MRK - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Darla, and I will be your conference operator today. At this time, I would like to welcome everyone to Merck's Fourth Quarter 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 Instructions] [Operator like the now Teri over Loxam. to would call turn to I go Please ahead.

Teri Loxam

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

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

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

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

to the understand quarter We in the units sales business help you a have press also provided for the products. table and in release our

the In table than allocation a X, components to and on pension section provides This statement. be have standard new addition in the requires XXXX, effective that income the other accounting which expense. the the information Merck will is costs in standard, you Investor we on which other January website the to of financials reflected income included note of on supplemental service pension costs related

This report XXXX expense XXXX has will in we an to table other result in of or and and purposes. this result for no of will As that The will increase they be income income be a operating shows impact net standard, amounts offsetting but new an supplemental cost change EPS and XXXX. income. what the restated when sold, increased reporting XXXX other Merck's on expenses goods expense be will

Such that within the our these uncertainties. amounts. from inaccurate XXXX. Safe make uncertainties statements forth beliefs and Harbor and in assumptions set the of during forward-looking for Reform statements call statements and U.S. current are management relative is provision made Act materially subject of be materialize, would may to that Private may the If of prove today's Merck's the some restated underlying guidance the statements. differ meaning gross those risks like Securities Litigation operating forward-looking expense XXXX are you significant remind considered results on Our actual we XXXX of I the margin or to of to

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

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

Ken Frazier

continued and today. Merck you, call Thank Health most our advancing we Last all to the year you Teri. pursuing thank Hello year, for as business. successful another our of for mission science promising the Human across was and XXXX, everyone joining Animal

core strong our vaccine, GARDASIL; HIV especially Merck. growth business, progress for medicines Our other with results pipeline. next-generation FDA the key its and of our to and ongoing year's of with portfolio; advancement and and for as the submission Health performance full oncology in KEYTRUDA, including remains pressures. we loss doravirine continued year expanding several and driver Animal progress advancement Lynparza uptake a The highlights the within significant despite were of continued also products to of year demonstrate specialty for grow of strength exclusivity HIV and challenging include: underlying our able a

momentum and for behind these good they company. drive top We pillars XXXX anticipate are solid that the will growth and bottom with entering line

addresses bringing the actively and best in our are to and unmet pipeline key business pipeline. that such to We a at is success, and finding same medical We engaged long-term innovation we we're the needs portfolio development. continue actively and meaningfully building that Merck's further believe to invest significantly science in the external R&D, time, augment forward

behind In work line and environment. our ahead our portfolio our focused I'm year the years. our evolving addition excited in changing with to what evolve health pipeline, model to we including efforts lies operating reshape in future continue discovery to care and capabilities, for this

We our to expect access. ways our continue and we remain and products medically patient pipeline value the finding to important to increase to deliver innovative breakthroughs, dedicated demonstrate to of

more as call well through details level over the that to on XXXX flexibility by companies as increases to Finally, tax cash. for and the Rob our and the full I U.S.-based reform, which quarter guidance. us helps Congress our pleased we enacted providing access now overseas and tax our go playing fourth will are turn reform, results financial administration year field to Rob? to

Rob Davis

Thanks, good Ken, morning and everyone.

of deemed As earnings was The on to Ken onetime billion repatriated, with partially deferred $X.X newly the enacted we're in legislation by fourth offset in of quarter a tax impact foreign approximately provisional new to the $X tax liabilities. pleased noted, reform. changes Merck charge. a This the transition be reflects tax billion

additional are as well efforts. planning States, $X development United opportunities, R&D capacity enable approximately billion drivers in discovery $XX with and key in priorities, to our support our over for does five strategy to investment also value. value-creating unmet sustainable next our capital key tax seeking capital years, medicines capital fundamentally we in of medical While not to add and long-term flexibility to Health growth that it as vaccines to and shareholder business the that billion investment funding in improve of growing reform address deploy addition investments enhances oncology, does well To needs, our ongoing point, benefiting as allocation the driving change our as our invent roughly ability of patients Animal new

in remain We the row our for also increased we committed dividend, to November. last which seventh a year

deals extent deploy to don't to we we shareholders. time, Finally, the towards capital it development to look return the business over

and nominal In driven by the Now fourth quarter, more and financials. headwinds the results. a VYTORIN non-GAAP fourth mainly KEYTRUDA, quarter X of approximately REMICADE; let's BRIDION line of pressure turn in top competitive the basis, to due ZETIA, in for the grew impact the ZOSTAVAX; and LOEs percentage to This Health. our remarks June focus the we $XX.X for ex-exchange revenue including quarter, will from company point benefit sales products a the billion and offset the strength Total Animal grew $XXX million foreign on X% negative both than My incident. cyber on like from exchange.

provide Health business additional and excluding Adam just Our on Human moment. detail X% will a in that grew exchange,

excluding and poultry business growth Our animal, Animal ruminants exchange, our Health companion driven continued businesses. delivered in X% strength by

was Non-GAAP operating expenses the quarter, $X.X roughly in year-over-year. parts other reflecting the gross was XX.X% billion to flat the transactions Looking spending. of related cyber as P&L. in higher higher driven R&D cost year-over-year, of goods as increase to were R&D The margin Non-GAAP spending. development sold by June the $XXX timing of clinical million and the the operating in of approximately The reflect well development incident. also costs expense business lines increased

Our lower non-GAAP certain X roughly lower rate versus the year-over-year, effective full year of in a rate in items rate jurisdictions year tax points XX.X%. in quarter, percentage tax and XX.X% year. the resulted resulting full Increased last tax onetime was lower income and

excluding of earned we share foreign basis, of XX% per the exchange. X% on Taken positive year increase or $X.XX versus an impact non-GAAP the prior together, a

