MRK - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Doherty, and I will be your conference operator today. At this time, I would like to welcome everyone to Merck's Second Quarter 2018 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 Welcome Global Merck Ken good Quarter Doherty, Adam President Rob you, Thank morning. of Financial Chief and Call. and Executive Officer; I'm Dr. Davis, Chairman Perlmutter, our XXXX President to Today, joined Health; our Research by of Labs. Frazier, Schechter, Chief Officer; Human Conference Second 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

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

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

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

Ken Frazier

Hello, Teri. the everyone, for joining you and call. you, thank Thank

growth. second delivered the During Merck strong quarter,

clinical data our LENVIMA. regulatory further Lynparza KEYTRUDA, and at through of and leadership focused important ASCO of in milestones execution, the the also achievement presentation for oncology advanced We commercial

AACR, tumor position. we at a oncology included a KEYTRUDA types, for non-small KEYTRUDA, depth assets advanced abstract Following treatment we’ve for LENVIMA results XX well years to first-line five adding we becoming when unprecedented as first cancer data with the more melanoma. leadership portfolio our our just up in abstracts This clinical the followed cancer from foundational Lynparza breadth the at data than single across ago XXX which is and presented similarly in the and presented increase substantial impressive has cell and for is lung that further the as Merck’s oncology believe other pipeline, of and expand ASCO.

driver. business is also growth an vaccines Our important

cancer, Director to cervical offer gained China, strong continues expanded our contributes Briefly than recommendations all We to Health. our Human turning take countries help the brand. Animal HPV business approval recently eliminate are predominantly called for GARDASIL seen The in countries results caused long-term by to confidence and faster all worldwide. is we General this recently which This growing see deliver HPV. We've momentum vaccination action pleased to in of Health. to growing to WHO several for which of

core a innovative In products businesses, long-term a are addition two our at as it the of also company. the scale innovations sharing our we synergies and across portfolio strategy. Delivering to we growth who gained our from global is diversifies pillar and is key the of

augment health business animal development. internal We and externally will pipelines as our to through as well continue investments through human

results in that, growth now who our over shareholder year, Officer, so call our across we demonstrated I far Financial to detail. value. and long-term business turn momentum we Davis, will focused this have our more have are Rob? With good Rob and our execute on drive Chief continuing As results to go to create through the

Rob Davis

deliver Thanks, everyone. in In the on a were an quarter, note X% Ken, comments non-GAAP will EPS company and both we based my that are meaningful in revenue billion, Total businesses, be second earnings basis. and performance good and Health revenues growth. year-over-year. strong Animal increase $XX.X resulting morning, Please the today Human

Excluding the impact of revenues exchange, X%. second quarter grew

Human provide an X% moment. excluding business increase billion exchange, Health results XX%. sales of Our totaled in the Animal Health color and grew those quarter, $X.X on will Adam more a in

growing XX%, the impact the second profits prior Health $XXX segment livestock X% increase XX% the grew compared excluding sales sale or XX% an exchange, sales to year and Companion quarter, exchange. were with million of growing XX%. in Excluding Animal Animal of

lines. XXX increased of XXXX. Adempas. reflects amortization the to catchup sizable XX.X% sales Gross expense the an milestone a was to in basis the points second versus The decrease for including decrease margin related Turning of adjustment quarter, accrued a quarter

for the well in the exchange. The R&D, quarter, primarily early excluding LENVIMA, second a foreign margin from addition, due well Lynparza X% variances, of as increase negative for was the tax $X.X point reflecting clinical increase an percentage the cyber event X%, Operating benefit In driven continued as were gross tax $X.XX last of rates share, was we year's efforts. unfavorable including as Pasting investment exchange. by by billion, development increased manufacturing impact impacted was and together, two per partly to expenses our reform. The year-over-year, development as earned XX.X% in FX.

operational Turning we less range Based a on for environment guidance for in XXXX, narrowing EPS prior and versus raising strength, the and guidance to our continued favorable exchange expectations the year. despite our May. range outlook our narrowing are revenue

and a margin will with the mid-July at $XX.X For the currency impact by quarter. X approximately anticipate positive point $XX primarily percentage expect the Adempas change driven related full foreign from We amortization our revenues being we gross including rates. year, now now year-over-year be lower between milestone this slight by slightly to be billion, billion

expect OpEx by increase We to low digits. to year-over-year mid-single continue to

lowered and XX.X%. expect We now slightly rate XX.X% have tax between be to and our assumption it

the in -- average shares the as billion or $X.X year. X.X end outstanding approximately shares anticipate to continue billion We of of

effectively EPS In to top continue be $X.XX, we point at execute $X.XX impact to like in that, and roughly well between bottom from necessary on we’re to on percentage detail including we Human near business. expect resources mid-July turn currency support to With the performance. strategy line negative to Health summary, driving our and foreign to I’d our the X Re-allocating Taken long-term provide now making together, growth. in a rates. investments term, more the support commercial opportunities to R&D call Adam over our Adam?

