Q1 2025 Merck & Co Inc Earnings Call
Speaker Change: Thank you for standing by. Welcome to the Merck & Co and corporate Rathlete, New Jersey, USA, quarter one's cells and earnings conference call. At this time, while participants are in listening mode until the question and answer session today's conference.
Speaker Change: At that time, to ask a question, press star one on your phone to record your name at the prompt. This call is being recorded. If any of the objections, you may disconnect at this time.
Speaker Change: Out unlike to turn a call, or to Mr. Dannenbaum, Senior Vice President and Investor Relations, sir, you may begin.
Dustin: Thank you Dustin and good morning everyone. Welcome to the first quarter 2025 conference call for Merck & Co. Incorporated Railway New Jersey USA. Speaking on today's call will be Rob Davis, Chairman and Chief Executive Officer, Caroline Litchfield, Chief National Officer, and Dr. Dean Lee, President of Research Labs. Thank you very much.
Dustin: 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 that we've excluded from our non-GAAP results. There is a reconciliation in our press release. [inaudible]
Dustin: I will also remind you that some of the statements that we made today may be considered forward-licensed statements If our underlying assumptions prove inaccurate or uncertainties materialize actual results may differ materially from those set forth in the forward-looking statements.
Dustin: RCC filings, including Item 1A in the 2024-10K, identified 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.
Speaker Change: Merck & Co Inc., Rob Lee, New Jersey, USA, undertakes no obligation to publicly update any four-looking statements. [inaudible]
Speaker Change: 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 our company's website. With that, I'd like to turn the call over to Rob.
Rob: Thank you Peter, good morning and thank you for joining today's call. Thank you for joining today's call.
Rob: Our company made strong progress to start the year with increasing contributions from our newer commercialized medicines and vaccines and continued advancement of our pipeline.
Rob: while working with focus and urgency to both realize the full potential of our near-term opportunities. [inaudible]
Rob: and to rapidly progress the next wave of minimization that will positively impact the lives of the patients we serve and drive future value creation for all of our stakeholders.
Rob: In what is a dynamic global environment, we continue to work with regulators and policymakers around the world to tackle some of the biggest health challenges and ensure patient and customer access for a life saving and life improving medicines and vaccines.
Rob: Over the last few years, we've been evolving our supply chain strategy in an effort to better balance our manufacturing footprint.
Rob: which aligns well with the new administration's efforts to regrow the US manufacturing base. [inaudible]
Rob: This can be seen by our efforts beginning with the passing of the Tax Cut and Jobs Act, and accelerated since the pandemic.
Rob: Of note, since 2018, we've invested $12 billion in U.S. manufacturing, and we've committed to an additional $9 billion plus for projects through 2028.
Rob: Our investments are leading to more of our products for US patients being manufactured in the US as well as more opportunities for export.
Rob: Turning to our first quarter results, our performance was in line with our expectations. [inaudible]
Rob: with revenue of $15.5 billion, reflecting strength in oncology, animal health, and increasingly meaningful contributions from the continued strong launches of win-revere and cat-active.
Rob: As we look forward, we remain competent in our outlook for improved growth in the second half of the year.
Rob: Considering the current environment, we are maintaining our four-year revenue and EPS guidance, excluding business development charges, which Caroline will speak to in more detail.
Rob: The benefit from improved foreign exchange is offset in part by approximately $200 million of expected cost from terrorists implemented to date primarily between US and China and to a lesser degree Canada and Mexico
Rob: with respect to potential additional tariffs by the U.S. Specifically on pharmaceuticals, our global supply chain and current inventory levels put us in a good position to navigate potential near-term impacts.
Rob: and our ongoing efforts to locate more manufacturing in the US or US supply, including for the majority of our upcoming new products, will help us manage over the medium and long term.
Rob: As I look at how we've started 2025, I'm proud of the continued advancement of our research efforts. [inaudible]
Rob: Recently, we presented important phase three data for wind repair in additional patient populations supporting the strong potential for this product to improve the lives of more people living with pulmonary arterial hypertension.
Rob: In addition, our HIV pipeline is now coming into sharpal focus with data presentations from two Phase III trials of the Vloctervier-based regiments. [inaudible]
Rob: And new clinical trial starts and regulatory submissions and oncology reinforce our belief that we are well positioned through long-term leadership with a promise of helping even more patients with cancer. Thank you very much.
Rob: The success of biopharmaceutical innovation on the scale we're driving is not measured in quarters, but rather in years.
and we're seeing compelling progress on this front.
Rob: Since 2021, we've nearly tripled our late-phase pipeline through both the advancement of internally discovered compounds
Rob: As well as the completion of numerous important business development transactions across multiple therapeutic areas of great unmet need including oncology, cardiometabolic, ophthalmology, and immunology
Rob: Together, our efforts have resulted in an expanded late-face pipeline, comprising programs having potential commercial opportunity of over $50 billion by the mid-2030s.
Speaker Change: When we're there in Kat Baxon, represent the initial launches from this robust pipeline of 20 promising potential new road drivers we expect to come to the market over the next few years, almost all of which have blocked us to potential.
Speaker Change: Looking ahead, we have a rich slate of data readouts, presentations, filings, and additional approvals.
Speaker Change: Our pipeline includes some of the world's most scientifically advanced modalities, and Dean and our research colleagues are advancing several molecules that have foundational multi-indication potential in areas of significant unmet need. [inaudible]
Speaker Change: We've also deepened and extended our commitment to early research and development and over the next few years expect many of these programs to advance to phase two and to become visible to you.
Speaker Change: Thanks to the incredible efforts of our dedicated team and the strong progress we are achieving, we believe that we're well positioned to successfully navigate through the Katrina L.O. In period.
and our work is not finished. [inaudible]
Speaker Change: Science and Value-driven business development remains a top priority and we continue to assess opportunities with urgency and an eye toward driving near and long-term growth and value creation. Thank you very much.