BD including of items our was operating true natural the impacts that masked there the and earlier. lower fourth several U.S. reflecting was quarter, legislation to disasters described a a the GAAP benefit strength I reform While the timing the tax related loss of by basis, was $X.XX, provisional On hit deals. tax of of charge EPS the from the enactment some rate quarter, cyber, somewhat in

guidance to outlook and turn our XXXX. let's Now for

year of Animal the $XX.X rates. using an This We point oncology, impact driven vaccines from our and mid-January revenues range Health. foreign full range expect $XX.X be assumes pillars to mainly XXXX X exchange in billion, billion growing in strength approximately by percentage of positive to

guidance, the call. remaining and Before margin at to going mentioned of the rates beginning the the amounts, expense that XXXX gross operating you which guidance into Teri relative remind I'll are growth restated the

by to across our We non-GAAP XXXX lower primarily slightly expect margin year-over-year, mix gross the product driven portfolio. be

as to year-over-year opportunities, rate. a increase KEYTRUDA including our our well and investments pipeline, as expenses to as programs. necessary Lynparza; an primarily care mid-single-digit operating pipeline the to spending at is such our continue make driven as non-GAAP our R&D low specialty oncology we drive expect by increase many in vaccines We other This to and

I Despite not flat with what compared have full due the XXXX, repeat generally will to benefit in that anticipate the reflects our the percentage relative we to few be range rate of tax non-GAAP points absent XXXX. tax, the be tax a the referenced reform. in been to tax rate XX%, earlier, to XXXX year benefit, from reform of Regarding onetime rate would favorable XXXX will in which which reform XX% impact

X Beyond outstanding point the project XXXX, continue repurchase as average additional billion program. anticipate prior our some versus we diluted approximately decrease billion X.X We – XXXX, share for shares we year, favorability. reflecting a of

Taken $X.XX together, to full point year XXXX bottom a X summary, and impact negative from in be P&L. mid-January reflects in $X.XX, rates. the non-GAAP leveraged currency of reflected growth year we foreign percentage to range of In top and line EPS expect an resulting approximately which a strong at execution

and vaccines by We driven expect Health. meaningful and growth continue oncology, our anticipate momentum Animal pillars XXXX delivering of into to performance our revenue

approach to solid resources, call drive EPS over our continuing long-term deliver long-term while turn remain trajectory to to We disciplined in allocation the I'll will the need maximize business growth of opportunities, invest We growth to to fully this fund the year. future best Adam. near-term our capital in of for balancing believe in With and the us enabling while the both shareholder our to pipeline that, value. us delivering positions invest

Adam Schechter

on full This In $X lead comments fourth Global across XXXX Thank nearly remains for solid a franchise. exceptional was with all our will XXXX, billion. the quarter a now of Sales $X.X year of In of Global sales metastatic provide headwinds lung the and for and of another for patient U.S., billion grew was morning, surpassing KEYTRUDA therapies. despite cancer, year the of basis. morning, the highlight billion our X% on I'll Health. and I'll of XXXX good Rob. And of an tripled for treatment than launches, be few I'll versus the LOEs. KEYTRUDA constant-currency oncology starts highlights continues year Human you KEYTRUDA start more $XX.X performance key non-I-O Human Global XXXX. franchises from nearly execution to new oncology. indications. Health I-O and everyone. leading across My option

in benefit with We in broader continue and of agent trial monotherapy tumor carboplatin seeing the first-line position this very overall U.S. they a of an of combination to across use build KEYTRUDA combination I-O non-squamous the should are on and as as of and has ALIMTA looking forward combination. success in recent with and to and KEYTRUDA that increased to announcement only all-comers KEYNOTE-XXX non-squamous in an is leading many with even platinum KEYNOTE-XXX the the Anecdotal survival the feedback ALIMTA show of our in setting from leadership patients, adoption catalyze population. types chemotherapy patients study. is also therapy been high expressers the outside from an results full physicians positive, the

for as growth. foundation melanoma, tumor In to a Altogether, the beyond lung in key bladder incremental establish expected XXXX approval we recent drive as for addition to an and KEYTRUDA see KEYTRUDA continue our in and markets, extraordinary including leadership opportunity of cancers, cancer. to in are types treatment we in additional

codeveloping opportunity in and indication. colleagues see the in of breast great field class for additional for ovarian with following opportunity label The approval long-term metastatic onboard other cancer being are and which leadership Lynparza, see reps markets brought the U.S., new in deployed Lynparza. we force the XXXX. AstraZeneca. is are We regained at Merck top cancer will we the currently and also in co-commercializing be significant launching now Lynparza broader We our U.S.,

Now moving around year, the the for Global were in for markets to $X the JANUVIA nearly with strong diabetes. full world. most sales volume billion franchise remaining trends

years, several pricing in continued discussed pressure, I've last we market-leading particularly maintain access. over the the As face

markets international for will franchise We of the increasing expect importance moving forward. the be in opportunity growth JANUVIA

to looking leadership with as additional disease But and our metformin we're on STEGLUJAN. of We AXc pleased JANUVIA, build their majority diabetes to to patients JANUVIA options launch help to a add-on are believe will in also progresses. lower patients. of Beyond we provide the first remain STEGLATRO in the

the look BRIDION specialty year. headwind sales ZEPATIER we hospital several products nearly ZEPATIER our in portfolio, products like LOE to at were offset and billion As XXXX. helped for $X.X the from

due reduction and anticipated, to the volume As reflected U.S. in fourth share competitive sales landscape. the the quarter a in significant in

