MRK - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Darla, and I will be your conference operator today. At this time, I'd like to welcome everyone to Merck's Q3 2017 Sales and Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank like call now Loxam. to turn to would over the Teri I go Please ahead.

Teri Loxam

and Welcome Global Merck Ken morning, Quarter you, Adam President Rob good Thank Darla, of Financial Chief everyone. and and Executive Call. Officer; Dr. I'm Davis, Perlmutter, our Chairman President XXXX Today to Health; joined Research our by of Laboratories. Frazier, Schechter, Chief Officer; Human Conference Third Merck's Roger

out call the to I'd a over few point items. Before I turn like Ken, to

our in items. items results have we that see costs, other will acquisition-related as certain restructuring GAAP charges, You such and

these You reconciliation should note from press that our in these results we release. a have provide excluded and our non-GAAP of

We provision may to made that based those we Securities help units the some the be have Safe Harbor press statements business our the remind of statements a products. of the underlying inaccurate today's during of materialize, quarter are release considered management in current If of beliefs the significant and Such the forth and forward-looking I results from uncertainties. or would Litigation of for Merck's XXXX. forward-looking the prove you risks you within and also that like the to actual statements. sales may call provided our table Reform make understand subject on in differ statements to Act materially assumptions U.S. the are set uncertainties Private in meetings

to of any company's statements cautionary from results XA update this materially in our statement. that to filings, including XX-K, any the forward-looking no Merck certain undertakes made projected factors Our XXXX actual in forward-looking those obligation morning. statements SEC publicly identify risk could cause the and differ

to SEC as that, release filings Ken. our merck.com. over turn to today's see With earnings the well call can You I'd like on as

Kenneth C. Frazier

Good today. Teri. for morning, the you all thank everyone, joining you, and Thank call

and the on underlying our delivering our launches for again results business. businesses. Animal products executing Health been strength new global the vaccines year, and Our we've third of growth quarter demonstrate Throughout in

been is Our patent combined particularly an strong loss of disasters. performance recently, notable protected we've and $X.X isolated pricing but in incident, a nearly sales, natural continued several pressures, year facing the where cyber meaningful most in billion

to company's premier biopharmaceutical Our measure ability be in to consistent our To Francisco, direct in resources ability prioritize that on of resolve Cambridge, long-term we is based research deliver medicines to we and a hubs our the that invest our deliver continue intensive next the and new on innovation. function to company. success vaccines. discovery South Massachusetts, the including Merck generation of believe underscores laboratories, also sustainably We other research potential the oncology, KEYTRUDA. is differentiated creation medicines at value in to advance pipeline, opportunities performance needs. San also best promise to the external AstraZeneca, involves vaccines. of and our products And add end, Merck's our the and to it have time, is significant the An leadership scouring formed with to believe which looking our codeveloping to we're strength which the landscape anchored LYNPARZA. find portfolio. co-commercializing address same science progress already highest collaboration LYNPARZA growing our determining seeing example with by which We're good We're and newly augment potential in unmet the At to carefully will oncology

vaccines operating while and model time the portfolio that our our animal and environment. evolving significant growth, reshaping these and oncology pillars to with could supporting resources requires disciplined believe our sizably of HIV. prioritize certain we and pipeline We represent in growth instance, key For recently line decision opportunities, care for add other same health at our areas health. investment, in invention changing Recognizing remain in namely and of long-term for opportunities to our made we the the R&D

Going forward, call opportunities go over sustainable for to of Chief build the long-term Financial Officer, new to Rob? seek additional our on society will ways our value now launches to Rob growth pipeline more we maximize momentum Merck's product Davis, through results that, and will or and and in and the turn With I shareholders. detail.

Robert M. Davis

despite Thanks, our quarter. good allowing in a third morning, Ken, growth to operational us quarter strong non-GAAP the everyone. deliver results and Overall, reflect performance, on bottom-line solid challenges basis, several

year. Now, Total billion, company revenues $XX.X year X% starting of with were our decrease top-line results. first a over

of impact decline X%, Health. with partially the X% by exchange, revenues in Human the declined business Excluding third Health Animal in our growth quarter offset XX%

mix, it's $X margin a our billion quarter, primarily by in was sales which in Ruminants Companion the from increase $X.X XX% Non-GAAP early detail Health BRAVECTO, including XXXX. Human the largest development. the year-over-year and for our the in growth moment, business, contributor Vallée year higher worth acquisition. that highlighting Health quarterly first by Non-GAAP expenses was product Animal will basis operating driven continued strength versus an the our the driven of in of KEYTRUDA business, gross drug expense, of Animal performance Adam by increased and X% investment year, time, primarily XX contributions improvement. the increased includes over of Favorable R&D points While third ZEPATIER, quarter reached billion to in business roughly driven reflecting

$X.XX the the billion on that a loss of GAAP we announced X% exchange. excluding AstraZeneca non-GAAP formation charge in earlier our to a basis, strategic related Note earned oncology collaboration $X.XX share together, the with of Taken reflects quarter. of EPS per up $X.XX

similar had in $XXX costs impact $XXX our million July, and results, lines. approximately quarter, in revenue fourth operating lost event from As spread quarter June impact to in the and unfavorable expenses in sales the the third approximately expense revenue the sold we an million cautioned negatively and We cyber goods impacted is of guidance. of anticipate which reflected including cost across a updated

half part from as than as by higher we fulfill the in resulting cyberattack, borrowed the driven XXXX. GARDASIL quarter shipments growth, had noting sales will temporary from the stockpile down be we ultimately in as cyber anticipate second quarter stockpile demand production a the planned. the borrowing and have In replenish while in million occur of LOEs. the recognized of items, which were third of The overall shutdown worth quarter. will well absent reported The of stockpile, the CDC originally would we $XXX our for even was million, revenue addition, significant the we $XXX to in It's the currently face that