Speaker Change: In summary, our results reflect the continued demand for breakthrough therapies and novel solutions.
that can address global health challenges.
Speaker Change: We're leveraging our scientific leadership to deliver the next wave of innovation that can save and improve lives around the world.
Speaker Change: Our commercial performance today continues to enable the advancement of our pipeline and in turn, create long-term value for patients, customers and shareholders.
Speaker Change: We remain confident in our strategic direction, our commitment to research and development of the source for sustainable value creation.
and are enduring promise to positively impact patients.
Speaker Change: Thank you Rob. Good morning. As Rob noted, first quarter performance was in line with our expectations. The fundamentals of our business remained healthy, fueled by robust global demand for our innovative portfolio. Thank you very much.
Speaker Change: We are confident in our ability to deliver on the promise of today while we make strategic investments to enable the innovations of tomorrow, leveraging leading edge science to save and improve lives around the world.
Now turning to our first quarter result.
Speaker Change: Total company revenues were $15.5 billion, a decrease of 2%, or an increase of 1%, excluding the impact of foreign exchange.
Speaker Change: As expected, results were impacted by a decline in sales of Gardasil in China, of approximately 1.1 billion dollars, reducing growth, excluding foreign exchange by 7 percentage points.
Speaker Change: Excluding these sales and the impacts from foreign exchange, global growth was 8%, primarily driven by new products, win-revere and kept faxive, as well as strengths in oncology and animal health.
The following revenue comments will be on an ex-exchange basis.
In oncology, Deltavki Trudeau grew 6% to $7.2 billion. $7.2 billion.
Speaker Change: Global Growth was driven by increased uptake from earlier stage cancers and robust demand for metastatic invocations.
Speaker Change: In the earlier stage setting, growth was driven by increased utilization in resectable triple negative breast cancer, renal cell carcinoma, and non-small cell lung cancer
Speaker Change: In Metastatic Disease, we saw increased use of Ketruder in combination with Padseth in first line locally advanced urethelial cancer, as well as Ketruder in combination with chemotherapy in first line endometrial cancer. Thank you for your time.
Speaker Change: In the US, as previously communicated, growth was negatively impacted by approximately $250 million, due to the timing of wholesale of purchases. [inaudible]
Speaker Change: Abroad oncology portfolio achieved strong growth, driven by Weller Egg, with sales increasing 63% to $137 million, due to increased use in certain patients with previously treated advanced renal cell carcinoma in the US.
Speaker Change: Welireg is now the market leader in the treatment of patients with advanced renal cell of Casanoma following prior therapies.
Speaker Change: Invexines, Gardasil Fales will $1.3 billion, a decrease of 40% driven by China, where we see elevated channel inventories and continued soft demand.
In the rest of the world, growth was 16%.
In the US, they'll benefit it from price and demand.
Speaker Change: Outside the US and China, growth was driven by higher overall demand, including from the catch-up cohort in Japan.
Speaker Change: In New McCockel, Capfax itself will $107 million, driven primarily by demand from the retail pharmacy segment.
Speaker Change: We have made great progress in the early stages of this launch and a well-positioned to help protect adults from invasive pneumococcal disease.
Speaker Change: Beck's New Bansales increased 7% as growth from launches in international markets was partially offset by competitive pressures in the US.
Speaker Change: In Cartier Fascula, the strong momentum of the ongoing launch of wind-refair continues, with global sales of $218 million.
Speaker Change: The launch continues to perform in line with our high expectations, and we remain excited about the significant benefit Wynne Revere is providing for patients.
Speaker Change: In the US, more than 1,400 new patients received a prescription during the quarter. We are continuing to see a steady increase in the percentage of new prescriptions for patients whose background PAH therapies do not include across the cycling.
Speaker Change: Outside the US, we continue to progress with launches and reimbursement.
Speaker Change: Overall, we are very pleased with the uptake of Winrever and look forward to positively impacting the lives of more patients with pulmonary arterial hypertension.
Speaker Change: The strength of the additional data from the Clinical Development Program, which Dean will speak to in a moment, provides further confidence to physicians and patients, and supports our belief in win-reverse significant potential.
Speaker Change: Our Animal Health Business delivered another quarter of robust growth, with sales increasing 10%.
Speaker Change: Livestock growth reflects higher demand across all species, as well as the benefit from timing of resulting ruminants and cells from the Acro-Portfolio acquired from Elanko.
Companion Animal Sales Growth Reflects Price.
Speaker Change: I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis. Thank you.
Speaker Change: Gross margin with 82.2%, an increase of 1% point driven by favourable product mix
operating expenses decreased to $6.1 billion. $6.1 billion.
Speaker Change: There were no significant business development expenses in the quarter, compared with a $656 million charge a year ago. Thank you very much.
Speaker Change: Excluding this charge, operating expenses grew 6%, reflecting disciplined investments in support of our robust, early and late-face pipeline and key growth drivers.
Other expense was $75 million. $75 million.
Our tax rate of 14.2% benefited from certain discrete items.
Taken together, earnings per share with $2.22 cents. [inaudible]
Speaker Change: Now turning to our 2025 non-GAAP guidance. As Rob noted, we are maintaining our full year revenue guidance of between $64.1 and $65.6 billion.
Speaker Change: This range represents growth of 1 to 3%, excluding a negative impact from foreign exchange of approximately 1% using mid-April rates. This range represents a negative impact from foreign exchange of approximately 1% using mid-April rates.
Speaker Change: Our gross margin assumption is now approximately 82%. This includes approximately $200 million in cost related to the tariffs implemented to date. [inaudible]
Speaker Change: Operating expenses are now assumed to be between $25.6 and $26.6 billion and $25.7 billion.
Speaker Change: This range now includes a $200 million payment related to the license agreement with Hung Rae Farmer, which is expected to close in the second quarter . . . . . . . .