Adam Schechter

were currency This and grew highlights on X% be few GARDASIL drivers the to you, highlighting sales good around the world. start key a and I’ll Global Human from Roughly of and Health key on Rob, My and very XXXX. grew morning, of Human second X%, franchises, of our outside quarter, XX% constant well. billion. of including Thank our will focus with $X.X last quarter KEYTRUDA, sales Global the solid I’ll in of morning now global commercial the performance Health of U.S. comments BRIDION I’ll for provide presence Consistent growth everyone. our execution basis. performed oncology. and our a with

oncology be the opportunities for $X.X types types a KEYTRUDA sales approved and in to starts. X similarly and advantage United will a leader be significant current a will indications yet Our countries immunotherapy leading approved to world. competitive LENVIMA. come, new We tumor in is means believe In in in States, years. with us our across rapid breath this uptake nearly tumor billion Lynparza of KEYTRUDA, indications, worldwide across XX benefiting now multiple indications the of KEYTRUDA many with continue U.S. a global help in from the of around field business and is patient the

all looking first-line resulting combination combined. bladder survival lung with broader in benefited indications high benefits lung is cancer, accelerated in of well cancer combination clearly adoption regardless of In MSI patients chemotherapy. cancers. from all of growth the in across expression. significant first-line non-squamous using their patients, use as the this We’re in now demonstrated at of KEYTRUDA metastatic in quarter Sales PD-LX diagnosed this KEYNOTE-XXX see benefit as Physicians and sharply

prior approximately AACR. new points currently We capturing to roughly excluding ALK, starts, are of EGFR share two-thirds higher XX and than patient

substantial continued this We XXXX beyond. of in of indication half the expect adoption second and

non-small of to enable the addition, roughly patients population, which market. represents cell survival cancer in KEYNOTE-XXX In standard this the with us squamous in to of lung strong care become XX% benefits from

strength KEYTRUDA growth XX% be the program, within should cancer lung benefit, cell sales. overall able non-small shown total and of all the represents of in significant which over Outside indication now our patients gold survival clinical we're XX% standard. to With of KEYTRUDA seeing the represent its roughly is U.S.,

cancers. We are grow major continued neck most markets and have first-line in strong also for indications. seeing lung, secured we monotherapy to and reimbursement bladder and Sales worldwide in our head uptake melanoma, in

additional by KEYTRUDA driven patients breast, cancers, us. the continued be and renal, including and the in confident indications opportunities We neck future. as approved adjuvant-stage are prospects from potential exciting KEYTRUDA, potential in penetration The well indications hepatocellular, in near- growth other, of gastric, for head benefit various to and long-term many the of of very with as continued

as sales performance inhibitor ovarian prescriptions. co-commercializing the business co-developing PARP Oncology new which with Lymparza, Lymparza, and U.S. to turning the grew ovarian benefited cancer breast from in cancer growth new strong recent Japan. launch as Ex-U.S. significantly, in cancer in continued indication. which from total AstraZeneca. we’re of Now in benefitted well both the strong and class by the the sales driven launch leads in

an recent enable ovarian approval to in approval the Going forward, breast growth. for cancer expect in China we strong continue expectations Japan and to cancer

in Our to fast this to cell LENVIMA In carcinoma potential representatives also States, date. the started we FDUFA look the in August June, start. hepatocellular XX LENVIMA forward United partnership advanced for carcinoma within with and promoting approval Eisai sales quarter up is renal our

six Europe LENVIMA months, and both promoting many in Asia-Pacific. in key next the Over begin countries we'll

very in are and both as you with confident see monotherapy as combination future can our Lymparza a LENVIMA, and So of about other we growth agents.

underlying growth. X% exceed transition vaccines, quarter, GARDASIL, grew in to which of The to systems U.S., of very more growth broadly in two this worldwide. continue of strong the to become U.S. complete, demand. the led high Global HPV key continue represents benefit pillar vaccination moving billion vaccines and as remains is $X.X by regimen by remains very which nearly to demand. Outside Now dose see healthcare understood another and strong we the

men ages robust We're about excited in our women growth significant the In has launch XX forward. a and to opportunity particularly GARDASIL China remains there. believe of and a use moving acceptance FDA GARDASIL been the SPLA XX for addition, will following uptick of in

Now moving to diabetes.

to flat stable. offset with with Trends year the levels. were billion, sales continues largely nearly ex-U.S. Global franchise consistent demand-driven being in continued largely by ago growth pricing pressure worldwide remained diabetes U.S. markets $X.X relatively Our be strong

And of blockade market neuromuscular very in The grow PBM and in China hospital continues in growth specialty agent as of worldwide. PBM a both in of portfolio, and market report procedures. robotic gain continues choice. Lastly, invasive our increases reversal another launched share to We strong PBM and the minimally pleased in growth quarter to for vaccines remains surgical by the including ex-U.S. U.S. quarter because Health believe total, our our are future over business I'll prospects to and very we're key In optimistic our strong. hospital we specialty. driven performance of both turn it by about our and this With global Roger. growth Human potential, U.S. oncology, and areas that, recently

Dr. Roger Perlmutter

Adam. Thanks,

the many During important we programs. of oncology meetings the quarter, present advanced in to had we diseases our at opportunity infectious key related multiple and data scientific programs second our to and

the at types than Since is KEYTRUDA. metastatic for different the for broader relapsed the XX greater with standing treatment categories for in microsatellite the whose US or in lymphoma FDA women tumors PDUFA for the XX. October and of patients all, the latter presented date we of completed and that tumors PDLX, FDA ASCO KEYTRUDA recently CPS registration review the with to eight treatment indications, has lung of Society KEYNOTE-XXX June. first or Clinical use the the granted metastatic was the X approval call, patients in treatment submission or mediastinal priority use metastatic Also the PDUFA of cancer whose meeting for and of or during chemotherapy renal B-cell carcinoma earnings KEYTRUDA to expressed our for one. treatment tumor carcinoma patients were combination date for for equal the of of American In cervical the demonstrate granted sBLA results with cell study, in submission advanced of of use first-line the of second at instability. recurrent of Looking quarter, different refractory for based the November and our for in Oncology KEYTRUDA the gave our The last on which with now

