MRK - Earnings call transcript Q3 2018

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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 the Merck's Third 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 like Relations call and now Loxam, to turn Investor SVP, Global to would over the Teri I Communications. Please go ahead.

Teri Loxam

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

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

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

earnings can our well filings see today's on as SEC release merck.com. as You

quarter of presentation. presentation to and over our posted Merck.com. Finally, our this effort and throughout I'd – this highlights some This we to we includes of in investor will a transparency, turn we the further of to With the certain from morning's call Ken. to discussion, slides that, communications an the have improve will section reference like

Kenneth C. Frazier

Thanks, that is on strong track value of is that performance the everyone. and to strategy patients. working, our demonstrates to good and innovation Merck deliver Teri, right our and morning, shareholders The sustainable business

In addition to pipeline results our third data continued with readouts advance the delivering and exciting new solid we quarter, in milestones. to also

well While I performance. making indications tumor across clinic and with field there the of tremendous continues to I-O quarter, to We've firsthand aspects the KEYTRUDA's would world. lead multiple how are turn depth seeing commercially. breadth types. we business a This many KEYTRUDA to executed of and the patients first this cancer is around highlight the to both And drug difference in like the to are

long-term near- as very future are and throughout that towards confident look successfully We launch and KEYTRUDA's we our as medicine continue the to growth treatment. approvals. believe science and of differentiate foundational following prospects, continue approach indications will development a has KEYTRUDA's cancer the to in existing We

our and further LYNPARZA our in leadership assets well our expand us that LENVIMA, by encouraged both also business of as to development, other position are We as targets oncology. the pipeline strategic in oncology

business and Animal company's history, an And Health the GARDASIL, to growth. oncology, is industry in demand is Beyond Merck well. vaccine strongest business portfolio continues Hospital our experience performing The has our healthy which leader. led Specialty by and

and given confident our we momentum year we We close long-term existing outlook. for prepare about are portfolio And have pipeline. our great and out the as XXXX,

capital pipeline, supported by ample and our program, to remains an also dividend which more strong These a share a As our growth. with cash sheet a detail in about repurchase accelerated flexibility business increase, development, talk are along our today balanced to reflection shareholders, by will in driven actions our the prospects, provide we growth capacity strategy a of while and Rob for future major in to which allocation moment. investing commitment our confidence with to a continue return actions, in priority. flow and have we that generation innovation, cash us balance Even these announced

employees, Looking to patients, ahead, with the of on as objective our call to value well-balanced serve enhancing on colleague, in we achieve I'd are business. innovative our the build rest and Along to scientists provide And growth needs strong the over will strength that shareholder the Merck's quarter. and our team of to delivering of believe of while portfolio creation. value. to continue sustainable with confident our detail I'm and of excited We performance, the my like world-class urgently Rob critical that, and vaccines more to we Davis, needed medicines turn drive

Robert M. Davis

both are we comments top year-over-year. growth, Thanks, increase my company line quarter, and that bottom In year Ken, an a morning, and basis. and good will were finish well-positioned the Please strong. today Total X% the third of note everyone. revenues be delivered billion, non-GAAP we to $XX.X on

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

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

for our see demand to products. continue We strong

However, shorter by the million third segment $XXX this compared growth season. quarter's rate Health were an as tick timing was quarter, Animal of prior flea well X% increase and in year. profits a revenue as impacted of purchases, to unfavorably

oncology manufacturing was quarter, points the with the year-over-year, of higher clinical third favorable XXXX, quarter XXXX. as of was of margin basis in from of Recall, expense spend, the to percentage driven favorable versus which expenses licensing investments related was by increase The negatively and gross the a as costs. primarily effects third exchange. billion of development, $X.X variances impact driven X% Operating XXX X R&D, well cyber-attack the exchange. point discovery in XX.X% quarter margins to increased an including of comprised increase Turning by in Gross the early increase lines. impacted

the XX.X% quarter roughly was for of tax Our year-over-year. flat rate

earned we $X.XX an increase excluding exchange. of together, X%, Taken share, per

year. Turning outlook for to the the

We and revenue raising are operational performance range XXXX, the range guidance strong for narrowing our throughout EPS our now year. narrowing our and reflecting guidance

remain mid-October the mid-October full revenues We summary between expect can now expect of X expect and to tax our be we our $X.XX For impact year, other presentation. on earnings be provided quarter slide billion, and to same. our aspects $X.XX, $XX.X roughly All EPS XX% X to We rate guidance between of foreign our second $XX.X the XX%. minimal percentage found now at be A point between guidance including be our impact now a a including at and exchange billion exchange from call from rates. foreign negative of on rates.

for strategy, Before capital are create deliver concluding, let me which able about speaking a to allocation through patients, the spend we value. ultimately business our few and grow our moments shareholder meaningful

committed As balanced Ken you mentioned, which slide to are allocation, to can X. on maintaining capital a see approach we

key priority first order R&D value be drive in Our and our to continues creation. to to brands invest and in launches appropriately support

