Q2 2025 Merck & Co Inc Earnings Call

Unknown Executive: Welcome to the Merck & Co, Inc., Raleway, New Jersey, USA Q2 Sales & Earnings Conference Call. At this time, all participants are in a listen-only mode until the question-and-answer session of today's conference. At that time, to ask a question, press Star 1 on your phone and record your name at the prompt.

Unknown Executive: This call is being recorded. If you have any objections, you may disconnect at this time.

Peter Dannenbaum: I would now like to turn the conference over to Mr. Peter Dannenbaum, Senior Vice President, Investor Relations. Sir, you may begin. Thank you, Shirley, and good morning, everyone. Welcome to the second quarter 2025 conference call for Merck & Co Inc. in Rahway, New Jersey, USA.

Thank you for standing by, welcome to the Merkin Company Inc, Rahway New Jersey USA, Q2 sales and earnings conference call. At this time, all participants are on the list and only mode until the question and answer session of today's conference. 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 conference over to Mr. Peter Dannenbaum, Senior Vice President, Investor Relations. Sir, you may begin.

Peter Dannenbaum: 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 Research Labs. 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.

Thank you, Shirley and good morning everyone. Welcome to the second quarter 2025 conference call for American company. Incorporated, Rahway New Jersey USA.

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 research labs

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 our company's management and are subject to significant risks and uncertainties. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

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.

I will also remind you that some of the statements that we make today may be considered forward-looking statements within the meeting of the Safe Harbor. Provision of the US private Security's litigation, Reform Act of 1995

Peter Dannenbaum: Our SEC filings, including Item 1A and the 2024-10-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.

Peter Dannenbaum: Merck & Co, Inc., in Robben, N.J., U.S.A. 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. The 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.

that statements are made based on the current beliefs of our company's management and our subject to significant risks and uncertainties. If our underlying assumptions prove an accurate or uncertainty is materialized actual results. May differ materially from those set forth in the forward-looking statements, our FCC filings, including item, 1, a and the 2024 10K identify certain risk factors and cautionary statements that could cause the company's actual resolved to different materially from those projected, in any of our 4 looking statements made this morning, American company, incorporated Robin, New Jersey, USA undertakes, no obligation to publicly update, any 4 looking statements,

Rob Davis: With that, I'd like to turn the call over to Rob.

During today's call, slide presentation, will accompany our speakers prepared remarks, these slides, along with the earnings release today's prepared remarks, and our FCC 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 Davis: Thank you, Peter. Good morning, and thank you for joining today's call. We continue to make meaningful progress in delivering our important medicines and vaccines to patients and customers while advancing our innovative pipeline. Over the past few months, we've shared a steady cadence of updates that highlight our strong clinical momentum. And our growth is increasingly benefiting from new product launches now underway with more to come. We've also taken additional steps to augment our pipeline. Our recently announced acquisition of Rona Pharma is another example of acting decisively when science and value align. and moving with urgency to achieve our business development objectives.

Thank you Peter. Good morning. And thank you for joining today's call.

We continue to make meaningful progress in delivering our important medicines and vaccines to patients and customers while advancing our Innovative pipeline,

Over the past few months, we've shared a steady cadence of updates that highlight our strong clinical momentum.

And our growth is increasingly benefiting from new product launches. Now underway,

With more to come.

We've also taken additional steps to augment our pipeline.

our recently announced acquisition of Verona Pharma is another example of acting decisively when science and value aligned

Rob Davis: I have increasing confidence that our science-driven strategy will continue to generate long-term value for shareholders and for all of our stakeholders.

And moving with urgency to achieve our business development objectives.

I have increasing confidence that our signs driven strategy will continue to generate long-term value for shareholders.

Rob Davis: Turning to our second quarter results. We delivered performance in line with our expectations. with revenue of $15.8 billion. Results reflect strength across oncology and animal health. As well as increasing contributions from our new product launches, with Ren Revere achieving $1 billion of cumulative sales in just over a year since approval. We expect to return to growth in the second half of 2025 and remain confident in our outlook for the remainder of the year. I'm proud of the tangible progress we're making in expanding and advancing our research program across key therapeutic areas. We're now conducting more than 80 phase 3 studies across a range of therapeutic areas.

and for all of our stakeholders,

Turning to our second quarter results.

We delivered performance in line with our expectations, with revenue of $15.8 billion.

Results reflect strength across oncology and Animal Health.

As well as increasing contributions from our new product launches, Win River has achieved $1 billion in cumulative sales in just over a year since approval.

We expect to return to growth in the second half of 2025 and remain confident in our outlook for the remainder of the year.

I'm proud that the tangible progress, we're making in expanding and advancing our research program across key therapeutic areas.

Rob Davis: And we're increasingly seeing the potential we've long spoken about validated with positive clinical trial results.

We're now conducting more than 80 phase 3 studies across a range of therapeutic areas.

And we're increasingly seeing the potential, we've long spoken about.

Rob Davis: Registrational Filings, and New Product Launch. These proof points provide me with growing confidence. that we're on track to achieve our ambition.

Validated with positive clinical trial results.

Registrational filings and new product launches.

Rob Davis: Moving to some notable recent news. We announced encouraging top-line results from the first two Phase III trials evaluating Competing approaches, and enlisting opinions as necessary. Our old PCSK9 inhibitor. for the treatment of hyperlipidemia. And for Winn-Revere, based on the Hyperion study for patients recently diagnosed with PAA. On the regulatory front, the FDA approved, and the ACIP recommended, influenza for the prevention of RSV in infants younger than 8 months of age who are born during or entering their first RSVC. We're well prepared to support families ahead of the upcoming Additionally, the FDA has accepted our supplemental BLA for Wenriver and PAH, and a new drug application for the fixed-dose combination of darabarine and esloctavir for the treatment of HIV.

To achieve our ambitions.

Moving to some notable recent news.

We announced encouraging Topline results from the first 2 phase 3 trials, evaluating elicited.

Our old pcsk9 inhibitor.

For the treatment of hyperlipidemia.

And for when Reaver based on the Hyperion study for patients recently diagnosed with PAW.

On the regulatory front, the FDA approved and the acip recommended influenza for the prevention of RSV and infants younger than 8, months of age, who are born during or entering their first RSV season.

We're well prepared to support families ahead of the upcoming season.

Rob Davis: At the IAS conference earlier this month, we highlighted new findings from our Promising HIV Pipeline. And we're excited about MK 8527. which has the potential to be the first once-monthly pill for HIV prevention. We also hosted an investor event to showcase our HIV programs and the important commercial opportunity they represent.

Additionally, the FDA has accepted our supplemental bla for Win, River in Paw and a new drug application. For the fixed dose combination of Dara and his locker beer for the treatment of HIV.

at the IAS conference earlier this month,

We highlighted new findings from our promising, HIV pipeline.

And we're excited about MK-8527.

Which has the potential to be the first once-monthly pill for HIV prevention.

We also hosted an investor event to showcase our HIV programs.

Rob Davis: Our oncology pipeline continues to break new ground. We marked the 10th earlier stage approval for Keytruda, and at ASCO, presented encouraging data across multiple novel candidates, further reinforcing the potential of our portfolio to help even more patients with cancer. Finally, the acquisition of Verona Pharma brings us O2VERE, a novel first-in-class treatment for chronic obstructive pulmonary disease, or COPD, that complements our growing cardiopulmonary program and reflects our commitment to transformative science in areas of significant unmet need. Upon closing in the fourth quarter, we'll leverage our commercial capabilities to accelerate Otavera's successful launch and look forward to welcoming the Verona Pharma team to our Overall, we are encouraged by our continued progress.

And the important commercial opportunity. They represent

our oncology pipeline continues to break new ground. We Mark the 10th earlier stage approval for katuda and at ASCO presented encouraging data, across multiple novel candidates. Further reinforcing the potential of our portfolio to help even more patients with cancer.

finally the acquisition of Rona brings us to their a novel first in class treatment for chronic obstructive pulmonary disease or COPD that complements our growing cardio pulmonary program and reflects our commitment to transformative science in areas of significant unmet need

upon closing in the fourth quarter, we'll leverage our commercial capabilities to accelerate oshiverse successful launch

Forward to welcoming the Verona Pharma team to our company.

Rob Davis: Each of these impactful milestones is an important building block as we move toward a more diversified future. As I've said before, our company is entering a period of rapid transformation, which will be marked by meaningful impact on patients and the practice of medicine.

Overall we are encouraged by our continued progress. Each of these impactful Milestones is an important building block as we move toward a more Diversified future.

Rob Davis: And we couldn't be more excited about our Over the past several years, we've built the largest and most diverse pipeline in our company's recent history. We have over 20 new and potential future growth drivers, including the successful recent launches of WinRiver and Catback. We also have numerous novel late phase compounds with potential for significant patient benefit and blockbuster commercial opportunities. Candidates such as Elisa Tide, Elisa Tebart, Sac TMT, and MK 3000, to name a few, represent potentially profound scientific advances, exactly the types of innovations that Merck is known We're committed to fully investing behind our pipeline, given the tremendous opportunities we see, and we'll continue to do so with sharp focus and discipline for the benefit of the patients we serve.

As I've said before, our company is entering a period of rapid transformation, which will be marked by meaningful impact on patients and the practice of medicine.

And we couldn't be more excited about our future.

Than most diverse.

Future growth drivers, including the successful recent launches of Win, River, and capacitive.

We also have numerous novel, late, phase compounds with potential for significant patient benefit and Blockbuster commercial opportunity.

Candidates such as Enlisted, the list of key Bart.

TMT and MK, 3000 to name a few represent. Potentially profound scientific advances, exactly. The types of innovations that murk is known for.

We're committed to fully investing behind our pipeline given the tremendous opportunities. We see. And

We continue to do so with sharp Focus.

Rob Davis: Today, we announced a multi-year optimization initiative which will redirect investment and resources from more mature areas of our business to our burgeoning array of new growth drivers, further enable the transformation of our portfolio, and drive our next chapter of productive, innovation-driven growth.

and discipline for the benefit of the patients, we serve

Today we announced a multi-year optimization initiative which will redirect investment and resources for more mature, areas of our business, to our burgeoning array of New Growth, drivers further, enable the transformation of our portfolio.

Rob Davis: Caroline will provide more detail on this in just a moment. In summary, we're leveraging our scientific expertise to deliver the next wave of innovation that can save and improve lives around the world. My confidence in our ability to successfully navigate the protruded LOE period increases with each new launch, data readout, and business development transaction.

And drive our next chapter of productive innovation-driven growth.

Caroline will provide more detail on this in just a moment.

In summary, we're leveraging our scientific expertise to deliver the next wave of innovation that can save and improve lives around the world.

Rob Davis: I continue to see the LOE as more of a hill than a cliff, and I am confident in our ability to grow over the long term.

My confidence in our ability to successfully navigate the Cruda LOE period increases with each new launch data readout and business development transaction.

Rob Davis: I want to thank our talented and dedicated global team for their hard work and commitment to delivering value for patients, shareholders, and for all of our stakeholders.

I continue to see the LOE as more of a hill than a cliff and I'm confident in our ability to grow over the long term.

