Q4 2024 Merck & Co Inc Earnings Call
Speaker Change: Thank you for standing by. Welcome to the Merck and Company Q4 sales and earnings conference call. At this time, all participants are in a listen-only mode until the question-and-answer session of today's conference.
Speaker Change: At that time, to ask a question, press star 1 on your phone and record your name at the prompt. This call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. Peter Dannenbaum, Senior Vice President, Investor Relations. Sir, you may begin.
Peter Dannenbaum: Thank you, Shirley, and good morning, everyone. Welcome to Merck's fourth quarter 2024 conference call.
Rob Davis: Speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee, President of Merck Research Labs.
Peter Dannenbaum: Before we get started, I'd like to point out that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items that we have excluded from our non-GAAP 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 the U.S. Private Securities Litigation Reform Act of 1995. Such statements are made based on the current beliefs of Merck's management and are subject to significant risks and uncertainties.
Peter Dannenbaum: If our underlying assumptions prove inaccurate or an uncertainty materializes, actual results may differ materially from those set forth in the forward-looking statements.
Peter Dannenbaum: Our SEC filings, including Item 1A in the 2023 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.
Peter Dannenbaum: During today's call a slide presentation will accompany our speakers prepared remarks. These slides along with the earnings release, today's prepared remarks, and our SEC filings are all posted to the investor relations 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: 2024 was another year of significant advancement across our company, and I'm proud of the continued progress we're making in developing and delivering transformative medicines and vaccines to help save and improve lives around the world.
Rob Davis: We are impacting patients on a global scale. In fact, in 2024, we reached nearly half a billion people with our medicines and vaccines, including through donations.
Rob Davis: We remain focused on the pursuit of breakthrough science and innovation as the source of sustainable long-term value creation for patients and shareholders.
We're continuing to execute on our strategic priorities.
Rob Davis: We're progressing our pipeline, launching important new products that have significant patient benefit and strong commercial potential, advancing key clinical programs in our robust early and late phase pipeline.
and augmenting our pipeline through promising business development.
Rob Davis: Our business remains well positioned thanks to the dedication of our talented global team and I'm more confident than ever in our ability to advance patient care fueling Merck's long-term growth potential.
Now, turning to our results and outlook.
Rob Davis: We delivered strong growth in 2024, reflecting demand for our innovative portfolio, including for Keytruda, which continues to benefit more patients with cancer globally.
Rob Davis: We also saw higher demand and achieved strong sales for Gardasil outside of China.
Rob Davis: As we close out 2024 and enter 2025, the market dynamics, regardless though in China, have remained challenging.
Rob Davis: Like many other companies, we've seen increased pressure on discretionary consumer spending, including across the vaccine space more broadly, and demand for Gardasil has not recovered to the level we had expected.
Rob Davis: As a result, overall channel inventory remains elevated at above normal levels.
Rob Davis: In light of this, and based on further discussions with our commercialization partner, Gerpay, over the past couple of weeks, in particular regarding their most recent financial disclosure and working capital levels,
Rob Davis: We've made the decision to take a new approach and temporarily pause shipments to China beginning this month and through at least mid-year.
Rob Davis: We believe taking this action now will facilitate a more rapid reduction of inventory and help support the financial position of our important and valued partner.
Rob Davis: Importantly, we believe China still represents a significant long-term opportunity for Gardasil given the large number of females and now males with our recent approval that are not yet immunized.
Rob Davis: And we remain both committed and well-positioned to maximize this potential for the long term.
Rob Davis: Outside of China, demand for Gardasil remains robust, and we expect strong growth this year and well into the future.
Rob Davis: Our overall business remains very healthy. In fact, irrespective of the performance of Gardasil in China, we expect the company to deliver strong growth in the second half of this year, as well as in both 2026 and 2027.
Rob Davis: Longer term, our confidence and our ability to successfully navigate the Katrina LOE period is unchanged.
Rob Davis: which is based on the strength of our pipeline, the excitement we have for our ongoing and upcoming launches of innovative new products, and the commercial opportunity they represent.
Next, I'd like to turn to our research efforts.
Rob Davis: We're making remarkable progress across multiple therapeutic areas in our late phase pipeline.
Rob Davis: In the fourth quarter, we announced FDA acceptance for our filing of Clesrobimab, our long-acting monoclonal antibody, to protect infants from RSV disease.
Rob Davis: and positive top-line results from three programs, including for subcutaneous prembolizumab, for zlatrivir in combination with darabarine in the treatment of HIV, and for WinRiver from the Zenith trial.
Rob Davis: We also executed value-enhancing business development that is both science-led and portfolio-informed.
Rob Davis: We license promising investigational assets, including in oncology, with a clinical-stage anti-PD-1 VEGF bispecific antibody from Lenova, and in cardiometabolic, with an oral GLP-1 receptor agonist candidate from Hanso.
Rob Davis: Merck is anchored today by a robust set of commercial products addressing important medical needs and we're rapidly moving to a future with a much more diversified portfolio.
Rob Davis: We have amassed an expansive pipeline with tremendous potential to further advance the practice of medicine around the world.
Rob Davis: You can expect a steady cadence of data readouts in the coming months and years, leading to potential new launches as we seek to bring much-needed innovation to patients.
Rob Davis: In fact, we have 20 potential new growth drivers, almost all of which have blockbuster opportunity.
Rob Davis: These include Lynne Revere and CABVAXIV, our adult pneumococcal conjugate vaccine, which is now launching in the U.S., as well as many innovative assets currently in Phase III development.
Rob Davis: Over the past three years, we have nearly tripled the number of assets in late phase development across a broad range of therapeutic areas and modalities.
Rob Davis: We are positioned for long-term leadership in oncology as we continue to diversify and deepen our pipeline.
Rob Davis: We are excited about cardiometabolic as a future area of growth, including with our oral PCSK9 inhibitor program, where we have important phase 3 readouts this year.
in Immunology, HIV, and Ophthalmology.
Rob Davis: We have opportunities to bring forward first-in-class and or best-in-class blockbuster medicines.