Turning guidance. to XXXX

the to $XX expect as date our revenues Given to narrowing billion. year. We exchange environment, strength favorable raising for and year we $XX.X and well a more range rate as our full now revenue between billion be are operational

a to increase our year-over-year in margin. gross continue moderate expect We

R&D to We also our the digit support opportunities. including to to expenses other oncology collaboration, business, mid-single continue driven well non-GAAP our cost rate pipeline to compared XXXX, expect as as and operating a grow year AstraZeneca by higher vaccines full at

in $XXX rate also year million the XX% the development expenses the to be the and We business of now closing of fourth are XX%. driven non-GAAP expect assuming largely We approximately by tax between full quarter, Rigontec acquisition.

the We project continue to approximately outstanding for of average X.XX year. diluted shares billion

less using a together, $X.XX execute In X% full revenue range our non-GAAP non-GAAP ranges our of negative EPS include from $X.XX. impact are to mid-October exchange to expected Taken well. we narrowing rates. summary, than and foreign raising Both year continue for EPS the we and to

in term invest for growth, pipeline as year can drive will in which opportunities invested and many long we continue next throughout well. have believe that this have year our in we We we to

I'll With wherever We have that, trajectory long the reallocating continue our will business. disciplined resources been of we remain over to Adam. call possible. turn term And to maximize to the

Adam H. Schechter

products. currency provide on decline the Global This of Health you, Rob, exclusivity Thank delivered constant the And billion, third highlights will for X%, Health and on I'll Human sales Global be $X.X morning, good Human my a of of loss Performance by morning primarily the everyone. comments driven a of quarter. basis. for several

products, continue and to KEYTRUDA, from ZEPATIER, see growth strong We launch underlying BRIDION. including

in XX for And we the indications in I-O across Merck sales Europe, Now agent KEYTRUDA billion new AstraZeneca. time, we KEYTRUDA. a With $X for a excited and and time which sales on are launched In for first new indications. six start in the types just start for XXXX about remain is all in making as KEYTRUDA have growth portfolio. franchises alone, second-largest three few Japan. with product with U.S. exceeded KEYTRUDA key Worldwide KEYTRUDA our we the the oncology. have the patients MSI-high quarter. the the executing start KEYTRUDA. This four any U.S., in that six immuno-oncology. in we in an opportunity on U.S., with more million in cancers, globally and $XXX I'll over have Merck grew in the tumor also LYNPARZA, begun indications now leader I'll quarter co-marketing focused And product opportunity global with extensive exciting the and I'll highlight to than launches, other on of We

was as channel Although normalized demand both over there noise most this over some in the levels, data, their at you if growth quarter we quarter, in as script look seen inventory as year recent the substantial have year distributors well quarter.

cancer as KEYTRUDA build the to most are growth U.S. cancer in leadership expressers, Lung on of to well contributed in in for of prescribed nearly patients our as uptake continued the outside continued KEYTRUDA/ALIMTA was setting. patients. largest type, three making combination sales. new cancer, metastatic being lung with XX% treatment tumor KEYRUDA, one adoption high first-line by the in but all the approximately new We monotherapy of cancer in the lung lung of lung cancer indications driven of Across U.S. position cancer on lung it our started

to line melanoma position the strong launch. as the fifth continued In melanoma. are leadership or additional reimbursement months second leadership have seeing to new cancer, addition Rx of despite share, the bladder contribution greater is in in we neck in seen two KEYTRUDA lung the and greater And I-O head being in from maintain market leadership the entrant. continues class a just and Within second-line markets a setting, for cancer settings. cancer, PD-X in position and we achieved States, the momentum Outside KEYTRUDA in established first-line United in

and as is Xbladder we testing around great establishing approval cancer world, focused this our that in rates the cancer lung also in we PD-LX foundation remain on in for Following reimbursement consistent with Japan we're of process treatment each for through Europe, KEYTRUDA cancer. in the strong, also now working KEYTRUDA for a U.S. in with Early the country. see performance recent indication the Altogether, opportunity

working began We at launch with AstraZeneca also ongoing our the by of side up support ramping to colleagues LYNPARZA. are sales force our side and

we're breast metastatic cancer. about in We with cancer. opportunity are label And the looking upcoming ovarian forward the in opportunity the see we broader excited to

Global $X.X move billion, were I'll decline Now X%. JANUVIA. franchise to JANUVIA the sales a of for

also we we've discussed years. pricing continued globally, growth experienced While pressure volume last we several saw for the as

pricing growth we support continue, to especially the U.S. trends pressure While outside expect macro of volume going forward,

As of diabetes to a which from a our foundation products. our relatively result, new as we franchise grow stable portfolio view

sales to in now the in two-dose the GARDASIL Underlying worldwide we are demand the current on helping Vaccine going absent outside growth the Moving grown would Global have to to quarter were JV contribution the impact our in negative are European the in the from forward. the termination. increased in strong. sales transition $X.X regimen the the confident patient borrowing continuous including the U.S., stockpile. billion from supply starts Based U.S. our trends, business. with of for And U.S. offset GARDASIL remains

particularly for opportunities move from as business, growth next to Vaccine We the year. see continued the GARDASIL we strength in continue into in our

Hospital Moving U.S. the by ZEPATIER to quarter well driven progressed launch in the and growth The Japan, Europe, now Specialty. and with

focused we and maximizing evolving the remain year. marketplace next on on throughout competitive And pressure remainder landscape. potential, ZEPATIER expect recognize and this year we the its while However, of significant into we

markets delivered demand BRIDION quarter the ongoing driven of another the including XX%, growth U.S. strong most more around the by great than launch world, in Finally, with in

U.S., the closing, We have show benefit execution positive In in our top from demonstrates our contribution XX% with which from and from repurchasing the seen the accounts experience BRIDION. nearly launches. strong results continued the market's

Vaccine and for success well others. oncology believe global position in us And our addition to in into franchises these XXXX. momentum businesses good have heading We we