of States, for BLA by supplementary in KEYTRUDA the use our Outside care utility of an ASCO carcinoma. filings the KEYTRUDA the commentator of greater second-line supplementary including related reports evaluation with the KEYTRUDA were registration standard Many the cell and supporting with of receiving the was suffering treatment cell cell resection of approval we our patients chemotherapy plus expect carcinoma At combination the the therapy filing cancer approved that new lung FDA was cell undergoing the or by for compared the June, KEYTRUDA and support simultaneous with period unresectable results distant for a September these yield for its also earlier showed KEYNOTE-XXX small the priority accepted for KEYTRUDA treatment XX the Data cancer. for numerous both survival meeting receiving those remove, the abstracts melanoma a therapies normal were into lung. KEYTRUDA XX, of first-line approvals XXX China. that cancer treatment of than of the KEYTRUDA presented action PDUFA patients announced colleagues for we Now beginning combination which as treatment non-small review of February and very tested patience PD-X described represented improvement of support in what melanoma breast FDA these alone. data of not representing surgical in settings. adjutant alone. non-squamous of in ASCO in merge the more the just of with and date date are my in of yesterday that was too study, will robust in in a These greater to XXXX. by At from treatment lung data first advanced renal really be expect use of renal sBLA chemotherapy incorporated advanced will future, Similarly, we some than of quarter. the will the XX% in receiving also in progress cutaneous as accepted Separately patients that therapy of overall and China data of cancer in United definitive for melanoma, chemotherapy in prostate a for

Beyond of KEYTRUDA, in the the maintenance AstraZeneca, substantial is and BRCA-mutated the ovarian HERX-negative programs. Lynparza treatment tablets at breast Japan. our cancer progress in the achieved very in in With then of other for our treatment oncology Union use we platinum-sensitive of cancer made colleagues registration European

AIDS borrowed Amsterdam, regulatory join this combination tablet for LENVIMA agent hepatocellular Our at Doravirine, of education inhibitor of Eisai age. efforts Doravirine, is colleagues XXnd approval combination same used with Earlier HIV continued date the actions. with burden multi-kinase as on our week, other Japan, at International carcinoma currently as XX-week as other reverse under States. in in under The single regimen, LENVIMA in for this treatment in suppression XX. Progress HIV-infected well. of from patients, DRIVE-FORWARD also and October yielded review with presented areas at in new in FDA we inhibitor doing a the a important the Conference data agency of both United our of an Study single investigational is antiretroviral action review the in with treatment-naive transcriptase long-term non-nucleoside is this

men American transcriptase reverse emblematic BLA award has HPV these At polymerase have II the the nucleoside blocks this at the worldwide studies in worldwide persuasively an quarter, cervical United June, XX to Phase combination Cancer later granted especially in become Doravirine last setting eliminating meeting the and Their use the October disease as Cancer cancers also vaccination Human use cancer. against will diseases play shared designated MK-XXXX, first-in-class the States. the X from of both this translocation campaigns goal and infectious We importance caused impact year. that his arena, new role the for mentioned, endorsed Cancer cancer in focus Society and these the in both durably by with XX accepted effective GARDASIL GARDASIL on of old. gender-neutral National HPV the we of in and pivotal in Institute derivative Data Alaska China activity. and Also that of action approved for in priority in adolescence. as about well is ASCO the supplementary Doug centers especially GARDASIL X women to as an available with HPV our of median who year’s mounting Early through Adam efforts. Institute, years FDA regulatory of in We’re of the diseases, as a XX both of study Lowy review X. announced ages actions of date girls women and Papillomavirus-induced GARDASIL increased for will National immunization see XX

of able Ebola other infection including trial and valent XXXX. many conjugate vaccine Phase the people in II Suffit! Ebola pneumococcal underway, described seronegative a vaccination to vaccine Ebola currently is permitted investigation this activity investigational But been and contribute disease healthcare Teri. in and progress the these publish our today, prevention healthy I game-changer CMV VXXX, Democratic I demonstrated primary the at Ebola registration risks We’ve especially novel Merck have the We supply for our many high virus of and evaluated trials; during in in to to under of important to works now which the VXXX, back the in effort the workers women, a to have recent the World contracting of protective are disease the III in will study. control vaccine large to tribute call recent being continuing of Phase as most will wish make at data Health XXXX-XXXX part rapid initiatives our pay to upgrade currently any, XX which Democratic Republic doses previously Ebola XX,XXX healthcare the Research This been of turn VXXX outbreak. the for in this workers VXXX, containment the this Congolese of to Organization tirelessly to over as towards of Congo and nearly upgrades Congo. we of dedicated Ça successful has and Health the infection. the Laboratories have Lancet in the the virus My vaccine, Ministry virus proud disease which Republic colleagues

Teri Loxam

question-and-answer the on we’ll try two get Thanks, of your remind as question to Roger. we session. maximum as or I'd so Doherty, to the that limit one on like move two parts to everyone to can people possible. many to on phone questions a try with

we So, please? Doherty, if can move on

Operator

first line of Instructions] question [Operator Cowen. from comes the with Scala Your Steve

Steve Scala

much. were its you strategy pursuing is Merck cancer III At question unresectable where Pacific. what very in with is you Thank asked ASCO Roger, Merck's perhaps that done approval single-arm has not suggesting answer but trial. the Stage meeting, the well lung Astra on

us So U.S. the secondly, I'm you could provide by Adam, very there. wondering market Thank you us in type and you can KEYTRUDA's EU? share And tumor update if much.