Caroline Litchfield: With that, I'll turn the call over to Caroline. Thank you, Rob. Good morning. As Rob noted, second quarter performance was in line with our expectations. I am pleased to again report that the fundamentals of our business remain strong. Continued robust global demand for our diverse, innovative portfolio of human and animal health products. Our commercial and operational execution enables us to generate value in the short and advance our pipeline for the long term. To deliver value for all states.

I went to thank our town of indicated Global team for the hard work and commitment to delivering value for patients shareholders. And for all of our stakeholders,

With that, I'll turn the call over to Caroline.

Thank you rob. Good morning.

As well, noted.

There are expect.

I am pleased to again report that the fundamentals of our business remain strong, with continued robust global demand for our diverse, innovative portfolio of human and animal health products.

Caroline Litchfield: We are now turning to our second quarter results. Total company revenues were $15.8 billion, a decrease both nominally and excluding the impact of foreign exchange. As expected, results were impacted by a decline in sales of Gardasil in China of approximately $1.3 billion. Producing growth by 9% Excluding these global growth with Primarily driven by strength in oncology and animal health, as well as new products, Winn-River and Capfexiv, which are each off to an outstanding start. will be on an ex-exchange basis. In Oncology, cells of Keytruda increased to 9% Transcribed by Transcription Outsourcing, LLC. and increased uptake in earlier stage attempts.

enables us to generate value in the short term while we invest in the next generation of Innovations and Advance our pipeline for the long term to deliver value for all stakeholders,

now, turning to our second quarter results,

Total company revenues were 15.8 billion. A decrease of 2% both nominally and excluding the impact of foreign exchange.

As expected results were impacted by a decline in sales of Garder. Still in China of approximately 1.3 billion dollars reducing growth by 9 percentage points,

Excluding these sales Global growth was 7%. Primarily driven by strength in oncology and Animal Health as well as new products when repair and kept effective, which are each of us to an outstanding start,

The following Revenue comments will be on an ex exchange basis.

Caroline Litchfield: Usage in tumours predominantly affecting women. Including those with certain breast, cervical and endometrial cancers was a key contributor to growth. In combination with PEDCEF in frontline locally advanced urocelial cancer. We also received positive feedback from health care providers following the recent launch of a treatment regimen with Cretruda for certain conditions. Based on Keynote 689. This is the first period. Our broader oncology portfolio achieved another quarter of strong growth. Of note, well-erected cells increased 29%... $162 million, predominantly driven by increased use in certain areas. In vaccines, Gardasil sales were $1.1 billion, a decrease of 55%, driven primarily by Reflecting the exploration of reimbursable...

In oncology, sales of Keytruda increased 9% to $8 billion, with growth in both U.S. and international markets driven by robust demand from metastatic indications and increased uptake in earlier stage IT cancers.

Usage in tumors predominantly affecting women including those with certain breasts cervical and endometrial. Cancers was a key contributor to growth

In addition we saw increased use of keytruda in combination with pads theft in first line locally Advanced, urothelial cancer.

We also received positive feedback from Healthcare Providers following the recent launch of a treatment regimen with creatura for certain patients, with respectable locally Advanced head and neck cancer based on keynote 689.

This is the first perioperative anti-PD-1 regimen approved for the treatment of patients with this disease.

Our broader oncology portfolio achieved another quarter of strong growth of note. Well erect sales increase 29% to 162 million predominantly driven by increased use in certain patients with previously treated Advanced renal cell carcinoma in the US.

In vaccines guarded, still sales will run 1.1 billion dollars, a decrease of 55% driven primarily by China.

Caroline Litchfield: Catch-Up Cohort, and Timing of Public Sector Purchases in Certain International Markets. Bell's growth of 2% in the U.S. was attributable to price and higher demand, partially offset by... In New McCorkle, tabfaxid sales were $129 million, driven by demand from both retail pharmacies and non-retail customers. Including Integrated Delivery Network We remain welc- In the U.S., growth benefited by approximately Partially offset by competitive pressure. The benefit to Vax'n'Vax was offset by a drawdown of CDC stockpile income. for Rototech and Ferris. Outside the US, growth in certain international markets was offset by a competitor preferential Following the recent FDA approval and ACIP recommendation, we are excited to have started taking orders for inflond For more information visit www.fda.gov Our Monoclonal Antibody for the Prevention of RSD Lower Respiratory Tract Disease in Infants Entering Their First RSD Test.

Excluding China sales declined 4% due to lower sales in Japan, reflecting the expiration of reimbursement for the catch-up cohort and timing of public sector purchases in certain International markets.

sales growth of 2% in the US was attributable to price and higher demand, partially offset by CDC purchasing patterns

In new mcoco have effective sales will 129 million driven by demand from both retail pharmacies and non- Retail customers, including integrated delivery networks and Clinics.

We remain. Well, positioned to help protect more results from invasive, new Macco disease and drive. Continuous growth moving forward.

Back new Vance sales, increase 20%.

In the US growth benefited by approximately 60 million dollars from CDC stockpile activity, partially offset by competitive pressures.

The benefit to Vexing Vance was offset by a drawdown of CDC's stockpile inventory for Rotate Tech and Fairfax, resulting in a net neutral transaction.

Outside the U.S. gross, in certain international markets, was offset by a competitor's preferential recommendation in Japan.

Caroline Litchfield: Influences compelling clinical data and operational make it an important option for parents and providers. We have made great progress in achieving the milestones nec- RSC Lower Respiratory Tract In cardiovascular, Wiener Affair continued its strong with global sales of $336 million. As Rob noted, in just 15 months... Cumulative net sales of Winner Affair have already exceeded $1 billion. is a testament to both the impact Ring of Fair Had Harmony Arterial Our Ability to Pair Leading-Edge Science with Execution Experts. In the U.S., more than 1,600 new patients received a prescription during the quarter. We are continuing to see a steady increase in the percentage of new prescriptions.

Following the recent FDA approval and ACIP recommendation, we are excited to have started taking orders for Influenza our Monicon antibody for the prevention of RSV lower respiratory tract disease in infants entering their first RSV season.

In France, there is compelling clinical data and operational simplicity, making it an important option for parents and providers.

We have made great progress in achieving the milestones necessary to help ensure a successful launch and are well-positioned to help protect infants from RSV lower respiratory tract disease.

As Rob noted, in just 15 months since launch, cumulative net sales of WinRepair have already exceeded $1 billion.

This achievement is a testament to both the impact winner of their heads for patients with pulmonary, arterial hypertension and our ability to pair Leading Edge science with execution Excellence, even in disease areas that are new to us.

In the US more than 1600, new patients received a prescription during the quarter.

Caroline Litchfield: Background Therapies do not include a prosthetic eye. Outside the U.S., we continue to progress with approvals and reimbursements. Including in Japan, where we expect a launch later in the third quarter. Overall, the ongoing launch of WinRevere continues to meet our higher...

We are continuing to see a steady increase in the percentage of new prescriptions for patients, whose background therapy. Do not include a proper cycling.

Outside the U.S., we continue to progress with approvals and reimbursement, including in Japan, where we expect a launch later in the third quarter.

Caroline Litchfield: And we look forward to positive...

Caroline Litchfield: © The Bulletproof Executive 2013 Our Animal Health Delivered very strong growth, with sales increasing 11%. Livestock growth reflects higher demand across all... As well as sales from the Acra portfolio acquired from... Companion Animal Sales Growth Reflects Price Growth in both segments also benefited from improved supply.

Overall, the ongoing launch of winre continues to meet our high expectations and we look forward to positively impacting the lives of more patients with pah.

Our Animal Health business delivered very strong growth, with sales increasing 11%.

Livestock growth reflects higher demand across all species as well as sales from the aqua portfolio acquired from elango.

Companion. Animal cells growth, reflects price.

Caroline Litchfield: I will now walk you through the remainder of our P&L and my comments will be on a non-GAP basis. An increase of 1.3 percentage points driven by favorable products. © The Bulletproof Executive 2013 Excluding this charge, operating expenses grew 4%, reflecting disciplined investment .

Growth in both segments. Also, benefited from improved Supply

I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis.

Growth margin was 82.2% and increase of 1.3 percentage points driven by favorable product mix.

Operating expenses increased to 6.6 billion dollars, including a $200 million charge related to the license agreements with Hungary.

Caroline Litchfield: Thank you for watching. Our tech suite. Taken together, earnings per share were $2.00 Turning to our As Rob noted, our company is rapidly moving to a future with a diversified set of growth drivers. We have a compelling array of novel pipeline As a result of our study. To ensure we are well positioned to maximize the many opportunities in front of us.

Excluding this charge, operating expenses grew 4%, reflecting disciplined investments in support of our robust early and late-phase pipeline, as well as key growth drivers.

Other expense with 54 million.

Our tax rate was 15%.

Taken together, earnings per share were $2.13.

Turning to our Outlook.

As Rob noted, our company is rapidly moving to a future with a diversified set of growth drivers each with the potential to address. Important unmet patient needs

We have a compelling array of Novel pipeline candidates as a result of our steadfast commitment to Innovation and our long-standing efforts to invest with discipline.

Caroline Litchfield: We have announced a multi-year optimization program. Portfolio Management Program will enable us to fully reinvest $3 billion of cost For more information visit www.fema.gov from lower growth areas. It will also allow us to leverage technological advancements. taken together, our overall invest © The Bulletproof Executive 2013 We are confident these actions will position us to deliver value for patients, customers, and shareholders. as well as drive long-term growth.

To ensure we are well positioned to maximize the many opportunities in front of us. We have announced a multi-year optimization program

This portfolio Management program will enable us to fully reinvest 3 billion dollars of cost savings from lower growth areas of our business the higher potential areas in order to have Maximum Impact.

It will also allow us to leverage technological. Advancements to enable productivity and streamline our operations.

Taken together, our overall investment will continue to increase, a reflection of the many compelling opportunities we have.

Caroline Litchfield: Now turning to our 2025 Non-Gap Guide. We expect full year revenue. This range represents growth of 1.5% of approximately 0.5% using mid-July rates. Our gross margin assumption remains approximately Our guidance of $200 million of costs related... Pending the outcome of additional potential government. $4 Billion Transcripts provided by Transcription Outsourcing, LLC. This guidance does not assume the proposed acquisition of Verona or additional significant $300,000,000 and $400,000,000 We now assume a full year tax rate between $15 and $16. We assume approximately 2.51 billion shares outstanding. Taken together, our EPS Guidance. This range includes a negative impact from foreign influence.

We are confident that these actions will position us to deliver value for patients, customers, and shareholders, as well as drive long-term growth.

Now, turning to our 2025 non-GAAP guidance.

We expect full year Revenue to be between 64.3 and 65.3 billion.

This range represents growth of 1 to 2%. Excluding a negative impact from foreign exchange of approximately 0.5% using mid July rates.

Our growth margin assumption remains approximately 82%.

Our guidance of 200 million dollars of costs related to the impact of terrorists is unchanged. Pending the outcome of additional potential government actions.

Operating expenses are now assumed to be between 25.6 and 26.4 billion.