Speaker Change: It also includes the $300 million tech transfer payment related to Lenovo which remains in our guidance but has not yet occurred.
Speaker Change: As a reminder, our guidance does not assume additional significant potential business development transactions. Thank you very much.
Speaker Change: Other expense is expected to be between $300 and $400 million. And $200 million.
Speaker Change: We assume a fully attached rate between 15.5 and 16.5 percent. We assume a fully attached rate between 15.5 and 16.5 percent.
We assume approximately 2.51 billion shares outstanding.
Taken together, we expect EPS of $8.82 to $8.97. Thank you very much.
Speaker Change: This range includes a negative impact from foreign exchange of more than 20 cents using mid-April rates.
Speaker Change: Recall, our prior guidance range was $8.88 to $9.03. If not for the one-time charge of $200 million dollars related to Hong Re, or $0.06 per share, our guidance range is unchanged.
Speaker Change: As you consider your models there are a few items to keep in mind.
Following the successful HPV catch-up vaccination program in Japan.
Speaker Change: We expect uptake to moderate, as future sales will predominantly reflect the primary age cohort. As a result, global Garda Philgrofe, excluding China, while still strong, is anticipated to slow going forward.
Speaker Change: Becky Trudeau, the timing of wholesaler purchasing in the US negatively impacted sales by approximately $250 million in the first quarter, and is expected to positively impact sales by roughly
Speaker Change: As a reminder, we lowered the list prices for the Genusius family of products in the US at the beginning of 2025.
Speaker Change: The lower list prices reduce the rebate amount our company pays to Medicaid and as a result we expect higher net sales for these products in 2025.
Speaker Change: First quarter sales of the Genusius family of products in the US also benefited by more than $100 million from favourable one-time two-ups.
Now turning to capital allocation, where our strategy remains unchanged [inaudible]
Speaker Change: We will continue to prioritise investments in our business, the drive near and long-term growth, and returns for our shareholders.
Speaker Change: Our company is rapidly moving towards a future with the more diversified portfolio of growth drivers.
Speaker Change: As we continue to assess our business, we are likely to take actions that will seek to maximise the potential of these opportunities by investing with discipline while transforming our business to drive continuous productivity across the company.
Speaker Change: We intend to communicate more about these efforts later this year.
Speaker Change: We remain committed to our dividend with the goal of increasing it over time.
Speaker Change: We increased our shared repurchases in the quarter to approximately $1.2 billion, similar to the full year amount in 2024.
Speaker Change: We expect the pace of repurchase to continue at this level, given our strong balance sheet. Our top priority, however, remains to invest fully behind our growth drivers and pipeline, as well as business development. [inaudible]
Speaker Change: To conclude, we are confident in the outlook for our business, driven by our strong portfolios and exceptional pipeline. [inaudible]
Dean: 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. I'd like to turn the call over to Dean.
Dean: Thank you, Caroline. Good morning. Progress continued in the first quarter with the steady cadence of positive clinical and regulatory milestones. Thank you very much.
Dean: Today, I will provide updates from programs in cardiometabolic disease, HIV, vaccines, and we'll close with oncology
Cardi with Cardiometabolic Disease,
Dean: Since its first approval just over a year ago, Wynne Revere, the first and only active in signaling inhibitor for the treatment of pulmonary arteria hypertension, does continue to generate clear evidence of benefit for a broad spectrum of patients with pH.
Dean: Last month, detailed results from the Phase III Zenith trial, evaluating high-risk patients with pH, were presented at the American College of Cardiologies, ACC25 Conference.
The findings showed an important 76% risk reduction.
Dean: In the Compositive All-Calls Death, lung transplantation, and PAH hospitalization, with a Kaplan Meyer curve illustrating in early, and sustained separation, as early as four to five weeks after initiation of Winliver. [inaudible]
Dean: Results were published simultaneously in the New England Journal of Medicine.
Dean: Venus is the first positive trial and pH with a primary endpoint comprised entirely of major outcome measures and the first to be stopped early for overwhelming efficacy.
Dean: The significant reduction in risk of major morbidity and mortality events reinforces Wynne Revere's efficacy.
Dean: The safety profile in Zenith was generally consistent with that observed in previous studies. [inaudible]
Dean: As a reminder, prompted by the early stoppage of the Zenith study and a review of the totality of data from the Wind River Clinical Program to date, the External Steering Committee determined that the Phase 3 Hyperion Study had lost clinical equipoise and should also be stopped early.
Dean: All participants have now been given the option to receive Winrever. We anticipate sharing data from the Hyperion study later this year.
Dean: The Clinical Benefit and Statistically Significant Improvement Observed across a range of patients receiving Windriver in the stellar and zenith study provide strong evidence for its potential to be practiced changing and to alter the trajectory for patients with this devastating disease.
Dean: The clinical program also includes the ongoing Long-Term Extension Study, SOTERIA, as well as the Phase II Light Ray Study, which is being conducted to support the development of an autoinjector option for patients.
Dean: In addition, the Phase II Cade & Study exploring the potential and pulmonary hypertension due to left-heart disease, a specific segment within WHO Group II has completed recruitment and is an on track for completion later this year.
Dean: We continue to bolster our portfolio candidates targeting cardiovascular disease. [inaudible]
Dean: In March, we announced an exclusive license agreement with Hungary, Pharma, for HRS 5346, an investigational or a small molecule like a protein A or LP-little A formation inhibitor.
Dean: Elevated Levels of L.P. Little A in the Blood are an inherited Afro-sclerotic cardiovascular disease risk factor for which there are currently no approved treatment options.
Dean: Hung Raid, recently initiated a Phase II clinical trial for HRS 5346 in China.
Dean: We are planning a robust global clinical development program that expands and complements our broader cardiometabolic pipeline.
Next, the vaccines.
Dean: We continue to secure regulatory approvals globally for Kav Vaxit. More recently, the European Commission granted approvals for active immunization for the prevention of invasive disease and pneumonia caused by streptococcus pneumonia in adults. The European Commission granted approvals for the prevention of invasive disease and pneumonia in adults.