XXXX Global in important pressure. XXXX see grew under million. BRIDION $XXX U.S. an continue growth continue the world. most this outside we for markets opportunity expect coming We around to over with to XX% nearly also dynamic markets in in many of to the just sales Conversely,

growth continued positive product. BRIDION the portfolio growing We hospital driver specialty trend given robotic and expect to remain minimally and a customers' toward the invasive key experience for procedures the with and

to vaccines. moving Now

Our and In in saw million the adult in pediatric in the we to broad nearly GARDASIL in Outside Asia market to our reached increased quarter, year-over-year. termination and U.S. for as demand vaccines global billion new the the rates GARDASIL reacted in in fourth portfolio China. ZOSTAVAX Sales XXXX. continue full Sales Underlying XXXX, well ZOSTAVAX saw in recommendations. decrease with product significant vaccines well $XXX of the billion our as JV $X.X for of year. reached ACIP reached with as growth perform Pacific of we business $X.X in and the driving launch U.S. and increased growth U.S., coverage the strong demand for remained Europe growth U.S. vaccination of increased gender-neutral

XXXX. U.S. closing, we brand are for in in of both the well positioned in the In this excited We the and are growth U.S. for about XXXX. outside opportunities important growth

more that, We expect that growth call to our I'll KEYTRUDA, BRIDION including Lynparza, stable and diabetes from franchise turn than products we to to over relatively be With GARDASIL face. headwinds Roger. the offset and the key

Roger Perlmutter

the years. product England three Marketing as PREVYMIS publication allogeneic of and described January, New by In numerous the the registered associated for of is in in in recent other European the product you, Adam. was prophylaxis the Beginning allogeneic for mortality our made opposed for with Medicine, under quarter, colleagues Japan. and was our on past thank the FDA in Union review with new terminase the Laboratories PREVYMIS jurisdictions, authorization in is Journal stem the during adult as first infection disease and approved XX recipients And And approvals. the hematopoietic PREVYMIS, was of over to transplant. cell in prophylaxis recipients. of in transplant months. placebo Merck fourth cytomegalovirus My Research progress use drug all-cause obtained cytomegalovirus inhibitor, this including reduction fronts also of JANUVIA diabetes. X treatment And in the in of In infection with of the products we SGLTX monotherapy December, FDA approval the received as name in treatment ertugliflozin, combination family metformin the for or with or containing presented is brand a with for which inhibitor type STEGLATRO CMV hematopoietic

Progress a As also the opinion these the a was with review result collaboration colleagues and elsewhere. more last at are of from nowhere week segment oncology. than Pfizer, received evident the worldwide CHMP in in approval under positive three products

to the gained This metastatic is PARP inhibitor, inhibitor a of the approval our first and germline Lynparza, we BRCA new in utility with HERX-negative ovarian component Japan previously patients first broaden inhibitor in chemotherapy. important for drug. the is irrespective BRCA was also any responded of the Lynparza platinum-based PARP strategy treatment for indication in of the who to Japan. approved have mutation. with a approval cancer setting, treatment a our ADP-ribose at together it's in First, polymerase this cancer, in poly colleagues AstraZeneca, status, patients of of the breast Lynparza have breast approved FDA second-line for cancer maintenance for for our

results that of KEYTRUDA-treated under presented at disease. continue analysis thus the therapy, first-line the of with patients together their of results the EORTC, overall May experience non-small in KEYNOTE-XXX resulted lung progression-free progression-free direction study and analysis survival KEYTRUDA treatment overall significant than of European statistically lung placebo both patients urothelial characterizing and aggressive a an of contribute recurrent-free permitting we treatment the malignancies. variety will cooperative for cell Organization cisplatinum, the were improved activity This Beyond Research the influence enrolled interim cell second-line KEYTRUDA was patients KEYNOTE-XXX KEYTRUDA by strides combination This interim on combination less data of in understanding the in as the as that from the or remember, of meeting. survival results treatment for Xx tumor. review together for significantly of that resected, FDA our of and treatment typically a two melanoma. but made Lynparza, Union. achieved likely of Japan. of that and These mediastinal the in including cancer standard KEYNOTE-XXX were Based in approval patients will approval co-primary cancer in an revealed primary were from extended treatment improvement rare of non-squamous, treatment approved carboplatin KEYTRUDA as also study United with study, The in in lymphoma, key study accepted EORTC will the obtained or the many B announced United recently, plus In cell to Moreover, of survival malignancies accelerated meaningful Based endpoints. previously States pemetrexed, what mirrors was survival filing accomplishments and recurrence our January, our in further upcoming other be of of the for in European scientific KEYTRUDA XX% More KEYNOTE-XXXG of which States year. analysis, endpoints, compared to the we results structured survival. for and our you such high-risk to studies of however, last early study, as overshadowed, study, disease. importantly with the the Cancer the KEYNOTE-XXX on non-squamous, resulted more KEYNOTE-XXXG KEYTRUDA in of Treatment previously the either with in ability the non-small showing KEYNOTE-XXX malignant our had

data, soonest an as encouraged presented which certainly the will possible of be by also are as venue. KEYNOTE-XXX of the appropriate scientific We details strength in

regarding agents with will we have FDA development tenofovir advanced October reverse combination have for of agents that has lamivudine especially Earlier HIV accepted infection. the reviews. use used The in that established inhibitor for clinical PDUFA and treatment Drug that and treatment believe month, a for regulatory the number for these date Our transcriptase new teams antiviral broad affairs HIV regulatory utility, combination announced Applications with interacting doravirine and other has when New with a in other to of are filings. a agencies a complete of this with non-nucleoside second-generation doravirine, new of two combination as we prove infection. agency for the We in XX regimen

we marketed development example, combinations MK-XXXX, of recognized with Breakthrough studying the are our anti-retroviral in metastatic potent with weeks a XXth, ago, the Therapy A discovered multi-kinase and were was a for Unsurprisingly, directed and KEYTRUDA Eisai. we broadest of carcinoma treatment doravirine For agent. Lenvima, regulatory and/or space and renal inhibitor few KEYTRUDA. novel towards highly that announced cell combination the by yet Designation, with in advanced another efforts

many Teri. with supporting over We to at XXX with of more call. sharing the occur are activity of April scientific amount Clearly, our Eisai pursuing I'll these the which about large look including information combination. details KEYTRUDA, late studies, presentations than call regulatory underway the the regarding novel clinical these turn registered of We are that clinical during exceptionally I in involved groups cadence the the and regulatory our combinations, clinical provide to forward summer, will the meetings given back and affairs will now development earnings this in collaborating early than of more spring busy. data development activities XXX more