This range continues to include the $300 million Milestone to Lenovo for the tech transfer that was completed earlier this month.

Business Development, transactions.

Other expense is expected to be between 300 and 400 million.

We now assume a fully effective tax rate between 15% and 16%.

We assume approximately 2.51 billion shares outstanding.

Taken together, our EPS guidance is $8.87 to $8.97.

Caroline Litchfield: of approximately 15 cents using mid-July rate. As you consider your models, there are a few items. We remain confident in the outlook for our launch products and continued growth across oncology and animal health, as well as our return to growth in the second half of the year. In China, Gardasil Channel Infantries remain elevated and demand continues to be stopped. As a result, we will not... As we look to the balance of the year for gardeners... Transcripts by Transcription Outsourcing, LLC. Overall, we expect full-year growth for Gardasil, excluding Next, we expect other... Transcribed by Transcription Outsourcing, LLC.

this range includes a negative impact from foreign exchange of approximately 15 cents using mid July rates

As you can see, your models, there are a few items to keep in mind.

We remain confident in the outlook for our launch products and continued growth across oncology and Animal Health, as well as our return to growth in the second half of the year.

In China, guard inventories remain elevated and demand continues to be soft.

As a result, we will not resume shipments to China through, at least the end of this year.

As we look to the balance of the year for garter till Japan will be a more significant headwind to growth in the second half of the year as we lap the increase in vaccinations from the catch-up cohort in 2024.

Overall, we expect full year growth for Gil, excluding China.

Caroline Litchfield: While we actively manage the impact from foreign exchange through our Revenue Hedging Program Based on mid-July rates, we expect to see a negative impact from our hedges. Finally, we expect operating expenses to be roughly evenly split between the 3rd and 4th quarters.

Next, we expect other revenues to be significantly, lower in the second half of the year.

While we actively manage the impact, from foreign exchange through our Revenue hedging program based on Mid July rates, we expect to see a negative impact from our Hedges, which is reflected in other revenues.

Caroline Litchfield: Now turning to capital allocation, where our strategy remains unknown. We will prioritize investment. We will continue to invest in our innovative pipe Including the initiation of many new late stage clinical trials across multiple novel ???? !!!!! !!! !!!!! each of which We remain committed to our dividend with the goal... Business development remains a high priority, as evidenced by our acquisition of Verona Pharma, which we expect to finance through a combination of cash-on-hand, commercial paper and new debt We maintain the ability within our strong investment grade credit rating. To view additional science-driven, value-enhancing transactions going forward, please click on the link in the description.

Finally, we expect operating expenses to be roughly evenly split between the third and fourth quarters, excluding business development expenses.

Now, turning to Capital allocation, where our strategy remains unchanged.

We will prioritize investments in our business to drive near- and long-term growth.

We will continue to invest in our innovative pipeline, including the initiation of many new late-stage clinical trials across multiple novel candidates.

Each of which has the potential to meaningfully address, important unmet medical needs.

We remain committed to our dividend, with the goal of increasing it over time.

Business Development remains a high priority as evidenced by our acquisition of Verona farmer, which we expect to ferment through a combination of cash on hand, commercial paper and new debt issuance.

Caroline Litchfield: We continued our pace of Sherry Patch. with approximately $1.3 billion in the quarter. We expect to maintain a similar level of repurchase. We are confident in the outlook of our people.

We maintain the ability within our strong investment grade, credit rating to pursue additional science-driven value enhancing transactions going forward.

We continued our pace of Sherry purchases with approximately 1.3 billion dollars in the quarter.

We expect to maintain a similar level of repurchases. In each of the third, and fourth quarters of 2025, given our strong balance sheet,

Dean Lee: Driven by global demand for our innovative inline portfolio and With that, I'd now like to turn the call over to... Thank you, Caroline. Good morning, everyone. In the second quarter, we continued to see strong momentum across the country. Today, I will cover updates from our Cardiopulmonary Infectious HIV and Oncology Program.

To conclude. We are confident in the Outlook of our business driven by global demand for our Innovative inline portfolio and launches.

We maintain our steadfast commitment to Bringing forward medically significant innovations that will enable us to deliver value to patients customers and shareholders well into the future with that. I'd now like to turn the call over to Dean

Thank you, Caroline. Good morning, everyone. In the second quarter, we continued to see strong momentum across the pipeline.

Dean Lee: First, on the proposed acquisition of Verona... Building on what Rob noted We have been following the strong progress of the Verona team for a number of years. OTAVIR is the first novel mechanism for the inhaled main . Dual Inhibitor of Phosphodiesterase 3 and 4 with bronchodilatory and non-steroidal anti-inflammatory As such, it is an important maintenance therapy. Otavir is used to improve symptoms of COPD for better breathing and to reduce the number demonstrated clinically meaningful improvement in lung These results provided strong validation that culminated in a FDA approval.

Today, I will cover updates from our cardiopulmonary infectious diseases, HIV, and oncology programs.

First, on the proposed acquisition of Verona Pharma.

Building on what Rob noted earlier, we have been following the strong progress of the Verona team for a number of years.

Okay, is this the first novel mechanism for the inhaled maintenance treatment of COPD in more than two decades? It is a dual inhibitor of phosphodiesterase 3 and 4, with bronchodilatory and non-steroidal anti-inflammatory properties.

As such it is an important maintenance therapy option for patients, who are persistently symptomatic.

Otter is used to improve symptoms of COPD for better breathing and to reduce the number of flare-ups.

patients with moderate to severe symptomatic, COPD demonstrated, clinically meaningful Improvement in lung function,

these results, provided strong validation that culminated in a FDA approval, in June of 2024,

Dean Lee: Combination Therapies and Alternative Formulas. Now to focus on Wynryd. Evidence continues to accumulate for Winn-Revere's strong clinical benefit across a broad spectrum of patients with pulmonary arterial heart disease. The Phase 3 Hyperion trial evaluating WNREVERA in adults recently diagnosed with PAH was stopped early based on review of available data from the program. Positive top-line results announced last showed that adding Winterville on top of background therapy significantly reduced the risk of clinical worsening events compared to background therapy alone. Detailed findings will be presented at a scientific congress later this year. Additionally, the FDA granted priority review for a Supplemental Biologics License application to update the label for WinRivere based on data from the Phase 3 Zenith trial instead of PDUFA date of October 12.

We are eager to complete the acquisition and work with the Verona team advancing ongoing work in brochi ecosys and evaluate utility in additional indications, combination therapies and alternative formulation.

now to focus on win review,

evidence continues to accumulate for when reviewers strong clinical benefits across a broad spectrum of patients with pulmonary arterial hypertension.

The phase 3 Hyperion trial evaluating when River in adults recently diagnosed with Paw was stopped early based on review of available data from the program.

Despite the early stoppage positive, topline results announced last month showed that adding the winner on top of background therapy significantly reduced the risk of clinical worsening events compared to background therapy alone.

Detailed findings will be presented at a scientific congress later this year.

Dean Lee: As a reminder, XENOS was the first positive trial in PAH with a primary endpoint comprised entirely of major outcome measures and the first Phase III study in PAH to be stopped early for overwhelming Caroline mentioned the Ministry of Health, Labor and Welfare in Japan has recently granted approval for Moving to Inlicitide, positive top-line results were announced from the Phase III coral reef heterozygous familial hypercholesterolemia and coral reef add-on clinical trials for Inlicitide. Our investigational, once-daily, oral PCSK9 inhibitor for the treatment of adults with hyperlipidemia on lipid-lowering therapies, including at least a staph. Of note, the CDC estimates that in the United States, more than a million people have heterozygous familial hypercholesterolemia, and approximately 86 million adults older than have high cholesterol.

Additionally, the FDA granted priority review for a supplemental biologics license. Application to update the label for Win. River Based on data from the phase 3 Zenith trial. Instead of Padua date of October 25th,

As a reminder, Zenus was the first positive trial in PH, with a primary endpoint comprised entirely of major outcome measures. It was also the first Phase 3 study in PH to be stopped early for overwhelming efficacy.

Caroline mentioned the Ministry of Health labor and Welfare. In Japan has recently granted approval for Win River.

moving to enlisted tide positive, Topline, results were announced from the phase 3, core week, heterosis famiglio, hyper cholesterol limia and coral reef add-ons, clinical trials, for enlisted tied, our investigational, once daily oral pcsk9, inhibitor for the treatment of adults with hyperlipidemia on lipid lowering therapies, including, at least the Statin

Dean Lee: Both trials met their primary and all key secondary end Demonstrating Statistically Significant and Clinically Meaningful Reduction. LDL Cholesterol for Patients Receiving Elicitide vs. Non-LDL Cholesterol Detailed findings will be presented at future medical Finally, we are eagerly awaiting results from the Coral Reef Lipids Phase 3 trial in the broader hyperlipidemia population, and I am pleased to report that we recently completed enrollment for the Phase 3 Coral Reef Outcomes.

Of note, the CDC estimates that in the United States, more than a million. People have heterosis familiar hyper cholesterol limia and approximately 86 million adults older than 20 have high cholesterol.

Both trials, met their primary and all key. Secondary endpoints demonstrating, statistically, significant and clinically meaningful reductions. In LDL cholesterol for patients. Receiving illicit Tide versus placebo.

Detailed findings will be presented at future medical meetings.

Dean Lee: Next, Infectious Last month, the FDA approved Inflanzia, our long-acting monoclonal antibody for the prevention of respiratory syncytial virus lower respiratory tract and Infants Born During or Entering Their First RCMP. Pflanzia is the first and only option designed to protect infants with the same dose regardless CDC's Advisory Committee on Immunization Practices. Subsequently voted to recommend Amplonzia for use in infants younger than 8 months of age for their first RSVP. Include this new option in the Vaccines for Children's program, an important step in ensuring This vote is provisional and we await confirmation.

Finally, we are eagerly awaiting results from the CORAL Reef Lipids Phase 3 trial in the broader hyperlipidemia population. I am pleased to report that we recently completed enrollment for the Phase 3 CORAL Reef Outcomes trial.

Next to infectious disease.

Last month, the FDA approved and flannia, our long-acting monoclonal, antibody for the prevention of respiratory. Since this show, virus lower respiratory tract disease in infants, born during or entering their first RSP season in Flames, is the first and only option designed to protect infants with the same dose regardless of weight.

the cdc's advisory committee on immunization practices, subsequently voted to recommend and fansa for use in infants, younger than 8 months of age for their first RSV season and include this new option in the vaccines for children's programs, an important step in ensuring access

Dean Lee: In vaccines, we initiated the first Phase 3 clinical trial for our investigational quadrivalent dengue vaccine, B.1.8. The MOBILIZE-1 study will evaluate the safety, immunogenicity, and efficacy of a single dose of V181 for the prevention of dengue disease caused by any of the four dengue virus serotypes. regardless of prior According to the World Health Organization, about half of the world's population is now at risk of dengue, with an estimated 100 to 400 million infections occurring each year.

This vote is provisional and we await confirmation.

In vaccines, we initiated the first phase 3 clinical trial for our investigational quadrivalent dangy vaccine v181, the mobilized, 1 study, will evaluate the safety, immunogenicity and efficacy of a single dose of v181.

