviously, as we think in 2025 and over the next several years...
If you're running in that two to three billion dollar range.
That's why we made the comment that with that, and given the other opportunities we see around the world,
We remain confident in our ability to get to the $11 billion.
And the contribution that it would make to get us to where we need, understanding also that long term, we do expect to be able to have the potential for growth driven by the male opportunity in China and then obviously continuing to thrive more broadly around the rest of the world.
Great. Thanks, Chris. Next question, please.
Speaker Change: Thank you. And this question comes from Terence Flynn with Morgan Stanley. You may ask your question.
Great. Thanks so much. Maybe just one question and one
The Gardasil side, Rob, that's the $2 to $3 billion includes the males or it does not include the males? Sorry, it was a little unclear based on the last response. And then, obviously, next-gen I.O. remains a big focus for both Merck and the industry. I know, Dean, you talked a lot about some of the efforts Merck has made on this front. We'd just be curious to get your perspective on the PD-1, PD-L1 VEGF by specifics. Obviously, there's some data emerging out of China there. Just, you know, any thoughts on that data and where that might fit from a competitive landscape perspective or if that's a target Merck has considered at all? Thank you.
Yeah, so I'll take the first part of that question, Terence. So the answer is yes, the two to three billion dollars over the next several years does include mail, but we have the opportunity as you look longer term to drive growth with that opportunity. That was really the point we were trying to make.
In relation to your question in relationship to the vascular endothelial growth factor pathway,
There's been a lot of data in that. It's not just the most recent data.
Speaker Change: You know, Merck has made a substantial investment in that pathway. Our collaborations with ACI and Exalexis is along that pathway. It's PD-1, in this case with the VEGF RTK inhibitors. Other companies have taken their PD-L1 and added to, for example, Avastin. And I would just emphasize our interest in HIF-2-alpha is also related to vascular endothelial growth factor.
In relationship to the specific question about Summit, that deep expertise that has developed in that VEGF, I think it's really important for all of us to watch carefully, and we are watching carefully, the ability to turn PFS into OS.
The other issue is that in China the health system is a little bit different as to how they
They treat individuals, but also the patients here are also different in terms of their response to AdministraVegF.
I would also emphasize that the experiment that was done in China is an experiment that we would be unable to do, for example, in the United States. We would not be able to compare a new combo against Keytruda monotherapy in the PD-L1 1-49% PD-L1. That's something that we would not be able to do because in that situation, the comparator is not monotherapy, but it's 189, you know, 189.
Speaker Change: But, broadly speaking...
Speaker Change: Combos will be important. Combos to deepen it, to go earlier stage will be important. I think vascular endothelial growth factor pathways are important. INT will be important. RAS will be important. ADCs will be important. And all of those readouts will come some before 2028, some around 2028, and some will happen after 2028.
Speaker Change: Great. Thanks, Terence. Next question, please, Shirley.
Thank you. Our next question comes from Carter Gould with Barclays. Your line is open.
Good morning. Thanks for taking the question. I appreciate all the Gardasil color. Maybe on Wynn-Rivera, can you comment on the impact of stocking in the quarter? And I'm trying to also kind of square, Rob, some of your comments around sort of, you know, the efforts to work through the sickest patients, kind of maybe help.
Speaker Change: frame for us how far you're along that initial bolus of patients, those later line patients within the stellar label.
So Carter, in the quarter, over 80% of the revenue is to support demand.
And so a very small level of inventory build, and we'd expect inventory dollars to build over time, given the growth that we expect in the product.
In terms of the patients that are being prescribed the product,
As Rob noted, a large portion, it's actually about 80% of the patients, are on background triple therapy or in combination with the prostacyclin. So we're making really good progress in that segment. At the same time, a large number of the physicians have prescribed Winn-Revere now to patients that are not on a prostacyclin background therapy, which gives us confidence for the ability to move to the patients who are more dual therapy over time. And we remain confident in the opportunity in line with our high expectations here to benefit patients and to drive significant commercial benefit for our company.
Thanks, Carter. Next question, please, Shirley. Thank you. And next question comes from Umer Raffat with Evercore ISI. You may ask your question.
Hi guys, thanks for taking my question. I wanted to focus on Garfield just a little more.