Dean: This is based on safety and immunogenicity data from multiple pivotal studies in the program and is the fourth approval for a cat-backed building on prior approvals in the U.S.
Canada, and Australia.
Dean: Gartoso 9 was recently approved by the National Medical Products Administration of China to help prevent certain HPV-related cancers and diseases in males 16 to 26 years old, making it the first nine-valent HPV vaccine approved for certain males and females in China.
Dean: Bernie to HIV, detailed results from two pivotal phase three trials, evaluating adults with very logically suppressed HIV-1.
Who switched to the investigational one-staley Oral Fixed Those Combination of Draverine and Azotovir.
Dean: An investigational, nuclear side, reverse transcriptase, translocation, inhibitor, were presented at the conference on retrovirus and opportunistic infections in March. [inaudible]
Dean: In both trials, at week 48, Doraverine and his last room at the primary efficacy success criteria for non-inferiority to comparator anti-retro viral therapies and primary safety objectives.
The combinations of deravering and his Latvier is the first complete two drug regimen without an inter-graced brand transfer inhibitor.
Dean: to demonstrate comparable efficacy and safety to the three-drug INSTEAD-based regimen, VIC-TAR-V, in a Phase III trial. We plan to submit applications for marketing authorization to regulatory agencies by mid-year.
Dean: These data and additional programs evaluating longer acting regiments for treatment and pre-exposure prophylaxis underscore our ongoing commitment to find new options that address the evolving needs of people at risk of and living with HIV.
Moving to oncology.
Last month at the European Lung Cancer Congress,
Dean: We announced detailed findings from a pivotal phase 3 trial evaluating a six weeks dosing regimen of the investigational subcutaneous fixed dose combination of pemberalism and their hyaluronidase alpha with chemotherapy versus intravenous catruta with chemotherapy.
Dean: The study met its dual primary endpoints demonstrating non-inferior pharmacokinetics for subcutaneous Pemberlizabab versus intravenous Catruda. Consistent results were also reported for efficacy entering the endpoints across treatment arms.
Dean: The median time for administration of subcutaneous embryolizumab, given every six weeks, was approximately two minutes.
Dean: A meaningful reduction compared to the time needed to administer Katrina as an IV infusion.
Dean: Of note, at the American Association for Cancer Research meeting next week, data from another study evaluating a three-week dosing regimen will be presented.
Dean: The FDA has set up due for date of September 23 and the European Medicines Agency is reviewing the application. [inaudible]
Dean: We are seeking approval for both a 6-week and a 3-week dosing option.
Dean: If approved, Subcutaneous from Realizamab would provide an important option for health care systems and patients most notably for those in earlier stage settings where Katrina continues to have an unparalleled breath of approvals and a significant impact for patients. Thank you very much.
Dean: The FDA granted Priority Review for Extrude as part of a perioperative treatment regimen for patients newly diagnosed with stage 3 or 4A resectable. Locally advanced head and neck squamous cell carcinoma The FDA granted Priority Review for Extrude as part of a perioperative treatment regimen for patients
Dean: based on the keynote, 689 study, the Padufa date is June 23rd. This is the end of the video.
as a reminder. [inaudible]
Dean: This is the first trial in 20 years for patients with resected locally advanced head and neck, squamous Alcarcinoma, and the first phase three trial to show a statistically significant event-free survival benefit of neo-aggivant plus adjuvant therapy for newly diagnosed patients in this setting.
Dean: Earlier intervention had the potential to improve outcomes and reduce the burden of disease in this patient population.
Dean: Results will be submitted to regulatory agencies and, if approved, this will mark the 10th indication of a intruder-based regimen for the treatment of an earlier stage cancer.
Dean: Detailed findings will be presented at the American Association for Cancer Research Meeting next week, where it may be important to scrutinize the Kaplan Meyer plot for the divergence of the curves as a sign of event-free survival benefit.
Dean: Please mark your calendars for the evening of Monday June 2nd for an Investor event at the 2025 <unk> annual meeting in Chicago, where we will provide an update on pipeline progress and the latest on our oncology strategy.
Dean: Finally, we have a number of near term milestones to look out for this year, including an oncology upcoming <unk> dates for you know six eight nights in earlier stage head and neck squamous cell carcinoma in June.
Dean: Cutaneous Campbellism App in September in RSV, the upcoming Paducah for clothes rubber map in June and the cardio metabolic space anticipated results from three phase III registration, enabling studies evaluating our oral P. C. S. Canine inhibitor candidate Elisa type for the treatment.
Dean: A hypercholesterolemia and the scheduled fall primary completion date of the phase III cadence study evaluating when revere in pulmonary hypertension due to left heart disease.
Dean: Well as the final readout from the Phase III Hyperion study.
Dean: Lastly, in HIV filing for <unk> in Iraq, Zubair Regiment and results from the Phase Iia trial for MK eight five to seven a novel <unk> candidate as a potentially important once monthly or option for pre exposure prophylaxis.
Peter: <unk>, we continue to advance our pipeline and execute on our strategy with speed on rigor I look forward to providing further updates on our progress and now I turn the call back to Peter.
Peter: Thanks, Dean Dustin we're ready for Q&A, we request that analysts limit themselves to one question. Please.
Peter: Ladies and gentlemen.
Peter: Wish to ask a question. Please press star one on your phone.
Peter: Telephone keypad you may withdraw your question at any time by pressing star two.
Peter: If youre using a speakerphone, please pick up the handset before pressing the numbers.
Peter: Once again, if you have a question you May press Star one one moment. Please for our first question.
Speaker Change: Our first question is from Geoff Meacham from Citi Bank go ahead. Your line is open.
Speaker Change: Okay, great. Thanks, so much for the question.