I'll Now Roger. the turn to call over

Roger M. Perlmutter

in express patients gastric for approval in maintenance AstraZeneca, – application LYNPARZA our suspected tablets for gastroesophageal for action with and of who previously announced by adjuvant, BRCA U.S. received with treatment the Adam. have with additional as accelerated formulation registration PDUFA part peritoneal have received FDA recurrent LYNPARZA, quarter patients data or The Food uses with advanced mutation in regardless also including based of we treated partnership during ovarian accepted use platinum previously U.S. In tumors KEYTRUDA alleles. two or States Japan. adenocarcinoma, Administration Thanks, or Progress the continued undergoing or FDA patients deleterious our that LYNPARZA review the the for drug received have to chemotherapy new and supplemental regulatory formation more metastatic seen primary treatment We're tablet also Drug with recurrent be metastatic in a BRCA lines LYNPARZA of approval with the our germline, who review XXXX. Also date the cancer, ovarian, tube, during Administration in treatment setting. the of the with either ADP-ribose responded chemotherapy. BRCA-mutated, approval poly the status cancer in excited of a review we cancer, for of new of we've is the the or have of polymerase for Food that junction or fallopian whose granted line LYNPARZA quarter of chemotherapy third particular, for with patients quarter United of by first been fourth and inhibitor, to breast HERX-negative deleterious new who neoadjuvant, Drug third who priority PD-LX. treatment.

testing Congress lowering During to placebo cardiovascular the of of regimen, of with patient results REVEAL, risk of European the XX,XXX as at presented the whether could the an third the major quarter study, events Cardiology, LDL-cholesterol we control. added effective our when compared reduce anacetrapib, Society the

experts primary that in the study not concluded regulatory filings of the program, including disease, anacetrapib the with Although its prosecution after we endpoint, drug. who would us consultation through those cardiovascular met advised had decade-long REVEAL development of pursue this we

hepatitis and themselves, the participated families, who of team reviewing to landscape, grateful study execution patients, physicians after Separately, to not the highly effective in that our data during we enthusiastic regimens of was triplet This this study doublet aspects are analysis. therapeutic our process. followed inadequacies University in and decisions to regarding from ZEPATIER. management inhibitor. portfolio any nucleoside C the all Despite HCV MK-XXXXB. evolving and led prioritization the these and decision triplet therapies, development containing our very especially decided HCV conclusions We compounds pursue Oxford about stimulated antiviral polymerase MK-XXXX, by we instead newest not But directly the remain

of in Veterans including demonstrating from in this (sic) XX.X% Affairs], activity month very urologic X and Administration X real high earlier chronic CKD with chronic For kidney world patients a presented example, X. HCV we X or a genotype antiviral data the U.S. very response Department with [U.S. severe patients Veterans disease, infected disease, renal sustained

for disease III prophylaxis Beyond to in terminase PDUFA FDA for during of Human quarter our Medicinal this third greater or crossover recipients to XX.X than chemotherapy, currently despite of and adult for with program those Earlier KEYTRUDA XX% median month, the in Agency. a the first-line hematopoietic the a the vaccine we to letermovir, and a long-term again in earlier with showing month, of being XX was continued PD-LX, (sic) oncology are Human XX% reactivation lung from data survival Phase Medicinal CMV on of a X. as KEYNOTE-XXX, European at cancer, follow-up treatment by presented effective compared Use] cell arm Julie pivotal elaborate infection They're rate. that to the Committee in which also review in this ZEPATIER, Products World months, receiving we infectious evaluated study program, presented broad express patients Brahmer the transplants. for Lung Medicines Returning the data from research. inhibitor patients cells cytomegalovirus cell for Cancer of the allogeneic of on date [Committee our colleagues Products non-small by These tumor Conference under stem the randomized data months Yokohama November of

the is to therapy, Data follow-up European treatment regimen. to was the in presented added with separation results longer We month comparing survival curves traditional enhanced KEYTRUDA chemotherapy. of study, in at the with combination that Medical carboplatin/pemetrexed, our improvements documented following when impressive achieved survival traditional also continue Oncology KEYNOTE-XXXG this see meetings overall KEYTRUDA for with with treatment Society last in

primary to of While observed was months seemed a had therapy This follow-up, the KEYTRUDA combination X.X to In crossover the true was chemotherapy in ratio confer survival. hazard survival median overall ratio survival hazard analysis, X.XX. XX.X a anti-PD-X/LX improved with XX% for words, overall administration overall the chemotherapy for to early of in after fallen in the other despite rate arm.

data, revise of for nearly The to FDA. overall With by conduct date, underlying patterned plan the been in KEYNOTE-XXXG, capture February endpoints patient second observe. we This reviewed include enrolled, study been again that fully with KEYNOTE-XXX have these the the analysis we a to pre-survival longer of interim survival. therefore announced the analyses, statistical mind, extended to results exists has as an of after KEYNOTE-XXX, term And quarter. study opportunity and completion rate completion estimated in to the upon depending and survival elected has depending upon XXX we revision event in XXXX. the timeline progression event for is The underlying accepted rate, dual

pipeline and LYNPARZA purchase the I And beyond a quarter development. of antagonist Munich-based molecules, to the the our which that clinic approved have or acquired RIG-I have been in entered Rigontec. note include Lastly, programs, these through either XX selumetinib, early beyond oncology which proprietary we third enter

of beginning will details of now in I'll early to see Teri. turn call a meetings beginning presented studies And of evidence the scientific back now activity XXXX. these are number in be programs. We in these to

Teri Loxam

to to possible as the portion people questions as keep Q&A of of to the two many on maximum allow everyone our be call us get Thanks, moving this would to call. morning. like please a to Roger. to We'll remind on I

if up, So, queue Darla, please. can you everyone

Operator

Certainly.

Your is first from with question Baum Andrew Citi.