Teri Loxam

a on everyone before we get to or so remind I’d do questions call. on possible. move we'll call And two Darla, portion the Q&A we please? the as started, can of please Darla, people Roger. maximum of to many as that, the to their could try one get to we to like Thanks,

Operator

[Operator Bernstein. Instructions] with Your is you. first Sanford question Tim Thank from Anderson

Alex Man

two. my I Hi, this Tim for Thanks is for Anderson. Alex Man on have taking questions.

second, have the in say can Thanks. the high-expresser while this your more than you to subgroup? benefit of past. on head with thinking XXX the on What's sounded Echo felt around a the melanoma occurring should the about readout? trial KEYTRUDA of cautious in into you're understand bit some in a plus I investors KEYNOTE-XXX And what risk we limited for as think epacadostat, latest now, First, just combination degree how we

Roger Perlmutter

we we respect Right, Well, Alex. KEYNOTE-XXX, with describe to of limited just you quite about what in are this of first all, with terms will as study. say,

the we has soon course, And to appropriate priority highest to I data encouraged the would certainly data and we're as would an presented published just the as practitioners. as are like which Our ensure be forum. in scientific that data, the appropriate KEYNOTE-XXX venue in soon to the data we that be the by about reiterate in see also scientific received possible those optimistic as strength possible. way of of are KEYNOTE-XXX by will

I it so of with about to from been the see profile combines KEYTRUDA. when effect benefit question that know. that have of actually a is efficacy has do that benefit such very very epacadostat again, XXX, see an with most such patients. practitioners the important And – is But meaningful to important thing that are I've in the patients that would treat them much is, does respect standpoint? it how with the their how can that, best And KEYTRUDA? get we we well one before, front data, is, said information to as combination need until guide don't just to have pleased, Echo And the We in an adverse ensures say that way epacadostat used thinking question a cancer we

Teri Loxam

move Thanks, next to on question. Darla, the we'll Roger.

Operator

David from Risinger with It's Stanley. Morgan

David Risinger

Thanks so much.

I questions. have So two

for cancer and the ex-U.S.? then bit respect by outlook on provide – First, mix I'm hoping and the you. color pressures you second, And provide could more competitive type little to ZOSTAVAX, also can with you KEYTRUDA a on please the in sales. sales outlooks U.S. color ZOSTAVAX some Thank

Adam Schechter

morning. good David, Hi,

XXX%, U.S. XX% outside more XXX%. in outside In it than KEYTRUDA, more grew the the at first So we if very and all, growth and the it the – grew of than strong U.S. year-over-year look U.S., had U.S., you

and If said you before. we U.S. XX% indication, down of sales about data to as try the melanoma, perfect, break Right in X% But rest about head to International the X% break not another the I've of XX% out. data bladder in sales than get more other. it the by still are and then remain it's melanoma. now, it's the in in easy lung, neck, market, majority believe the not our in to in

the launched However, we as are increases seeing new world. indications we around

So more I available. important becoming ZOSTAVAX, I have data is I've before, a outside more and said have growth in makes that easily ACIP With United recommendations precision the don't States, with to the and is it difficult. in driver the and U.S. very a not the of U.S., is because lung melanoma driver. it more the more still regard as and the But

see are we'll of that and to time, we'll product a based pressure the the see a outside versus U.S. similar then pressure think upon U.S., I recommendations it's continue over the And competitor ZOSTAVAX. the vaccination really in really think of those as launches recommending guidelines. because I preferential

So we forward. competitively we very as strong expect move pressure

Teri Loxam

the we'll Thanks, to Darla, move Adam. question, on next please.

Operator

of line Baum the with from It’s Andrew Citi.

Yan Li

Yan questions, please. for it’s Baum. Two on Hi, Andrew Li

their, on not manage you us, and A enrolled obviously, second oncology did progressed out had strategy. back total that percentage whilst results? inform of because obtaining treatment of going KEYNOTE-XXX, on them your disease question, to to the First was or question what patients performance status broader to receive their KEYNOTE-XXX, the worsened can originally

position Thank what approvals materially gene recent NGS as appetite FDA new tissue-agnostic of well Given assay and exposure molecule for paradigm? for as to Merck’s take you. advantage strategy MSI that is small PMS is expanding your the an KEYTRUDA, in the oncology approval

Roger Perlmutter

Right.

Okay.

question, expressed how who those We’ve majority studied there KEYTRUDA again, as even more at guess more demonstrated important the an those is – we’ll KEYNOTE-XXX not KEYTRUDA I achieve therapies of study, and So demonstrated those view were – range responses. front different in individuals in other the any for Preclinically, additional into types. I as dramatic the will their oncolytic table the can will the have numbers interpretation molecule and in And tumors broad-spectrum first and can become the we me. you and randomized combination is what think combinations. the beneficial of KEYTRUDA more what those spectrum future aspect many, you’re for preclinically responses we presumably exactly But Obviously, with strategy at. of the don’t many broad really all, with and study I the of many effect that that that we affects rapidly. of high radiotherapy, things KEYNOTE-XXX, combinations enormously that published, a progressed first been PD-X monotherapy in was more of I first the the different types as sure data, in one provide that advancing truly to in I’m enrolled add for patients the – improve treatment will exposure regard antineoplastic disease don’t of they can study, chemotherapies targeted of getting vast have itself. study allocation. to oncology, of describes is cytotoxic become because PD-LX. active the across guess, that would to types, immune-based is tumor KEYTRUDA related combination addition infection think happen receive guess, in very of all immunization, more well therapies work traditional generally, viruses treatment whose in to with I antagonism all, for is – the as chemotherapy, therapies the well as guess, therapies, other well, the including is I the activity didn’t – offline. important evidence look that has But of tumor types. in KEYTRUDA my What of again And tumor tumor foundational. have the than patient And strategy say agent also to level which, that I and that, I effect do of recognize introduced Clinically, small clinical XX in course, practice. broad diverse. It it’s is