$XX market And see funding focus. Consistent significant that stated, in primary billion allocate increased from demand. up XXXX. will success. grow $XX This capital announced resources for this also remains we roughly to our growth ourselves we to is our from estimate billion As in we continue to with opportunities on through We of focus, portfolio that projects position we to prior drive now revenue plan February. our spend opportunities

well and across Vaccines key Animal Health, development and Our manufacturing continues increase businesses, to including as demand our through these operations Oncology, projected, higher in capacity focus as primary discovery our IT projects infrastructure. to invest be is originally to where and than

business will long-term our best-in-class and balance flexibility for growth to We building value-creating generate shareholders. strong continue We prioritize believe and we ultimately development collaboration. sheet, also to the pursue development, including opportunities. With partnerships forms business all acquisitions, have value financial a of pipeline

continue and will look evaluate pipeline. to We and portfolio to the those create opportunities actively strongest at

record our While a strong we cash the returning to meaningful business, have our primary objective of is track fund shareholders. to

form the share approximately in of year, we've returned dividends to $XX billion Over and repurchases. the past shareholders

the grow share that historical beginning levels Today, will strong $X.XX repurchases. dividend quarterly our per our we by cash long-term we and sheet of our quarter overall growth, pipeline, balance share have increasingly our in announced confidence projections increase strength, increase or $X.XX XX% first and above dividend to flow decided to we Given the in revenue we've by XXXX.

additional billion In approximately billion addition, the share repurchase has capacity. $XX repurchase approved board us an in giving authorization; share $XX

providing $X a over ASR, step, billion remainder our the flex the two-plus with repurchase first program regular we opportunity us years. share the to entered next a As into

further ability any that to our today, to value With able that, And have on Given over the Human to shareholders these to Adam? Adam long reflection return actions drive the value-creating detail this over business. development like the are opportunities strategy. business to of our that of retaining more term. sheet, balance believe cash while confidence. additional call to the We we're provide significant Health on turn to ability execute the we our growth to shareholders strength I'd a

Adam H. Schechter

This for XXXX. Yes. quarter you, morning, on basis. a constant everyone. third Human Thank the good the Rob, I'll and morning of My currency will of Health comments Global performance on be provide highlights

Hospital products by and well We of this and the X% in to continued Sales the both very quarter grew execute Oncology, franchises. Specialty ex-U.S. performance driven Vaccines, markets. billion, our in key and U.S. to $X.X strong

renal is We I-O total look week about broadly. oncology loss registration billion announced numerous Five I'll future also enabling and starting on and pharmaceutical in and pressures of industry with foundational the $X.X Oncology. the we results. as have applications the We performance on prospects. is now next KEYTRUDA patient a years file four the in unprecedented our key where in the launching on overcome and U.S. tumor nearly now FDA, treatment. revenue optimistic this starts over market indications carcinoma, are XX therapy leading oncology, the franchises of KEYTRUDA's has more and competitive months. in strong certain And significant types, such focus both With last sales in patient on not new become forward expected exclusivity growth trial are readouts quarter, to are we cell products. now additional the but after volumes with field only

and of non-small rapidly range was commercial vast us KEYTRUDA's whose EGFR by cancer have have first-line regulatory more our nonsquamous results chemotherapy demonstrated growth community across this with KEYTRUDA the express combination use the capabilities PD-LX world. U.S., do enabled seen setting. in including across benefits of of around driven or the benefits the KEYNOTE-XXX patients, in growth diagnosed or in establish of survival patients robust to in the this And wide using of see ALK. more levels tumors patients We clinical therapy all lung setting, and express the this physicians patients, KEYTRUDA bring not convincing further continued non-expressers. global as the benefit KEYTRUDA's combination higher [cell] the whose In to cancers. a Our is tumors of quarter low in benefit those of newly we

our leadership strong strong our indications ex-U.S. neck, major of Use reimbursement see continues in chemo We presence tripled. And has a all combo early reimbursing. by combo our European is now metastatic we the as market in markets. upon for in approvals. well. uptake majority began bladder, of MSI-High Germany, helping patients global discussions In head addressable received extensive sales to are lung, such following as increase, KEYTRUDA in and further large beyond of growth first-line in cancer major that Europe usage indication Merck's monotherapy driven Additionally, immediately Europe, of of KEYTRUDA already approval and positions other markets. lung and in some nonsquamous other cancers. believe first-line markets lung reimbursement drive have chemo beginning in our Use now have lung as represents proved and approval, to in begun the markets, September

cancer. the therapies U.S. grew PARP of both to strong KEYTRUDA, prescriptions. growth. meaningful growth sales Beyond both confidence revenue to in of cancer contributors significantly, these in of uptake as sales the ovarian driven breast inhibitor potential well oncology and total LYNPARZA as class and LENVIMA growth new our in LYNPARZA Merck's be in from the by leads add to

We building approval weekend. potential we this data with maintenance first-line great in strongly. are the advanced also to which past LENVIMA, Separately, continued SOLO-X partnership forward ovarian by the important indication. given to Eisai we're this impressive opportunity BRCA-mutated grow excited in very And progress making of presented the look for cancer, our

Japan Following we cancer this have hepatocellular LENVIMA that indication. adoption in in approval seen earlier year, rapid of

differentiated in U.S. the and approvals existing and thyroid the in to hepatocellular Europe recent the add renal Additionally, indications carcinoma. cell

our awareness demand a for help the demand proved an growth. to achieved potentially run moving reflecting Vaccines. obtain that cervical up exciting a year GARDASIL as ahead. anti-cancer believe model worldwide. and of cancer nearly been to from as meaningful Countries women could States, in were sales, Australia is over goal rate is billion has and GARDASIL cancers. serving as GARDASIL others. recent expansion successful vaccine XX% the have that elimination, We viewed of to very launch Global strong like this of China sales rates Now And the to include a certain United growth for represents vaccination ago. ex-U.S. strong. has cohort increased increasingly a contributor up very H HPV-related as demand to The in billion an Vaccine $X men remains $X.X driving well quarter, and opportunity. XX age levels long In

our to franchise. diabetes Moving

continues billion, Increased to stable in markets global with $X.X year to U.S. offset in about be nearly franchise was pricing ex-U.S. sales diabetes pressure the demand ago equal relatively of Our levels. by

growth Hospital it recent is prospects With Human our pneumonia. solid optimism. Phase we great and very in look to to call Specialty we ZERBAXA alternative franchises. I'll summary, Oncology, quarter. this HIV is Vaccines, represents believe performed well, doravirine also over confident success potential, believe HIV great in due bacterial opportunity We in our performance to the our to for well grew the therapies BRIDION, Health In which and for very our exciting and and that, patients remain the exciting in again an space, a with X our Finally, led bridge future and hospital strongly given we turn Roger. Hospital/Specialty looking And launched business August are future NNRTI the by strong. growing acquired In pipeline. business the overall with Global forward positioned