Andrew S. Baum

you've Thank you. currently [ipilimumab/pembrolizumab] patients deal you. cancers, you see combination KEYTRUDA? do in with mutational of with burden]? repair of versus low of and on refractory your And please. in endpoint Thank a primary with initiated seen mutations, ovarian recently breast significantly could trial? DNA in questions, high the given germline opportunity comment market And differential that? beyond as activity TMB cancer. play you ipi/pembro second, LYNPARZA patients in part is KEYNOTE-XXXG as viewing prevalence Couple Both well forms your recent Roger, the [tumor the whether as any What TMB with then baseline on

Roger M. Perlmutter

Andrew, Right, okay.

cut where tumors. data have there's of burden population, see know at where to we to patients And So question have other be tumor function of as MSI-high course in But of all first a label and of of kinds MSI-high really points those don't have of mutational mutational mutational to are. all, as the the you in activity second not a stratify. a at And an tumor tumor on populations. those we burden we're mutational mutational in in burden burden We we including we lot broad those studies. for the cut – to have define differential magnitude as can rise not each from populations lot tumor what work your of of That is define endpoint still you our in burden And work of explicit to meaningful? burden. a look what KEYNOTE-XXX tumor does KEYNOTE-XXXG are response who We've type data part actually done rates specifically. believe tumor is, tumor the done points that's in response good. point quite because for And one mutational burden. from looking question. tumor has a within point at that can course this mutational within But We're

not KEYNOTE-XXX that's part program. So of the

the to regard are with Specifically really opportunities broad. quite LYNPARZA,

with together studies AstraZeneca, have, our potential a We of dozen types. a at tumor covering broad colleagues more than registration-enabling range

lymphocytes on the is course, fact to tumor that that question, virtue for And effect the the by of increase. One DNA that mechanism the be targets that the mutations could of presence expected be of to excited mutational neo-androgens us, of have of things in KEYTRUDA. encode the provide might those unleashed relevant that PARP accumulation acceptable repair, would an salvage inhibitors for burden could T

something and therapy about. So of the combination really is LYNPARZA very we're that KEYTRUDA excited

along in Of those as we course well. of generated pursue preliminary as niraparib collaboration combination And has been with with part lines studies to continue with those data our KEYTRUDA TESARO.

Teri Loxam

We'll Thanks, next on the to move please? Roger. question,

Operator

Anderson Bernstein. Tim from from It's Sanford

Alexander Man

here, Hi. my This for is please. Alex two questions. on Tim. Thanks for Man taking I have

First, a high question. level

well hasn't have So the you yet XXXX, much. very needle threaded guys done stock your too I-O throughout

earnings I-O else years the reasons the sometimes that source surprises And think patients only nervous one much on potential in only early Publicly, you expressers. growth can a this then small what sample the Phase to next sets newly-posted investors with this to first-line IDO is combo as clinical not two over of ECHO-XXX, of are and for in high When in I-O years, and is first-line driver recruits combos trial you that three III two and growth? of your One in revenue lung, lung forward happen. seen exclusively. can point of outside second, data this only we've

all expressers to combo's expressers you. really IDO in what high hypothesis chemotherapy the like that to potential you drove is in Thank combo ECHO-XXX? So only? And pursue the the unlock need rationale

Kenneth C. Frazier

start with Let the first our me question about portfolio.

a of company portfolio as and positions all, capitalizes on and a we broad the long that first for company balanced our strength best So believe success. term

fillers the LYNPARZA, the in investments are term. for as and our early-stage to We of across many already oncology. long you've have the to our company believe clinical making time, we a committed in programs same to optimize assets number portfolio KEYTRUDA will oncology be meaningful other addition At we that outside growth necessary heard,

with For that Afferent. cough we III compound Phase into moving from example, acquired our we're

Vaccines programs We in business. advancing of also have a our number

the areas have we early going pipeline, on assets. of a of generation work other our including addition, In in lot of next HIV

have growth. appropriate to on ongoing long to shift our term portfolio balance assets resources basis the that investments actively need term, while to delivering we We to So making an potential. the the those again, in higher review recognize growth drive short

have like So move going beyond like pipeline in oncology, in to we in Vaccines continue our areas believe to to we addition And areas cough, we're forward. opportunities that. we augment as

Teri Loxam

want Roger, do the to you other... answer

Roger M. Perlmutter

the be respect respect just with will IDOX are, studies so We've with that which combination a there evaluating of posted might studies. lot Yeah, yield IDOX studies of into to potentially to a you as combinations. lung know, And put in cancer results. number time

quite seen respect data right, have You're and combinations that exists with IDOX KEYTRUDA. with the to you

We inhibitors, the inhibitors molecules, are of of reason makes T for It inflammation axis that one best second immunity we've sense in responsive existence preexistence that there think in found lymphocytes. as IDOX the that blockade. years high setting last because are is other beyond a evaluating ways population. checkpoint and this improve many look lot important, PD-LX information IDOX remains a you occurs that existence of study, we preexisting these these the or that inflammation with inhibition observation of it. looking you over a for time. when And just a another But we is in at tell virtue at don't the We're IDOX have inflammation, trying over The already T represents a of exactly can That's – combination in us course sort level KEYTRUDA. But one fundamental of where in bunch of as lymphocyte present, would that by the lot high behave. of know of responsiveness information evaluate activity it lymphocyte circumstance clearly inadequate. how to to responsiveness. to inhibition reveal see a a T And would of is improvement checkpoint know

tumor and to trying get is And visible what through goal here. we're That's that to try done that the make so immunity reduction.

Teri Loxam

Great. We'll question, next please? the on move to

Operator

Schott Chris with from It's JPMorgan.