Speaker Change: I guess I'll kick it off with the tariff question. So Rob I recognize it's hard to talk specifics, but maybe at a high level can you talk about merck's mitigating strategies as an offset you know whether it's a new capex cycle, whether it's changing the elements of the supply chain or even raising U S priced thanks, so much.
Rob: Yes, Jeff I appreciate the question and you know obviously Carolina spoke to the tariffs. We have included in our in our earnings so far the $200 million and just to be clear that relates to the existing tariffs that had been announced largely between China and the U S and to a lesser extent, Canada and Mexico.
Speaker Change: So I think you're really referring to the potential for further sector specific tariffs that could come in what we're doing and in that regard.
Speaker Change: We've been very focused and I tried to highlight this in the script, we've actually had started to change and rebalance our our supply chain strategy going back actually beginning with the tax cut and jobs Act, where we started moving more towards being able to have U S for U S Europe for Europe and.
Speaker Change: Asia for Asia, and we've been in the process of doing that that was a big part of where we announced that we've spent $12 billion since that time to date and then we expect to spend an additional nine plus billion dollars.
Speaker Change: Expect frankly that number is going to grow.
Speaker Change: Going forward. So we have already been in the process of changing our supply chain, but what we've done specifically.
Speaker Change: In the near term, we have I think done a good job of managing our inventory. So as you look at 2025, we are well positioned with inventory to be able to mitigate anything we could see in the short term and then in the medium to long term, we have already started to identify where we can either reposition our own manufacturing so change the.
Speaker Change: The priorities of existing plants bring on external manufacturing in some cases to bridge gaps and then finally to build internal manufacturing long term so that we have that.
And our base going forward, so really as I look at it short term I think we're in a good shape medium and long term, we are taking the steps to position ourselves and that really is our main efforts, we're not using and do not really see price as a lever.
Speaker Change: For tariffs.
Speaker Change: Just given there's always limitations and once you can do there so for us it's more about how do we optimize our supply chain, but again a lot of what we're doing now frankly, we were already underway and so in many ways. We are aligned with what the administration is wanting to do and feel that we're in a position to be able to do that.
Jeff: Quite effectively alright, thanks, Jeff next question. Please duston.
Speaker Change: Our next question is from Tim Anderson from Bank of America Go ahead. Your line is open.
Tim Anderson: Alright. Thank you. So I wanted to ask about long term guidance, Rob It was something I asked last quarter.
Tim Anderson: Wanted to ask again, so lots of concerns about keytruda going into IRA facing patent expiry at the end of 'twenty eight.
Tim Anderson: And then my view unless you guys kind of give clarity on what that means downstream at 28, My curious kind of continue to haunt us stocks and now trades at a single digit P. Multiple which is a level that Merck shares have not been other than once in the last 25 years.
Tim Anderson: Oh nine after you buy Schering plough, Oh, so last quarter when I ask that you seem to imply you might keep it at some point.
Speaker Change: I'm wondering where you are on that line of thinking as the stock continues to kind of drift lower thank you.
Speaker Change: Yeah. So Tim Thanks for the question you know what we tried to do at the Jpmorgan Conference and I think everyone is aware is really highlight the confidence we have in our long term by focusing on the strength of the pipeline I commented in our script that we have over 20.
Speaker Change: New products that we see coming over the next few years.
Speaker Change: Almost all of which have blockbuster potential and if you look at the totality of those as you look forward. This really makes up the bulk of what is the $50 billion plus potential we see out in the in the early to mid 2030. So I think that gives people a sense of what we're doing whether we go beyond that to give specific line by line guidance as <unk>.
Speaker Change: Now we do not have a plan to do that but we are continuing to evaluate it and we will take.
Speaker Change: Take a sense of where the majority of investors have a view on that many people frankly disagree with you that we've heard from.
Tim Anderson: Thanks, Tim next question please.
Luisa Hector: Next question is from Luisa Hector from Burma Go ahead. Your line is open.
Luisa Hector: Hello, Thanks for taking my question perhaps.
Luisa Hector: Perhaps you could comment on how much the Tianjin switching within the FDA and the HHS kidney as.
Luisa Hector: With reference to vaccines and the outlook there. Thank you.
Luisa Hector: Okay.
Dean: Yes. This is dean thanks for the question and specific relationship to the F D. A.
Dean: I'll just say we've listed programs with imminent do FID date, like <unk> keynote 689, and all of our our commuter.
Dean: Communications have suggested that they are all on track.
Dean: There was actually very active dialogue with FDA on programs with near term filings, including analyst Hittite and also for example, when we're there as we speak about potential label changes what we cant comment is is the mid to long term sort of impact of the many FDA personnel transitions and we will.
Luisa Hector: Just have to see and be very watchful for that but in the immediate <unk> date, and then the active dialogues that we've had on programs that we've been talking to them for the last year Youre in a half we haven't seen any shift in time lines great. Thanks. Luisa next question. Please duston.
Speaker Change: Next question is from Rod Mill demand from Guggenheim Securities Go ahead. Your line is open.
Rod Mill: Maybe again, just more of a macro big picture questions here at cube.
Speaker Change: One you mentioned business development the top priority I'm wondering if you can just sort of comment on the sort of environment. What does it tell me now given all the macro volatility and the unknown from tariffs et cetera.
Rod Mill: Hi.
Rod Mill: And just to do a.
Rod Mill: Larger deal or you may be more meaningful sized bolt on deals and also peanuts for seller side is there a willingness to kind of look in terms of any insight there would be appreciated.
Rod Mill: Second topic that comes up a lot and that was pretty good potential for international reference pricing of some sort.
Rod Mill: U S prices make it heightened.
Speaker Change: Hi can somebody to actually was pricing.
Speaker Change: That would be a lot of unknown there too, but just curious if you can comment on your perspective on that or any insights you might have on <unk>.
Speaker Change: You know on that potentially becoming a reality. Thank you.
Yeah, no. Thanks Shlomo for the questions.