Roger M. Perlmutter

with of third on non-small XX quarter regulatory the our of activity treatment Thanks, Europe the presentation, the in studies. in -XXXG, nonsquamous slide metastatic the Adam. and were also in integrated United platinum-based label including Alimta, for KEYNOTE-XXX KEYNOTE-XXXC, States. important for Well, the lung results very combination results The KEYTRUDA, summarized KEYTRUDA reflecting cancer in and of as therapy approval first-line incorporated the saw the -XXX revised for cell

of advanced approval in therapy. approved also for for China and treatment provides the under melanoma, such based summary States clinical a catalysts. the in results. China KEYTRUDA of XX cell review important was squamous appropriate KEYTRUDA KEYNOTE-XXX first announced, the directed with of regulatory on combination Slide regulatory is previously As carcinoma lung United in PD-X the for first-line treatment chemotherapy, the in a of the

a based Burtness lung [Medicines have as patients many with treatment melanoma which week. Barbara KEYTRUDA on Agency] squamous based Medical Committee used opinion cells, tumor excision compared tumors, statistical School And the an last in advantage. for X.XX Dr. hazard seen ratio surgical was a indications chemotherapy employed all KEYTRUDA a first-line KEYNOTE-XXX Europe this We've combination tumor the of of regimen And for a given treatment survival This the other the potential Human as judged non-small-cell overall with adjuvant the week, care For on treatment this addressed cell carcinoma The survival melanoma, Oncology regimen, many hazard of least in cetuximab based in EXTREME Products analysis of the neck. new hepatocellular this areas. also expressing review cutaneous new neck the X-fluorouracil. earlier treatment as in standard Society population. definitive control with based the standard cell seen of treatment the carcinoma patients The to head the And At EXTREME in of the in is of made meetings European patients or improvement of for in has indication that administered when either monotherapy suggests an and are Medicine first-line of be reported of PD-LX the results KEYTRUDA, adopted for study to in as KEYTRUDA chemotherapy the therapy study, become University Cell X% where monotherapy Yale ratio proportion active squamous this included or on substantial KEYNOTE-XXX. head Merkel disease of greater Type and settings, with KEYNOTE-XXX in Medicinal under positive in with platinum-based the which PD-LX score, care identifying progress first-line the the other carcinoma, of can monotherapy jurisdictions. and of second-line And expression by the combined plan for XX improvement on platinum-based on at and in X.XX KEYNOTE-XXX, I comprehensive trial, as with of CPS in with X-fluorouracil. of in in KEYTRUDA includes to population with cancer the carcinoma the of expanded in following overall the error. adjuvant KEYNOTE-XXX, comparator, European with for

of we shown opinion persistent in treatment showed the cell with or from this Phase a last survival, meeting, on These for And KEYTRUDA in the head an containing data incorporate results KEYNOTE-XXX, refractory response Meanwhile, KEYNOTE-XXX appropriate which meeting. data. on a carcinoma in we intend adopted to our we the marketed renal second-line we as XX. the the a the non-muscle-invasive more filing progression-free neck previously-filed and slide locally-advanced as of cancer improved presented And complete cancer week, ESMO first-line to results And study, will carcinoma KEYNOTE-XXX. Europe, submit we continued KEYNOTE-XXX based by KEYTRUDA to of rate result, of Phase for study, in second-line new which data a for as will following our important neck, X monotherapy. plus overall axitinib, the KEYNOTE-XXX X and that head combination new the The response with XX% just file achieved data. upcoming hence be announced approval separate overall than presented KEYNOTE-XXX use emerge squamous CHMP the data sunitinib. intend patients indication the recurrent U.S. as survival, cell therapy regulatory scientific first-line the Inlyta, Pfizer the KEYTRUDA seek compared or of As In positive bladder and around the world. of study, patients at of with

Beyond or for future opportunities KEYTRUDA, XX.X% at of standard-of-care will near in disease death the a studies programs of of compared SOLO-X, And emerge also At shown or future. XX. SOLO-X, in KEYTRUDA, placebo we progression to just patients meeting, women following BRCA-mutated our regimens. partial three-year important which Oncology that are reduced were remained slides cancer. are we with maintenance compared Numerous receiving in the of prostate, addressing advancing our LYNPARZA treatment complete studies in who data and study In LYNPARZA pancreatic time ways LYNPARZA presenting newly that in placebo. results risk the XX.X% XX%, astonishing and cancer, from expanding breast, of ESMO progression-free, colleagues with platinum-based address by the from such will XX AstraZeneca LYNPARZA receiving an on diagnosed the combination the await eagerly use with in with ovarian women remission of joined point, LYNPARZA

for approval China. the During the the the the first-line advanced States, of Union, treatment European carcinoma with led LENVIMA in third in of hepatocellular quarter, Eisai and our United partnership to