Chris Schott

Great. Thanks the very much questions. for

question one is First Ken. maybe for a

fits strategic how of Animal just terms another some the debate and to Merck over exploring that how Health they I overall And in is time know Just their announced in your of competitors business. Animal there's been Health it portfolio. core options for one are

just from Merck? crossover? I And discussion, broadly bit the benefit then talk little on in despite here more part you we that as maybe about show just just second PFS can can to overall co-primary. of confidence those Or question that the we on the a the story? you hit OS more had that Animal was know we kind on both overall from as it your the that Merck study you. here, data your some we encouraging more to some approaches as wrapping hear guess any wait terms from KEYNOTE-XXXG. Will updated bit think confidence update endpoints can on I up? a thoughts just prior on of for My So get before the primary – from to of But your as just business? just company do overall competitors? really within just we'll Health, KEYNOTE-XXX we survival a you're adding get to different endpoint about to need fits How in broader the of little Just here. franchises Thank

Kenneth C. Frazier

Thanks for the question, Chris.

company. can Health on the So we growth see create portal the long as we we innovation pillar growth are driving through term and And innovation Animal a focused for generally. that through of that

noted it see strong first meaningful. quarter, growth going well inside is which as as time surpassed continue margins and driver, a because forward for to billion portfolio, the our we market this we $X it a as As key outlook. has it healthy And

nicely growth development. intend, opportunities, augment business we fitting additional business overall perspective So to very from that And find we as our further we with it augmenting where see and company. an our

business, important So Chris. our of it's part an

Roger M. Perlmutter

separate that issue, KEYNOTE-XXX, the at PFS the you as regarding you is the the OS, at first for essentially know, curves time PFS look And, Chris, of key when to curves as analysis. opposed

plus for different those already quite are as to chemotherapy of chemotherapy at alone. So curves months, three the combination KEYTRUDA opposed

group, that only of on we curves the at because and not right of until closer with in study to perhaps out But separation OS, beyond what XX KEYNOTE-XXXG get now. you're For months. part really based per separating meaningful XX the small the of months patients curves have in size study, seeing are XX those you

KEYTRUDA, And achieve. that we of we standard. would to of study, extent that data trying we're cancer survival be And results. announce that we're in the that manage Now is going positive, earlier. believe they when with to to data may long all a And To be, going It's overall to what able possible come. the very the the we're out become see to people who the physicians would how we've of of is will we overall terms that. of course study. patients time be these KEYNOTE-XXX are improved the extent survival then preserve got not as But PFS for idea about like to – really the to course gold very careful the to receiving them important see driving the lung power we be driving KEYNOTE-XXX be

while going of integrity be we're in opportunities will be analyses So interim the the the study. for to careful preserve there study, to

can will are But as announce the be study patient definitely be results. want interest know. think preserve the meaningful, important. as these confident to integrity second you'll very to You of It going of that we have the we care. We're results we that soon the be to in

Teri Loxam

please. question, We'll move the next to on

Operator

Risinger from Morgan It's David with Stanley.

David R. Risinger

very Thanks much.

on wanted trial. KEYNOTE-XXX to questions up So Phase III IDO follow and I with the

clinicaltrials.gov. with to to completed in the according of XXXX Roger, So KEYNOTE-XXX, respect February enrollment

February patients why alive And is that combo that related numbers wondering event is in because event the rate should would based the the completion you to low OS? a expected have interim later hand, you the is that the is first longer. two them? Just much be that, Phase interim the the please assume could keeping that in And And But maybe for year? primary years upon color we have half KEYTRUDA timing? Or XXXX of next there IDO to any with provide you. separately can posted, framework on the of IIIs look respect for been then timing first first timing readouts? Thank provide you other of the

Roger M. Perlmutter

is later, But The bit Right, experience we're based later. think low. and completed David. a On prior March. little event what – rate a little enrollment on it bit I I mean our event the completed KEYNOTE-XXX, yeah. now, seeing study the in rate

many And the have, date. how how of events power simply well, up based calculate, simply need long with the study which events the to the calculate to we we be, we and we we and see. we how – so expect hazard how what that's times, at And many on will come ratio

that going other very the following closely. be we're On event to rate hand,

can't it at point. stabilized so And this have

add that KEYTRUDA meaningful response be IDOX will to and for when And issue there. that's will combination interim going can't rate. of I and so But do And them. to that again, see I evidence take durable sure of the such a types, analyses there that chance what across clinicaltrials.gov that the in will benefit impact a you just studies. about studies. we'll dozen design. know you appeared response with exactly KEYTRUDA were larger information We study And a control, trying done of combination we to survival. see have the the be in I there that or on progression to of a The for you're beginning to place. that in hasten do that expect clarity get we're have rate, saw response randomization improvement terms post IDOX gives have with plus will responses half any IDOX, we think study, give a we that rate into opportunities we those you on and range a feel overall to that that for Phase is That's actually provide announced not what in different where tumor drove translate improvement III that

the trying at, that because to are improve that It's clearly cancer patients. simple. be we're looking we're treatment going So for those to things

Teri Loxam

next move on please. the to Okay. question, We'll

Operator

Cowen. Scala with Steve From

Steve Scala

readouts also step-wide IMpower-XXX Roche's growth XXXX? outlook you. preliminary simultaneous look would for very the Merck's to simultaneous risks. appreciated. Merck had to And versus thank looking and at some any readouts? KEYNOTE-XXX you IMpower-XXX half thoughts of the are but X% for Roche similar perhaps believes growth you in the Could But I'm Thank what consensus completions. can clearly PFS I is compare thoughts why do a still primary what OS much. Merck not first PFS in on doing? is out EPS Ken, opportunities readout, this is versus relative There XXXX. Roche take step-wide next understand another the sure way for Specifically year. will year. And then and OS Well, contrast doing read OS and secondly, is and go. Any and be