Rob Davis: Further, we expect to benefit from promising programs in our infectious disease and vaccines pipeline.
strong growth in our animal health business.
Rob Davis: and many early phase programs that will enter phase two over the next few years.
Rob Davis: And we remain well-positioned to pursue additional science-driven, value-creating business development.
In summary, I have increased confidence in our long-term future.
Rob Davis: While the rapid change in the Chinese market for Gardasil has caused a short-term headwind for our company, our overall business is healthy and growing.
Rob Davis: We remain strongly positioned to successfully navigate the Katrina LOE period as we continue to deliver on our purpose of saving and improving lives.
Rob Davis: I want to again recognize the commitment and efforts of our global teams.
Rob Davis: Together, we remain focused on delivering and sustaining value for patients, shareholders, and for all of our stakeholders today and well into the future. With that, I'll turn the call over to Caroline.
Caroline: Growth was driven by oncology, animal health, and new product launches, which more than upset the Gardasil headwinds in China.
Caroline: These results demonstrate the strength of our business and give us confidence in our outlook.
Caroline: Our commercial and operational execution enables us to deliver value in the short term while we invest in new innovations and deliver our pipeline for the long term.
Now turning to our fourth quarter results.
Caroline: Total company revenues were $15.6 billion, an increase of 7%, or 9% excluding the impact of foreign exchange.
The following revenue comments will be on an ex-exchange basis.
Caroline: Our human health business sustained its momentum, with sales increasing 8%, driven primarily by oncology.
Turning to the performance of our key brands.
Caroline: In oncology, cells of Keytruda grew 21% for $7.8 billion, driven by continued robust global demand from metastatic indications and increased uptake from earlier stage cancers.
In the U.S., Keytruda grew across all key tumor types.
Caroline: In metastatic disease, we saw increased uptake for Keytruda in combination with PADCEF in first-line, locally-advanced urothelial cancer, supported by the strong results from Keynote A39.
Caroline: as well as Keytruda in combination with chemotherapy in first-line endometrial cancer based on the compelling data from Keynote 868.
Caroline: In the earlier stage setting, growth was driven by increased use in receptable non-small cell lung cancer, as well as triple negative breast cancer.
Caroline: Outside the U.S., growth was driven by increased uptake in earlier-stage cancers, including high-risk, early-stage, triple-negative breast cancer, as well as continued demand in metastatic disease.
Caroline: Inflation-related price increases, consistent with market practice in Argentina, also contributed to growth.
Caroline: Our broader oncology portfolio achieved strong growth, including Wellireg, with sales more than doubling to $160 million, driven by increased uptake in certain patients with previously treated advanced renal cell carcinoma in the U.S.
Caroline: In vaccines, Gardasil sales were $1.6 billion, a decrease of 18% due to lower demand in China.
Caroline: In the U.S., sales benefited from price and demand, partially offset by CDC purchasing patterns.
Caroline: Outside the U.S. and China, double-digit sales growth was driven by higher overall demand, including the catch-up cohort in Japan.
Caroline: In New Macau, capvaxib cells were $50 million, driven by demand from the Retail Pharmacy Channel.
Caroline: We have made great progress in achieving the commercial milestones necessary to ensure a successful launch, and are well positioned to help protect adults from invasive pneumococcal disease.
Caroline: Vax Nuvance sales decreased 9% as growth from launches in international markets was more than offset by competitive pressures in the U.S.
Caroline: In cardiovascular, we are seeing steady growth from the ongoing launch of Winn-River, which contributed $200 million of sales, predominantly in the U.S., where we saw some impact to prescription volumes due to the holiday season.
Caroline: Approximately 1,500 new patients in the U.S. received a prescription, bringing the total number of new patients prescribed to approximately 5,200 since launch.
Caroline: Access remains strong and our experience continues to indicate that approximately 80% of those patients who receive a prescription will receive commercial product.
Caroline: Notably, we continue to see the vast majority of patients remain on treatment.
Caroline: The breadth of physicians and depth at which they prescribe continues to grow. We are also seeing an increase in the percentage of prescriptions for patients not on prostacycline background therapy.
Outside the U.S., initial launches are progressing well.
Caroline: In summary, we remain confident in our growth expectations for Wynne-Rivera as we look forward to positively impacting more patients with pulmonary arterial hypertension.
Caroline: Livestock growth reflects higher demand for poultry, fell from the recently acquired ACRA portfolio from Elanco, and price.
Companion animal sales growth reflects price.
Caroline: I will now walk you through the remainder of our P&L and my comments will be on a non-GAP basis.
Caroline: Growth margin was 80.8%, an increase of 3.6 percentage points driven by reduced royalty rates for Keytruda and Gardasil, as well as favorable product mix.
Operating expenses decreased to $7.4 billion.
Caroline: Charges of $700 million related to the license agreements with Lenovo and Henso Pharma this quarter were lower than the charge of $5.5 billion a year ago related to the collaboration with Daiichi Sankyo.
Caroline: Excluding these charges, operating expenses grew 10%, reflecting strategic investments in support of our robust early and late phase pipeline and key growth drivers.
Other expense was $5 million.
Our text rate was 16.2%.
Now turning to our 2025 Non-Gap Guidance.
Caroline: We expect revenue to be between $64.1 and $65.6 billion, representing growth of 2 to 4%, excluding a negative impact from foreign exchange of approximately 2% using mid-January rates.
Caroline: For Gardasil in China, our guidance assumes no further shipments at the low end and less than $1 billion at the high end.
Caroline: Excluding sales of Gardasil in China, in both 2024 and 2025, and the negative impact from foreign exchange, total company growth is expected to be 7 to 9 percent.
Caroline: Operating expenses are assumed to be between $25.4 and $26.4 billion.
Caroline: This range includes a $300 million payment related to the license agreement with Lenovo, which will be recognized upon completion of the technology transfer for MK2010.
Caroline: As a reminder, our guidance does not assume additional significant potential business development transactions.
Caroline: Other expense is expected to be between $300 and $400 million.
Caroline: We assume a full year tax rate between 16 and 17 percent.
We assume approximately 2.53 billion shares outstanding.
Taken together, we expect EPS of $8.88 to $9.03.