LENVIMA of LENVIMA advanced for carcinoma. designation breakthrough the also a malignancies. partner microsatellite range a We the of KEYTRUDA endometrial attractive metastatic the very of is treatment for received combination or KEYTRUDA with across broad FDA in from stable

portfolio, impact in tumor Both KEYTRUDA first-line most exploring As newer agonist of will checkpoint cell STING LENVIMA inhibitor. some treatment well first of types, light our the further. meeting, the impact we and combination an drugs our also At be to opportunity the still across directed of And combination programs programs in for KEYNOTE-XXX KEYTRUDA of would example, of including renal our the MK-XXXX, CTLA-X way. in the KEYTRUDA. that ESMO new a in the MK-XXXX, highlight expand positive carcinoma, had intratumoral injection; our we broad is trial, oncology with of seek of indeed, KEYTRUDA the anticipate range with in developed instance the to under

therapeutic active also Our in teams areas. are other

lamivudine PIFELTRO, positive for a quarter, meaning studying will also During for blocks activity. for and of Phase PIFELTRO of September, marketing FDA the authorization PIFELTRO DELSTRIGO. second the inhibitor also opinion under Committee Products non-nucleosidal first-in-class name for nucleoside reverse The polymerase towards the Medicinal X with European also third be generation Use Human and this for available gained HIV which that was well derivative as control translocation, in Data combination approved DELSTRIGO approval in we the in protease with expected study our year. infection, brand adopted MK-XXXX, tenofovir our We're that can in become transcriptase late-November. from end as this durably combination

and X Our study pneumonia from an large relebactam, anti-microbial will ZERBAXA, bacterial Phase reported be efforts infected and beta-lactamase our Also to syndrome. a approval regulatory the to which which X future, means near with men in or as inhibitor, improve hospital-acquired submitted our as FDA data dose. dysplastic responses reduce incidence HPV-related in investigational These in malignancies new to data include using certain bacteria. ages ventilator-associated XX will imipenem the positive to the women in with agencies patients supporting patients of we granted infectious in to we for clinical XX results expressing have for carbapenemase shown GARDASIL arena, disease the

the We of interest with infection. even control in the see high broader strategies around developing world elimination continue or of HPV goal to

prevention under seronegative vaccine call for vaccine in primary our initiatives and late-stage being cardiometabolic the currently relatively shown data become trials; in of is disease will healthy as VXXX, in and under VXXX, we clinical in for way I'll near investigation X available on infection a vaccine which our large assets slide now turn study. Phase the many XX-valent future. Phase evaluated neuroscience, including set currently conjugate to pneumococcal CMV have More large We the of broadly, women, other a important XX, back novel which X over Teri. in have

Teri Loxam

Thanks, getting with we'll Roger. Darla, questions. be started

we to people questions two remind I to possible. that as everyone just maximum, one to do, Before can many your wanted we so please get or to as keep

start portion, Darla, please? Q&A the off So, let's

Operator

And is Hi. your Credit Divan Divan question (USA) taking question. from Vamil for first Vamil Suisse with Suisse. K. Credit LLC Great. Thanks Securities - the

think see your you first my end asset just business year. that the that a Ken. the just as second and we fact how a from the So company. how thinking about as transformational for curious you're question doing might and is is a CEO the maybe last development? presented recently won't term or And Roger. And Health Animal question how just STING lot then, on next your on obviously about specific Or more you about around impact outlook more that one of There views for are staying announcement business strategic guys weekend. for was one you think how broader questions company's for should in longer you Merck perspective? longer I'm a the around that Does the impact it's a something your (XX:XX) we be guys data retiring of at And strategy

think the I more in than think you how – I about monotherapy was limited data we impact saw expecting. was curious the Just

for the so have or monotherapy forward you a of combination for before So impact moving much. it's approaches other how your some do with whether in about pipeline? need think STING Thanks the approach, you

Kenneth C. Frazier

Thanks, the for Okay. Vamil, questions.

will way talking start other. I me whether affect about about or Let not or the my how deals extended think by one tenure transformational

to to responsibility, on to the portfolio management, is our remains sustainable focus drive together our a focus. best to opportunities team So That best continue as the value. put

have team what remain acquiring And sizes we approach, That's all they and what value. in identifying we that And also right all of discuss. is, will management board comments While sustainable and That's we've debates as Merck? our disciplined the question capacity create our assets our we're deals debates. do that's earlier types. discusses. we said in to The our to committed the what for deals are today, and

believe people question, stay what all your value creation of longer makes change the standpoint. to I from expected little the don't about I'm a no, answer of fundamental bit sense that to to So is these fact a analysis sustainable going

Roger M. Perlmutter

there adjunctive. at the had the combination pattern on just response is it's our It's Yeah. something response Roger. agonist What the KEYTRUDA And, was indicated, of a Vamil, tumor presented to first still response, we remember suggests think ESMO, we that But, describe of the kinds important being to besides in STING do opportunity molecule. of days, to this manner it's I the that to at birth effect And this we're On further in MK-XXXX, if announcement. Birth it's than speak therapies so abscopal clear. important inflammation. the KEYTRUDA. more because recognize we there's It was as the That announcements going potential. which looked can are to seeking that see to have very And as But I effectively. thing XXXX they intratumorally that the injected itself. given these few tumors KEYTRUDA, with patients. improve is boy, be stimulates important you early

so so So, far good.

kinds we inflammatory enthusiastic how studying approaches, see Let's XXXX, of about including that setting. TLR do. mediators, and we're we things but And not in other just other agonists including viruses, this these are oncolytic