Roger M. Perlmutter

Steve. Right,

So I treatment studies and they really IMpower designed comment on can't effect they're believe of their and course what how seeing. they've

assign our power the more the in order revise more to – to For us, overall to to study of survival endpoint. we put program decided

months late crossover Remember, versus they that such that get overall gets numbers at you PFS. got we primary of is issue what survival the impressive arm, dual a of survival to the a continuing really really proved then therapy. such median dramatic And means despite quickly. that's less beginning, terms And in KEYNOTE-XXXG important to is separate we of very That's either anybody And be chemotherapy the the everybody important. PFS the it of KEYTRUDA KEYTRUDA. overall clearly you who the the gives as late. than thing KEYTRUDA PFS, a early confidence And on in endpoints. because thing. in improvement study have lot anyway is had there's in data. The is the the and that are with most comparing really chemotherapy KEYTRUDA. further OS us We fact KEYNOTE-XXXG pretty look everybody gets fails decline that study, to chemotherapy is nine The us, or then KEYTRUDA gets got on

and the KEYNOTE-XXX really that's ultimately that we cell the of for important. survival That's data understand crucially the want early important on thing we crucially Because changing. we solid So practice sure to that's make study. patients obtain in very business late KEYTRUDA important. that non-small versus very That's that cancer. becomes with And lung versus of

what that So study. in we've done that's

Robert M. Davis

we're It's our it's Health business, the portfolio. year we've really Health. And to we KEYTRUDA what growth growth Ken's Thanks, but term and our just see until quite highlight forward. GARDASIL. fourth have good provide provide that And for done XXXX to look specific and our give that the vaccines point we Steve. second finally in continue Animal billion Roger. to to of with Ken But of oncology was portfolio. Animal grew believe now And opportunities about made, which that question reiterating we to broader of I in maybe just pillars touched strong only And seeing. Obviously don't in Adam And given get KEYTRUDA overall the real year And continue headwinds to expanding expect some the With continued do growth, well. start will see to a we date. several as growth a your in business. we to believe to meaningful quarter, continue size, that the which for it's XX% would has what I'd a Good growth. there $X we is opportunity point Yeah. great I it long then we by seen what this to XXXX, with morning, obviously that sense fact double with digits especially it growing call, guidance you starts upon continue with be the we that not quarter. very growth, point, to February. has reaching know, your can EPS Great. tailwinds as in quarter BRIDION, then earnings XXXX

finally, pillars for starting And to to believe about then of Adam as oncology do we I drive investment. that that real the want to we stable growth to an next in with So of be we investments, we're with the opportunities and product, very year. to beyond we is broader products mentioned, is others but some ZEPATIER year. have advance some only as pipeline. the ZETIA/VYTORIN we given going But clearly things we think on as line from continue R&D A continued we promise, which the have from we which tails good add to particularly with drive the the move continuing have as a Roger next of obviously to and make that, and opportunity think pipeline foundation we'll point mentioned. in, invest LYNPARZA obviously name other see continue And face that few, highlighted the on ZOSTAVAX, as that a KEYTRUDA as off then pressures vaccines to pressure, well I'd top LOE a And growth into Rigontec pricing not really like then and pressure with front there. only JANUVIA other we that you other even lot lot

long going obviously the to R&D growth. P&L overall next leveraged as can driving we opportunities right make those will reallocate are by And we an investment we remain committed that to growth But into we So to we challenging meaningful drive making get and be in next disciplined will to trade-offs make year. behind That more do term. year. everything resources

February, So a and forward look then where we of some And of you gives the hopefully to that sense pushes more we'll pulls. give specifics. you

Teri Loxam

please. the question, Great. on move next to We'll

Operator

It's Markets. Capital from Arfaei BMO with Alex

Alex Arfaei

much chemo you I Okay. first questions. want just Is for reason to taking KEYNOTE-XXXG very doing And lifted the sure you once the get arm, the and better I Good to crossover, correctly. Roger, progress, that that Thank expected. everybody XX% clearly the in they morning, in KEYNOTE-XXX, heard with question will you're folks. make on traditionally KEYTRUDA? being chemo seeing they all is much XX% than ask arm I

could another to again KEYNOTE-XXXG So in Adam. And that for how my follow-up setting. with latest hitting please? a still an Thank to Or confident much. getting basically you breakdown for the indications, X.X Are you're from promote you by rate, your just very us believing give second-line what's regarding I'm sales XXX% And et XX% presumably cetera? to you're effective endpoint, PD-Xs struggle trying feedback updates you at given latest Since are you're that know getting we ESMO? going KEYTRUDA median pushback? crossover, physicians about XX-month the years, have they OS XX-month OS approximate are significant PFS of

Roger M. Perlmutter

are are is in if at exact So, which – already out. different that crossover. to announce a survival progressing in study the very extremely way Alex, time therapy basically line. we And in that They drop demonstrated point, effective study study KEYTRUDA hit that the will mandatory response who behaves patients look at course, we from PFS if gain question is was is we PFS. and based KEYTRUDA (XX:XX), data. We've there's in KEYNOTE-XXX the second-line second no immature, fact will cause the positive overall in no, And of to when which you've is that a access, the to on

as so to you're what's to plus want is KEYTRUDA patients, chemotherapy non-small can need that as physicians best how and that's late? is to because cell a contemplate And opposed we to difference, that. population But overall essence and make understand be chemotherapy of this as ultimately to really the so crossover. the they important to And survival in patient difference plus providing of result combination the for treat This we the what try lung that sure cancer. going we thing understand do early in opportunity is looking for at key KEYTRUDA

Adam H. Schechter

we're answer a high your in strong States I to United if above you also expressers the very uptake mean utilization And KEYTRUDA cancer. in in lung in the look XX, at seeing lung seeing we're and question And significant Japan, uptake monotherapy. the cancer, of regarding

a the combination used lot we're combination. with where that they If of now the therapy. being feel to patients. in And to more it's at seeing very the prescribe are use that comfortable label, with lung hearing that's so in hearing you they XX, where chemotherapy, look combination ALIMTA. sector We're and they're We're the community our that using expressers the X most cancer comfortable treat between physicians of increased

which to indication significant an for to then In cancer non-expressers types. coming a that from melanoma, we're our that addition, XX% we lot additional everything in you sales physicians we're now represents bladder, tested be work and think opportunity. give we to those in about patients are head reinforce the XX% the is the have rough on and in spending those the patient or And think time on of lung of estimate, used patients, are U.S., XX% trying XX% neck, really we educating the PD-LX not X% what To about a else. in combination

Teri Loxam

Thanks, on the Adam. question, please. Great. go We'll next to

Operator

with It's Bank. Gilbert from Gregg Deutsche

Gregg Gilbert

other that than curious Thanks. study [CheckMate] have for to to noticed some on different? PD-X then answered relates designed the you when not that could vaccine And for Thanks. that one how trying questions And its vaccine your IPR a and And take patents. was Prevnar from agents that XXX your was you. We recently were Bristol, pneumococcal by you you III? Roger, question are any that posted, Have into pembro/ipi be that will obvious to the answer status? fact Phase

Roger M. Perlmutter

Right, Gregg.

