MRK - Earnings call transcript Q3 2019

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Operator

Good morning. My name is Jerome, and I will be your conference operator today. At this time, I would like to welcome everyone to the Merck & Company Third Quarter 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 President the go of now Peter ahead. over Dannenbaum, Vice Investor to would call turn to I Relations. Please

Peter Dannenbaum

Quarter Officer; Chairman Labs, have and Thank to Executive Merck Officer; I'm good Research and our Chief Roger by XXXX Chief prepared Perlmutter, Davis, Third of Financial joined our you, each Today, Dr. Conference remarks. who Frazier, morning. Ken will Rob Call. and Jerome Merck's Welcome President

Marketing joined available by Frank Mike portion In Officer; addition, Chief Officer, be and our our will of I'm for Commercial Chief also Clyburn, Nally, Q&A the who call. the

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

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

from in results excluded know provide and should reconciliation we've that, our You release. our non-GAAP press these a

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

to and some like within you are that prove may the forth If XXXX. in current of made materially are set meaning considered those materialize, forward-looking differ Litigation and from or beliefs Such forward-looking Act the based Private actual Reform statements today's during risks the statements Securities safe of subject call uncertainties of U.S. remind that the our Merck's on significant provision inaccurate statements management to assumptions make the of of uncertainties. be I'd we underlying harbor results statements. may the

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

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

also merck.com, our from includes a of results. to of the section which have Investors the We presentation posted some highlights

call to that, over turn like to the I'd Ken. With

Ken Frazier

its you the both Merck and thank our one extremely performance of Research achieved call. best putting science-led path morning all Execution sustained resources that We're for patients the right innovation joining Good and our best quarters pleased value is commercial been Peter. in belief and and Labs by and reinforces Merck our exceptional and approach success focus strategy again years. year. you, Thank of this we has the and our our the significant operations meaningful many into in towards in This are business to and shareholders. the delivering the

of into in June, growth As we of the highlighted visibility our next good we years. derisked over our Investor the Day have at five portfolio innovative products

the in beyond. We over investments we science are decade making breakthroughs now unmet will also areas need help from development, that us the of deliver discovery on through cutting-edge are significant clinical late-stage confident focused and medical next

strong momentum happy Tilos seeing Immune supplementing Notwithstanding strengthening our development we and very business additions Peloton, the business, are will our this aimed at Design in our and we we are pipeline, Antelliq, year. prioritize and continue of with to portfolio

are and the benefits on a focusing We our drivers operating growth of now strength. are realizing of from key position

ways realize an all our to across evolving the the for to to we're portfolio company. position best more focused future to by At Investor create and a growth. spoke in also innovation-driven our changing our of efforts driving are operations order Rob vision With productivity health that this said, Day, model, operating mindful Merck industry effort human becoming our we sustainable optimize about landscape. In for looking

now colleague I'll to that, to the of performance. details review pass over With Rob quarterly it our my

Rob Davis

everyone. Thanks, morning, Ken. Good

the operations revenue successful quarter drive our growth innovation. across achieved highlight clinical As this commercial our sustained Ken through strategy stated, the strong of results execution we and to

operating invest time margin in remain and As to through we resource improved delivering operating disciplined to fully meaningful expansion efficiencies. committed pipeline, over also continuing such, our allocation while

XX% company negative my Now, of divisions Total our billion, revenues Both contributed quarter. an on or remainder year-over-year, growth XX% to ex-exchange increase pertaining Animal health this The results. will to impact $XX.X the the comments our to from of Health basis. human excluding sales were and an turning foreign currency. be

revenues key Our XX% human health grew in our vaccines businesses. by and led oncology products hospital

established standard lung first to firmly The squamous first-line eligible driven penetrate and non-PD-LX KEYTRUDA in XX% benefits oncology, populations, billion patient trials, year-over-year by as lung our growth all was the strong increased low all in continues expressors. In cancer care a first-line $X the In demand of sales including U.S and KEYTRUDA and across four KEYTRUDA have survival the settings. demonstrated these for non-squamous time In quarter. across exceeded indications.