Teri Loxam

question, Darla. please, Next

Operator

JPMorgan. Schott Chris with It's from

Chris Schott

very the Thanks and guys much are color slide additional you for questions, the Great. deck. providing the in also appreciate

couple just renal. questions first-line here. I a had So Maybe first, of

the data see in combos elaborate obviously lung perspective ESMO, I your today the can data and Second you in But we at some stand just pending, in to terms Europe. interested in KEYTRUDA fitting you've on got be would you how recommendation was know with had the into OPDIVO/YERVOY? question there. of treatment PD-X/PKI I Just your bit terms first-line where a in landscape, a more relative particularly you recommendation ex-U.S. how much. the this and a KEYTRUDA And positive Could KEYNOTE-XXX, you've third the XXXX? an past? slip I in if think there. so about on as update tumor Thanks penetration? And quickly just given by get we on a one are U.S. of ramp, we really in of as into usage and in can quick done type expecting rest year

Roger M. Perlmutter

So, is Chris, Roger. this

is of speak I the what they are Those people With extremely first. be enthusiastic are important. therefore first Suffice its at And In of very, that there is that power that this me endpoint first-line data. the Let efficacy other renal we've issues. much the efficacy this KEYTRUDA say there analysis, from it the then as secondary in those first Obviously what results the the to treatment overall with this very well it. survival course interim. And recognize are the terms line be take it's to with where results. we combination. in results, level is rate. think we're on met as We respect top try cell in in setting, looking Adam in at people KEYNOTE-XXX announced the survival interested going to And about renal overall top and interested survival progression-free is, adverse line combination And interim axitinib important results haven't both, to the at can to of effects? carcinoma, going and renal, how effect obtained presented are response as came important endpoints typical, key to combination. results of

Adam H. Schechter

This Chris. Hi, Yeah. is Adam.

at other have is, provided lung, then than U.S., in XX, the as who get X% is at does U.S. look Europe, and Let percent XX%; by neck; bladder; X% about But we've and country. patients tumor breakout the non-small-cell in-roads. I major it's been type. and if and making launching by markets, differ me type I've the about about versus know, indications. other hard caveat the significant you And for outside tumor types. PD-LX The the the melanoma; you very X% all this When we're MSI-High; largest the greater by it all monotherapy it's now XX% look data. lung cancer, and tumor always U.S. start And for European And the you you giving lung as in head XX% said, to

we So there. seeing significant are growth

eligible the triple the With market. size the of combo, that will

countries to chemo considered. will much we're on a it you're to in have be But failed, that have patients in comes getting Also market before, reimbursement working right combo because in to It's markets, to where So is person reimbursement in, is first-line lot in not been as soon away, a you'll comes Germany and treated bolus. as come start lung, bigger a like possible. that as always in us. But other diagnosed, that ramp-up obviously for that's get I've you each quickly. of slower, be said, as come sales the going when see

Teri Loxam

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

Operator

from Rubin Sachs. with Jami Goldman It's

Jami Rubin

Thank you.

second be have we question, you've recognize I'm based that growth for done clear all see Animal elaborate that's Ken. Health to just Animal the competitive we Just by But think meaningful. hugely bit first I the – a at that that going? pillar which I at business and you couple were in been and what that? a the word have sand terms $XX Zoetis you math Can And you per Merck's potential while surprised is on you, line of noticed company an both a time been that Elanco, a time of to mean approximate value on won't line we with we margin diversification, expansion very And you in for share And a asking. strong the being expect any upside if done, characterized you actually meaningful. and you the provide conference, as where recent at used point if would market Health in obviously see successful. your in the you've

you are can take And its will value? to mind? Merck highlight order which you indefinitely? consider Thanks. what looking steps part should we Animal not, in sounds you what consider your spinning it to conditions business, for If Health you're this that like of Or expect don't be changing

Kenneth C. Frazier

actively say So this, the about that, of we first thing our Jami, basis. is ongoing on I an would evaluate all, portfolio

to overall terms on are we we to be today outside decide making and forever. So necessarily decision sense we the makes our think that know decision to you expect what do we also attention in world. strategy portfolio for what growth driving I of happens our of pay that value will want shareholders. But the make you our we shouldn't are that actively evaluating any that sustainable

particular. In fact, our Animal in we share excitement sector the and as around a market's business Health's value

the we've very competitors. compared we fact, its this inside business run believe that In well to company,

look leader. you a global if it's So at our business,

that view margins. We in one as it has continue to a at owner of. industry-leading When it we can good be you it, growth look

for did to With as Oncology we looking helpful kind parts our not issue see time. driving a expect do remain our market expansion, we'll actively say as meaningful what factors, growth basis. margin And including just being And around time the whether an operating around development, we that portfolio. we that margin beginning, the think said very as about of on But business being of to Health, the more thing in to to to that that we so we particular I We to right specific ongoing it or like coming expansion continue at that certain not expansion. of Animal relates should over to our periods, asset, portfolio, don't respect and time, review at margin the to and that's know have us again, at numbers back multiple putting decide do. it, this

and We for to right seeing will we growth What make few in an to annual expansion. give the number continue drive tell But time, specific be. I very to will basis. At same say grow expand, for it think that a terms as drive the to of don't to investments way do us work you we're business expansion that in making margin this to today, normally really margin can guidance try sense that is years. makes hard will our on we I next the us kinds over it the need that what we to of continue the

Teri Loxam

move the next Thanks. let's please. Great. on question, to Darla,

Operator

Alex Arfaei Markets. from with BMO It's Capital

Alex Arfaei

prospects priority? doesn't demonstrated see can long-term do much. you development as business you your still you very just Ken, mean capacity. a have growth the why your now, you Thank Great. confidence given But in I should. appreciate because you that

business key? I something your could, this? is as KEYTRUDA Or Roger. is if follow at given up of you it a And a because development exposure? So management else looking Are reasons, driving risk a priority for