choice of much the related of So agents That’s we’re if and KEYTRUDA-responsive very about benefit of course, interested a extent individual of meaningful the saying, tumor other active responsiveness. long, to age, of in targets population. increasing to status that the patient, add focused on combination will, range they are winded variety knowledge based a you a segment can long precision the medicine, way and real will on be indices the the the of issues, in other patient’s performance having that different cancer

Teri Loxam

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

Operator

with the Gerberry Bank from of It's line America. of Jason

Jason Gerberry

Thanks my questions. for taking

Just two for me.

second Just study out just what is opportunity stable JANUVIA, positive, you commercial readout, And into some a the the years. recent And that about how relative monotherapy mixed viewing particularly performance with Roger, and given, if outlook bit expressers? for the guys positive been into are – the confidence the study long can my XX% to question, guess, KEYNOTE-XXX sub for data KEYNOTE-XXX, first, little talk this then you outcome? think, for has I your I drives

combinations. Or without that includes year? of SGLTX can stable incremental Just contribution that Thanks. do be franchise if you think kind next that the fixed-dose curious contribution JANUVIA/JANUMET from

Roger Perlmutter

aspect. I is lower populations one PD-LX in greater of only that variety cells. whose it’s demonstrated looks a we’ve of start, of at in settings. and results who then had not of Indeed, and a that of we expanded measure the KEYTRUDA, responsiveness tumors have than that whose take that PD-LX, Adam the settings. version likely lower-expressing commercial for respond good do KEYNOTE-XXX, which in the an levels I’ll KEYNOTE-XXX different are Right. expression But to PD-LX express can individuals tumors believe to of individuals KEYTRUDA is whole express and variety in we whole those XX% mean, case

So I’m under expect year. have optimistic this We available be half is in wait KEYNOTE-XXX to Monitoring is but, Data event-driven. of a broader course, supervision data. and about in population, the a Committee first will the The the for data of the do of we study

give just would to lung somebody I before monotherapy on has – – combination will is treating therapy individual more than say younger, think we’ll likely be favorable And this with robust, one an might those the details. attractive. said. expression to respond therapy PD-LX of comorbidities, what, would to profile complete, the with I I many respect oncologists be that’s the in patients, toxicity once issues So therapy therapy? a my when cancer events be: But does is Is they’re example, combination will when way forward. individual are that irrespective an expectation attractive, can more who will a that how But of combination And think then example just which more Where so might going about for answer. in personalized Adam have pass again, more older be of less which – population Adam,

Adam Schechter

Yes.

in is opportunity, commercial today to cancer, the metastatic non-I-O regard with So KEYTRUDA and lung across I-O therapies. leading option

the at believe to moving So increasingly important With U.S. as look forward. diabetes we that are as and continue in continue the will relatively it believe and we we We position that a franchise, to would move outside strong will will growth build it able regard the I forward. be we franchise. stable strong that position, believe a be we a be to franchise, upon very to

moving for So we to we we’re with I franchise and that JANUVIA forward. NRDL SGLTX China, combo JANUVIA the but continue SGLTX at have the in in portfolio that China for the a now, example important, diabetes look and relatively as approval launching altogether, speak. will as be we stable believe

Teri Loxam

Thanks.

Next question please, Darla.

Operator

of with line Cowen. the Steve Scala from It’s

Steve Scala

Thank you.

First, achieved, trials an expectation for and PFS for trials. small have of but may announced were created of that combo course, the outcome suggest unrealistic Roger, larger chemo on KEYNOTE-XXX, Merck, KEYNOTE-XXXG OS

cap benefit pharma. degree the was would KEYNOTE-XXX think be OS still KEYNOTE-XXG than has big you you versus and that would PFS Roger, Today, Merck less today that products it pipeline well do fewest if disclosed for in the question past? or pipeline substantially either the of Merck’s Ken that how a Second characterize So received? in is in has

you could thoughts a function pipeline just appreciated. very be policy. today much. of course, Of would disclosure the But be on any Thank that

Roger Perlmutter

of in back what as possible I feel going Well, do in to of were just to have want said chance data. we’re That’s then KEYNOTE-XXX we’re what respond have to believe general the would encouraged a – strength your before, to we’re if way. hypothetical always can’t and in you And and them I an results I the will what everyone encouraged which Well, decide how if the of always X, as by Right, respect KEYNOTE-XXX, appropriate scientific to do data, those the but is Y the terms, and how strength venue, look with by soon more pipeline. data Steve. present course, we about at Z. them. the or the they about feel second And retreat to physicians really those question market might things certainly a pipeline? about the is,

other the would point hand, the that Rob of growth guess to On I pillars mentioned. I

became of a our the KEYTRUDA and which But that of and space that, really in series related space, exciting. of a we exciting which just First have have in Lynparza, collaboration important; beyond of lot look and AstraZeneca. molecules part opportunities oncology are also all, pretty we the not immuno-oncology selemetinib, with

asset late of a had injection, LAG-X others antibody, much other agonist of anti-GOT And intratumoral last those, Phase programs. a haven’t for with bunch but course, small number interesting year. molecules acquired a include about gone just we chance antibody, Rigontec a our like forward We that like our to STING of in they company have and I like say a

a things we on lot So there. going have of

intriguing quite we’re that some promising. And data really and that seeing are there of quite

we look in for as growth. oncology So space, the more see we opportunities

space. in for growth have vaccine also opportunity We the an

we X. to strong profile, GARDASIL activity and GARDASIL as we have detailed, particularly GARDASIL-X enormously space expand an in Adam continue vaccine with As the

the So pneumococcal is promise are reducing we – Phase offers is vaccine virus-related that, into well, remarkable serotypes. going that it cervical conjugate program incidence vaccine with beyond particularly of are dramatically an XX III we a – But and extended cancer. with the that of disease papilloma

vaccines coming other forward. still have We

exciting. looks vaccine, interesting We extremely cytomegalovirus quite which have

quite a vaccine, looks dengue which We have interesting.