We combination are In risk first-line launches uptake in We're in the and And chemo first-line in we positive of encouraged seeing and across launch we renal received patient year. momentum advanced both are and new carcinoma, from cell also our cancer the melanoma, early we've our three recent leaders groups KEYTRUDA adjuvant since positive which indicated. by scientific community. earlier head continues the this with and are strong neck feedback indications. prescribing for and approval in all monotherapy

all continue EU, those bringing Outside usage driven we growth the are of bladder based reimbursements in for strong look is we're in PD-LX first-line driver China, more seeing by globally. we Japan, across KEYTRUDA and in In And to and sales excited lung cancer. States, of subgroups the approval markets. our to grow XX%, and KEYNOTE-XXX. to primary lung in we patient forward we recent patients lung share off KEYTRUDA and recently the received In United the KEYNOTE-XXX by grew the Europe additional

continued Lynparza respectively. our and from for with reflect both important Our collaborations products and AstraZeneca Eisai strength results Lenvima, also

Lynparza of our revenue Europe, as ovarian Japan. in the on United reflects fact, in in In the doubled than both products States, well cancer from as uptake and further based in results more SOLO-X third growth China strength quarter.

share Lenvima. we to well the broaden the patient XX% Lynparza has of indications future. Launches In use PARP the carcinoma particularly in total in continue inhibitor in across approved and hepatocellular drive certain and sets up increased are to of Japan, launch leadership endometrial the over China This in in the United the the look Also, the United as additional patients we early in treat expect class. more combination to future. use approvals States, with us of KEYTRUDA States, Lenvima carcinoma first and of Lynparza we

vaccines. to Turning

GARDASIL, business vaccines States. sector third the due growth outside in purchases Our The is reflects quarter. our pediatric negatively United revenue primarily the timing growth well of strength our U.S. of impacted continued as portfolio in in as to which public

the from share within increased strong reversal due in business Our to hospital market. benefited United reflecting States XX% in growth the BRIDION, performance

Animal acquisition. the purchases XX% Health the grew acquired $X.X contributions animal due XX% timing from billion. by the Antelliq this revenue driven to XX%, increased our products year. due also line sales of in Companion quarter BRAVECTO to last of Livestock partially the grew products, to

our of my of rest driven be on the promotional in drove costs variances. costs increased drove clinical $X.X quarter, a billion margin to and associated year-over-year. while by quarter, spend higher X% higher expenses Gross points our discovery Turning with unfavorable SG&A a P&L, growth and for the XX will manufacturing efforts, year-over-year, decrease higher non-GAAP in basis. our expense. XX.X% basis Operating development comments of the was pillars R&D Higher administrative expenses

as by portfolio as income Other in our net lower equity was higher securities impacted income well expense. and expense interest unfavorably

driven mix. was points for assumed rate lower Our result tax earnings of of the effective year quarter as basis tax a represents a effective rate XX.X%, year-over-year. decrease by a full favorable This XXX

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

to turning year. Now, our for outlook the

approximately the for of includes We XX% represents XXXX. guidance impact are narrowing quarter We the CDC year $XX.X This and $XXX expect revenue borrowing, XXXX. $XX the our revenue both raising GARDASIL ranges of now full to billion, non-GAAP which growth fourth million. our and stockpile negatively which of impact billion will XX% to versus EPS a revenues by

a from Our foreign exchange range points using negative updated of impact two percentage mid-October roughly assumes rates. revenue

the We are roughly non-GAAP for expected to tax lowering year. our XX.X% rate

approximately percentage $X.XX impact a exchange. point growth $X.XX, to July elements EPS XX% other remain in foreign range provided negative which is unchanged. versus from to our non-GAAP revised now including guidance represents one Our of roughly XXXX, of All XX%

moment Before our take put I a context. results into conclude, I'd like to XXXX to

expected and the full for growth bottom year rates are line exceptional. Our top

to you think as and a EPS are revenue things, there in in While your keep strong few we XXXX, models. mind growth to about expect I'd continue like you

we in First, pressure XXXX. increased expect pricing

Second, third, we as demand and of rates for mainly last GARDASIL growth Noxafil expect the face continues elevated expect we to couple And the reported pressure outpace supply recall, what tempered and we NuvaRing. years. you'll versus on product to over for

That very in being confident we said, business. our remain

believe are year our growth each year through underappreciated. expect including to we revenue continue where XXXX, prospects revenue still We strong a and

another are in guidance summary, business we third our quarter of our and updated and results the In point strategy. confidence have our proof

to continues we positively approach the serve. innovation-led our impact patients importantly, More

which be and we As will and such development, for significant of we shareholders. research continue believe invest to the patients will sustainable both and value source in

like I'd to call to Roger. over turn the that, With

Roger Perlmutter

Thanks, Rob.

presented new in quarter, building at scientific progress key new for products, During made significant the third portfolio. and advanced we meaningful research data important meetings indications our

in progress to first Turning approval. oncology

in During the LENVIMA with third whose quarter, prior deficient have therapy progressed in mismatch U.S. combination repair FDA advanced and cancer from for tumors patients KEYTRUDA when not endometrial following are with for disease the systemic whose received given accelerated approval MSI-High.