Caroline: This range includes approximately $0.09 related to the expected payment to Lenovo and a negative impact from foreign exchange of approximately $0.35 using mid-January rates.
Caroline: As you consider your models, there are a few items to keep in mind.
Caroline: In 2025, we are expecting to see the benefit of a more diverse commercial portfolio with continued strength in oncology and animal health, as well as contributions from new product launches.
Caroline: During the first half of the year, we expect roughly flat year-over-year revenues, as the headwind in China is offset by high single-digit growth across the rest of our business.
During the second half, we expect strong year-over-year growth.
Caroline: Looking at Gardasil longer term, while we believe there continues to be a path to the $11 billion, we feel it is prudent to withdraw this target given uncertain timing of an economic recovery in China.
Caroline: For Keytruda, U.S. sales benefited from approximately $200 million of wholesaler inventory buy-in during the fourth quarter, which we expect to reverse in the first quarter.
Caroline: We expect Medicare Part D redesign to have a negative impact to sales of approximately $400 million, primarily affecting Winn-River and our portfolio of small-molecule oncology products, including Wellireg, Limpasa, and Lenvima.
Caroline: At the beginning of 2025, we lowered the list prices of the Genuvia family of products in the U.S. to more closely align them with net prices.
Caroline: The lower list price will reduce the rebate amount Merck pays to Medicaid, and as a result, we expect higher net sales for these products in 2025.
Now turning to capital allocation, where our strategy remains unchanged.
Caroline: We will prioritize investments in our business to drive near and long-term growth. We will continue to make disciplined investments in our key growth drivers and expansive pipelines. We remain committed to our dividend with the goal of continuing to increase it over time.
Caroline: Business development remains a priority and we are well positioned to pursue additional science-driven, value-enhancing transactions.
Caroline: We recently increased our authorization for share repurchases by $10 billion to $12 billion in total. Given the opportunities to invest in our business and augment our pipeline through business development, we expect to maintain a modest level of share repurchases this year.
Caroline: We remain committed to not having excess cash build on our balance sheet, and the higher authorization provides flexibility to increase share repurchases if appropriate.
Caroline: We enter 2025 with confidence in the outlook for our business, driven by global demand for our innovative medicines and vaccines, as well as our exceptional pipeline. Our long-standing commitment to leverage leading-edge science to improve the lives of patients has put us in a position of financial and operational strength.
Caroline: With investment in innovation and our ongoing focus on execution, we are well-positioned to deliver value to patients, customers, and shareholders now and well into the future. With that, I'd now like to turn the call over to Dean.
Dean: Thank you Caroline. Good morning. We are making progress in early and late phase programs across multiple therapeutic areas.
Dean: Today, I will cover major updates since the last earnings call and provide a summary of highlights from 2024.
starting with cardiometabolic disease.
Dean: The Phase 3 Zenith Trial Evaluating Winn-Revere in Patients with Pulmonary Arterial Hypertension.
who are at high risk.
demonstrated a statistically significant reduction.
Dean: and the risk of morbidity or mortality events compared to placebo, both on top of background PAH therapy.
Based on the overwhelming efficacy.
Speaker Change: The trial was stopped so that all participants have the option to receive Winn-Le-Bear.
Speaker Change: Detailed results will be presented at the American College of Cardiology's ACC25 conference in late March.
Speaker Change: Following a review of the totality of efficacy data from the Winn-Revere clinical program, including positive results from the Zenith trial, the External Steering Committee and Merck unanimously concluded that the phase 3 Hyperion study should stop early.
Speaker Change: We discuss this with the FDA and have notified study investigators.
Speaker Change: Based on the strong clinical benefit Winn-Revere demonstrated in the Steller and Zenith trials, it was determined that the Hyperion study had lost clinical equipoise.
Speaker Change: The study will remain blinded, and all participants will have the option to receive Winn-Revere as part of the open-label, long-term extension study, CETERIA.
Speaker Change: We anticipate data will be available later this year, and we will present at a future medical congress.
Speaker Change: This reinforces growing recognition that WinRivere, the first and only active in-signaling inhibitor for the treatment of PAH, has the potential to change the practice of medicine and be transformational for patients with this progressive and debilitating disease.
Speaker Change: Winn-Revere has now been approved in more than 35 countries globally. Recently, we submitted an application for approval to regulatory authorities in Japan.
Speaker Change: More broadly, in the cardiometabolic space, in December, we entered a licensing agreement with Hansel Pharma for an investigational preclinical oral small molecule GLP-1 receptor agonist, now known as MK4082, which will be entering the clinic this year.
Speaker Change: With our extensive experience in increting biology, we are well positioned to advance oral small molecule GLP-1 agonist-containing combinations with next-generation agents for weight loss as well as those that target cardiometabolic disease.
Next, infectious diseases.
Speaker Change: The FDA has set a target action date of June 10th for Clesrobimab, a prophylactic, long-acting, monoclonal antibody for infants entering their first RSV season, when the risk of serious illness is greatest.
Speaker Change: If approved, Clasrobamat would be the first and only single-dose passive immunization for infants irrespective of weight with the potential to protect babies for the full RSV season.
Speaker Change: We announce top-line results from the two Pivotal Phase III trials evaluating the investigational
Speaker Change: Once daily, oral combination of daravirine and isilostravir in adults with HIV infection that is virologically suppressed on different antiretroviral therapy regimens.
Speaker Change: Detailed findings from these studies will be presented at an upcoming Scientific Congress, and we plan to submit the data as part of a package for regulatory approval.
Speaker Change: Islotavir, a potentially first-in-class nucleoside reverse transcriptase translocation inhibitor, is also being evaluated in multiple late-phase clinical trials in combination with other antiretroviral therapies for the treatment of HIV.
Speaker Change: This includes ongoing Phase III trials in combination with Gilead's capsid inhibitor lenacapavir as a once-weekly oral treatment option.
Speaker Change: We are also evaluating MK8527, another investigational NRTTI candidate, as a potential important once-monthly oral option for pre-exposure prophylaxis, which we expect to advance to Phase 3 this year.