as And so really there’s speaking, many neuroscience many of we a very lot in of work going look on areas, those in have well. activity and the cardiovascular vaccine including is and interesting disease, quite program Broadly exciting. other that

time. difficult dramatically and enthusiastic So that say and about across compare have grow our pursuing. very currently that But on can it’s based we I’m the to the opportunities companies we’re I across pipelines we that programs business that would believe

Teri Loxam

We’ll Roger. on Thanks, move to the next question.

Operator

It’s from Leerink. with line of the Seamus Fernandez

Seamus Fernandez

the questions. Great. for Thanks

So As to of defined XXXX-plus, the and story points XXXX. survival? evidence overall leverage chemotherapy, incrementally really of give talk to is benefits evolve the on particularly Roger, as suggest would second set results? as exciting really they’ve just but chemotherapy, and see was And I to view about the PFS has that direction. to one. hoping the really Is that portfolio. the in that, KEYNOTE-XXX Merck you in there the combination the then the see perhaps physicians, for now on to about opportunities a that? us data going the they a any the clearly be general around be just Or and of that started could not because question Adam sense emphasized story you the in the they’ve KEYNOTE-XXX in suggests in that quick leverage KEYTRUDA their that of we’ve evidence is with ALIMTA just other a practice talked we’ve definitive opportunity already provided that the Thanks. evidence something can presentation Rob

Roger Perlmutter

improvements I gold survival to of to the of and the goal survival actually KEYTRUDA place. overall with malignant overall where would disease, in plus is is say, respect the certainly, treatment all, take we terms Seamus, of our that standard agree Okay. possible, – demonstrate chemotherapy first in with story, that

two-arm two-to-one over patients looked overall endpoint. it randomization, patients As that the XX And and quite per for – analysis emerged led to XXXG as that, survival was data, really stronger, wanted KEYNOTE-XXX study, and me more an study, to We a survival it overall we powered just overall was more over time, as in data for and crossover, the became small meaningful. we for an did and the which study the change data surprising overall to KEYNOTE-XXX reason. just emphasize in again dataset, decide result, enrolled is as survival The was saw announced, despite that not a for a plan because the as study we those but result that overall was arm survival powered stronger as become XXX which positive. survival, of had we statistical in

oncologists it both and data. to And will survival presenting analysis PFS the patients. those and be interim cancer be very think in So on its overall important will treating endpoint, that we I met engaged first

Adam Schechter

we such KEYTRUDA. that areas Specialty BRIDION. for a is regard particular some – we’re But growth have I obviously look as we beyond growth forward. pillar real XXXX to provide the vaccines, as new And growth to to We with today. believe then continue and in have of Oncology should pillars into I lot real to with will us. believe the us of moving real look we And data future, opportunity then GARDASIL, us, Hospital be growth think for out, And guidance strength. as continued not has additional giving broadly be potential going a Lynparza continue several of we products a indications, in

think good look years, have we still we growth. pretty to as pillars we So of out the some

Ken Frazier

strong add the also comparisons us our business, Animal and growth would business in global have. that is provide Health which strong also, I will with outpacing I production both portfolio, with great, a they companion, a industry think,

Rob Davis

then I to P&L of leveraged said, you a delivering time. goal And we’ve have how sales a down earnings, to continue as finally, consistently from tier over guess, about clearly, we to think we

behind a see we had in of guided in Roger I has you the outlined. in opportunities pipeline we period and As that the see previously, investment many XXXX are we as think

laid real as expect those long growth will of We a actually out, the revenues, will go P&L over in we growth, continue return to Adam down forward. tailwinds the down do term we But drive P&L, leveraged investment through Ken tiering that pillars time forward. going and we to the that

Teri Loxam

Thanks. We’ll move please. next the onto question

Operator

from the with Chris of JPMorgan. It’s line Schott

Chris Schott

Great. much very question. Thanks for the

You’re your hundred of and your peers. is coming a to obviously, above a bit on many rate a your XXXX The just can but be couple points you seems basis beyond? rate clearly tax of dynamics for give seeing benefit, is more first one what color little in here

there an relative I So XX% that was talking on question for to The for And help there. the little to first-line rate improvement second dynamics much about? that indication is EU room filing KEYNOTE-XXX. based on a the had me understand latest bit lung just this how XX% you’re broader

can anything you Just Thanks that thoughts latest all? very is there do And timing process to on much. there. at accelerate

Rob Davis

question. thanks for the Chris

rate important the tax to points. to the that some that’s in onetime XXXX, related important able regards actually had XXXX. think credit point tax were tax plan XXXX to we with drove in benefited That’s XXXX But – from we items foreign benefits a it’s to I out by few higher So than it down to that slightly is credits. that related primarily rate do in what

in probably around a reality, XX%. look rate run better was at is So which to at XXXX,

we of That come companies. If I case think XXXX actually us and at points. tax in We'll see benefiting in So beyond sorry, a going be – the structural something though for a that, we rate And if us higher over guidance you were percentage XXXX look actually we forward the a that at out going another little forward, reform mix little we But from where XX% to going income rate. we see The we cause will say look we move few XX%, down or other range, relative XX% putting part on look is That down. be the probably beyond. to does actually in over to time. was a as I’d gave, that XX%. XXXX. States what’s as of some United in by there, still continues. of higher as been we bit bit That’s have to to a XXXX, the of do for XX% have we