Roger Perlmutter

strategy. a and non-metastatic. available Yeah, And but Steve. will we're will that of on. we permit is is strategy, years Suffice to not will that that in have data different comment regulatory data The commenting that come we approval on specific do the indication, cancer the pursuing months something be we specific forward not were additional it expect say non-resectable that cancer cancer, registrational advanced aspects some there ahead we in generate lung that

Adam Schechter

going Hi, Steve. hope well. all is I

neck, estimate X% start you estimate the I you and perfect you look is is to second rough exact lung and the area. and melanoma, there. of MSI the as all largest is XX% is Europe, the bladder, if melanoma say are other I'll your data melanoma, if the this others. But about head is tumor Just revenue; Japan, lung XX% about harder U.S., to contributor; lung, it's with the X% is numbers rest with types the give at to XX% not the on. by majority by get regard in even and all other numbers you High then you and about then is which know about and at of then followed bladder, in rest the would is a rough then look the question, all clearly What And indications. in in in But if followed like data and in then Europe

Teri Loxam

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

Operator

of Your next the comes question Andrew from Citi. line Baum with

Andrew Baum

question for Roger. Adam one A Thank for then you. and

through do months So your has particular, House, seen And might commercial I by for comment you there that have to the the made be faster HHF, been guess on way happen expect indirect to could that we on either federal structure of amend have any impact or there of been by think or direct rages likely this do remove book timing Could the under but something administration Lymparza. of then comment this activity coming. you that significantly believe you the or you should it's White XX separately, you could on puzzles In action that. the whether either a – the potential the could plans possibility just PBM’s this now, taking understanding than business or is down? more whether

you know there to then anything but uncertainty add I of there, And is So be could Roger. lot helpful? would

anticipation can hasn't previously As of far as expansion missed the about unless see, the that happened spoke trial I yet, was them. -- of I’ve

of dealing a own partner with whether wondering or than challenges senior for rather being was some by just employees your assets departure the of of it's meeting this the company whether your resource I your is compounded constraints. So internal

Adam Schechter

Well, thank Andrew. you,

rebates Let plans about to the Safe PBMs. me your start and for question with the proposal remove first Harbor

it's on to saying to point. difficult So specifics I this comment at start by rather have

something high to have many to patients work the to cost across address to we're as Congress will We lowering I find out-of-pockets strongly we and As patients, patients to there's to considered access appropriate solutions would so you help important that that say meaningful support think being is of. out-of-pocket do the what it's sure issues. the drugs know and and make the with different or proposals administration these

Dr. Roger Perlmutter

you And AstraZeneca Andrew, trial, the plus consummate. the since know with we've lot with a olaparib as described as and I’ve respect to partnership well done with the quite expansion of Lynparza

lot wanted the that and you'll longer than we've bit We But two for and we a in trials we we to lot grow have all a and exactly taken to a have should our really organizations be seeing any come studies your doubt. gone of lot should is it's little it. where clinical in to of through are new soon agree on cylinders, what study firing It question. we a very study together response way those personnel is not and we because by in team constrained no

Teri Loxam

for question, Andrew. Thanks your

question please? Next

Operator

next Sachs. of comes Your Rubin Goldman line from Jami a with question

Jami Rubin

questions. couple have I you. a of Thank

Russell over really a despite you they $XXX up sales Adempas from milestone, when to where way meaningful KEYTRUDA. seen Ken you're thinking if First, second-line just reported see in point have we it's the wondering, lung of really with yet Myers, Even haven't the margins Street market were cadence adjust to KEYTRUDA this are to but about do operating see by stickiness margin importantly, expect KEYNOTE-XXX. from Rob, more million. in the quarter well, uptake, ago and if comfortable Yes, operating an the as year even you we And impact given is the a KEYTRUDA inflection the pull-through doing KEYTRUDA. below the

And simplification mean Animal opening Ken, go But of Investors loud growth, other. go going I'm so values and off then, cetera, Merck’s toward noticed question you've et in fully with is as through spinning So are do for correctly? noticed with operating outside sure valuation we your the and et companies big are you the it et Lilly, heard about animal difference also cetera, And up? And between industry. thinking up? across Should they health. -- that in unlocking of wave I'm seen committed on to assets, you've when this Merck they are rewarding We've We you that such sure I Health comments, Animal corporate cetera. et Health. your clear margins a Novartis, cetera.

think and Thanks. on is House? why while growth two those this KEYTRUDA So confident an in questions, you a important and I'd understand appreciate So Animal we if KEYTRUDA not committed understand sure driver, company if that’s that it. I'm to deigning business, I could I address fully

Teri Loxam

Thanks, Jami.