Next, to vaccines.
Speaker Change: The National Medical Products Administration of China approved Gardasil to help prevent certain HPV-related cancers and diseases in males 9 to 26 years old.
Speaker Change: In November, at the International Papillomavirus Conference, we presented new clinical and real-world data for GARDIS-09 that examined the prevalence of oral HPV infection.
Speaker Change: This evidence reinforces the importance of gender-neutral HPV vaccination with Gardasil in adults up to age 45.
Speaker Change: More recently, the American Cancer Society's Annual Report on Cancer Facts and Trends noted an increase in cervical cancer diagnosis rates in females ages 30 to 44.
Speaker Change: There remains a need to protect more individuals from HPV-related cancers.
Speaker Change: In Europe, the Committee for Medicinal Products for Human Use of the European Medicines Agency recommended the approval of CAVAXIS.
Speaker Change: for Active Immunization for the Prevention of Invasive Disease and Pneumonia Caused by Streptococcus pneumoniae in Adults.
evaluating the investigational subcutaneous six-dose combination of pembrolizumab and
Speaker Change: and barohyaluronidase alpha in combination with chemotherapy compared to intravenous Keytruda with chemotherapy met its dual primary pharmacokinetic parameter endpoints of non-inferiority. If approved, this route of administration would be a meaningful option for patients.
Speaker Change: We plan to share detailed findings of the study at an upcoming scientific congress.
Speaker Change: Consistent with our growing and increasingly diverse pipeline of oncology candidates, more than 20 abstracts from studies evaluating treatment options for a range of hematologic malignancies were presented at the American Society of Hematology annual meeting.
Speaker Change: This included early results from the Phase II Waveline 007 study evaluating ziloverdimab bridleton, an investigational antibody drug conjugate targeting ROR1, in patients with diffuse large B-cell lymphoma.
On the regulatory front, in China...
Speaker Change: We received three approvals for KITRUDA-based regimens, including a neoadjuvant-adjuvant treatment regimen for patients with resectable non-small-cell lung cancer based on Keynote 671.
Speaker Change: The treatment of certain types of locally advanced cervical cancer based on keynote
Speaker Change: and first-line treatment of patients with urothelial carcinoma in combination with PADSA based on keynote A39.
Speaker Change: In addition, Wellreg was approved for the treatment of adult patients with VHL-associated renal cell carcinoma based on LightSpark004.
Speaker Change: In Japan, the Ministry of Health, Labor, and Welfare approved two Keytruda-based regiments, including the treatment of advanced cervical cancer based on keynote A18 and for primary advanced or recurrent endometrial carcinoma based on keynote 868.
Speaker Change: In the U.S., the FDA granted breakthrough therapy designation to SAC-TMT, our investigational trope 2-directed antibody drug conjugate for the treatment of certain patients with previously treated advanced non-small cell lung cancer. SAC-TMT is being developed through a collaboration with Keelan Biotech with 10 ongoing phase 3 studies across multiple solid tumors.
Speaker Change: Finally, in December, we completed an exclusive global license agreement with Lenovo Medicines for a novel investigational PD-1 VEGF bispecific antibody, now known as MK2010.
Speaker Change: We plan to explore the full potential of MK2010 across multiple tumor types in a global patient population.
Rob Davis: As Rob mentioned, 2024 was marked by significant pipeline progress. Greater than 20 phase 3 studies were initiated spanning cardiometabolic, immunology, infectious diseases, oncology, ophthalmology, and vaccines.
Rob Davis: We received more than 25 regulatory approvals in major regions, including for Wind River and Kavaksit.
Rob Davis: At the same time, we successfully executed on our one-pipeline strategy by leveraging our clinical expertise and business development capabilities to identify and secure external opportunities where science,
Rob Davis: Medical need and value intersected to expand, complement, and diversify the pipeline.
Rob Davis: License agreements with Hansel and Lenovo secured rights to potentially important candidates for cardiometabolic disease and oncology.
Notable milestones to look out for in 2025 include
Detailed results from the Zenith trial.
Results from three...
Rob Davis: Phase III Registration Enabling Studies Evaluating Our Oral PCSK9 Inhibitor Candidate Elicitides.
where the treatment of hypercholesterolemia are anticipated.
Rob Davis: And the primary completion date of the Phase 2 cadence study evaluating Wiener Revere and pulmonary hypertension due to left heart disease is scheduled for the fall.
Rob Davis: I look forward to providing further updates on our pipeline progress, and now I will turn the call back to Peter.
Peter Dannenbaum: Thank you, Dean. Surely we're now ready for questions. I'd request that analysts limit themselves to one question to get to as many questioners as possible. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2.
Speaker Change: Our first question comes from Umer Raffat with Evercore ISI. Your line is open. You may ask your question.
Umer Raffat: Good morning guys. Thanks for taking my question. I realize that there's a lot of folks on Gardasil this morning, but allow me to focus on another gross driver, which is...
tracked a slightly weaker versus consensus winner there.
And my question really is...
Umer Raffat: As we think about the cadence of growth into 2025, there's been some question marks off of some claims data suggesting maybe the start of the year might have been slightly weaker versus some of the growth expectations. So do you feel reasonably comfortable that Wind Rever can grow about 100% year over year from the fourth quarter trends into end of 2025? Thank you.
Great. Next question, please, Shirley.
Speaker Change: Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open. You may ask your question.
Terence Flynn: Hi, good morning. Thanks for taking the question. I was just wondering if the change in outer ear Gardasil sales impacts at all how you're thinking about either the size, the type, or the cadence of your M&A and business development strategy here. Does this open the door to maybe larger deals now? Thank you.
Terence Flynn: Yeah, no, thanks for the question. As we look forward, and I think we've been pretty consistent, the long-term expectations we had of the company, especially as we get into the LOE period,
Terence Flynn: We're never counting on Gardasil as a growth driver because we always had an expectation that eventually it would start to plateau as we got through all of the cohorts and really we're back to just the birth cohorts. So as we look forward, our expectation for what the post-LOE period looks like is frankly unchanged.
Speaker Change: from what I previously communicated. That said, as we've also communicated, while I feel...