For the prevention of dengue disease caused by any of the 4D viruses.

Stereotypes regardless of Prior exposure.

Dean Lee: Turning to HIV, earlier this month we hosted an investor event coinciding with the International AIDS Society Conference on HIV. At the conference, we presented findings from a Phase II study of MK 8527, a novel NRTTI candidate being evaluated as an oral option for HIV pre-exposure prophylaxis. The data support the targeted monthly dosing schedule of MK8527, which has the potential to enable rapid onset of protection within one hour of intake without the need for a loading dose. These findings support the initiation of two Phase 3 studies. 1 to evaluate the safety and efficacy of MK 8527 among people at greater likelihood of HIV-1 exposure, expressive 11.

According to the World Health Organization about half of the world's population is now at risk of dangi with an estimated 100 to 400 million infections occurring each year.

Turning to HIV earlier this month, we hosted an investor event coinciding with the international Aid Society conference on HIV signs.

At the conference, we presented findings from a phase 2 study of MK 8527. A novel nrti candidate, being evaluated as an oral option for HIV pre-exposure prophylaxis.

The data support the targeted monthly dosing schedule of MK 8527, which has the potential to enable rapid onset of protection within one hour of intake without the need for a loading dose.

Dean Lee: And a separate study in women and adolescent girls, Expressive 10, in collaboration with the Gates Foundation. We believe MK 8527 has the potential to be an important new option for people at high risk for HIV. At IAS, we also presented data for the combination of izlotrivir, an investigational NRTTI, anchor therapy, and ulanivirine, an investigational and NRTTI. Being evaluated as a potential once-weekly regimen for the treatment of adults living with HIV. A Phase II Study in Adults with Suppressed HIV is on- Finally, the FDA accepted for review the new drug application for the fixed-dose combination of daravirine and evloxib.

These findings support the initiation of 2 phase 3, studies, 1 to evaluate the safety. And efficacy of MK, 8527, among people at greater likelihood of hiv1 exposure, expressive 11.

And a separate study in women and adolescent girls expressed 10 in collaboration with the Gates Foundation.

We Believe MK 8527 has a potential to be an important new option for people at high risk for HIV.

At Ias, we also presented data for the combination of vascular and investigation of nrti, anchor therapy, and Ulen and investigational, and nrti being evaluated. There's a potential once weekly regimen for the treatment of adults living with HIV.

The Phase 2 study in adults with suppress HIV is ongoing.

Dean Lee: An investigation of once-daily oral-to-drug regimen. Treatment of Adults Living with HIV-1 that is Virologically Suppressed on Anti-Retroviral Therapy. Target action date is April 28, 2026.

Dean Lee: Moving to oncology, during last month's investor event at ASCO, we showcased how we have leveraged our foundational position with Katruda to create a diverse pipeline by successfully executing on our oncology strategy and advancing key pipelines. We are uniquely positioned to advance cancer care with a broad... Differentiated Portfolio & Pipeline Spanning Immuno-Oncology Strategic ambition is to develop leading assets in all three segments so that in a world of combination therapies, our pipeline will be optimally positioned. We will continue to change the practice of clinical ongoing. With regards to tissue targeting, through our collaboration with Daiichi Sankyo, we now have three phase three trials evaluating infinitumab direct ID8, esophageal O1, and unrespectable advanced or metastatic esophageal squamous cell carcinoma.

Finally, the FDA accepted for review, the new drug application, for the fixed dose, combination of deravine and a vaser. An investigation of once, daily oral 2 drug regimen, for the treatment of adults, living with HIV 1, that is very logically suppress on anti-retroviral therapy, the target action date is April 28th 2026.

Moving to oncology during last month's investor event at ASCO. We showcased how we have leveraged our foundational position with katuda to create a diverse pipeline by successfully, executing on our oncology strategy, and advancing key pipeline's candidates.

We are uniquely positioned to advance Cancer Care with a broad.

Differentiated portfolio and pipelines spanning immuno-oncology, precision medicine, and tissue targeting.

The strategic ambition is to develop leading assets in all three segments so that, in a world of combination therapies, our pipeline will be optimally positioned to continue to change the practice of clinical oncology.

With regards to tissue targeting through our collaboration with Daiichi Sankyo, thank you. We now have three Phase 3 trials evaluating Infinite to map directs to CAMP.

Dean Lee: IDA Prostate O1 in Metastatic Castrate Resistant Prostate Cancer and IDA Lung O2 in Relapsed Small Cell Truda continues to generate compelling data and regulatory We recently received FDA approval for its use as part of a perioperative treatment regimen for certain patients with resectable, locally advanced head and neck squamous cell carcinoma based on the Keynote 689 study. This marks the 42nd indication The 10th Earlier Stage Approval for a Kutruda-Based Registration. Earlier intervention has the © 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services in ovarian Positive Progression Free Survival and Overall Survival Results for Keytruda Plus Chemotherapy with or without Bevacizumab were announced in certain patients based on the Phase 3 Keynote B96-7.

Id8 esophageal 01 in unresectable advanced or metastatic esophageal squamous cell carcinoma.

Id8 prostate, 01 in metastatic castrate, resistant, prostate cancer, and id8, lung O2 and relapse, small cell, lung cancer.

The true to continues to generate compelling data, and Regulatory approvals.

We recently received FDA approval for its use as part of a perioperative treatment regimen for certain patients, with respectable locally Advanced, head and neck squamous cell carcinoma. Based on the keynote 689 study.

Dean Lee: This is the first immune checkpoint inhibitor-based regimen to demonstrate a statistically significant overall survival benefit in ovarian cancer. plan to present the results at an upcoming medical...

In ovarian cancer, positive progression-free survival and overall survival results for Katuda plus chemotherapy with or without Bev were announced in certain patients based on the Phase 3 KEYNOTE B96 trial.

This is the first of a new checkpoint: an inhibitor-based regimen to demonstrate a statistically significant overall survival benefit in ovarian cancer.

We plan to present the results at an upcoming medical meeting.

Dean Lee: And finally, the Ministry of Health, Labor, and Welfare. Granted approval for Wella Reds for certain patients with advanced renal cell carcinoma.

Dean Lee: As we look to the second half of this year, we anticipate multiple important milestones. In Oncology, the upcoming PDUFA date for subcutaneous perimodalizumab on September 23rd. In the cardiopulmonary space, for Winn-Revere, the October 25th PDUFA date for the FDA label update based on the Phase 3 Xenotype. Presentation of detailed findings from the Hyperion Study and the primary completion date in September of the Phase 2 Cadence Study in Pulmonary Hypertension due to left heart or Elicitide, begin presenting the detailed results of phase 3 trials from the Coral Reef Development Program at major cardiovascular centers. And finally, the closing of the Verona Pharma acquisition in the fourth quarter.

And finally, the Ministry of Health, labor and Welfare. In Japan. Granted approval for Weller eggs for certain patients with Advanced renal cell carcinoma

As we look to the second half of this year, we anticipate multiple important milestones.

In oncology, the upcoming Paducah date for subcutaneous perm is on September 23rd.

Presentation of detailed findings from the Hyperion study and the primary completion date in September of the phase 2, Cadence study in pulmonary hypertension, due to left heart disease.

For elicited begin presenting the detailed results of phase 3 trials from the coral reef development program at Major cardiovascular conferences.

Dean Lee: I look forward to providing further updates on our progress.

And finally, the closing of the Verona Pharma acquisition in the fourth quarter.

Dean Lee: And now I turn the call back to Thank you, Dean.

I look forward to providing further updates on our progress and now, I turn the call back to Peter

Unknown Executive: Surely we're ready to begin Q&A now. We request that analysts limit themselves to one question today in order to get to as many questioners as possible.

Unknown Executive: 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. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press star 1. And one moment, please, for our first question.

Thank you, Dean Shirley. We're ready to begin Q&A. Now, we request that analysts limit themselves to one question today in order to get to as many questions as possible. 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. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press star 1. One moment, please, for our first question.

Daina Graybosch: Our first question comes from Daina Graybosch with Lyrinc Partners. Your line is open, you may ask your question. Hi, thanks for the question. I wonder if you could help us understand cadence that you said has a September primary completion date. Specifically, can you help us put the outcomes in context? I think you have a couple of primary outcomes or primary and first secondary of PVR and reduction or an improvement in six minute walk distance. What's your bar for success on both of those?

I think our first question comes from Daina Graybosch with the Ring Partners. Your line is open. You may ask your question.

Hi. Um, thanks for the question. Uh, I wonder if you could help us understand Cadence, uh, that you said has a September primary completion date. Specifically, can you help us put the outcomes in context?

Daina Graybosch: And if you replicate those outcomes in phase three, can they support registration in this test path indication or will you have to show benefit on a hard cardiovascular or mortality outcome as well?

Dean Lee: Daina, thank you very much. This is Dean. As you're talking about Winn-River, right, we have a lot of data in pulmonary arterial hypertension. The data that we're exploring outside of pulmonary arterial hypertension is in cadence, and it is in a select population with heart failure. It's generally one that has hemodynamics that's a little bit more reminiscent of PAH than other diseases. And so we're really interested to study that. We want to study whether we can move out of PAH but focus on those who have heart failure and have a PAH physiology. In terms of the outcomes, you're right, it's PVR at six minutes.

I think you have a couple of primary outcomes, or primary and first secondary, of PVR and an improvement in the 6-minute walk distance. What's your bar for success on both of those? And if you replicate those outcomes in Phase 3, can they support registration, and does this have CAP indication, or will you have to show benefit on a hard cardiovascular or mortality outcome as well? Thank you.

Dean Lee: I would say probably the most important thing, just because this is a patient population that's very different than a PAH population, the most important signal for me is really the PVR. I think the six-minute walk will be also important. But to me, it's whether or not we can make a substantial impact on PVR in this patient population that is not PAH. In terms of this question of whether or not one would need to do a Phase III, I would say that we'll have to see the data. But my expectation in front of the data is I would imagine that the FDA would be interested in a Phase III trial to really demonstrate the effectiveness of this treatment in this broader patient population.

Dana, thank you very much. This is Dean, uh, as you're talking about Wind River, right? We we have a lot of data in pulmonary arterial hypertension, the data that we're exploring outside of pulmonary. Artery hypertension is in Cadence, and it is in a select population with heart failure. It's generally 1 that has hemodynamics that's a little bit more reminiscent of paw then, uh then uh uh uh other diseases and so we're really interested to study whether we can move out of paw, but, but focus on those who have heart failure and have a pH physiology in terms of the outcomes. You're right. It's PVR at 6 minute. I I would say probably the most important thing just because

This is a patient population that's very different from a pH population. The most important signal for me is really the PVR. I think the 6-minute walk will also be important, but to me, it's whether or not we can make a substantial impact on PVR. In this patient population that is not pH, in terms of this question of whether or not I would need to do a Phase 3, I would say that we'll have to see the data, but my expectation.

Daina Graybosch: Great.

Unknown Executive: Thank you, Dana. Next question, please.