So KEYTRUDA, Animal then uptake and with we'll with the on Adam then of Rob operating go Health. the for margins about start Ken talk to follow-up commercial

Adam Schechter

Yeah. Hi, Jamie.

it's seen first our of XXXX. single quarter in very sometimes people it's XX% sales And there. KEYTRUDA. growth since more every you don’t are the the XX%, think US. the our if And So immunotherapy we're the the And outside of that the I launch the both performance launched than 'XX, the and is outside first U.S. reward, at recognize fact with look doubled the U.S. we’ve half only first of pleased for versus And sales robust half sequentially of we’ve

very But and into of month. new RF patients base each all And really had a when you that, mentioned, well Roger points always combination launched forward can chemo bolus about And to as been feedback moving neck, not I that in for represents done of growth new AACR. But the looking for patients XX the tell the we’ve have combo are that’s has We we’re that increase patients market since not the large to day received. become in I’ve you has a part share, yet the a those and U.S. continue and is head for forward. very therapy. spoken us share on I now and the well KEYTRUDA, with use patients EGFR patients and of are two-thirds and on exclude because every as bladder diagnosed going grow this about. said addition opportunity and be ALK, to patients starting and big these coming you are to as MSI-high,

Rob Davis

we pretty and P&L operating at Good margin, been morning, see Clearly, fairly start and of intend both you’re starting think to in this to now we of and the vaccines question meaningful Jami. pick the term, quarter, look this. obviously long studies the But but lot advance operating as period as said well expansion I and of that as to growth we’ve driving continuing we’ve R&D a company, are is through profile several with the to through continue look about you previously, for as expect LENVIMA also the studies margin as look investment we programs as And the a Lynparza consistent in XXXX, our the term, near saw quarter portfolio. for up we ongoing to your clinical we we’re as time. at over seeing clinical to both leverage in KEYTRUDA, the see

we’re need cognizant get to the also operating of make sure the we but to want appropriate making obviously long investments margin term. to and So expansion, for very we’re leverage

a of we it few fact due benefited one-time pilot type expansion that a effect we through larger of get with quite And really coming positive from the plans the going that actually, very we the was converted expectation that decline expect variances so probably This into us margin on and you’re the the carryover to to did as due actually we that our gross into we commercialization is then manufacturing our so. manufacturing this due Adempas. start-up of years fact or bit variances. And not Part to slight that year is of we quarter, the ago or year the commercial bolus as plans. to the to of our of -- have see in brought you into expect spend looking year-on-year. from the cyber part mentioned came did next Recall over the did see until we that year KEYTRUDA a margins to of of you’re gross negative for line,

seeing you that So gross are happening the line. margin through

the from do expansion had As also products in guidance gross the like term. margin you we’ve important margin. high on other said We we’re an being products down, by coming forward well, had as high being the and both launching, specific then margin products important a not see past, very getting ZETIA of offset BRIDION new which margin-positive, ZEPATIER like tailwinds one KEYTRUDA, the are long LOEs, look margin, a which

higher are headwinds depend not with forward, will slightly how currency or whether as end play forward. and lower look we product those largely on look mix So offsetting. themselves as we through And really slightly we tailwinds up and a margin margin or

a that of happening hopefully both sense gives So you gross margin and of operating what’s line. the

Ken Frazier

question And, Animal Health. about Jami, your for thanks

value various consistently me for know start you portfolio generate light shareholders long how corporate to our Let determine showing letting by and the that reevaluate over in including the we of you environment, term. highest the we can facts, our

earlier You growth we in impact mentioned that health. call the about the talked of animal

the rest the In important has to our fact our business addition quickly animal animal our growing to industry note than of is to it's out together between business and R&D. human we R&D achieve we that growth, having great health health to Animal human with health from think though portfolio. provides us health the and We’ll able believe and more in do a of important human point that of health our synergies we KEYTRUDA synergies within diversification health our And also deal are Merck. its peers animal

as we health and across to oncology portfolio. Right which innovations have side. on their well. health investigating that now they're human example, companion vaccine and catalog, has and the that human health led health Animal shared discovery technology have innovative our examples where of leveraging from diabetes animal our For other animals, health access to is animal protein

intent as of grow reasons, pharmaceutical an in capabilities see faster animal intrinsic Merck. health company, help and we business So animal our research-based we see our sit market still a our also believe today, will and impact we its strategy we health will all have overall these as synergies with those and fitting here on

Teri Loxam

Great. Thanks for question, on We'll your please? to Jami. the next question move

Operator

comes Your Chris from question line next with JPMorgan. Schott of the

Christopher Schott

very Thanks much for the Great. questions.

go of color you're to right over It would two-thirds non-AL here. starts. you now when to frontline Maybe can now second mentioned, about those As is just sight? patients? on My Just any lung XX%, had first for Where quarter, Where XX% at you KEYTRUDA. that at go penetration do rates non-EGFR there two be we new GARDASIL. PD-Xs think go think appreciated? in

business of $X.X got now. billion kind You billion or $X.X run-rate

that this larger markets could as we’re hands significant to should to how product And about there those our you so you I much the of here how part talking little of get think quickly You’re you I hit bit we much. on markets. overtime. growth the ramp a just my trying to guess how think here. about whether is product from Thank growth. be question can as mean

Adam Schechter

This Hi, is Adam. Chris.

regard a note. first-line things of to with First lung, in to rates penetration of KEYTRUDA couple all,

exclude even share there I believe and the XX% if two-thirds grow EGFR, benefits of opportunity happened we in mentioned markets. the we that increase that for point have all And you that substantial very First survival to have still of ALK and now XX is and quickly further. as

So not other to for because see yet opportunity therapy very combo we've we the good chemo data. we big only the launched the we launched U.S., and believe continue Outside some monotherapy, that have growth. remains

the think So opportunity growth I there remains significant.

some to no indication continue of good as all our indications we're but new before, there future, the that growth are opportunity. a just that new market. of as in driver I expecting the potential future for doubt patients, So the the been lung I patients the about large, to be that said two-thirds is us and will about, those are we're those into excited diagnosed talked rather be coming And

to Australia, is the world. the we represent opportunity the increase also regard is Outside in of United be about that around and opportunity to United frankly indication, I So geographies, us in China moving opportunity XX United important still years there very XX also And With another GARDASIL, new States, in there that. the an for with that in opportunity In the uptake opportunity there discussed globally. XX-XX the of States. there is is China exemplar years is very then in rates to opportunity will as XX-year introduced markets do olds, the countries in talk for to And old in been new believe vaccination data campaigns there XX really the strong. a significant elimination lot there but States, that's I believe like old. to forward. with continues

that short term significant. very GARDASIL for remains for growth term believe long the I in the So opportunity and