CTLA-X your wondering updated Just about data.

than safety agents, But Some interesting you. just activity. seeing other as just with CheckMate-XXX Seems for YERVOY what have priority we're field you combination. the as and to get I'm CTLA-X this where competitive a you. evolves as your better ranks more wondering Thank information from and

Kenneth C. Frazier

in by our forward. the pleased end of and our that which in particularly business the to on portfolio priority is day, we're for make start why now, we that But that's saying important an development, it's know our continue growing the the let with So going build At field. business doesn't comfortable. way pipeline. me that Oncology we build on And have to us us

question we questions Going back to was a a that few that asked situation ago, that's the face as the company.

is pipeline going pipeline. of We strong our to a de-risking, it's never future that's add enough. to growth. can Our not question driving question a be always of And just our

Roger M. Perlmutter

dose mean, interested appropriate question. right. molecule. select a looks Not and you're be promising. such our molecule a MK-XXXX, the schedule sure would pretty looks to good. and I on we've and combination try I directed but the quite hard mean, we the for And what to Alex, establish a in are and, molecule Yeah, little CTLA-X worked why,

that of people reason. we make it may it. seeing. data explicit through there. ESMO Haven't be But to opportunity aware what And think made were sure that We stepping be wanted there that a we possibility we looks of were for so for may did still And sort at present like an the it. there We're decisions.

Teri Loxam

Great.

the Let's to next on please. move question,

Operator

with Guggenheim. Fernandez Seamus from It's

Seamus Fernandez

for Thanks very the much questions.

your about maybe priority. you I prepared on around business the times, think development number first times of mentioned a the So six development. really comments, question as is A business BD, in

can So maybe, a the perhaps of could to targeting opine timeframe, if sense, of or adding a post-JANUVIA on bit timeframe, pipeline Yeah. little where key as the give the the just an really well, opportunity. Roger areas Ken, you us think incremental sort as you and

Kenneth C. Frazier

– let – sorry. I Go I'm I'm I'm me and So ahead oh, sorry. sorry. finish. just

Seamus Fernandez

go. follow I'll my question okay. up with That's second No. you after

Kenneth C. Frazier

them way all. No, think that ahead have go I we can should ask you it, and so

Seamus Fernandez

Okay. Then can you proceed.

maybe, give us then quick it. in and the just on TNBC and you to for understand a And much. you. could Roger, So opportunity study, just you upon wake a cancer with meaningful my you other last data question. neoadjuvant Maybe setting? help adjuvant the TKIs like sense the the just LENVIMA can kidney The in you've result Thanks the KEYNOTE-XXX as then of setting. of two see just improve it, seen first-line same opportunity in cusp do we're the the questions so us of, Maybe

Kenneth C. Frazier

for interrupting. Thanks, apologize Okay. I and Seamus,

a that we with So for And an me generates enhance our now. pipeline to over job that's pipeline. it it scientific remains is because We let what best-in-class And find to respect development, important to business the intend and for do. us, what shareholders. think ultimately value our priority turn Roger it's growth to innovations best building will long-term

Roger M. Perlmutter

from from way. science, in opportunities revenue the scale, to licensed the on interested if something the always case. right business And Right. the or over mean, it can those pipeline. side, on best materially for the we Well, are our that the terrific. that have business majority case molecules a contributes be which pharmaceutical be company could care. the any the some If acquired impact could, the It in I our of beginning, best develop a I we're meaningful biggest at development will also way everybody But we I think development that patient in in that acquire recognizes outside adds typically must fundamentally

data promising. And And like. very the in of in KEYTRUDA don't that hepatocellular should – data and data We're axitinib I LENVIMA the interesting. are that from one going lenvatinib charging is success in protein we be previously the respect other and course combination extremely ASCO certainly of will are pre-judge as discussed lenvatinib. story. slightly any work kinase first-line think I of the those But see ahead to Every the with had different we any think both have presented to inhibitors to of exactly way that the combinations. tyrosine datasets We've clear. done well. I that both want And of would we've renal, single arena what endometrial predict With after don't were with characteristics. those to there's look

those we're you're be would right. enthusiastic KEYNOTE-XXX DMC about point combinations. review. And getting where lastly, there to a close So the is

A add forward aggressive anything triple are cancer seeing this and mean, population responses quarter, those data in extremely negative what that I can look to that the principle, a to it's so in hard We welcome. that – will disease, looking like. be improve expecting will principle, predict those would fourth disease, quarter. But data. very And in happen we're obviously breast concerning very

Teri Loxam

Thanks, Roger. Great.

on to question. move the next Let's

Operator

with Baum It's from Andrew Citi.

Andrew S. Baum

you. Thank

a for of for Roger Adam. for questions So one well, – and couple couple then a

light dynamic. Part where going of And that? valuation of to, from also you you Adam. own has about your for In the role in President's quick you future development the Oncology] expansion in factor for So TMB of of potentially in finally, reimbursement but U.S. you. throughout of is recently enacted from reform? alluded predictive of being the proposed where leaning most outlook Europe of about looks just you're Merck's like, then, address, couple see responsiveness. of thinking on males you're to referenced how a development? CheckMate-XXX inflammatory influence biomarkers of the JCO risk vaccination that Merck and Obviously, this comments Second, in future – a both part survival, that business commenting combinations and a does in the as on various afternoon. [Journal the in timelines And focus. China, from Thank I'm for within interested how for and very disclosure critical from light Ken GARDASIL studies? as published that B Clinical The the recent what around terms paper business signatures how think TMB TMB you overall the as dynamism