Speaker Change: We have always said we do believe we need to do more.
Speaker Change: to continue to augment the pipeline we've built. And so we will continue to drive business development, and we're looking at business development in a full range, always with science being the leading question. But if we can see value and a tie-in to our strategy where science intersects, we will be willing to move, and it'll still be in that, you know, $0 to $15 billion range is our sweet spot, but obviously open.
Speaker Change: to looking at deals, and as we've also said, we're open to commercialized assets as well if they fit the overall profile I laid out of science and value.
Speaker Change: Thank you. Our next question comes from Luisa Hector with Barenburg. Your line is open. You may ask your question.
Luisa Hector: Oh hi, thank you for taking my question. Perhaps on the oral PCSK9, could you just add a bit more color around what you're you're targeting for cholesterol lowering, whether we might need to see all three trials in-house before you issue a press release?
Luisa Hector: And I think you mentioned before potential combinations, obviously you have now optionality on the oral GLP, so just perhaps some color around where you could go with further development. Thank you.
Luisa Hector: I'll take that. Thank you very much for the questions. This is Dean.
Luisa Hector: Yeah, we have, you know, three phase threes that are ongoing that should be reading out April, July, and August of 2025. I would imagine that there is a possibility that
Luisa Hector: given a prominent conference at the end of the year that we would hope to be able to present publicly that data. In relationship to what we're trying to achieve with the oral PCSK9, I would just look at what the antibodies can do and just say.
We want to achieve a very similar profile of the
PCSK9 antibodies in an oral molecule.
Luisa Hector: to the general population just in the United States, but throughout the globe.
Luisa Hector: In terms of combinations, there are a number of combinations that one could do, and I like how you put it, because it ends up being something that's really important as a singular drug, but it also is a platform to add other important cardiometabolic solutions.
Luisa Hector: And so, you know, we will probably be providing that data a little bit later after we've cleared the phase threes for the oral PCSK9 inhibitor and lissatide.
Great. Thanks, Louise. The next question, please.
China. So, thank you.
Speaker Change: Yeah, Mohit, thanks for the question. We have not commented specifically on how much inventory Jirfa is sitting on. They're a public company, so we need to leave it to them to make comments about that.
But I think the important point here is to understand...
that as we've seen the marketplace,
Speaker Change: What we intend to do is to accelerate that drawdown so we are planning
Speaker Change: to ship and by frankly by not shipping February potentially through the mid-year and essentially longer depending on how we see the inventory come down.
Speaker Change: We can get to a more normal market dynamic, one where, with the underlying demand and the fact that we have the mail indication coming,
Speaker Change: It can come back to growth. So the speed with which we burn that down, we'll have to see. But the other thing I would just highlight for context, with this rebasing,
Gardasil, China now is about 1%.
Speaker Change: So it is becoming of our total revenue. So, you know, obviously that's an important thing to understand, and that's why we also highlighted that
Speaker Change: If you look at the way the business is going to progress, as we get into the back half this year and we anniversary the Garcila China situation, we will be strong growth for overall mark as well as as we go into 2026.
Great. Thanks, Mohit. Next question, please.
Speaker Change: Thank you. Our next question comes from Daina Graybosch with Lerner and Parker. Your line is open. You may ask your question.
Daina Graybosch: Hi, thanks for the question. I want to ask another one on Monroe Ver and the Hyperion trial. Can you help us understand what outcomes you may be able to provide from that trial given
Thank you.
Daina Graybosch: Thanks for that question. So if I could just take a step up and then address your Hyperion question directly.
Daina Graybosch: So the aspiration of WinRiver was that it would be a first-in-class action of an active in-signaling inhibitor, and the molecular design was to address the fundamental human genetic basis.
Daina Graybosch: And what we're trying to do is build the evidentiary wall of data that this novel mechanism can change the practice of medicine. So for Steller
Daina Graybosch: You know, it's already got an FDA and a global approval, and it's clear that it increases exercise capacity, increases functional class, and decreases risk of clinical worsening.
Daina Graybosch: Zenith is very important because it is, I believe, the first PAH trial ever to be done on hard outcomes.
Daina Graybosch: And I also believe it's the first PAH trial ever stopped early for overwhelming efficacy. And I think in 2025 ACC, people are going to stare at the data and look at lung transplantation, hospitalization, and death.
Daina Graybosch: and look at that and also we'll also steer into how soon after treatment those benefits are observed.
Daina Graybosch: So that leads me now to Hyperion, where Hyperion is actually in a very similar...
Daina Graybosch: patient population is stellar. It's the earlier use of Winn-Revere in that patient population and it was decided to stop early. It remains blinded but the investigators basically having looked at all of the data
Daina Graybosch: really felt that it was not ethical to withhold treatment. So we will have to see what that data is.
Daina Graybosch: because it remains blinded and hopefully we will have that data and further updates.
But again, the Zenith updates will be at 8 PC.
Daina Graybosch: There is continuing safety data from the readout of these Phase 3s and consequent rollover of patients into exterior.
and the long-term safety experience that we've had.
Daina Graybosch: is well within the label. And I'll just remind everyone, the label says 4% in the treated and 1% in placebo, so it's maybe a 3%. We're well within those margins. And so that data, as we get more and more information, will become more public this year as our investigators.
put together presentations and publications.
Daina Graybosch: So our aspiration of changing the practice of medicine for pH has growing support. I know no other active in signaling inhibitor in clinical development and also we're clearly exploring outside of pH other forms of pulmonary hypertension.
Thank you, Daina. Next question, please, Shirley.
Speaker Change: Thank you. Our next question comes from Jeff Meacham with Citi. Your line is open. You may ask your question.
Jeff Meacham: Thanks for taking the question. Sorry to continue to harp on Gardasil, but I guess given the situation in China, you guys are less willing to predict the timing of recovery, but I guess the question, Rob, is there an inventory threshold that you need to see?
Jeff Meacham: to start shipping again. I wasn't sure what the, you know, what kind of tipping point would be for that.
Jeff Meacham: And maybe more broadly, just given the political climate towards vaccines overall, maybe just talk about where this TA falls in your BD or internal R&D priorities, if that's changed at all. Thank you very much.