Speaker Change: On the first question.
Speaker Change: Macro environment and what does it mean.
Speaker Change: From a business development perspective, maybe just to provide context to be clear our focus on business development is unchanged, our desire and belief that we need to continue to identify new science based opportunities to continue to build on the pipeline.
Speaker Change: Is unchanged and so our strategy continues as we look at the environment I mean, clearly the what's happening.
Speaker Change: Does it make it more complex to get things done because of the uncertainty everyone is wrestling with and we are doing everything we can to make sure. We reflect that as we think about value and what we are willing to pay and in that environment, but it's not stopping us from being aggressive in wanting to move forward and do deals as it.
Speaker Change: To the sellers.
Speaker Change: I'd say that we continue to see at least in the conversations we've had.
Speaker Change: A little bit of a disconnect between what is the reality of the market.
Speaker Change: The sellers space and what is the expectation for value that they have I don't think they are fully aligned to the realities, where we where we are today and so we continue to to move forward, but that is kind of environment, we seek and but I am confident that you are going to see us get some stuff done.
Speaker Change: As we move forward because we've got things in the queue that we're looking for and then as it relates to the most favored nations question No I don't want to speculate on.
Speaker Change: The administration might do specifically, but I would say generally.
Speaker Change: We recognize I recognize and I think the industry recognizes that the price differential that exist between the United States and the rest of the world on all four.
Speaker Change: <unk> innovative medicines needs to be addressed.
Speaker Change: We are open and willing to work with the administration.
Speaker Change: To do that and I think it's important that I would highlight a few areas that we see as kind of the focal areas first and foremost we.
Speaker Change: As an industry and Merck continued to believe PJM reform would be one important step if you look at the fact that over 50 cents of every dollar goes to somewhere in the middle of.
Speaker Change: The discovers and manufacturers only get less than half of every dollar.
Speaker Change: If we could find a way to bring more of that back to the patient at the pharmacy counter that could meaningfully.
Speaker Change: Reduce prices in the U S that would be an important step to do to lessen the differential and then secondly, and.
Speaker Change: And I agree with there was I think you probably saw the recent commentary from some of my peers, but I agree with the fact that we have to continue to encourage foreign governments to understand that they need to get fair value for the innovation, we bring and that they would give access to their patients. So that we can bring the medicines to them.
Speaker Change: And it's at prices that reward us for the risk and the innovation that we have and I think that that's also an important element we are spending time.
Speaker Change: Individually as a company and along with our other industry peers.
Speaker Change: Promoting that point everywhere, we can around the world and.
Speaker Change: And we will continue to do that and then as I mentioned lastly, we're very open to working with the administration to find solutions to address this but the important thing is we need to make sure we protect access in the United States and we protect the innovation engine, we have and the jobs it creates and the strength of this <unk>.
Speaker Change: Industry is an important contributor to the United States, We don't want to lose the leadership we have in this important field and that's what we're trying to advocate for as we work with the administration.
Speaker Change: Thank you Bob next question please.
Speaker Change: Next question from Chris Schott from Jpmorgan go ahead. Your line is open.
Chris Schott: Okay. Great. Thanks, So much just had one question just a quick follow up on an earlier one other question can you just talk about gardasil and the potential to move to a single dose in the U S. B. It shouldn't your thoughts on the potential for a CDC recommendation here and <unk> ability to potentially just price and such an outcome.
Chris Schott: My follow up was just on the manufacturing and kind of longer term tariffs.
Chris Schott: Mitigation efforts should we think about those efforts mostly focused on new products in pipeline or is there also an ability to address legacy products such as keytruda with those longer term efforts. Thank you.
Chris Schott: Yeah, Chris Thanks for the question, let me address the Gardasil reduce dosing and I think you're specifically, referring to ACI P and.
Chris Schott: Potential deliberations in relationship to reduce dosing and I don't want to speculate what the ACI P may do but I just want to emphasize that we are extremely confident in the safety and efficacy.
Chris Schott: Gardasil nine and in the dosing regimen and I would just emphasize we have had clear.
Chris Schott: Perm.
Chris Schott: Assistant and recent.
Chris Schott: Guidance from the FDA on what would require for the licensure of our reduced dosing of our single dose. They are very clear on the high evidentiary standards. They pointed out to us that it must be efficacy against disease endpoint not just infections you must have data in mail.
Chris Schott: And females, recognizing that HPV related head and neck and males is is actually greater here in the United States than cervical cancer.
Chris Schott: Emphasized to us high statistical bar and they emphasized to us long term durability of protection.
Chris Schott: The FDA is incredibly up to date and aware of the limitations of existing trials and none meet the criteria for them to have a label change. So there appears to be a disparity between the stringent clinical requirements outlined by the FDA and some of the proposals.
Chris Schott: In front of the ACI P. So what we are hopeful is that there will be a robust.
Chris Schott: Discussion.
Speaker Change: And interrogation in a public setting in relationship to the clear disparity in the evidentiary standards set by US set by the FDA to us and the options at the AC IP is is considering Caroline did you want to answer the other question, yes. So in terms of should see.
Speaker Change: ICI P look towards any different type of dosing regimen, we saw.
Speaker Change: Firmly behind the value that <unk> brings in preventing certain HPV related cancers, and we will be looking to ensure that that cost effectiveness is understood as we appropriately price the vaccine.
Speaker Change: Did you want to touch on the second question as well, which is a manufacturing in Columbus, Oh, Yeah, sorry about that I was enjoying your answers so much [laughter] forgot the question sorry about that.
Chris Schott: Chris to your question about the manufacturing it's really both so clearly we are very focused on new products.
Chris Schott: Some of which we already have in the United States, others, we're gonna be moving to bring them to the United States, but we also were very focused on keytruda as you probably can surmise.
Chris Schott: Our biggest exposure is keytruda in the near term, but I feel very good that as we sit here today with as I mentioned, the fact that we have.