So the conjugate question to vaccine first our is pneumococcal respect program. with

program We have pneumococcal conjugate a in broad very vaccines.

designed We improve we operate area. at advantage to believe opportunities, freedom are We this in invasive meaningful vaccination, improve to first opposed always of can respect disease. looking specificities to KEYTRUDA moving combination combined advancing look resistance which shortly. agents We've order the be With to will when the are as two ipilimumab mechanisms carbohydrate offer in forward into study with of with to really KEYTRUDA, III those to pneumococcal very whereby that to V-XXX, is Phase together have we And of see we believed whether the set the alone. that. expand these

is alone that therapeutic course the because the gets chemotherapy. combination when we've those add a think with And of substantial that impressive to KEYTRUDA do I you toxicity one regimen. of of agents the in one, comparison, ipilimumab results two course randomized very the comparison you already add demonstrated combination of versus critical

needs comparison the that's to be that made. So ultimately

Teri Loxam

next on to Great. please. Thanks. We'll question, move the

Operator

mentioned LOE Vamil K. you Vamil in side. JANUVIA And from a LLC little years. taking Great. few Securities the with for (USA) Credit shifting just the a Divan stable. to is Hi. Divan Credit Thanks portfolio obviously Suisse. diabetes Maybe bit coming We It's that - question. Suisse you feel have

from the that Or question, to area boost focused But you business road? now to MSI-high face beyond with just have going maybe is portfolio kind have the on broadly terms years are in an And areas just glargine given down then the on in JANUVIA to and more business also through of what a just oncology, sort follow-up the anacetrapib, development one is on what indication. of that biosimilar. You of decision few the side a development? (XX:XX) multiple maybe curious you've looked oncology

Just of that's no from MSI-high commercial how obviously terms going a curious out doctors there's perspective there. in

getting using from of in Thanks. what people traction So sort commercial you're And that that approaching how a perspective? biomarker? you're

Kenneth C. Frazier

thanks, Okay. Vamil, question. for Well, the

overall, that us. and we'll and think pipeline I the healthier we the the the category what oncology to pretty continue are that Diabetes our drug, acquisitions to our to look like opportunity development our find patients is As here we're innovations scientific therapeutic a category. other strategy, business provide I work a But But patients. diabetic look area. the of that to it and to relates enhance therefore we think much, will opportunities differentiated will provide benefit best help We live lives. is agnostic, is beyond very oncology. And for we're doing actually regardless key for in to for looking therapeutic find partnerships collaborations to important overall

we and Diabetes I Health. opportunities grow remains in And for series our So and a strong us. look oncology Animal opportunities to think to important and diabetes elsewhere. our of we'll have Vaccines pillars those

Roger M. Perlmutter

of oncology. a working And tumor and new we're MSI-high, indications of as having the establish KEYTRUDA of increase across types. to in of What a is doing now helped KEYTRUDA And MSI-high standard with obviously helpful. multitude very testing regard to value care it other right awareness is

primarily that an are if available endometrial that just it's MSI-high cancers, are you now across of some but cancer. Right I like colorectal in a uncommon. think you know common it's biomarker, spectrum As used or established MSI-high, Others is cancer mentioned. about wide

education So in lot the marketplace. is a it really of

time will meaningful going term, as be So to believe will I the But for a market opportunity. education over the it's take time some in it do short evolve.

Teri Loxam

please. the Great. next We'll move on question, to

Operator

Meacham Barclays. It's with from Geoff

Geoffrey Meacham

potential we Morning, ECHO-XXX versus in a cohort? in Adam or you uptake what's then seen that what could the what for – III, by just risk/benefit approval bit data? docs, melanoma about guys. melanoma, do on or on in Thanks Adam, trying perceptions see for KEYNOTE-XXXG little in the or lung Thank reimbursement EU you the not early you. you to And Phase think ahead from read heard negative KEYNOTE-XXX opportunity. Europe, the of Roger, versus recent your I'm far influenced the U.S.? can the in the reconcile And so you've on question. the will talk whether be the PD-LX have data

Roger M. Perlmutter

combination So, Geoff, let on provides time KEYTRUDA to of benefit. ECHO that do me data, meaningful have and just say whether actually know we IDOX the information present not the at antagonist sufficient

is We I've there and that that accrue that And relates before, response continue of intriguing, an response. that as breadth rate. in says to data that depth is said to improvement both

know. pursuing hand. studies very We you into really are have translate broad a through hopeful at data don't III we something will that meaningful. Phase III very moment that the as in But those in Phase program, We're that

Adam H. Schechter

see for we lung, look tested the to significantly. And good in you status. really hard to increase patients regard to of And very continue progress. countries, various we're EU, pickup the being with worked the the as seeing PD-LX number And across we've

already. XX%. In it's in So greater it's than Germany, UK, the over XX%

on. is to KEYNOTE-XXXG And about and comment. we before process now right wait every have to lung. each getting month, ultimately focus and more through more reimbursement have new are Our and continuing reimbursement. really we're first-line see And We'll work the more coming we for that can to countries second-line

Teri Loxam

on Go question, the next to please?