Speaker Change: Yeah, and Joe, thanks for the comments. So on China in particular, you know, there's not a... I don't want to commit to a specific inventory level. Obviously, we need to see it come down.
Speaker Change: meaningfully from where it is. And I think by taking this action to stop shipments,
Speaker Change: And given the demand that's there, you know, we're going to see that happen. We just have to let it work itself through because the economy there still is soft.
Speaker Change: And that has led to the fact that we are seeing consumer demand continue to be weak. And so, you know, as that situation resolves, I think that will determine the speed with which all of this happens. But I think it's important to just reemphasize...
Speaker Change: Going forward, by rebasing this now out, this is upside. This is not a core to our growth story going forward. And so that is also what we want to make sure people understand. I recognize it's a big change. And we want to do and we will do everything. We are very committed.
Speaker Change: and positioned well to drive growth in China. But to me at this point, that will be upside for the company. And beyond that, the breadth of what we have will drive the growth in in oncology, in animal health, and with our new launches to the vaccines business more broadly.
Speaker Change: You know, we continue to believe in vaccines as an important area. Obviously, we have...
Speaker Change: Kat Vaksiv, which is launching as we speak. We have Klezrobimab, a monoclonal antibody for RSV that we hope to get approval and see come before the RSV season this year. And then we have other programs in development, including Dengue, is probably one of the most significant other ones. So we continue to focus there.
Speaker Change: I wouldn't say that vaccines is a big focus of our BD strategy, primarily because we just haven't seen that many opportunities in the space. But we are continuing to be committed to driving the R&D we're doing in this space going forward and continue to believe there's opportunity for it.
Great. Thank you, Jeff. Next question, please, Shirley.
Speaker Change: Thank you. Our next question comes from Chris Schott with J.P. Morgan. Your line is open. You may ask your question.
Chris Schott: Thanks so much. Another one on Gardasil. Specific to the long-term guidance, I totally understand the near-term dynamics need to reduce inventory, but the removal of the $11 billion target...
Chris Schott: How much of this is conservatism, just given the dynamics of China?
Chris Schott: versus this being a more permanent reset of your view on the Chinese market. I'm just trying to get my hands around that. And then as part of that answer, maybe just talk about Gardasil X China. Has there been any change in your longer-term views on the global opportunity X China for the product? Thank you.
Chris Schott: Yeah, no, thanks for the question, Chris. So as you look at...
China. As Caroline said in the prepared remarks,
Speaker Change: We continue to believe there's a path to the 11 billion dollars, but Bill it's prudent
Speaker Change: really to withdraw the target right now because it is uncertain both the timing of the recovery in China and the extent.
Speaker Change: That being said, if you look at the underlying dynamics that had always caused us to believe in the growth in China, they're still there.
Speaker Change: We still have the 100 million plus women, 120 million women who have yet to be vaccinated in the Tier 1 to 5 cities. We have the male indication where we are the only company with that indication and we're launching that as we speak.
Speaker Change: And obviously, that is a population about the same size as females, about 200 million if you look in the total potential once we're in that marketplace. So the opportunity is there. We have the near-term dynamics of the inventory and the near-term dynamics of the economy we need to adjust.
Speaker Change: That is why, you know, I think it's prudent to just say, until we see that...
Speaker Change: Because China was a meaningful part of the $11 billion, that's why we made the decision to say let's pull back on the $11 billion. As we look at every other market around the world,
The rest of the world, our view remains unchanged.
And as Caroline pointed out, if you exclude...
Speaker Change: Garcelle China, we had strong double-digit growth this year again in the rest of the world and as we look forward if you exclude China we have strong growth coming in Garcelle every year, year on year. So nothing has changed in our long-term view. We need to get the China situation figured out. We need to lap
Speaker Change: This market dynamic and figure out what the actual growth and opportunity is in China and until we do that I just want to remove this from the dialogue because by continuing to always come back to this
Speaker Change: I feel like we miss what is so much else we have in the strength of our pipeline and in the growing breadth of our business that is really the fundamentals of our growth long term, has been and will continue to be, and I want to get people focused there because that's where we're focused.
Thanks, Chris. Next question, please.
Speaker Change: Thank you. Our next question comes from Tim Anderson with Bank of America. You may ask your question.
Tim Anderson: Thank you. A couple of questions on Keytruda. So I don't think Gardasil would have impacted the stock as much as it has over the last six months had it not been for these underlying concerns about Keytruda going into the IRA in 28, going off patent at the end of 28.
Tim Anderson: So my first question is, you know, when can we expect Merck will be in a position to talk about longer-term forward-looking guidance?
Tim Anderson: Like a lot of other companies that address this period at the moment you're saying
You can successfully navigate period, there's no quantification.
And I would argue that the latter is needed.
Tim Anderson: And then a second question is, you know, near-term Q-TRDA, investors worried about two competitor readouts in 25 that take on Q-TRDA head-to-head, the first is Astra's Avanzar trial with Ritro-2.
Tim Anderson: The second is the summit data with the PD-1 VEGF. It would be great to get any perspective from Dean on these two readouts. What's a realistic worst-case scenario? Thank you.
Dean: Yeah, Tim, thanks for the question. And, you know, as you pointed out,
I recognize the focus is on what's going to happen.
Post the following year...
Dean: We've tried to give direction. I think if you go back to what we said at JPMorgan, we were pretty clear in what we see, and that is if you look at the combination of the business development and the advances in our pipeline across oncology, and this is excluding anything to do with Keytruda, so these are small molecules,
Dean: the Individualized Neoantigen Therapy and our ADC portfolio combined with ophthalmology, with what we see in HIV, with cardiometabolic, as you can see the whole list there, we have 50 billion plus of what we see as
as potential.
Thank you.
Dean: That's why we continue to talk about a hill versus a cliff and my confidence in that growth trajectory we showed is still there.
Dean: We have not decided if and when we will give long-term guidance. That's always a two-edged sword, and I think we need to be thoughtful about that. But I also recognize, as we move through time, we need to continue to give proof points.