Teri Loxam

right. All

with Roger. start Let's

Roger M. Perlmutter

TMB, much and out for soon the thanks inflammatory there say describes those. TMB Andrew, CheckMate-XXX, journal referenced have is modest comparing patient relatively large study on information of by you of where question. the a studies With We a subsets. respect didn't I'm comprehensive that not yeah, We've TMB, done to a more from have large analysis. There's was quite a paper coming signature. Frontline patients in lot quite So, series from one very to single The JCO like influenced to ascertainment. I reports

could talk You the here. It's interesting. science I about underlying and quite

burden whole to it the a as example. a does, monotherapy, in not way think chemotherapy setting, understand. to question do response; in understand test the with a that of clear response variety with so patients very we continue tumor immune important therapy We the the KEYTRUDA study could clearly near mutation we for of KEYTRUDA is treat to utility for of to would neoepitopes jump conclusion quite of influences combination something important implemented how that. it's to to is any see People I rate, is improved that know, that reasons. appropriate term which mutational that's as and it in and that's as broad. depth. And And, that be not do nevertheless, be selecting And who

Teri Loxam

Go to Adam.

Adam H. Schechter

to want non-differentiator will U.S. I be competes the believe And areas, to specifically, mechanism we find of a I the significant development And think there's as be that extremely that and have with not that in new benefit. And, Andrew, products. doesn't business to late-entry, nothing when significant the important make future. necessarily good in regard remains world, in that additional U.S. continue to a products that we I U.S. new that those types about the difference give reimbursement those for want obviously product. wouldn't would the a

looking CDC the over But borrowing. at thing lumpy Vaccines is The it's we're over with we when that and seeing business to to can GARDASIL, looking to health for global look quarter. of look, from we lot very a if opportunity. GARDASIL we're that With was A real of basis. you $X of just represents you growth, the careful it's strong believe regard very time, any large have And you demand, patients. increase we're one at due breakthroughs looking but be also So if development, a stockpile on very significant billion. numbers sold growth

new there. at But also cohort. big growth lastly, of has are we're look what opportunities the say seeing Australia at to to year, United And look think venture at States, I'd beginning programs. in and additional implement other and you looking in real you the those back we've indication even done joint if or countries about then, a not types If big the China whether already they're from taken GARDASIL that's last where Europe,

growth see over GARDASIL runway of time. for we So real a long

Teri Loxam

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

Operator

It's Wolfe from with Anderson Tim Research.

Timothy Minton Anderson

A few Thank questions. you.

of towards You capital projects, manufacturing. about that on more spending going part talked with

that question over products next One know GARDASIL. very is is though is, you I the be my those outstrip is manufacturing chance look will tricky. Vaccines, as example, supply? whether years demand of there forward of KEYTRUDA, for the with there And couple can

is any And that flagging being of kind going that sales to guys an could there So you in be is terms seem and under-appreciated of we sort capped then, risk of should up anticipate back to GARDASIL, opportunity. be until running? manufacturing fully

opportunity size? could do going that it embrace comment. So you just various in of over is you is unrealistic guys billion, talk product year vaccinating a terms that to of the last with if broad you authorities just $X both touched in like think on sell on a health the to payers are something boys trying But preventing think where to time this keep different as your and that can about what think cancers? and markets I you double girls in in this way you highlighting. I'm quantify And is it

Teri Loxam

Great.

start with on the CapEx. Rob Let's

Robert M. Davis

Tim. for Yeah. question. the Morning, Thanks

So particular, our but Animal capacity Vaccines, if correct; are frankly around is in you you expanding, GARDASIL look Health. is portfolio, Vaccines at where KEYTRUDA and our broader it

And coming growth been the several meaningfully as and market, to really this the demand into year. the But our supply we as to it supply bring last company. important the marketplace. have in all we look able the GARDASIL we've at speak over the years, to including across increased long-term So of see areas I'll we what point specifically it's of out, spread to Adam key is the let

going forward, to increase meaningful to we on have As a also supply basis the look continue we forward. ability

some So we are making are investments the I'll very to give product maybe specifics we And in fact. beyond growth that to confident turn Adam it ensure that. can this necessary over drive in and to

Adam H. Schechter

Tim. Yeah. Yeah. Thanks, Rob; hi, and,

really are change of we moving doubled the of increase demand A demand it's alone demand So year the driven in countries. vaccines. for Gavi programs unprecedented terms worldwide And the last policy for in in multi-age countries lot to HPV from in necessarily. seeing the by many cohorts. increase demonstration is And are

continue increase to us. said, working HPV really the think base, have years. grow, three XXXX vaccines really really we that we I And global is top in from significantly as to to supply the to the So supply increase demand Rob for look And over going we're as it's global plans priority are our do need the and place we of a the going next to so hard supply.

mechanisms putting place vaccination. to different are in countries different world, the ensure around look you As

look you like So if you at France. Brazil, profile different very a country a than have say

believe grow. that continue to years countries demand launched. the approved and market But see growth seeing give the in highest very, women the And that will the will men So importance continue I it's understand for the And we're both in people strong. hard would say is beginning to to is the to growth that be generalizations. of that the cohorts very we're vaccinating after to And I nine really unprecedented. which really level in are

Teri Loxam

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

Operator

Evercore with Raffat Umer ISI. from It's

Umer Raffat

may. taking Thanks much for my Hi. if three so I question. I had

KEYTRUDA U.S. seeing other Part and proposed. a top of Trump come are out But they're where of formally the between ex-U.S. some we're as the disconnect proposals and price First, some B not seeing being proposed priorities, I-Os administration,

sure Because investors play XXX want consensus may I'm guess So already. you by And about Roger, ago. to just finally, see much has beyond levels. bps trial, powering XXX you up your is, you in And out? really you was that temperature how guys to be wanted the I'm increased speak negative curious from consensus in hear we margin implying One. this a triple get expansion, margins. there. it's I for breast your on going what's margin get is perhaps granular that there's expansion for then what XX% a that few general. neoadjuvant assumption months the on not how this just upcoming it secondly, question when bps, noticed current But Ken,

to get behind decision? Just thought process that wanted Thank the some color around you.