Roger Perlmutter

incorporated had of eager fit. the with with agencies to their one practice filing to be data. this data XXX this advice And respect we’ll strategy, and we how in light Chris, can Obviously, with respect we’re see to review regulatory and see into have certainly following the regulatory strategies regulators discussions data, as

Teri Loxam

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

Operator

Capital Market. It’s from the with Alex of line BMO Arfaei

Alex Arfaei

very the question. taking much Great. you Thank for

congratulations First on Keynote-XXX. of Roger, all,

of or to be opposed the term? burden to about growth type most we paid patients certainly Your what either help to factors Will team’s survival physicians longer are foresight determine to combo the of appears mentioned And monotherapy? able tumor then, overall to PD-LX Adam, insights provide GARDASIL other off. mutation as subgroup, opportunity XXX have from benefit should to include by think likely how You China.

I think global you opportunity. folks keep emphasizing the

similarly, if attention. us help of your thing a near-term And don’t sustainable. that’s or Just get HIV it’s understand assets whether a lot

commercial understand Just you us help could opportunity wondering Thank very the there. if much. you

Roger Perlmutter

they respect Well, as with going are data, certainly the different to and across possible. broad when analysis. – – strength subgroups those would I’m as said, soon – stratification, data, to the are Right. the one This scientific we encouraged we’re expecting of KEYNOTE-XXX range the evaluations And as appropriate will of we’re data. include presented, different a present a of forums expect to by in I’ve in data as these lot

determinants opportunity of So the to Obviously, opportunity effect. have them not or different that those look have for to present soon. I like. look an comment should broad data range there’ll at may might may some people a be can’t on We what relatively

Adam Schechter

we to be but that. and both we our an to GARDA to, I And GARDASIL drive regard aspects only growth business believe going first, underlying in continue HPV, with that’s can XXXX X. to And think important not demand beyond and for contributor

China. we coverage gender-neutral XX% outside have first received females manner. and in the cohorts in significant We and growth. to there still a of about I over that at dose, least there’s of there males continued greater is XX% the time more seeing believe the And opportunity. We’re for the even so mentioned room U.S, U.S. younger believe

time. of but us very over growth the could think be stages it in We’re a significant I early there opportunity for launch,

franchise, And to I of field. in HIV bridge, are say that look launching large a pipeline, we for think degree. It’s when prospects launch And I future. for under the we at think the HIV I enable as that in have But a So to GARDASIL our leader future the in someday strong GARDASIL very many at you doravirine. again for really be are review. the preparing has bridge to many, now, in that field which us foreseeable products With years. a the a is launching, and regards we’re growth to the Roger that, if HIV doravirine. look future the will right And where we X in we’ve I been

So it’s make or I the unmet significant significant category a I with with side still need, a that agents in we know are could It’s and where longer-acting think future a therapeutic place think medical agents well. impact. effects that there’s there less potentially ways

Teri Loxam

Thanks, to Adam. question. the move on next We’ll

Operator

from the line with Umer of Evercore It’s Raffat ISI.

Umer Raffat

milestones, first-line I-O, of data in will centered you a Phase chemo European one of Roger, to Perhaps envision Thanks which at discount you there that business is its part intrinsic out the my do III. that your one each value? and lung, your that’s side there for Ken. question. in meaningful taking Roger. impacts combination you how think in emphasizing major around first an And so separate much competitors emerging primarily material possible Do Ken, one really that your value? I-O, KEYTRUDA-driven X chemo? for all maybe Phase And there’s for span trades been obviously. positioning a is business if clinical hitting Do a that chemo their dedicated think unlocking on basically ALIMTA-based commercial so, is on

Ken Frazier

me as and the execution commercial respect relates comment let just to it on seen we’ve to with question So the KEYTRUDA. execution first clinical

we’ve is that able company I more about other times, within whole be And how of KEYTRUDA, they in in so said talked as which see the we We’ve opportunities I product, I that strong about, XXX% also Adam data to a particular think we have. excited And very internal pipeline by assets, oncology. internally. U.S. to see accompanied that people strong this unprecedented several one why see the we the believe seen has it then, is growth as this will of opportunity first we additional XXX% area it all, outside or moved will forward of is So and again, do think, way think are opportunity. a number U.S., including quickly that emerges, see that so a Lynparza very

So continue a franchise I It’s to And really legacy our us the it’s clearly, to on from that. leadership. more that things think said to or perspective, think world execute our important we well as also oncology here more have also I begins where will for that see been be received.

We great pneumococcal our Roger front opportunities with about vaccine of opportunity. GARDASIL. talked us in have

to its CMV want – Hospital have talked that. that business, And and BRIDION, want about neuroscience, Specialty We the our I really in our again, is and a behind We’ve and Health RSV business underscore leader HIV, dengue cetera. really business to et segment. I global Animal

will think I execution evidence and try think we think in to – and portfolio have and get comfortable excited emerge, I are to what about continues, the I why I see so your questions, people pipeline. So our we as think to our will

Roger Perlmutter

then, combinations, would results make of the to I And opportunities. combinations time really in is that announcement a reflect KEYTRUDA with with had if previously of of the patients respect elevate could course, guess very metastatic I recent we pause XXXG and I just cancer breadth three a and limited this to chemotherapy And chemo is, I-O, of the with lung combination points. minute. for such who what regard KEYNOTE-XXX data and our on would providing I based meaningful should remarkable with say sort

that of with point what makes therapy chemotherapy that we the treatment with is as terms XXXG, sets with discussed should KEYNOTE-XXX a kind cancer. ALIMTA demonstrated of on one first The and and platinum that, floor in of combination we lung only expect stronger,

that and forward important You the need to that’s well, least in future. going do at very

that’s first the So thing.