Teri Loxam

your for Move Chris. questions, on one to please. Thanks next the

Operator

with question Credit Suisse. from Your comes next line Vamil the Divan of

Vamil Divan

up just Christopher. Thanks Maybe for taking Great. my on following question.

comments Just of months, what think. think be out, I benefit of maybe I look suggests Bristol sort XX of lung now that survival If rate overall I XX% you think guess say, penetration from a the as we high forgot yesterday think? do is frontline to the will the market as XX cancer. from the in reasonable people penetration

how alone would on XX%, that second with more So you just satisfied months is And give in on is at can you it? XX to a a XX penetrate? maybe remains development your can maybe KEYTRUDA combined question what business of priority. We PD-X, PD-LX of be presuming out sense looked then much Ken of the that for and or my terms

think that a I investors active. more I've little been maybe have bit been surprised

and development thoughts deal forward? bit Thanks. rest just and business as terms appreciated. the my any some around on what's I you commentary going out in which being you done about of think back getting collaborations, a perspective these But larger change You've little your the a or and held look be more in all innovation focus of now, of maybe but change might on

Adam Schechter

is this So Adam.

of ALK. patient said through would point about So higher continued we share of also year. a EGFR currently as I AACR. substantial I go expect capturing, we're what starts prior two-thirds when than you new adoption But to we I rest increase is had the and indicating the said as this XX that’s said, roughly

cancer enable will do this become continue population market. the to of cell Also, in and that's standard as grow. the XX% to look non-small well, with about I lung should from patients it us you So squamous if of believe care at KEYNOTE-XXX, that

So about again, program seen overall represent is gold survival. lung to with with non-small overall clinical in or we've the cell indications all be cancer strength of the able survival And to that standard. XX% patients

there's I believe significant why that's opportunity So still there

Ken Frazier

partnerships, by we made years, kind said asset that I out including actively either of on willing development, acquisitions it because collaboration at couple untenable price and business licensing. was because the the how on best opportunities can't for as priority for company, looking reinforces we to was that important not I'd looked competition just didn't for the our Well, seller. previously, for past based of target are a some can structures, And all with is again And over and that the acquisitions, across respect and of start kinds the the assumptions.

the think, significant industry the has as there generally at a been biotech, M&A of in been across There's flowing the highs. are I seen, including terrific also recently. funding you’ve multiyear small which IPO,

that pipeline very premium. biotechs need to result, important they have capital a that and assure are less nevertheless augmenting as But business an ample are done being you sell have getting remains So I done to the right our perhaps to to development and or priority. at now desire high access prices and deals want

continue scour we'll So landscape carefully. to the

Operator

Stanley. Morgan Your next Risinger the David from comes line from of question

David Risinger

have I So two questions.

outlook? I’m then could when XXXX. guess to includes more the With the are just China, but financial respect and Thank over. of it back I’m that there is that pipeline the I shortages. the to conversion prospects and First, could the then comment holding the And X do finally, you And mid-stage longer-term assuming just you U.S.? things supply net And early- second. discuss for now on right sorry you on all versus questions, expect GARDASIL, beyond to dose sort X the you. that provide clarity to pricing

Adam Schechter

your do which to helping prospect. a to I’ll term longer first David, people understand take explaining has or question, with

we long-term giving our our prospect. way evaluate do we appreciate we’re for the own Obviously term to so additional guidance want in including longer why confident understand expectations. into insights that, investors possibility internal the to investors as best of perhaps continue desire the to we So

can we investments, regard. So that they I the to way you will that in do versus evaluate they that. best continue thinking get to say other will about that and back that, Merck do to are we

Ken Frazier

And with regard Again, GARDASIL. to remain long-term about opportunity growth we the optimistic there.

we’re still the at opportunity. in excited launch China that frankly beginning, We’re the about in and

we so of entirely complete, regimen the U.S., are the change. nearly transition X-dose completed. vast overlapping is Regarding not that the It’s the majority to

initially right that lastly, has such is China will So showing we will see are to people the so we ensure the that in on. what that need working have update there trying to always would into still amount large I going a transition. to and there we’ve as because larger of this I opportunity. anticipated, that get the that the the understand And what the country. of would parts that there, much to got be we’ve how than growth we’re been to many start product X-dose we’ll and then world demand finalize we we’re understand There in something think some frankly, say right products be And got

Operator

Gilbert question from comes next the Deutsche Your line of with Gregg Bank.