Vamil Divan: Your next question comes from Vamil Divan with Guggenheim Securities. Your line is open. You may ask your question. Great, thanks for taking my question. Maybe I'll just stick with Winterbeer.

In front of the data is, is I would imagine that the FDA would be interested in a uh a phase 3 trial uh to to to Really demonstrate the effectiveness of this treatment in this uh broader uh patient population, right? Thank you. Dana next question, please.

Thank you. Our next question comes from Val Duan with googleheim Securities. Your line is open. You may ask your question.

Vamil Divan: One is actually a follow up to the earlier question and then one question of myself. So just following up on the cadence discussion, I don't know if Dean or if someone could just maybe quantify the patient population. I know you mentioned patients maybe hemodynamically a little more skewed, what we've seen on the PH side, but just a sense of the market size would be helpful because we've been getting a lot of questions on how to think about the opportunity. But my other question, my main question is actually the XUS uptake of Winterbeer. There's just sort of a little bit of growth in the second quarter.

Great. Thanks for taking my question. Maybe I'll just stick with winter gear and just 1 is actually a follow-up to the earlier question, and then 1 question of myself. So just following up on the Cadence discussion. I don't know if Dean or someone could just maybe quantify the patient population and as a you mentioned patience, maybe a hemodynamically, a little more you to what we've seen in the pH side, but just a sense of the market size. It would be helpful because we've been getting a lot of questions on how to think about the opportunity, uh, with my other question. My main question is that you get to uptake of 1 of your, uh, there's just

Vamil Divan: I know you're just kind of getting going with the launch XUS. I'm curious, just as a relatively expensive product, recent US launch, has your XUS sort of strategy at all evolved given to the threat of most nation pricing? Are you thinking differently about what sort of pricing you might accept for Winterbeer XUS or which markets you may be targeting relative to what you were thinking a year or two ago? And just any sense of the sort of broader XUS market opportunities? Opportunity in PH specifically for Winterbeer would be helpful. Thank you.

Dean Lee: Yeah, I'll take the science question. This is Dean. In relationship to patients who have left heart failure, oftentimes they have pulmonary hypertension and not pulmonary arterial hypertension, and it's due to increased pressures in their left heart, often measured by a wedge pressure that then backs up to the pulmonary artery. That's not the patient population that we're most interested in. We're most interested in the patient population who has heart failure, and their pulmonary hypertension is elevated at a rate or a degree that is out of proportion to what their left heart pressures are. So, in some sense, when I say a pulmonary arterial hypertension-like physiology, that's what this patient population is, and that's why we chose that.

Just a little bit of growth in the second quarter. Uh I know you just kind of getting going with the launch X us and I'm curious just as a relatively expensive product. We send you a launch, has your xus sort of strategy at all evolved uh given to the threat of most labor Nation pricing, are you thinking differently about what sort of pricing? You might accept. But when review X us or which markets you may be uh targeting relative to what you're thinking a year or 2 ago. And just any sense of the sort of broader xus Market opportunity, uh, in PH specifically for win review, would it be helpful? Thank you.

Dean Lee: In terms of the dimension, how to dimension that, I would just say that, to a large degree, that dimension is underdiagnosed in cardiology because there's no treatment for it. In those patients, there's very limited numbers. I would say that if you look at estimates in the absence of any treatment for these patients, I think they're going to be in the range of what, you know, in the range of pulmonary arterial hypertension and some, and some factor maybe above that. But I do believe that, unlike pulmonary arterial hypertension, where there's very good epidemiology, here in this physiology, I don't know that the epidemiology is so certain because there hasn't been a treatment, and when oftentimes there's not a treatment, the epidemiology, one has to be a little bit thoughtful about.

They have pulmonary hypertension and not pulmonary arterial hypertension and it's due to increased pressures in their left heart. Often measured by a wedge pressure, that then backs up to the pulmonary artery. That's not the patient population. That will most interested in were most interested in the patient population who is heart failure. And their pulmonary hypertension is elevated at a rate or a degree that is out of proportion to what their left heart. Uh uh uh pressures are so in some sense, when I say a pulmonary arterial hypertension, like physiology, that's what this patient population is and that's why we chose a in terms of the dimensional. How to Dimension that? I would just say that to a large degree, that Dimension is is underdiagnosed in cardiology because there's no treatment for it. And those patients, there's very limited numbers. I would say that if you look at estimates in the

Absence of any treatment for these patients, I think they're going to be in the range of what you know in the range of pulmonary arterial hypertension and some and and some uh factor maybe above that. But I do believe that unlike pulmonary artery hypertension where there's very good epidemiology here in this physiology, I don't know that the epidemiology is so certain because there hasn't been a treatment and went often times, there's not a treatment the epidemiology

Rob Davis: Yeah, and this is Rob. As it relates to the to the XUS business, overall, to your point, it is it is still very early in the launch. And really, we're going to really see most of the reimbursements coming in the in the second half of this year. And that's when you're really going to see see growth. But if you look at what happened in the quarter, we're actually seeing, you know, contracting is in the markets where we are currently marketing the drug like Germany, it's off to a good start. What you saw from the revenues, actually, there was a pricing adjustment in the quarter that that's why it appeared flat.

1 has to be a little bit thoughtful about

Rob Davis: But if we look forward, we do continue to see a strong opportunity for growth. And just to contextualize, you might recall, this is about 90,000 patients, you know, worldwide, roughly half of that is United States. The other half is Europe and Japan. And, you know, we expect we've I think recently got approval in Japan. So, you know, that's coming in the back half the year. And then we expect broader reimbursement through Europe. So as we sit here today, it's early, but I would say it's on track. Thanks, Bob.

Yeah and normal. This is Rob as it relates to the to the xus business, you know, overall to your point it is it is still very early in the launch. Um and really we're going to really see most of the reimbursements coming in the, in the second half of of this year. And that's when you're really going to see see growth. But if you look at what happened in the quarter, we're actually seeing, you know, Contracting is in the markets where we are, uh, uh, currently, um, marketing, the drug like Germany, it's off to a good start. Um, what you saw from the the revenue is actually, there was a pricing adjustment in the quarter that that's why it appeared flat, but as we look forward, uh, we do continue to see a strong opportunity for growth and just to contextualize, you might recall, this is about 90,000 patients. Uh, you know, worldwide roughly half of that is United States. The other half is is Europe and Japan. Um and you know we expect we I think recently got approval in Japan. So you know that's coming in the back half of the year and then we

Expect broader reimbursement through Europe. So as we sit here today, it's early, but I would say it's on track.

Unknown Executive: Next question, please, Sherilyn.

Great.

Chris Schott: Your next question comes from Chris Schott with J.P. Morgan. Your line is open. You may ask your question. Great. Thanks so much for the question.

Thanks Mom. My next question. Please surely.

Thank you. Our next question comes from Chris Shaw with JP Morgan. Your line is open to me. Ask your question.

Chris Schott: I just wanted to dig into the $3 billion restructuring announcement. I know you mentioned the press release you're planning to fully reinvest that, but just when we balance what seems like a large ramp in the pipeline and the Phase 3 programs over the next few years against this cost initiative, can you just help us a little bit of how we should think about either operating margins or absolute OPEX growth trending the next few years? I'm just trying to get my hands around what that looks like in any just qualitative sense you can provide. Thank you.

Rob Davis: I appreciate that, Chris. Maybe I'll give a high-level answer, and then Caroline can fill in some of the details. If you look at what this is about, this is, as we sit here today and look at really the impressive opportunity we have with these 20-plus launches, we will and we need to fully fund behind those launches. We need to continue and we will fully fund behind our Phase 3 pipeline on an R&D basis to be able to do that and to continue to – so we will be growing our spend over time, but we want to do it productively and efficiently, and that's why we're looking to reallocate Money from and resources from the slower growth areas of the business to fully fund into the fast growing areas of our business.

Uh great thanks so much for the question. I just wanted to dig into the 3 billion dollar restructuring announcement. Uh, I know you mentioned the press release, you're planning to fully reinvest that, but just when we balance, what seems like a large ramp in the pipeline in the phase 3 programs over the next few years against this cost initiative. Can you just help us a little bit of how we should think about either operating margins or absolute Opex? Growth trending, the next few years, and I was trying to get my hands around, like, what, the, what that looks like in in any just qualitative sense. You can provide thank you? Yeah, yeah, I appreciate that Chris. Maybe I'll give a high level answer and then Caroline can can fill in some of the details. You know, if you look at what this is about, this is this is as we sit here today and look at really the really the impressive opportunity. We have with these 20 plus launches, we will and we need to fully fund behind those those launches we need to continue and we will fully fund behind our phase 3 pipeline uh on an R&D basis to be able to do that.

That and to continue to. So we will be growing our spend over time. Um but we want to do it, productively and efficiently and that's why we're looking to reallocate

Caroline Litchfield: So really, this $3 billion that we've referred to is a reallocation within our portfolio, from the slow growing areas to the faster growing areas, with continued expectation that you're going to see overall growth in spend, hopefully, though, at a more productive level than you would have otherwise seen.

Caroline Litchfield: And with those investments, as I said, targeted to our pipeline, making sure we fully fund the phase threes, and to preparing for the commercial launch, but maybe Caroline can build out some details. So I think you've covered the headlines well, Rob. In terms of the $3 billion saving opportunity, that will come through productivity across our enterprise. It will impact the R&D line, SG&A, as well as cost of goods. That said, we will reinvest all of that $3 billion, plus further investments, especially in R&D, given the strength of our pipeline, as well as in SG&A over time, as we launch the new products, and look to excel in the marketplace with those launches, in order to drive long term growth for our company.

Money from and resources from the slower growth areas of the business to fully fund into the fast growing areas of our business. So really, this 3 billion dollars that we've referred to is a reallocation within our portfolio from the slow growing areas to the faster growing areas with continued expectation, that you're going to see overall growth in spend hopefully though at a more productive level than you would have. Otherwise seen

and with those Investments, as I said,

that said, we will reinvest all of that 3 billion plus further Investments, especially in R&D given the strength of our pipeline

Chris Schott: Great. Thanks, Chris.

Unknown Executive: Next question, please, Shirley.

As well as in sgna over time, as we launched the new products and look to excel in the marketplace with those launches. In order to drive long-term growth for our company,

Asad Haider: Your next question comes from Asad Haider with Goldman Sachs. Your line is opening. May I ask your question? Great, thanks for taking the question.

Great. Thanks. Chris, next question please. Shirley.

Thank you. And this question comes from an Assad hater with Goldman Sachs. Your line is open. Ask your question.

Asad Haider: Three part on Gardasil. First, on Gardasil US, you noted positive price and demand upset by CDC purchasing, recognizing that CDC purchasing dynamics are always lumpy, they've always, they've also been a significant driver over the years. So maybe to your level of confidence on the demand dynamics from that channel in the current environment. And then maybe also just as it relates to the potential for ACIP recommendation towards lower Gardasil doses in the US. Can you just update us on how you're thinking about the range of outcomes into the ACIP meetings this fall?

Asad Haider: And then finally on China, Gardasil, Caroline, I think you said no shipments through at least the end of this year. So any early thoughts on how you're thinking about 2026? Great. Thanks, Asad.