Operator

Raffat Evercore. Umer from with It's

Umer Raffat

question. Hi. Thanks so much my for taking

I a parts. And find of I three have lung what focus chemo. And one So comparator first-line ECHO-XXX. ECHO-XXX I – epacadostat, plus KEYTRUDA I specifically plus new this the in to here's have is three question interesting. arm KEYTRUDA trial but The want with on

first-line So we've that's seen lung ever bar to-date. in the highest

of just chemo involved have here's further my in confirm this pembro you're chemo So into especially you combo, three-part IDO head fact KEYNOTE-XXX? finally, that question. how Two, plus plus this were curious your thinking in we the design? KEYTRUDA then you. about as trial validation pitting plus actively this comp you can trial, is KEYTRUDA in I'm One, this versus Thank you confidence a the this And comp?

Roger M. Perlmutter

These – are in with are all, of all by Umer, colleagues Insight designing not involved things So, being of the our are studies. first we pursued them. at these [BioPharm] independently actively that

iterations to because because safety. very terms impressive. call, on we through Secondly, both epacadostat compared study high cell gone say, the chose Epacadostat the KEYTRUDA want to repeatedly that, this we design see well efficacy randomized are you many, of tell demonstrated in studies as we are I bar design as the study make said lung regard – combination as non-small setting. eager – data And in we plain, and the many design KEYNOTE-XXXG reported, study results by because we're benefit. contribution with we've III particular is standard a a on It as provides in we what now that the some as these to cancer of meaningful of not do Phase plus I as and combination doing us have previously that information this KEYTUDA other just think I've

depth. combination. We translate rates, that have monotherapy, it in believe we've just But seen and survival reason improvements because we see in we have And do improved we're studies. that this in will intriguing, don't single-arm But the single-arm data these the that may That's studies. optimistic is that not we that know. that the into breadth or we case we information. response PFS both overall benefit imply we're are doing very And – and have they versus

Teri Loxam

can, other. one We're right. to running we time. We're out of to take try more All one through least, at if going get We'll another question. and

Operator

question next is with Goldman Jami And Rubin your Sachs. from

Jami Rubin

much. a you. for question Ken, very you Thank

helpful be expiration. Just JANUVIA do driver. important release, growth if talk BD the you think on wondering prepared that, company's into to business next sort or that to just growth development as you that mention just of important a press BD company scale you that a specific going hadn't expected a as reading think will the job operating the acquisition Clearly necessary And, very something R&D bit that I'm really you in an moves Rob, We an what giving XXXX before. about press expenses? seen without be in with you're importance lastly, of be forward? for guidance. SG&A? and as early more they And allocate the Roger, large is did driver, Can remarks releases your – previous Should going about to looking you assume could decade do year? talking little patent Or What you be just you you on the is KEYNOTE-XXX, is of think will how up, the on next up? PFS expenses be we maintained statistical should will analysis OS? assume Thanks we but very can that operating you much. between

Kenneth C. Frazier

Jami. morning, good Well,

our we've I'd and to best enhance business say I pipeline. look company. first important to development the all of in very unchanged. have growth priority other talk go it about and at the the an tried actively on back is the And to engaged looking for importance We're innovations Let term that because long that development is for scientific is press me that our releases, that of perspective what business consistently. say our would is And

As to what large those looking or We're consolidation it purely is we're looking the ability that we've for things relates primarily not synergies innovate. transactions, said enhance company's purposes. for to at that things

so further for that us we with bolt-ons, as help those And be that going to our continues particularly we're innervation I strategy. our things, that look view would think to will go

Teri Loxam

the do Great. Rob, to next? you take want

Robert M. Davis

Thanks Yeah. morning, for question. the Yeah. Jami. Good

I our is goal leverage drive term. a than operating So as have was we stated, to ago. a more specific be Obviously little to constantly maybe long minute

we With we at reallocation increase looking is, our productivity. anticipate operating as to said, the continues talked opportunities focus KEYTRUDA, that move LYNPARZA, make and to drive where resources expenses So portfolio. we opportunities around next of by to driven through to into that with broader trade-offs be do the being R&D year, and primarily about

SG&A the to will well to trade-offs, as we So continuing expenses some and the investments even invest make overall appropriately will R&D, on that the to best our as line, in is though drive of we though manage those rise, expect. launches. sure make to appropriate do we're And something behind key

earlier. said that than little clarity hopefully a So I what gives more

Roger M. Perlmutter

you and with allocation. we And, respect don't know, analysis to as Jami, plans KEYNOTE-XXX, statistical provide details health of

that that I'm But you. part through So suffice we overall it with survival is study not believe to to going go the say the of extremely important.

Kenneth C. Frazier

joining So let call saying by the close me thank us. you just again for

through of over period. those and in Puerto impacted past who've moment Thank to continue are to to by us for I'd just term to as notable. delivering I a the And that's expect Animal invest resilience topline and a into from all beyond. is well. months. And and on storms want acknowledge KEYTRUDA, courage also result, that and thank XXXX growth. a the I'd you. We're Rico Mexico this GARDASIL, employees particularly dedicated couple We year, the to we'll take just executing Health helped many we R&D. focusing been And And say pipeline drive who like in demonstrated sustainable our to long were our strength continue also particularly

Operator

this call. gentlemen, today's conference and Ladies concludes

disconnect. now may You

Teri Loxam	Merck & Co., Inc.
Kenneth C. Frazier	Merck & Co., Inc.
Robert M. Davis	Merck & Co., Inc.
Adam H. Schechter	Merck & Co., Inc.
Roger M. Perlmutter	Merck & Co., Inc.
Andrew S. Baum	Citigroup Global Markets Ltd.
Alexander Man	Sanford C. Bernstein & Co. LLC
Chris Schott	JPMorgan Securities LLC
David R. Risinger	Morgan Stanley & Co. LLC
Steve Scala	Cowen and Co. LLC
Alex Arfaei	BMO Capital Markets (United States)
Gregg Gilbert	Deutsche Bank Securities, Inc.
Vamil K. Divan	Credit Suisse Securities (NYSE:USA) LLC
Geoffrey Meacham	Barclays Capital, Inc.
Umer Raffat	Evercore ISI
Jami Rubin	Goldman Sachs & Co. LLC

Merck & Co. (MRK) 27 Oct 172017 Q3 Earnings call transcript