Gregg Gilbert

the be them company’s are in nuances I Thanks. with differentiation albeit then enthusiasm to than evolve want other with a it potential and them done. front, can should huge, you But views terms than other something the Pfizer to from for between pretty your things light start stakes re-leapfrogged focus? years But bigger the pneumococcal disconnect be Duravarin? Adam, studies changing. appears the their few about the possibly space Streets we could aware out have whose And of for leapfrog a Roger. will of XX-valent is that can to you in product. be The whose? obviously, sort on some then, commercial seems by Obviously vaccine you a any get on the where years shed talk of and there’s that how It opportunity few

Dr. Roger Perlmutter

because the evolve we’ve have vaccines, the we needs particularly been PNEUMOVAX, long susceptible Gregg. disease and is an of Clearly, pneumococcal of the With vaccine. availability of lot of invasive I pneumococcal for in population. marketplace Well, terms to where continue a think understanding the time. active area of thanks, On very a younger in this

changes will and which chemo we serotypes, There that but be coming – there pneumococcal lead there moving of there work human out, advancing it in need I introduced, epidemiology advanced forward are My advisor on the are will forward. -- So in the vaccines multiple as others will we'll be of marketplace. impact at population. area given vaccines is be extremely competitors to see other and for how clear disease quite will plays the things expectation Obviously closely. the new our there this its follow two. is marketplace vaccines be in that the in many but – important for need bread these are And in hard think colleagues

Adam Schechter

at at And in outside with look NNRTI to is commonly legacy a it's the treatment about used But the CNS some novel to MKE our the in And continue are the the on we've upgrades you doravirine, --X important more -- class so it moment. with improve regard look class most that at build have one a which wholly the and Roger HIV on that most limitations they're back. profile is would options and class that to to if based inhibitor regimens of talked frequently integration described I lung But it the of to as populations. RKI regimens the put profile more favorable product side product. bridge it effect and patient

continue us for real would the a market look way I term into with to our growth be relevant as it the in at to future as but a So near opportunity we pipeline. bridge

Teri Loxam

the the question. next? to move We'll on Thanks for

Operator

Your next comes line Saad the Evercore. with question from of Omar

Omar Saad

bit and maybe off to wanted a focus much more Hi, little and questions. a start for thanks I so taking my on specific. perhaps broader KEYTRUDA

two been or in that proxy trying relative the across mentioned own my it KEYTRUDA Both our you commercially, of similar on PFS. in indications of in that which than indications. understand Is have some put purposes. the those track even modeling PFS of how KEYTRUDA does PFS is thirds to therapy first each experience is duration the to question to the past other or for you’ve by is the PFS the I'm all it higher companies you to-date So for

Just wanted to understand that.

of trial on incorporated wanted a triple more perhaps, the as commercial for whether you KEYNOTE-XXX, one definitions PCR question the bit you speak of definition was focused And in more variety in negative could perhaps, breast. a profile? endpoints sort well. what's indication Roger, the the the to adjuvant my Secondly, could would secondary Adam, and on opportunity bar I in the over to you. as if to And other. speak And neoadjuvant, Thank focus that very and the competitive

Adam Schechter

to of exact really Yeah duration regard to very to a KEYTRUDA, and overtime so data quite of need with understand it's therapy. hard a data get do to bit the you've have

I'd So to I hesitant numbers. give any would, be specific

sources we world various over more provide are on that. information to may data evidence estimates better real specific able on And have we data, collecting are to be of that. time, We working

Dr. Roger Perlmutter

of draw you without extremely neoadjuvant breasts, very And about X to I-SPY your effect just broad pathology know the I impressive don't because exists Neoadjuvant are all, of the see pathologic the excited got attempting contexts. need experience any think with mean, definitions KEYTRUDA the the of of And different because opportunity of and wait we results neoadjuvant with of and And response. to it types. across data and that are therapy that for opportunities in the respect any into tumor there complete we is particularly going adjuvant range I you we've variety your well are the first pro-inflammatory already previously. very the to attention I response present way compare instructive surgery complete of attention a to

and about going a nice we could between KEYNOTE-XXX response was enthusiastic using the and good pathologic analysis will lead. there use forward that And in understanding about studied I that's by very I'm are that relationship the think outcomes. in particular other of with a in or cancer breast two complete where kind studies as

Adam Schechter

a the to is mentioned whole of host mean indications overall I've how regard reinforces having cancer with to care. before, foundational KEYTRUDA just And as indication, I

we're important. Lynparza. into to to market, With indication the with also cancer already to get one, this regard starting is we're every excited call but this breast So this is but

data as So as ready we indication the available. soon would are KEYTRUDA to launch or be with available

Teri Loxam

for the on to Thanks the Okay. next question. please? Move one

Operator

Bank of line question the comes next of from Jason from America. Your Gerberry

Jason Gerberry

my thanks taking Hi, questions. and good morning for

the talk KEYTRUDA actually bit do pricing Can would little see from reimbursement? and it to KEYTRUDA JANUVIA/JANUMET, of a about just a stabilized can be for drugs antibiotic had oral ex-U.S. seems the When second a talk It helpful? just But monotherapy, a than alone, see And about to or group? little U.S. talked bit spike expecting we little on you about we in in we're bit Any it are environment? combo my Thanks. adjustments then grows lung just little regulatory pricing maybe that outside question including of you you has and to higher net around as about you meaningful the quarter. expect guys your then and terms pressure. contribution to SGLT on pricing in were bit think high were continuing line? clarity Firstly, PD-LX have though that

Ken Frazier

So, I'll JANUVIA a start with question.

years, each the said, As next continue we see the I year. the I last last pressure pricing see offset this believe year year, year. is I of more that year, in the said is U.S. before, as couple tougher than pressure than be innumerous to they'll U.S. pressure pricing this we there And And is outside by strong last year, it was more there growth than pricing the in

where we we still that believe outside in of I continue. news there the are we're is U.S. growth there. launching for So good and growth the think will that opportunity is The a example, middle of China, in seeing

it's volume the growth in U.S. combo be we be though to have already U.S. waiting of lung will States, forward. United mean outside I markets is the majority reimbursing I'll for to the lung to happening see for revenue of from of what's pressure, is promote of regards pricing for the that moving additional U.S. monotherapy, still us able by of major is Even to offset the already there. the an outside outside we monotherapy. the I With the We're and outside represent continue the So U.S. the cancer coming most good opportunity U.S. KEYTRUDA think