Great. Thanks for taking the question. There are 3 part on cardoso, uh, first on goddess of us. You noted positive price and demand offset by CDC purchasing, uh, recognizing that CDC. Purchasing Dynamics are always lumpy. They've always they've also been a significant driver over the years so maybe just speak to your level of confidence on the demand Dynamics from that channel in the current environment. Um and then maybe also just as it relates to the potential for asip recommendation to towards uh lower goddess of doses. In the US. Can you just update us on how you're thinking about the range of outcomes into the ASAP meetings this fall? And then finally on China goddess of Caroline I think you said notes shipments through at least the end of this year. So any early thoughts on how you're thinking about 2026? Would be helpful. Thank you.

So, this is Dean, I guess I'll take the acip question first. And then, I'll leave the other questions to, uh, Caroline and, and, and Rob, you know, I I can't speculate what the acip may do. I just want to emphasize how confident we are in the safety and efficacy of G9, uh, regards to 9 but but I would emphasize that I think 1 of the things that has become clear to the acip, uh, is that there is a clear disparity between the stringent clinical requirements, outlined by the FDA versus the acip proposals that's there. And and the FDA has been very clear on the high evidentiary standard required for a single dose. I mean they they keep emphasizing to us efficacy against disease endpoints, not just infections data in males and females and this is something that's emphasized to us because we get reminded that that HPV related cancers in males is actually

I think now trending higher than, than cervical cancer and females they have a very high statistical bar and a long term, they want very long-term durability of, uh, protection. In terms of the acip, There's No Agenda posted for the August September and October. However, this was sort of a topic that got postponed. So we imagine that there will be discussion about it, but we are very clear on

The safety and efficacy, and the clear disparity between the FDA's high evidentiary standard and any data to date in relation to a single dose.

In the United States, we saw strong growth driven by price and demand, but that was mostly offset by the CDC channel, where there was a buy-down in the second quarter this year, greater than what we had seen in the second quarter of 2024.

As we look at our opportunities for Garter Phil, we do expect growth in 2025 and beyond, but that does not contemplate any change in the dosing schedule for the United States. We will need to see what happens as the ACIP continues those discussions.

As it pertains to China, as noted in the prepared remarks, demand remains soft and inventory remains elevated. We are on the ground doing all we can to activate demand, both with females as well as with males. That said, we will not ship further product this year, and we will assess at the year-end what the appropriate schedule should be for 2026. I should note that Gardens in China represents a fraction of our company now, much less than 1%.

Unknown Executive: Next question, please.

1% we're not counting on it for growth. We are counting on our new products and the excellent execution we have in our existing products to drive growth for our company in the second half of this year and into the future.

Evan Seigerman: Your next question comes from Evan Seigerman with BMO Capital Markets. Your line is open. You may ask your question. Kyle, thank you so much for taking my question.

Great. Thanks, Assad. Next question, please.

Thank you. And this question comes from Evans. Sermon with BMO Capital markets, your line is open. You may ask your question.

Evan Seigerman: As we think about business developments going forward, I'd love if you could expand on your approach to diligencing assets between Chinese and Western companies. I'm specifically asking in context of the recent Verona acquisition versus a recent collaboration announced by a competitor for Chinese PDE3-4 inhibitor. Thank you so much.

Dean Lee: Well, this is Dean. We have a very high standard, whether it's from China or from the United States. But in specific relationship to your question about Verona, I mean, Verona is a company we have followed at least for five years. It's we were always intrigued by by it because they had a dual inhibitor of PD three and four, with the possibility of bronchodilatory and non steroidal anti inflammatory properties. And as we watched it, we had recognized that it could be the first novel mechanism. And it is now the first novel mechanism to get approved for inhalation for COP D.

Verona acquisition versus a recent collaboration announcement by a competitor for a Chinese PD, PDE 34. Um inhibitor, thank you so much.

Dean Lee: And so for us, the fact that it's approved within the United States, and the fact that, you know, we've talked to patients and physicians who use it, we believe that it lays a beachhead or groundwork for this field, and our ability to move that quickly with Verona is is an advantage to us, especially when we're a company who's revisiting our roots in cardiopulmonary cardiometabolic. And we believe that there are other innovations around this pathway that will be important. But having that first mover advantage within the United States, and more broadly, is really important. When we looked at other assets within this space, specifically related to China, they were not in that position of a first mover advantage, which we thought was critical for Merck to enter the field.

Well, this is Dean. Uh we we have a very high standard whether it's from China or from the United States but in specific relationship to your question about, uh, Verona. I mean Verona is a company. We have followed at least for 5 years. Um, it's we, we were always intrigued by buy it because they had a dual inhibitor of pd3 and 4 with the possibility of Bronco dilatory and non-steroidal anti-inflammatory properties. And as we watched it, we had recognized that it could be the first novel mechanism and it is now the first novel mechanism to get approved for inhalation for cop D. And so, for us,

Uh, the fact that it's approved within the United States and the fact that, you know, we've talked to patients and physicians who use it, we believe that it lays a beachhead or groundwork for this field. Our ability to move that quickly with Verona is an advantage to us, especially when we're a company who's revisiting our roots in cardiopulmonary cardio.

Evan Seigerman: Great. Thanks, Evan.

Unknown Executive: Next question, please.

Um, and we believe that there are other innovations around this pathway that will be important. Having that first mover advantage within the United States and more broadly is really important. When we looked at other assets within the space, specifically related to China, they were not in that position of a first mover advantage, which we thought was critical for Merck to enter the field.

Umer Raffat: Q&A Question comes from Umer Raffat with Evercore. Your line is open, you may ask your question. Thank you for taking my question.

Right. Thanks, Evan. Next question, please.

Thank you. And this question comes from Rafid with Evercore. Your line is open. You may ask your question.

Dean Lee: I feel like there's been a ton of interest in the valuation paid for your Chinese partner, Lenovo, on the PD-1 VEGF, and my question is, considering the ongoing Phase 1 is an open-label study, can we reasonably assume everything is, in fact, on track and you are still in a position to start a potentially registration Phase 2, like a Keynote 21G, in the next few months? Yeah, so this is Dean. In relationship to PD-1 VEGF, you're exactly right. We've been interested in the dual signaling in this space for some time. I mean, I would actually mark 2018 as our interest in relationship to our broad collaboration with with our collaborators ASI.

Thanks for taking my question. I feel like there's been a ton of interest in the valuation paid for your Chinese partner Lenova on the pd1 vegf. Um and and my question is um considering the ongoing Phase 1 is an open label study, can we reasonably assume? Everything is in fact on track and you are still in a position to start a potentially registration Phase 2 like a keynote 21g and next year 1 thank you.

Dean Lee: In relationship to the Lenovo program itself, everything is going exactly as planned. Now, clearly, we're keeping an eye on the external environment and external data. But as related to the Lenovo program moving forward, that is going exactly as planned as we, according to the plan, when we initiated the partnership with Lenovo. Great. Thanks, Umer.

Yeah, so this is Dean in relation to PD-1 and VEGF. You're exactly right. We've been interested in the dual signaling in this space for some time. I would actually mark 2018 as our interest in relation to our broad collaboration with our collaborators at ASI, in relation to the Lenalidomide program itself. Everything is going exactly as planned. Now, clearly, we're keeping an eye on the external environment and external data.

But as related to the Lenovo program moving forward, that is going exactly as planned, according to the plan we established when we initiated the partnership with Lenovo.

Unknown Executive: Next question, please.

Akash Tewari: Our next question comes from Akash Tewari with Geoffrey's. Your line is open, you may ask your question. Hey, thanks so much. So we're seeing an increase in patient ads for Venrevir after some modest decreases over the last two quarters.

Umer, next question, please.

Thank you. Next question comes from Khari with Jeffrey. Your line is open. You may ask your question.

Akash Tewari: What's the right cadence when you think about this going forward, not only for the rest of 2025, but really 2026 and onwards, now that you have the Hyperion and Zenith results? And really, what's your progress in terms of progressing Venrevir into earlier lines of setting? Are you starting to see doctors adopt this medication more aggressively?

Akash Tewari: And then maybe if I could just sneak in one more question. On the Hanzo GLP-1 acid, can you confirm that that drug has actually moved into the clinic? Thank you. Great. Thanks, Akash.

Hey, thanks so much. Um, so we're seeing an increase in patient ads for Venere after some modest decreases over the last two quarters. What's the right cadence when you think about this going forward, not only for the rest of 2025, but really 2026 and onwards? Now that you have the Hyperion and Zenith results, what is your progress in terms of progressing Venere into earlier lines of setting? Are you starting to see doctors adopt this medication more aggressively? Uh, and then maybe if I could just sneak in one more question on the Hanzo GLP-1 asset. Can you confirm that that drug has actually moved into the clinic? Thank you.

Yeah, maybe I'll start and Caroline can can add as well. So, appreciate the question on, on win over here. You know, as we look, we've been pretty consistently adding 400 to 500 patients per month. So I went and read that the, the, the 1600 and the quarter relative to, you know. As, as some shift it is been actually pretty steady and we do continue to expect to see that kind of steady growth going forward as we moved uh through the rest of the year. Um so that would I think that was

First part of the question and then maybe Caroline. And then the second was how we're doing in penetrating the different patient segments. What we have as of now is 75% of the use is for patients with triple therapy or a background post-cycling.

A lot of confidence in our future, as we continue to not only help both severe patients, but increasingly move into both patients who are less severe. I think it's safe to say that Hyperion and Zenith are both contributing to that growing confidence. So everything is moving as we would hope it would as we entered the space.

Mentioned something. And when we're here, I mean I've actually talked to at many of uh, Ko's at the major Center. I I think there's just a stream of information that will be helpful. It's not 1 event per se. I think, you know, a label update would be really important. I do think that many of the, many of the Ko's have been waiting to see the data from Hyperion because it gives them a sense of prescribing, it earlier in the journey. So they'll be very interested in that there is a patient population of pH for example, who, who are overlap with connective tissue diseases. And, and they're going to want to see the culmination of all that data, across the 3, uh uh uh 3 trials, and you know, that data individually, and that data pulled will be very important and clearly clearly, you know, the continued deteriora and the fact that the adverse effects and all of this sort of thing are well within

The label is intended to create interest among the KOLs to begin adopting this earlier in the journey and to other patient populations, such as those with connective tissue disease, in relationship to the Hanso GLP-1. We mentioned that they are moving to the clinic this year, and everything is on schedule.

Terence Flynn: Next question, please. Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open. You may ask your question. Hi, thanks for taking the question. I was just wondering if you could offer any preliminary perspective on how a 15% tariff on pharmaceuticals would impact your 2026 outlook. Recognize you're not going to give guidance at this point, but was just wondering if you could help frame for us the potential impact there and then any insight if this would be phased in over time or if this would be implemented more near term. Thank you.

Great. Thanks, AOS. Next question, please.

Thank you. Our next question comes from Terren, Flynn with Morgan Stanley. Your line is opening me. Ask your question.