Kenneth C. Frazier

with start me let So the question. pricing

a early being expected to speaking need how that those to I start to the we So standpoint the Washington. would we it's there's on right have we'll to that, let to comment further administration me all just But be to to would implemented. What to ways But problem understand of anything do interact is I find open Congress President about patient of we with of from that's we saying, we're a really see on talked end really or the continue be innovation. to again, create to But B now Part this with to day, access is this try some these issues. the patients will agree meaningful while be opposed by at actually And of that and lot the in access the better more need details know think getting drugs. things. afternoon.

Teri Loxam

you Rob, can expansion? take margin the Great. maybe

Robert M. Davis

how to specifically look we No. thanks comment don't I on the relative Yeah. Umer, want question. consensus. for to

here top-line I to ability see to think through do that message meaningful drive to use faster leverage the that our to drive people over and expect growth productive to due margin a want we mix continue we of is the make expansion to key time. business sure the understand our investments of

How we're that's consensus, really, to So compares that to not going message. the comment.

Teri Loxam

And, up? to want Roger, finish you

Roger M. Perlmutter

I Yeah, we'll get and as how really know that as definitive of a believer study possible. through am. And [Baynes] issue Umer, I studies. Roy huge lot be ensure thinking you adequately to on a the in KEYNOTE-XXX, results from a the spend of that time will I'm powering

see way look what important in we sort know results learned we the is – I But of in The The we which are. and is about point But study. is do study recognize And ask how that everything change know simply should everyone we you that don't know on. study don't results this. that we the everything the doing at proceeds. and what data from improve we've our questions to in the going

can. we best we'll so And where see do exactly We're to we the but get always we to. right, it not going do

Teri Loxam

here. a to try next more Great. We're in couple to Darla, going get question.

Operator

Stanley. with from Morgan It's David Risinger

David R. Risinger

I my of from the much. very Thanks instructions closely, Teri will follow very unlike competitors. some

going two my I little including Health just Medicare, that for sales And number are, organically. Medicare second, growth? So in talk B? U.S. sense one, about of questions we was bit have But you X%, generates a don't could forward what that from Merck the is which could provide business. please Animal should you solid a It percentages expect more Part

be we could think I Thank think about if great. you. would should in there moderation was sense organic the that And growth how some growth. future you prospects, give us organic for a

Teri Loxam

We'll start Adam. with

Adam H. Schechter

Yeah.

in very in But B. where lot it's Part bigger – data And break you different that retroactive also reimbursed the reason than look changing hard, of Medicare. growth out because And the quarter which of is Medicaid areas, We is is you general, don't some it's because a is thanks our and growth. if from are through coming are we versus question. So, every the don't much for segment you get really today. you David, know at why portfolio, KEYTRUDA

bigger You differently. is think tell forward, go And for a that to much role us. Vaccines are we reimbursed obviously Oncology play going I can as

Robert M. Davis

I to timing business, at in had customer as a We ahead purchases That second space really could on quarter. the in any as Yeah. comps. quarter Health, the buy the a increase. actually what said. And see as remarks, the wouldn't impacts. prepared be slower the are impacted There some indication It affecting growth of as appear going I – some Animal Animal the is that look the what positively the in Companion in to price was I what's of question commented you your about

adjusted quarter, actually comes you'd third in see get past, we consistently. in to which term. the over by Health Animal as line, very said for where we much term, business pipeline, this that we strong, synergies our the growth look it's you as If been And in longer the growth from to we for with innovative our continue the business, driven see this business drive long Human Health above-market

So our changed. be in growth to very this continues strong. And hasn't confidence that profile

Teri Loxam

to Rob. I close. questions to we're in. to unfortunately, it appreciate the to over Dave, instructions. you listening to be to the able next close think there. hopefully And time Thanks, Ken toss get going And questions more have I really I'll we'll

Kenneth C. Frazier

for to want support and Merck. continuing I all you So thank your interest in

And by now. look patients been our our our Thank We on at Merck. time forward portfolio in shareholders. updating is believe has confidence I've momentum our about of great any we it are opportunity energized since better we And right you. you to with to deliver we here progress. We been the look at than for business and what future the can

Operator

Quarter Sales This Conference and Third concludes Earnings Call. XXXX Merck's

disconnect. now may You

Teri Loxam	Merck & Co., Inc.
Kenneth C. Frazier	Merck & Co., Inc.
Robert M. Davis	Merck & Co., Inc.
Adam H. Schechter	Merck & Co., Inc.
Roger M. Perlmutter	Merck & Co., Inc.
Vamil K. Divan	Credit Suisse Securities (NYSE:USA) LLC
Chris Schott	JPMorgan Securities LLC
Jami Rubin	Goldman Sachs & Co. LLC
Alex Arfaei	BMO Capital Markets (United States)
Seamus Fernandez	Guggenheim Securities
Andrew S. Baum	Citigroup Global Markets Ltd.
Timothy Minton Anderson	Wolfe Research, LLC
Umer Raffat	Evercore Group LLC
David R. Risinger	Morgan Stanley & Co. LLC

Merck & Co. (MRK) 25 Oct 182018 Q3 Earnings call transcript