Dean: Like what we're seeing with Catback Zip, like what we're seeing with Wind Revere, and like what we are confident you're going to see as Elicitide and the data for that start to flow through, and other products we have coming down the pike.
Dean: Those proof points are what are going to bring confidence over time, but I hear you on the guidance and we will reflect on that, but we do not have a plan right now to do that.
Dean: Yeah, this is Dean. I'll just answer in relationship to the Daiichi Sankyo COVID-2 ADC that you referenced.
Speaker Change: We're very comfortable about our TROPE 2 program. As you might know, in our Phase 3 clinical trials, we have 10 ongoing. And so we're very eager to have those move forward, and we're confident in them.
Speaker Change: In relationship to the VEGF PD-1 that you spoke about, I mean, I would just say combinations of PD-1 and VEGF independently have been extensively studied by us in combination with ACI and by other companies as well.
Speaker Change: And there is a general sense that there are many examples of improved progression-free survival that don't have a pattern of consistently hitting translatability to OS.
Speaker Change: suggest that maybe there's increased PFS for PD-1 or PD-L1, Jeff.
Speaker Change: And that needs to demonstrate OS. But the way that we look at that is that Merck is uniquely positioned to explore this, and it advantaged OS.
Thank you.
Speaker Change: 41 indications in 18 tumor types, 9 in earlier stage, and 4 with OS, to really rapidly bring this innovation, should it lead to OS, to many patients and many cancers.
Great. Thank you, Tim. Next question, please.
Speaker Change: Thank you. And this question comes from Akash Tewari with Jeffreys. Your line is open. You may ask your question.
Speaker Change: Thanks so much. And just kind of building on the last one, your team recently updated your new product guidance for oncology from $20 billion to $25 billion, despite the recent failures we've seen from both TIGID and LAC-3.
Speaker Change: What are the ballpark components of that $25 billion figure, particularly for the TROPE II and the Daiichi ADCs? And Dean, where do you think your TROPE II strategy differs versus ASTRA with DATO? Are there any particular biomarker populations where you feel like Merck will win out for both first and second line lung? Thank you.
Speaker Change: Akash, thanks for the question. So as you look at what makes up the $25 billion, to be clear, the I-O, I-O combinations were never part of that. So those were always supplemental to that. The $25 billion was made up of...
Speaker Change: The Antibody Drug Conjugate Programs we have, both from Colune and from Daiichi Sankyo, as well as
Speaker Change: approaches to cancer. This would be the, if you will, the LSD-1, the CYP11-A1, all of those suite of programs we had. The INT, which is the Individualized Neoantigen Therapy, which is the partnership we have with Moderna.
Speaker Change: That made up the numbers. What changed that allowed us to increase our confidence.
Speaker Change: is two things. One, we added the T-Cell Engager from Harpoon, which we're very excited about, both as a standalone and potentially in combination as we look at small cell lung cancer, and most importantly,
Speaker Change: The TROPE II program we have is, we think, going to be even more successful than we originally thought as we continue to see the data read out there, so we feel very good
Speaker Change: about that 25 plus billion dollar number. And then separate from that, just to be, it's important, we still are also very confident in our sub-Q Katrina, which as we pointed out at J.P. Morgan, we will be, you'll see data readouts, it'll be filed this year, and hopefully potentially even launched yet this year. So that is something we continue to also be very confident about. That is not in that 25 plus billion.
Speaker Change: So that's important. We will be much greater than that in oncology when you look at the totality of what we will have.
Speaker Change: Yeah, so I'll just answer as quickly as I possibly can. One of the things I would just be a little bit cautious is when...
Speaker Change: Everyone speaks about TROPE-2 or HER-2, ADC, that all the molecules are the same. The molecules are quite different.
Speaker Change: We've already seen that with Katsala and in HIRTU, and the same thing can be true when you look at ADCs given the same.
Speaker Change: We're very confident of our SAC-TMT in the design, but also early on, one of the things that we've always said is it's important to hit the right target.
Speaker Change: population, chemo plus pembrol has a broad impact and and every trial that we do we ask ourselves what patient population with a SAC TMT or any ADC will be distinguished from that baseline.
Speaker Change: In relationship to the other Daiichi Sankyo ones, Petruda Mab, you know, were
Very interested in relationship to the breast.
The B7H3, we're very interested in small cell lung cancer.
Speaker Change: CDH-6, we're very interested in ovarian, and we're very interested in mixing and matching some of them.
Speaker Change: with T-Cell Engagers. I do just want to make a call out just in relationship to the design of the chelin as well as the Daiichi Senkyo, you know, that's really, I think, important molecules.
Speaker Change: that we think if we hit the right patient population and combine them with the right IO strategy, whether it be T-cell engagers or PD-1s, that we will have differentiated profiles for patients.
Thank you, Akash. Next question, please.
Speaker Change: Thank you. Our next question comes from Trung Huynh, UBS. Your line is open. You may ask your question.
Trung Huynh: Hi guys, thanks for the question. I just wanted to ask on the tariff news we saw emerge over the weekend. So can you perhaps talk about your manufacturing footprint from China, Mexico and Canada?
Trung Huynh: And there were also some discussions from the administration on transfer pricing. So your IP for Kitruder is based out of Ireland. How much of an impact could that have on Merck if transfer pricing is also targeted? Thank you.
Speaker Change: Thank you for the question, Trung. Our company, like many other companies, has a manufacturing footprint that really enables global supply. We have very low levels of manufacturing happening in China, in Mexico, and Canada. So we'd expect a very immaterial impact from tariffs that were proposed over the weekend for those countries.
Speaker Change: We will continue to assess the situation based on the different tariffs that are being proposed by the U.S. government, but remain confident in our supply chain and our ability to supply our medicines and vaccines around the world.
Great, thank you Trung. Next question please.
Speaker Change: Thank you. Our next question comes from Vamal Devan with Guggenheim. Your line is open. You may ask your question.
Vamal Devan: Great, thanks for taking my question. Maybe just going back to Wind Revere, obviously you have the positive news on Zenith and Hyperion.