Rob Davis: Yeah, Terence, this is Rob. I appreciate the question. Maybe I'll take the second part of it first, you know. So we need to see more clarity, both from the administration and just overall as to exactly how this is going to play out. So it's still not clear exactly how this relates relative to the 232 investigation and the timing, so to speak, whether these apply now or will be phased in until there's further guidance. I can't really speak to it, but what I would tell you is as we look at, and I don't want to give 26 guidance because we're not giving forward guidance, but as you look at 25, I would tell you if this was implemented immediately, it would be minimal impact based on all the work we've done around inventory management and moving our manufacturing to the U.S.

Hi, thanks for taking the question. I was just offered. I was wondering if you could offer any preliminary perspective on how a 15% tariff on pharmaceuticals would impact your 2026 outlook. I recognize you're not going to give guidance at this point, but I was just wondering if you could help frame for us the potential impact there and then any insight if this would be phased in over time or if this would be implemented more near-term. Thank you.

Yeah, Terrence this is Rob. I appreciate the question. Maybe I'll take the second part of it, but first, you know, it. So we need to see more clarity, uh, both from the administration and just, um, overall as to exactly how this is going to play out. So it's still, it's not clear exactly how this relates relative to, to the 232 investigation and the timing. So to speak, whether these, uh, uh, apply now or will be phased in, uh, until they're spur. The guidance, I can't really speak to it. But what I would tell you is as we look at and I don't want to give 26 guidance because

Rob Davis: We're very well positioned overall as we look forward to be able to do that, and we have made very good progress as we look at even 26. We'll give the specific guidance as we move forward, but for 25, this would be minimal. Great. Thanks, Terence.

We're not giving poor guy. And so, as you look at 25, I would tell you if this was implemented immediately, it would be minimal impact, based on all the work we've done around Inventory management and moving. Uh, our manufacturing to the us we're we're very well positioned. Uh overall as we look forward, um, to be able to do that. And and we have made very good progress as we look at even 26. We'll give the specific guidance as we move forward, but for 25, this would be minimal.

Unknown Executive: Next question, please, Shirley.

Courtney Breen: Your next question comes from Courtney Breen with Bernstein. Your line is open. You may ask your question.

Great. Thanks. Terrence, next question, please. Sure, Charlie.

Thank you. And next question comes from Courtney Brain with Bernstein. Your line is open. You may ask your question.

Courtney Breen: Hi, thank you so much for taking the question today. Coming back to the comments you've made around the cost savings program and the reallocation of this, can you give us a little bit of context on your intentions with Keytruda, specifically recognizing that that asset is coming nearer to the end of its lifecycle, yet there are still many launches to come, as well as a subcutaneous product launch ahead, and so how you're planning on reallocating in the context of Keytruda SG&A relative to the newer opportunities that you need to fund in both R&D and those new launches.

Rob Davis: Thank you very much. Yeah, Courtney, thank you for the for the question. You know, as you think about where we sit in oncology, and maybe just contextualize, and I'll answer the question, you know, obviously, we've been the leader in IO therapy with Keytruda. And as we've consistently said, we have every intention of not only being and continuing to be the leader, but to broaden our leadership across the broader suite of oncology assets we have, which, as you know, now across the tissue targeting agents and, and by drug conjugates across all of the, the small molecules we have, we have a one of the broader, if not the broadest pipeline now moving forward in the oncology space.

Hi, thank you so much for taking the question today. Um, coming back to uh, the comments you've made around the cost Savings Program and the reallocation of this, can you give us a little bit of context? Um, your intentions to, with key truda specifically recognizing that that asset is coming nearer to the end of its life cycle? Yeah, there are still many launches to come as well as a subcutaneous product launch ahead and so how you're planning on react reallocating in the context of Cuda um sgna um, relative to the newer opportunities that you need to fund in both R&D and those new launches, thank you very much.

Rob Davis: So as you look at the spend, to your point, we're not necessarily looking to pull back spending on oncology, we're going to grow. And it's about reallocating the resources and adding to those resources, as we start to move away from just being focused on Keytruda to the broader suite of opportunities. So you're going to see other oncology growth spend as Keytruda is pulled back. Great. Thanks, Courtney.

Uh, the spend, uh, to your point. We're not necessarily looking to pull back, uh, spending on oncology. We're going to grow, and it's about reallocating the resources and adding to those resources as we start to move away from just being focused on Patra to the broader suite of opportunities. So you're going to see other, uh, oncology grow spend as, as Katuda, as, as, as pulled back.

Unknown Executive: Next question, please, Shirley.

Trung Nguyen: Your next question comes from Trung Nguyen with UBS. Your line is open, you may ask your question. Hi all, thanks for taking my question. It's just one on the One Big Beautiful bill expanding the orphan drug exclusion under the IRA and how that affects the timing of contruders potential selection for IRA price So when Katrina was initially approved, it carried. First non-orphan indication was approved about a year later. So does this One Big Beautiful Bill update effectively shift Katrina's IRA selection from 2028 to 2029? And then would the presence of biosimilars by that time actually mean Katrina won't be selected for IRA?

Great. Thanks. Courtney, next question please, Shirley.

Thank you. And this question comes from Chongwen with UBS. Your line is open. You may ask your question.

Hi. Um, thanks for taking my question. Uh, it's just one on the one, big, beautiful bill expanding the author and drug exclusion under the IRA, and how that affects the timing of crude as a potential selection for IRA price cuts.

Rob Davis: Thank you.

Rob Davis: Yes, I appreciate the question. So it may be just from a policy perspective, you know, we are very supportive of the language that was put in, in support of orphan drugs, you know, we've long believed that investing behind orphan and rare disease is important. And that the more we can do to support that it is it is something which will benefit patients going forward. So in that sense, we very much supportive of, of what the one big beautiful bill included in that regard, as it relates specifically to your question, you are correct that so Katrina did launch with an orphan indication in melanoma in 2014.

So when PatruDA was initially approved, it carried an orphan designation. Its first non-orphan indication was approved about a year later. So does this one big, beautiful bill update effectively shift KatruNA's IRA selection from 2028 to 2029? And then, with the presence of biosimilars by that time, does that actually mean KatruNA won't be selected for IRA? Thank you.

Rob Davis: The first non orphan indication was lung cancer in 2015. And based on the reading of the bill, as you've, as you've done, if you look at what is in there now, that would imply that you would expect now to see the drug selected for negotiation in 27 for implementation of the negotiated price in 2029. I'm not going to speculate to whether or not it continues to be included or not. As it relates to the, to the, to the LOE, the impending LOE, you know, we'll have to see how that plays out.

Yes, I appreciate the question. So it may be just from a policy perspective, you know, we are very supportive of the the language that was put in in support of Orphan drugs. You know, we've long believed that investing behind orphan and rare diseases important and that the more we can do to support that it is, it is something which will benefit patients going forward. So in that sense, we very much supportive of of what the 1. Big, beautiful Bill included in that regard, as it relates to specifically to your question. You are correct that. So Katrina did launch with an orphan indication in melanoma in 2014. The first non-orphan indication was a lung cancer in 2015 and based on the reading of the bill as you as you as you've done, if you look at what is in there, now that would imply that you would expect now to see the drug selected for negotiation in 27 for implementation of the negotiated price in 20.

Tim Anderson: But I also think it's important to also understand with all this said, you know, what we're focused on is how do we grow the business post the impending LOE of Katrina and drive for sustainability in our business long term. So that is our focus. This is this is nice, but but does not change that fundamental view of our business. Great. Thanks, Trung. Next question, please. Our next question comes from Tim Anderson with Bank of America. Your line is open. You may ask your question. Thank you. A couple of long term questions for Rob. So Rob, you continue to describe the loss of Keytruda as being more of a hill than a cliff.

N, I'm not going to speculate to whether or not, uh, it continues to be included or not, um, as it relates to the, uh, to the, to the eloe, the impending Eloise. You know, we'll have to see how that plays out, but I also think it's important to, uh, also understand with all this said, you know what we're focused on is, how do we grow the business? Post the impending yellow, we have katuda and, and drive for a sustainability in our business long term. So that is our Focus. Um, this is this is

Nice, but that does not change the fundamental view of our business.

Great. Thanks. Trunk. Next question, please.

Thank you. Our next question comes from, Tim Anderson with Bank of America. Your line is open. You may ask your question.

Tim Anderson: Our model shows the same, but I don't think investors and consensus really believe that. And you say you're confident in return to growth downstream of that period. So two questions. On the hill comment, can you just remind investors Biggest offsets that you see today for how losing a product that's 50% of your revenues at the time of expiry will in fact not be a And then second, when you talk about confidence in growth over the longer term. https://www.patreon.com https://www.patreon.com Those are the first of multiple new product offerings coming in that business that's going to allow us to more than double it by the time we get out to the mid 2030s.

Uh, thank you. A couple of long-term questions for Rob. So, Rob, you continue to describe the loss of Cruda as being more of a hill than a cliff. Our model shows the same, but I don’t think investors and consensus really believe that.

Um, and you say you're confident in return to growth Downstream of that. Period. So 2 questions on the hill, comment, can you just remind investors

the biggest offsets that you see today for how losing a product is 50% of your revenues, the time of expiry will, in fact not be a cliff

and then second, when you talk about confidence in growth, over the longer term,

Can you put parameters around that but when that would be likely, we show trough revenues 2031. That would be 3 years past patent. Expiry, all part is at a realistic time frame for when consistent growth would return,

Yeah, Jim, thank you for the question, actually. I I very much appreciate it because this is the core of the of the valuation thesis for our company. And and my own view of this is that I do think. The street under appreciates, the the power of what we have in our Pipeline. And as we see that play out as I've consistently said, as we see, those proof points continue to play out and I would point to when river is the first, we're now seeing it with cat-backs of I think cles roam app will be another 1. We have enlisted tide coming Sac TMT, uh, you know, all of these opportunities as they roll out, I think that confidence will grow over time but but to your specific question, what are we focused on? Recall that we've, we've given a guidance in in Broad sense to the fact that we see over 50 billion dollars

Potential opportunity from our our different therapeutic areas. Starting with oncology broad-based oncology. Um, we now have over 60 phase 3, clinical studies I think across was it 13 different, uh, tumor types. Um, uh, which will be coming over the next, you know, uh, 5 years, uh, that incredibly broad across our antibody drug conjugates across. All of the small molecules, we have the individualized, Neo antigen therapy. Um, you know, we the list would go on but we think those alone are over 25 billion and we had an opportunity to ask, go to begin to talk about some of that. And we will continue to show more of that as we go forward. Our competence there is better today uh, than it was even at ASCO with every card we turn. Um, we feel better about that going forward. Um, and then you look beyond that into cardio, metabolic we've, you know, directed to approximately 15 billion dollars,

And the cardio metabolic space. Uh, really was foundational. Uh, elements coming from when river which we talked about and we continue to be very enthused by what we're seeing there and elicited or or pcsk9 we continue to think as a huge opportunity uh, we'll continue to focus on what we have in ink. 6024, which is our mesh product, we're going to see, I think data later this year. Um, we continue to feel very good about that. So our overall Suite of the card and metabolic space, we feel we feel very good about

About, that's the 15 billion dollars, Ophthalmology, I think is underappreciated with a with a multi-billion dollar opportunity. We just recently went through our HIV portfolio with approximately 5 billion dollars of of opportunity. And and, you know, we feel very good about that. And the data we have and where we're where our portfolio is going to go is a very important immunology and other 5 billion uh, which is important to focus on Animal Health. You look at the quarter of the growth, we showed in Animal Health, this quarter, this business is going to be uh fast growing business for this company. Uh throughout our, our long-range plan period, and is really based on a new product story. Very much like the human health business. We're actually just got approval in Europe for new melvi. Our our Jak inhibitor for dermatitis. We just got approval for our, our injectable once annual in the United States.