Chris Schott: Basically on hand inventory in the United States to protect us through all of 2025, and then we've taken steps to be prepared both from a drug substance and drug product as we move into 2026 and 2027, we're as well positioned as you could be through both the short term actions on inventory as well as securing.
Chris Schott: Additional manufacturing in the United States, both through contract manufacturers and then we are already underway to go to our own internal manufacturing. So we're well positioned on Keytruda is you can be obviously, we have to wait and see what the tariffs are so I don't want to speak to the specific implications because it depends on the form they take but I think.
Chris Schott: We're positioned on both Keytruda and the new products. Thank.
Chris Schott: Thank you Chris next question please.
James Chen: Next question is from James Chen from Deutsche Bank Go ahead. Your line is open.
James Chen: Good morning. Thank you for the question one for Rob Rob you've already disclosed a healthy amount of U S. U S investments, but is there a need for more or room for more U S. Capex and is it pending U S tax reform and then one for Dean has the recent PD one veg F. Datasets made you and your team want to accelerate or maybe allocate more resource.
James Chen: L M 290 Nine's development. Thank you.
James Chen: Yes.
James Chen: Yeah. Thanks, Thanks for the question so as we sit here today.
James Chen: As we mentioned between the 12 billion, we've done plus the.
The $9 billion plus we have underway. So we're gonna be looking at you know north of $21 billion. Since 2018, as we look over the next few years I actually think over time, you're going to see that grow.
James Chen: As we continue to because thats based on the decision firm decisions. We've already made so that doesn't include.
James Chen: An expectation that's actually firm decisions and as we think about bringing back manufacturing I think you actually will see that number grow the tax environment. Obviously, we have to think holistically about all of this but theres not going to affect how we think about investment. We think we can both do the necessary investments and manage our tax position.
Speaker Change: Yeah in relationship to the PD, one veg F question, I think you're referring to that I think it's the harmony two and six sort of readout. That's come up one of the things that's actually very consistent that I think the field is looking for is whether any advancement in relationship to PFS over a single PD one.
Speaker Change: Can be translated to an OS and whether something that's in a China only study can be done globally, having said that.
Speaker Change: We we embrace the advancements in the field and we think Keytruda sets a high bar with 41 indications across 18 tumor tax as you know we have our own PD, one veg F and we will gate our decisions in relationship to this at our data and other data.
Speaker Change: A box, but as you point out we believe strongly that we are the advantage owner given clinical expertise extensive data generated and that in some sense. We have both the keytruda and a leap playbook and we would tend to move with speed and vigor. Most importantly, or equally important is it's good that PD one.
Speaker Change: Jeff So that OS benefit we also have an advantage of having unique portfolio agents.
Speaker Change: Clear a clear potential for combined ability. So we are looking at our own data and the data in the field as we make those decisions.
Speaker Change: And maybe I would just want to add that you know should the bispecific be successful you know I think you can expect the impact to us because of this is likely to come.
Speaker Change: Frankly, probably post the although we have keytruda is pretty small if you look across.
Speaker Change: Non small cell lung cancer, where potentially.
Speaker Change: The competitors that could be coming by that time, we will only be mid teens of our business Max and remember we're very hard we're working very diligently.
Speaker Change: Diligently to convert people to the earlier stage setting and as we do so they don't have an indication there so from that perspective, the risk to us is minimal, but I think what I really want to emphasize the opportunity is significant.
James Chen: And I think that's the point that Dean is trying to make I think this could be frankly, a really good thing from a long term great. Thanks. James next question. Please.
Next question from Steve Scala from TD, calling go ahead. Your line is open.
Steve Scala: Thank you so much regarding gardasil growth slowed down globally, which seems to be a new disclosure.
Steve Scala: What new information emerged since Q1, when the company spoke to growth in each and every market is there still a line of sight to 11 billion, which was repeated on the Q4 call and is 2025 still the trough year. Thank you.
Steve Scala: Thank you Steve for the question first the information that we're providing with regards to the opportunities to grow gardasil outside of China is not what we are highlighting however, it's a very effective execution by our colleagues in Japan.
Steve Scala: It's a catch up cohort program, but and on the 31st of March of this year and as a result of that engine. We expect our sales in Japan to reflect the primary age cohort and therefore be reduced from quarter. Two onwards, what we have achieved over the prior.
Steve Scala: At Cortez as we look to Gardasil globally. This year, we expect China to be a headwind. We had said previously with regards to China, We will assess do we or do we not ship further product. This year at the midpoint of this year and we will do that assessment.
Steve Scala: At the midpoint of this year, however, expect given the current dynamics in China, but is it is not likely that we will ship the product in China and that is actually an outcome that is incorporated into the midpoint of our guidance all of that said we do.
Steve Scala: Loan growth, excluding China strong double digit we've achieved in the first quarter and we expect continued strong growth as we go through the remainder of the year in terms of the longer term guidance.
Steve Scala: With all of the $11 billion target last quarter, given the fact that China was an important part of the achievement of that $11 billion. Our company remains focused and on the ground in China to maximize the opportunity and maximize the launch in males.
Steve Scala: We're working across the entirety of the wild protect many more lives from HPV related cancers and drive Thrus for our business as we move forward.
Steve Scala: Alright, Thanks, Steve next question please.
Speaker Change: Next question is from Alex Hammen from Wolfe Research go ahead. Your line is open.
Alex Hammen: Thanks for taking the question.
Speaker Change: So during the ATI P mean, he spoke about adjusting our wording for the HPV recommendation from 11 to 12 years old but eligible at nine to recommendation to nine to 12.
Speaker Change: It should be voted on at the June meeting how important do you see this wording update to an impact to your U S sales and from your Doctor checks do you see the broader recommendation being a material tailwind. Thank you.
Speaker Change: Yeah. Thanks for the thanks for the question as we are.
Speaker Change: Look at what is the potential recommendation that could come in June to your point.