Teri Loxam

Move to next on question. the

Operator

of line the with comes Boris question SunTrust. next from John Your

John Boris

revenue on of benchmark And of vaccines care in going Ken, be Animal the business that JANUVIA oncology question GSK Mark transitioning from and and the driving to we substantially, a loss and vaccines key players? and incremental you're taking the generated those Health versus the important primary Ken especially of exclusivity color beyond the care Rob. that three conclusion going would those U.S. of specialty Thanks call, look of was around certainly versus it Health implies Zoetis, that three at forward. and versus certainly businesses benchmark the revenue quite of for at When revenue from provide when My operating last against that the time operating we for forward, on margins the questions, you your businesses. any It's those Animal mentioned a results. margin on the benchmark you question Can magnitude two-thirds XXXX. from expand for especially Second expansion Roche franchises the oncology, when most basically congratulations

tail? divestitures respiratory that health at women’s look Any legacy that manufacturing assets because cost, the Thanks. you old carry within notably there’s assets thoughts about expected need fixed I XX% high and assets, and tail facilities. If assets most you health, dedicated added animal some healthcare revenue, of

Ken Frazier

So the question. can question jump margin you to… operating I Or on second and maybe did I’ll want hit the

Adam Schechter

what question So to long-term we operating margin. your think

operating We’re expand as we general, consistent move we we going not going that forward. believe to do been to see guidance we’re in margins give specific say have to

what look result of are clearly oncology what in But you think to which and thoughts just as general businesses. you vaccines give more a would mix to efficient of this, out, at some infrastructure, traditional As primary is you care with a pointed if I was businesses the out, context. at maybe that those would you relative point look

And think think type a of now, a and different what as first right never with drug dealing have multiple a is you’re what you many pure as with tumor that reasons. specialists. situation so the seen bit needs so about promote to company a you and have really oncology, indications. is the different different oncology, result couple a we to a you are specialty, in with specialty KEYTRUDA because time pure like many different we this have really that, types, Starting little for you crossing of As sell to a

KEYTRUDA the what is see that. than more be probably product given for So to companies, the just infrastructure you burden oncology traditional would for like going

we today. Although where still is to are very beneficial

And profile limited a that likewise, a then competitor. going we as I So are to play at not more with would pure be ontology expand look a just indication say, vaccines. in cautious to

vaccines at in we look only our products but portfolio, several care some go actually, the specialists, to those products look portfolio primary to our you our several marketed of not the will If also pipeline, be forward will vaccines in as and doctors. the to

of little and a will in footprint. a that bit itself So more mean of

a say to do So that want you I see of we sense expect give to that just it’s. while margins to expand,

think to thinking with we’re terms stuff in a And look what hard company it’s about. of what for would think I and pure the then the like. regards to portfolio,

call, in portfolio. always are of comments the reevaluating earlier at we beginning mentioned Ken the our As his

portfolio. question, But else’s always opportunity what assets would the asking like we at. If it hands, is your the short-term if diversified would that’s we point, we consider sense to manufacturing health, In creation, to short-term. that something it before important that perspective. products relative a from sustainable measure, sense someone makes to more be valuable growth balancing in and the deal We close as including see in see women’s particular, we’re it. in try think the We for to the across make everything not long-term, and sustainable value thing. the look and brands, both look we the what long-term are we the to is so optimize any And and makes path and I decisions

Teri Loxam

we’re more we and one to to if try can. get And going

Operator

with of Arfaei Our next question Markets. the BMO line Capital from comes Alex

Alex Arfaei

thank Adam, commentary good Okay, and KEYTRUDA. up follow morning. on you on your

You terms strong have mentioned you you animal obviously a very growth of above health, in think for which those a used rate. the number opportunities. greater on of prioritize market growth future be to please up growing commercial potential? indications follow that And then Could ones

think I return you. Thank to to should market gets expect closer larger we is When long Just guess you to rate? sustainable. how that wondering the growth this

Adam Schechter

from patients Yeah so the represents to these important patients cancer. as indications suffering look said. as I I that KEYTRUDA value at Each is of

As stage I again cancer us. gastric cancer look important be able breast the types as things, exciting in as even at the entry power well. quarter those indication are the indication is size renal cancer and further look those to for are adjuvant we cellular the out of to and our obviously important compete opportunities to And very

Ken Frazier

health. And then question animal with to your

the quarter, last we couple very of You consistently market look the in in health and you over are years we've right, as if you animal at outpacing markets look the strong been have back growth the quarter both And in growth. earlier, as have this portfolio the vaccines is in we're having animals. due across we product to products also mentioned fact launches meaningful but new largely robust our that line across a Tim

market as that growth. is it And forward. the story innovation So we really is look of driving a above

the have of which Ken not I would of earlier. see specific the as we to as as growth products forward story over well innovation but innovation guidance mentioned really give would to we're say the market the on I years above we the that several on going nature basis and new ties strength the synergies expect them products of look expect continue whole to next to the We

Ken Frazier

to and continuing participating on and and are in you the want advance our focused to Okay. outlook. of you about good term thank day. commercial call. Thank that want we very all reiterate And our a today's I'm optimistic to portfolio. I I year execution the for rest long have

Operator

conference ladies Thank gentlemen. does you conclude That call. today's and

disconnect. now may You

Merck & Co. (MRK) 27 Jul 182018 Q2 Earnings call transcript