Rob Davis: And then, you know, all of this excludes what else we're going to do in business development. The fact that we just did ODIVER, which added another multi-billion dollar opportunity that wasn't in that $50 billion when we set it, is further, you know, building block being added as well. And then we still have a lot to do on business development. We've been very clear we're not stopping. And we have an early stage pipeline, which as we move into 26 and especially into 27, you're going to see increasingly things coming out of our phase one pipeline into our phase two, which will be visible, that are all very exciting.

Those are the first of multiple new product, uh, offerings coming in that business, that it's going to allow us to more than double it. By the time, we get out to the mid 2030s and then, you know, all of this.

Excludes? What else we're going to do in business development? The fact that we just did oh there which added another multi-billion dollar opportunity. That wasn't in that 50 billion when we said it is further, uh uh, you know,

Rob Davis: So all of that is why if I sit and look at where we're at, I feel very good. And then, obviously, we continue to have subcutaneous, Katruda, and the base of what we believe will be the Katruda business, which we will continue to be able to benefit for patients through those offerings. So I think your characterization is fair. I actually agree with it. And as far as, though, as it looks to how quickly we get back to growth, you know, to be one where I would say I don't want to get specifics on years, but, you know, we've been very clear we want to minimize the cliff, which I think we have done.

Block, uh, building block, being added as well and then we still have a lot to do on Business Development. We've been very clear, we're not stopping and we have an early stage pipeline which is we move into 26 and specially into 27. You're going to see increasingly things coming out of our Phase, 1 pipeline into our Phase 2 which will be visible, that are all very exciting. So all of that

Rob Davis: That's why I talk about the hill. And we want to get back to growth quickly. And I do see a path to do that. And I'm confident we will.

Unknown Executive: And I think if you go back to the JPM presentation we gave, we had a slide in there, which was a representation, if you will, of the cone of opportunity within our long-range plan, that kind of gives a profile very similar to what you just described. Great. Thanks, Tim. I know we're over time. We have time for a few more questions. So, Shirley, next question, please.

Is why if I sit and look at where we're at, I feel very good and then obviously, we can continue to have uh, subcutaneous katuda and the base of what we believe will be the Katrina business, which we will continue to be able to benefit for patients through those offerings. So I, I think your characterization is, is, is fair. I actually agree with it. Um, and as far as though as it looks to how quickly we get back to to growth, um, you know, it'll be 1 where I would, I don't want to get specifics on years but you know, we've been very clear. We want to minimize the cliff, which I think we we have done. Uh, that's why I talk about the hill and we want to get back to growth quickly and I do see a path to do that and I'm confident we will. And I think if you go back to the JPM presentation, we gave we had a slide in there, which was a representation, if you will of the cone of opportunity within our long range plan.

That that kind of gives a profile very similar to what you just described.

Alex Hammond: Your next question comes from Alex Hammond with Wolf Research. Your line is open. You may ask your question. Thanks for taking the question.

Great, thanks, Tim. I know we're over time, but we have time for a few more questions. So surely, next question, please.

Thank you. Our next question comes from Alex Hammond with wolf research. Your line is open. You may ask your question.

Alex Hammond: For Inlisitide, the team has highlighted it as a platform to add other cardiometabolic acids With that context, what combinations and indications could we expect and when could we receive updates? Yeah, so thank you very much for the question. So just to reset, you know, our ambition is that this is going to be the first oral PCSK9. And it will not just be first, it will be the best in relationship to everything that we've seen from competitor data. And we expect to have it be the most effective oral LDL lowering option. And it should, you know, have confident in cardiovascular outcomes that are comparable, but actually, we believe, could be better than the biologics.

Thanks for taking the question for elysa tie. The team is highlighted it. As a platform to add other cardio, metabolic assets onto. Does that context, what combinations and indications could we expect? And when could we receive updates? Thank you.

Yeah. So thank you very much uh for the question. So just to reset you know, our ambition is that this is going to be the first

oral pcsk9 and it will not just be first. It will be the best uh, in relationship to everything that we've seen from competitor data.

Dean Lee: And we think that with the data that we have, you know, we recognize that 70% of patients with ASCVD, you know, even treated with statins do not treat the LDL cholesterol. So when you think about that, LDL is one axis in relationship to cardiovascular outcomes. And LDL, clearly, there would be combinations that you would make with inlicitide to even deepen that response even more. So that's a combination that would be advanced, that that can advance quickly. But I think there's also evolving data in relationship. And we will see that probably from others in relationship to, for example, Lp-Lit-O-A.

Boring option. And it should, you know, have competent cardiovascular outcomes that are comparable. But actually, we believe it could be better than the biologics. We think that, uh, with the data that we have, you know, we recognize that 70% of patients with ASCVD, you know, even treated with statins, do not treat the LDL cholesterol.

Dean Lee: I think in that patient population, if reducing Lp-Lit-O-A is indeed shown to be important for lowering cardiovascular outcomes, then the potential of having an Lp-Lit-O-A molecule that can do that, but also recognizing that PCSK9, inhibiting PCSK9, adds. Further reduction of Lp-a, and in the patient populations that who have high Lp-a, the way that I've treated them is I give them PCSK9, that a combination there may be something that's really important. And in the future, other combinations, potentially related to other access, you know, I talked about LVL, Lp-a, we would clearly be interested in inflammatory accesses and other accesses in combination.

So when you think about that LDL is 1 axis in relationship to cardiovascular outcome. Um, and LDL clearly there would be combinations that you would make with unless AI to even deepen that response even more. So that's a combination that would be Advanced uh, that that can advance quickly. But I think there's also evolving data in relationship and we will see that probably from others in relationships to, for example, LP Lita. I think in that patient population if reducing LP lit OA is is indeed shown to to to be important for lowering cardiovascular outcomes, then then the potential of having an LP little a molecule that can do that. But also recognizing that pcsk9 inhuman pcsk9 adds

Dean Lee: So in elicitide is a really important molecule. It is a molecule that we believe can serve as a platform to be driving cardiovascular outcomes in increments of 20, 25%, 30%. And we're very excited for that future.

Dean Lee: Great. Thanks, Alex. We have time for two more questions, please. Thank you. Our next question comes from James Shin with Deutsche Bank. Your line is open. You may ask your question. Good morning. Thank you for squeezing me in. One for Dean. Dean, I appreciate everything is on schedule for MK2010, but was Merck notified of Cino BioPharm's interest in Lenovo? And does that have any bearing on Merck's commitment to 2010 or the development of a PD-1 VEGF-5 specific more broadly? I would just emphasize our commitment is based on our interest in the space since 2018. So our commitment has has not changed.

Further reduction of LP lenoy, and in the patient, populations at who have high LP, Lita way, the way that I've treated them is, I give them pcsk9 that a combination, there may be something that's really important and in the future other combinations, potentially related to other axis. You know, I talked about LVL LP little way, we would clearly be interested in inflammatory axises and other axises in combination. So in lisete is a really important molecule. It is a, a, a molecule that we believe that can serve as a platform to be driving cardiovascular outcomes in in increments of 20 25% 30%. And we're very excited for that future. Great. Thanks, Alice. We have time for 2, more questions, please.

Thank you. Our next question comes from James Shin with Deutsche Bank. Your line is open. You may ask your question.

Good morning. Thank you for squeezing me in for Dean.

Dean, I appreciate everything is on schedule for Mk 20110 but was MK notified of fenobarbital.

And does that have any bearing on Merck's commitment to 2010 or the development of a PD1, VEGF by specific more broadly? Thank you.

Dean Lee: And as I've said, the you know, the Lenovo program that we have is moving forward as planned in terms of notification or not notification. That's something that we don't comment in terms of business development. Correct. Great.

Unknown Executive: Thanks.

Mohit Bansal: Last question, please. Your next question comes from Mohit Bansal with Wells Fargo. Your line is open. You may ask your question. Great. Thank you very much for taking my question. So I have a question regarding the guidance.

I would just emphasize our commitment is based on our interest in the space since 2018. So our commitment has not changed. And as I've said, the Lenova program that we have is moving forward as planned. In terms of notification or not notification, that's something that we don't comment on in terms of Business Development. Correct?

Great. Thanks last question, please.

Thank you. And next question comes from Mohit benzyl with Wells, Fargo. Your name is open. You may ask your question.

Caroline Litchfield: So if I compare the guidance on FX basis versus the prior quarter, it does seem like you're lower the upper end of the growth Just wanted to understand if there is a change in the operational business that we need to be aware about. Your line cut out. I think the question was about the reduction.

Great, thank you very much for taking my question. Uh, so I have a question regarding the guidance. If I compare the guidance on an FX basis versus the prior quarter, it does seem like you've lowered the upper end of the growth from.

Just wanted to understand uh if there is a there is a change in the operational business that that we need to be aware about. Thank you.

Caroline Litchfield: You see a reduction in the guidance, but can you talk about guidance, Caroline? Sure. So the guidance that we've given this quarter is to maintain the midpoint for revenues and to increase EPS by 3 cents. There was a very modest tailwind from foreign exchange, and that has really offset a few headwinds. The first would be a low level of COVID cases during the summer season, which has impacted our outlook for Lillegabrio. The second is we have seen an early entrant of a biosimilar for pembrolizumab in Argentina, which has impacted revenues there. All of that said, we are confident in our ability to drive growth in our business this year of between 1% and 2%.

Hey, your line cut out? I think the question was about the redo uh you see a reduction in the guidance. Um, but can you talk about guidance, Caroline?

Sure. So the guidance that we've given this quarter is to maintain the midpoint for revenues and to increase EPS by 3 cents. There was a very modest Tailwind from foreign exchange and that has really offset a few headwinds. The first would be a low-level of Co cases during the summer season.

Caroline Litchfield: And when you exclude the impact of the headwind of China's Gardasil, we have underlying growth of between 6% and 8%. So we're confident in our future, despite the uncertain macro environment that does exist for our industry.

Unknown Executive: Great. Thank you all very much for your questions. As always, Invest Relations is available for any follow-ups. Thank you very much. Thank you.

Which has impacted our outlook for the Gabriel. The second is we have seen an early entrance of a biosimilar for pembrolizumab.

Great. Thank you all very much for your questions. As always uh investor relations is available for any follow-ups. Thank you very much. Thank you.

Unknown Executive: This concludes today's conference. We thank you for your participation. At this time, you may disconnect your line.

Thank you for your participation at this time. You may disconnect your lines.