Speaker Change: Appears that we could see them extend the recommendation to nine years old and up we actually view that as a very important and positive development because of the fact that one as you look at.
Speaker Change: Adolescence were being vaccinated in their early teens to the extent that they will need multiple vaccinations, it's harder to get the fulfillment of the whole vaccination schedule. If you started nine we're more apt to see people complete the schedule, which is a positive and then in addition, our nine years old you rather time when there was not a.
Speaker Change: A lot of other vaccines happening vaccinations happening and so there can be a focus on the gardasil vaccination at a time when it's I think easier.
Speaker Change: Easier for the family to prioritize and focus on it. So we do see it as a positive I wouldn't view it as a big upside to the U S. We've kind of.
Speaker Change: Always viewed that this was an evolution that will be important and in fact, while this will be an important recommendation. It's already approved in that age cohort today and in fact, you do see vaccinations happening. This recommendation this reinforces it because it's coming from the CIP.
Alex Hammen: Great. Thanks, Alex next question please.
Speaker Change: Next question from Nomura <unk> from Evercore go ahead. Your line is open.
Rob: Thanks for taking my question I have a simple one perhaps if I may I'm, Rob are you intending to keep the IP for Keytruda sub Q here in the U S. Rather in Ireland as we head towards the potential approval. Thank you.
Speaker Change: Yes.
Speaker Change: I don't think we've ever disclosed where the IP is for for sub Q.
Speaker Change: I don't want to get into a discussion of that so well.
Speaker Change: Ill.
Speaker Change: Prefer not to speak to that just for proprietary reasons.
Speaker Change: Next question please.
Speaker Change: Next question is from Rockies to wherever you're from Jefferies. Go ahead. Your line is open.
Speaker Change: Hey, guys.
Speaker Change: So a few admittedly unfair questions on tariffs.
Speaker Change: One is a 25% tariff a reasonable expectation or do you expect that headline number to be higher what is your confidence that if they do get an ounce they'll at least be administered thoughtfully, whether its gradual implementation or expedited regulatory process can move manufacturing to the U S quickly and then finally, let's say they end up being 25% could be.
Speaker Change: Impact to Merck with reasonable mitigation efforts b and the kind of single digit range on earnings on a percent basis. Thanks, so much.
Speaker Change: No I. Appreciate the question you know I don't want to speculate on what the tariffs could be because we need to see what the languages from the administration I think the important point is as I previously stated.
Speaker Change: You have taken the steps both in terms of inventory management for the short term as well as starting to reposition manufacturing for the medium and long term, but I think we're well positioned.
Speaker Change: Most scenarios if they could they could come through but the specifics you're looking for I don't want to speculate because we need to see what it is.
Speaker Change: Next question please.
Speaker Change: Next question is from Mohit Bansal from Wells Fargo Go ahead. Your line is open.
Speaker Change: Great. Thank you very much for taking my question I have a question regarding.
Speaker Change: The BD strategy, what we have seen lately is that.
Speaker Change: You have acquired a bunch of assets from China.
Speaker Change: I mean.
Speaker Change: I completely understand the cost effectiveness of them, but at the same time it doesn't seem like the odd.
Speaker Change: Right.
Speaker Change: You have the first mover here the trop two gig LP little a and even <unk> PD, one so like why doesn't it feel like more or less.
A company like Merck is chasing the front runner scatter versus trying to be something that don't do something you know they do.
Speaker Change: Would love to understand the thought process there. Thank you.
Speaker Change: Yeah, I'll take that question first.
Speaker Change: So first of all I would remind us that I would sit there and I would consider.
Speaker Change: Celeron purchase and when we're there as bringing upfront leading molecule.
Speaker Change: I would also sit there and consider that the move to <unk>.
Speaker Change: And to the so-called Bart would would be that as well and I would reemphasize my excitement of R. R.
Speaker Change: Our acquisition of <unk>.
Speaker Change: I O in.
Speaker Change: In relationship to wet AMD and diabetic macular edema I should also emphasize that when you talk about certain compounds, let's say and L. P. Little a R. G. L. P. I would remind you also that we believe that we have we have an ambition to have the first and best World Tcs canine it will be firsthand.
Speaker Change: Market.
Speaker Change: It'll be the most effective we're very competent in the cardiovascular outcomes, but we're also very confident in its ability to combine with certain agents. So when you look at some of the BD I might not look at it as.
Speaker Change: In isolation of the rest of it.
Speaker Change: Of the pipeline I think that there are certain combinations that would be incredibly innovative that would require a combination but some of the innovation of the base of that innovation comes from comes from our company.
Speaker Change: And it's a coordinated one pipeline external internal pipeline fusing into a final product.
Speaker Change: Rob did you want to add anything.
Maybe just to reinforce I think a couple of points. We've been I think very balanced Dean gave some great. Examples of where we were we were first in class and frankly best in class. We're also looking at other strategy, where we might not be first but we still think we can be best in class. So I think you have to look at the total of the portfolio and not.
Speaker Change: Just the most recent.
Speaker Change: The three deals we've done and I actually think you'll see us continue to do a range of opportunities, which cover the full spectrum because as we look at it it's about how do we position ourselves for growth and in some cases.
Speaker Change: And some of these therapeutic areas, we think theres still unmet need I mean, dean highlighted a little bit but obesity. There is there is an opportunity for a next waves.
Speaker Change: Depending on what comes with the PD one bad jobs that can be a next wave were frankly, when you combine it with other agents. We have we could we could lead as well. So I don't think that's a fair characterization and I would urge you to think more important in terms of the total portfolio.
Speaker Change: Great. Thank you very much I think that puts us past the hour. So very much appreciate your time and attention. This morning, and if you have any.
Speaker Change: Additional questions. Please reach out to IR. Thank you all very much. Thank you.
Speaker Change: That concludes today's conference. Thank you for participating you may disconnect at this time.