Umer Raffat: That was very helpful commentary, Rob. You mentioned 500 million in sales in 3Q and 4Q to China, which obviously is 2 billion run rate. My question is, was that shipping to demand?
because if so what that means is
Inventory sitting at your feet is still something that would need to be worked down in 2025, as well as possible nine-valent local competition entry in 2025 as well. How do you factor those two dynamics into thinking about the 2025 number of 2 to 3 billion China?
Yeah, so if you look at what's happening in the overall marketplace, and just to give you a sense
From an inventory perspective, maybe starting there, if you look at overall inventory levels in China,
Umer Raffat: They did come down, and that's taking into account, and this is for Gardasil. Gardasil at GERFA, which frankly remains high and grew slightly.
But that was more than offset by reductions in the CDCs and the points of vaccination. So that's a good sign that we're seeing overall inventories coming down, which also would point to the fact that...
Umer Raffat: As we're looking at demand, which we're seeing stabilize.
We think we're at a position now where as we're starting to talk about what we're shipping, our expectation is we are shipping below demand. So we have been working very constructively.
Umer Raffat: with JERFAE.
to think about this, both as what we're doing this year as frankly, as well as we're continuing to have constructive dialogue around 2025. Our intention would be to balance the need to get product into the marketplace to meet the demand.
Both the female competitive launch that could come next year, but also the opportunity that a male approval early next year could allow us to have. So all of those factors are in as we think about that $2 to $3 billion number.
Great. Thanks, Umer. Perhaps two more questions.
Thank you and this question comes from Steve Scala with TD Cowan, let me ask your question.
Thank you very much. I mean, all things considered, is it still possible to see global Gardasil growth in 2025? And Rob, you've you noted at the start that recovery in China will take time, but it sounds like you have good visibility now because you're giving this two to three billion dollar guidance for Gardasil in China. So I'm unclear what it is that we're waiting for. Thank you.
Well, what we're talking about taking time is basically to work down the inventory and to then build demand over time so that we can continue to drive that market. What we're giving you is kind of what we see as the baseline of China. Our hope
is that we'll do better and we're going to put the work in to do better and to continue to drive long-term. I think that what I'm trying to make sure everyone hears is this isn't going to be solved next quarter.
It's going to take us through probably 2025, but we're thoughtful in how we're doing it. We're working with JIRFA in a constructive manner to do it. So those are the elements that are going to take time, because we need to build the demand. We know the opportunity is there with 120 million females still out there to go after, and with potentially 200 million males with the male opportunity. We have to activate that demand to make sure we can drive that business. So that's really what we're focusing on. As far as it relates to Gardasil for 2025, I don't think we really want to get into giving product line guidance right now. We were very specific to China because of the concerns that were there, and I wanted to make sure you know that we see solid overall growth for Merck.
Because that's important to have context, but beyond that we normally wouldn't be giving guidance at this point in time.
Speaker Change: Great. Thanks, Steve. Last question, please, Shirley.
Thank you. And that comes from Mohit Bansal with Wells Fargo. You may ask your question.
Mohit Bansal: Great. Thank you very much for taking my question. My question is regarding V940 in lung cancer. I see that you have started Phase III trials. Could you please help us understand
what kind of data you have seen in earlier stages which makes you move into phase three. I don't think we have seen a lot of data from our side here. Thank you.
I would just emphasize, and I was trying to sort of lay the foundation
Speaker Change: recognize that in earlier stage we have nine approvals and four with OS. That basis allows us to drive curative setting combos in a way that is that is advantageous for the patient and also often uniquely an ability for us.
And the specific study that you're, I think, referring to is the announcement with our partners Moderna of going in lung cancer. Specifically that one is built around Keynote 671, which has an OS benefit and is approved.
But the interesting thing is in the sort of neoadjuvant or perioperative followed by surgery, there becomes a situation where we can discern who has a pathological complete response.
and who doesn't have a pathological complete response.
and that patient population that does not have a pathological complete response.
There is the need and our ability to provide other combinations in that space, and that is where we're driving the INT in that situation in lung cancer.
Great. Thanks, Mohit, and thank you all for your good questions today. And as always, we're available for follow-ups. Please reach out when you want. Take care. Thank you very much.
Speaker Change: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your line at this time.