Vamal Devan: Just curious if it's changed in any way your expectations for cadence. I think that's a maybe underappreciated event later this year and obviously a different indication.
Speaker Change: But just, I guess, Dean, I'm curious if there's any read-throughs we should be making from the success you're having there, and then...
Speaker Change: Tied to that, if you can just comment if there's any sort of inventory fluctuation that I think has impacted the sales number of the first couple quarters. I just want to understand if it impacted winter of this past quarter.
Speaker Change: Yeah, so I'll just take the the Wind River question in relationship to the different patient populations. So patients who have pulmonary hypertension can have pulmonary hypertension because they have PAH.
Speaker Change: And what I would say is my confidence of WinRever as to potentially reshaping the standard of care and the treatment paradigm for pH is very high, especially since this molecule is designed at the
you know, genetic cause of the disease.
Speaker Change: The preclinical data suggests that that's an important experiment for us to do and we're eager to push that forward and we're excited to see the results.
Speaker Change: And in terms of inventory for Winn-River, we have not seen anything unusual. Inventory levels were normal as we exited the year. And in the quarter, we did include an adjustment for the value of the inventory in the channel given the Medicare Part D redesign.
Great. Thanks, Mamo. Next question, please.
Courtney Breen: Thank you. Our next question comes from Courtney Breen with Berenstain. You may ask your question.
Hi there, this is Courtney. Thanks for taking the mic.
Courtney Breen: Thank you for taking my call. Apologies, I was just coming off mute. I just wanted to clarify two things.
Courtney Breen: The first was just kind of coming back to Gardasil, and I know there's been a lot of conversation around that.
Courtney Breen: Can you please provide specificity as to whether there's any risk of write-off?
Courtney Breen: As we think about the inventory that's sitting in the channel at Sheffey and the age of that inventory.
Courtney Breen: And then the second question around Part D redesign. I know you just mentioned that specifically about WinRiver and kind of the channel dynamics there. But as you're thinking about 2025 and some of the guidance that peer companies are beginning to give, and we've seen some different ranges and different interpretations, can you just give some context as to what you've baked in in terms of volume relative to price when we think about the $400 million guidance?
© transcript Emily Beynon
Speaker Change: Thank you, Courtney. In terms of Gardasil inventory, we are, as Rob said, causing shipments to enable Shafei to utilize that inventory in the market, and that's inventory that our partner owns. So the risk for write-off of inventory from Merck is extremely low.
Speaker Change: In terms of part D redesign, what you have are the two dynamics. The first is the price impact.
Speaker Change: And as noted in our prepared remarks, that predominantly impacts Huynh Revere, as well as our oral oncology agents.
Speaker Change: That, we think, will be partially offset with some volume benefit as patients stay on therapy, but the majority of the $400 million that we noted is really the price impact.
Speaker Change: Great. Thanks, Courtney. We have time for one final question, please, Shirley. Thank you. Thank you. And our last question comes from James Shin with Deutsche Bank. Your line is open. You may ask your question.
Yes. Yeah.
Awesome. Sorry about that. I'm just making sure technical difficulties.
Speaker Change: I don't mean to belabor the Gardasil topic, but there is an upcoming February 2025 ACIP meeting, and the agenda suggests there's some follow-up on last October's dosing questions. Can you level set us on the expectations for this February session?
Speaker Change: And relative to the long-term guidance, so did the U.S. market play any role in that change to guidance or guidance being withdrawn? Thank you.
Speaker Change: Yeah, maybe I'll take the second part of the question and Dean can take the first part. No, no change. So, as we said earlier, if you exclude China, our expectations for the rest of the world, which would include the U.S.,
Speaker Change: are unchanged. So there's no change in our long-term belief in Gardasil from that regard. As it relates to the ACIP and the dosing question, we're going to have to wait and see where it is. You know, we continue to believe that the strength...
Speaker Change: of the clinical data supports the two and three dose regimen we have today.
Speaker Change: It's a very high bar, and I'll let Dean comment maybe on some from the FDA and other perspectives.
Speaker Change: But, you know, I think we need to see where this goes, but we continue to feel very strongly
Speaker Change: That the dosing is appropriate and do not necessarily see that as a risk in the U.S., but I'll let Dean comment.
Dean: Yeah, so the way that I would look at it, ACIP is CDC, the label is FDA.
Dean: Scheduling dose is the FDA. And I would just say that the dosing schedule of Gardasil has been rigorously vetted by the FDA. And as you've seen, as we've gone from three doses to two doses, the evidentiary proof
Dean: that is required by the FDA to change scheduling is high.
Dean: I should also emphasize that we have been in discussions with the FDA in relationship to how do we create.
Dean: and reach a randomized control trial that could change schedules for Gardasil, Gardasil-9 in men and in women. And the FDA, as you might imagine, has a very high bar for that proof.
Dean: Now, I would surmise that the remarkable history of efficacy and safety influences the FDA's high standards and rigorous standards for anyone to want to change the lay of the land. I can't speak to what will happen, but I might suspect, especially now,
Dean: Attention and expertise of the FDA on dosing and scheduling might be important to the CDC as they decide on this question of creating a schedule that is outside of the label from the FDA.
Rob Davis: Great. Thanks, Dean. Thanks, James. Rob, a couple of comments to close the call? Yeah, well, thank you all for your time on the call. You know, just maybe to end the call, I just want to reinforce our confidence in the long term. I recognize the GARDA situation in China is a change.
Rob Davis: I think it's the right decision we're making now to put this behind us to resolve this inventory situation and and move forward.
Rob Davis: As we said, we see strong growth in the second half of the year, leading into 2026, into
Rob Davis: And importantly, as we look to the period beyond, the strength of the pipeline, the diversity of the pipeline, the progress of the pipeline is profound. And I really believe
that once we fully.
Rob Davis: understand all of that, and I recognize it's going to take proof points in time, you'll understand why we have the competence we do in the long term. And we are committed to demonstrating that, and most importantly, to continue to advance that pipeline for the patients we serve. So with that, I'll close the call. Thank you.
Speaker Change: Thank you. This does conclude today's conference. We thank you for your participation. At this time, you may disconnect your lines.