promises as would with of of is that study, point treat second and with lot is out, contributor. this morbidity mortality have population. say squamous do there in thing first different important cell obviously, and, would KEYNOTE-XXX cancer example, of a of I about some different also large coming chemotherapy variety in The an and agents reference non-squamous, carcinoma for that And with out important the which will non-small in will time to But settings. the the chemotherapeutic be information half such a to of lung year lung is certain a provide contributor background. I studies the all different to KEYTRUDA quite we a how to regions, regimens individuals this but be

with based prove that still I range recognize. So that of that’s And I options of such to across set will the again, one that, individual will appropriate broadening select very on cancer think that characteristics patients, foundational the a to believe to of in lung exist cancer, the see is with therapy selection, KEYTRUDA thing we time, for third that for thing treatment an I that will recognize important patients think options. broad example, be a of

Operator

Sachs. Rubin from with It’s Goldman the of line Jami

Jami Rubin

been the very is of for talk your say I’m starting on in are story. out the on to of a their two it’s if Thanks phenomenal we wondering Ken, your transformational the in much. just changed with And kind really the direction good strategy gone flat And I question take see have what rethinking I interesting, again of years the step back, strategic you that aggressive that a said last shares earnings you. seems be a of Thank so news just couple and consolidation, wondering for you’re more of Pfizer KEYTRUDA, industry have interest deal. bolt- call. the Merck’s would you’ve years to hasn’t your company. that despite downplaying just I’m when you. that way last now it reluctance

Ken Frazier

pipeline. licensing. thanks look for all types at suggested that we deals for before acquisitions including structures, opportunities would said And as partnerships, and first the are collaborations enhance question. the engaged say, with best I actively I’ve Jami, Well, I looking and in to we all, of of before, our

We as and also ourselves across things on of restrict based development. don’t and we size our structure scan do stage

create Merck. are looking portfolio to the for the longer- We term for opportunity strongest best

to So just in to continue you the the that that would call have find. opportunities reluctance say my do I for I expressed large we deal. look can transformational what best past we

transformational the think provided necessarily this haven’t you ability pipelines going I to those finish forward. to large if the history so-called deals, drive look of their their when at they companies they synergies

strong this five, do company XX innovator would And now. what will much of I if very it look to us that be kind focused a years at that, from I’m allow So differently. on then deal help would

Teri Loxam

trying out more to We’re to in running now here get of and question going one we’re time.

Operator

with comes Suisse. Vamil your final And question Credit Divan from

Vamil Divan

great. sticking Hi, Thanks for me in.

if I So two could. questions,

Lynparza. one KEYTRUDA, on So the

way It a either to earlier have an you you’re is data other, example, data. good you outright? that’s on be priced of you’re for the may we’ll together? combination, Or companies, I Echo Roger, work way question, for the products curious, very products Just And that way acquired the then you like combination. the could that guys one single pricing a at importance can that that this following second how separate is more of the just on you And to you given are? Phase just III. highlight investors first wondering if PARP there just the trial. for discuss negotiations expecting be Would or the very they up next definitive bad had company we play my if owning how different out time? a the looking see points data over can one or many the if what had Given components around are I’m feel are flexibility, XXX. feel

very early immuno-oncology. the obviously of still We’re in days

good or And that combination So if I’m PD-X of what will informative sense you the provides you monotherapy? and a but information, with the clearer give thinking agree more results be think wondering it definitive. really definitive if us be might provide and over

Teri Loxam

Roger, you the up? and coming set can with So the we’re maybe data at looking start point Lynparza, KEYTRUDA next

Roger Perlmutter

Vamil, which studies to and of monotherapy respect first-line setting of responses with points, the KEYNOTE-XXX KEYTRUDA in lung are so in cell a the which those respect the lung mean looks cancer namely the cell non-small at data, cancer with some to settings, in data, talked in tumor we’ve to range non-squamous, cancer about I broader KEYTRUDA, Right. non-small – lung in should PD-LX expressed and neck which squamous KEYNOTE-XX the the patients quite interesting. defined KEYNOTE-XXX head by cancer. in also first-line be There’s data

of of studies, an have responsive say also settings, with settings, in traditional, coming broader hormonally that a make indication, only And breast pancreatic coming data so for plan XXX point, and just there’s quite cancer. XXX in combinations. in in There’s Again, Lynparza detailed I the a to will not including but over as of amount we And cancer tumors, through. that the sort the Lynparza, data forward. there’s a is enormous lot be over expanding ovarian

All things interesting, quite quite of those really it’s program. a and are robust

So a lot going on in Lynparza as well.

Adam Schechter

data the to too particularly don’t sense discuss the believe mean, like. current innovation, to to data, monotherapies. what see at combos premature will incremental innovation how would And with I monotherapies. of really own But at to outcomes necessarily you of have over until And market they it’s least look improve reward get if I combinations, to a you I the improvements see everything. have compare that we And the will the we the combination in pricing of believe pricing, general, look just

data. but see I successful, we be the will think partnerships that need to

Teri Loxam

Adam. Thanks Great.

We’re so just to I’m to back out turn Ken time, over it of going closing. for

Ken Frazier

today’s So to in again, momentum, for look XXXX call. future. just operating to I is the foundation for a Have very a great beyond. we day, speaking out that in you good you. to with XXXX Thank strong reiterate we’re thank you forward and all and participating closing want which

Operator

Quarter Fourth Call. Merck’s and Sales the concludes Earnings XXXX This

You now may disconnect.

Merck & Co. (MRK) 2 Feb 182017 Q4 Earnings call transcript