in of malignancy, carcinoma opportunities we what and urothelial squamous our neck with advanced cell LENVIMA carcinoma, to the in colleagues collaboration Eisai Japan large cell renal lung head marks we're believe of hepatocellular and cancer, combine in a first with including which the of approval treatment developing the This KEYTRUDA cancer. of non-small be cancer, set at will

carcinoma release, filing also our use As that metastatic cell for noted the with KEYTRUDA a date PDUFA squamous accepted monotherapy of cutaneous treatment or is surgery press of radiation, or recurrent in of not as in the XXXX. our the by XX, June sBLA curable FDA

one of States. approval Separately, on combination as Rob United KEYNOTE-XXX study. we traction is European regimen, data substantial from gained based Pfizer's Medicines Agency for in the mentioned, This received that our has the and also Inlyta KEYTRUDA

approval cell the or PD-LX least X% KEYNOTE-XXX of on tumor with locally was based of study, express Meanwhile, advanced at lung whose cancer, cells also on non-small first-line for obtained. treatment KEYTRUDA of tumors patients our in China, full metastatic

number new We each who diagnosed very the of are are cancer. patients year lung cell optimistic benefit in China, that will non-small with this provide to large indication

agents other FDA is suppressed virologically combination so-called and with in when a and U.S. indication. approval HIV-infected PIFELTRO who regimen. DELSTRIGO the the oncology, of combined are stable patients single-tablet Outside on switch a as for This granted

transcriptase We that reverse non-nucleoside offers with transcriptase inhibitor. islatravir, translocation our nucleoside our and PIFELTRO, combined many believe opportunities for second-generation inhibitor including investigational regimens

the hospital-acquired combination the versus pneumonia of Phase X the met infectious disease in Also RECARBRIO and and of we piperacillin in ventilator-associated where non-inferiority endpoint bacterial its data area, obtained primary tazobactam.

bacterial serious of Together with offer development I'm a full in will believe exceedingly regulatory XXXX has colleagues we exemplary of of proud options RECARBRIO in these clinical approvals. led in for and affairs, treatment pneumonias. suite whose ZERBAXA, performance the to my

presentation Society to AstraZeneca, in case, third important platinum-based the the developing bevacizumab quarter at of data at activity patients combination ovarian Oncology with who Medical The therapy. we demonstrating for meeting PAOLA-X new the treatment which saw colleagues trial, cancer in European including the Lynparza, with of the had for responded are of this in also advanced previously

But recombination have we radiographic bear ablation And hormonal repair men tumor trial also we delayed homologous in next-generation malignancy PROfound the castration-resistant was prostate in metastatic our defects. of therapy. cancer, with progression whose demonstrated have gene progressed which cells

X currently ovarian, trials yielded the castration-resistant cancer. of therapy to have treatment pancreatic breast, under data now the advantageous, encourage Lynparza Lynparza positive X the trials in Phase X could view incorporating prostate Phase Phase that especially in this addition types: exploring different way. are four and KEYTRUDA metastatic prove prostate. hypothesis Studies of tumor

response what European Society significant trial. for our in as of pathologic the for we seen II complete KEYNOTE-XXX therapy in triple-negative meetings, breast demonstrated confirming from at increase a previously have Also data neoadjuvant the study Phase cancer Oncology X Medical KEYTRUDA I-SPY statistically rate,

well the on in data, additional Phase outcome coupled with a ongoing for trend administration measurements survival, event-free from These KEYTRUDA auger X portion of demonstrated adjuvant this future results favoring trial. KEYNOTE-XXX which

that advances being is earlier many done. the the critical highlight work been segments made to in pipeline where me have permit not does Time of

world. research However, the to that I biologic discovery the of period improve extend third new lives of note Francisco, in to the accelerate the in San facility understanding wish we of South close that a we where quarter to over and as celebrated translation fundamental therapies a came expect time breakthroughs into opening around our

prevent of for experimental In recently this to context, I cannot that Use Products fail Medicines Committee The VXXX, our Agency designed strain Human mention of Ebola Zaire adopted the Medicinal positive to opinion the transmission of European virus. vaccine a for has for

As recent disease spread help of all Ebola to the the Congo. has of you are Republic been outbreak thoughtfully a of aware, in Democratic the virus deployed VXXX of slow

for X.XX nearly virus of is who World Health by permit outbreaks heroic VXXX of shipped exposure in have it approval to at infection, that other health the environments wherever risk agencies, in care the workers VXXX dangerous tool teams Organization Our with this doses routine million colleagues to very use highest immunizing this performing deadly those of and work ultimately we virus. of Ebola believe vaccine needed. and prevent will important whenever and They are

We questions. will now take your

Peter Dannenbaum

queue Jerome, you the please? can line up

Operator

line [Operator Morgan Instructions] Stanley. David of Your with the first question comes Risinger from

You your may ask question.

Ken Frazier

Good morning, David.

David Risinger

very you Good Thank Great. much. morning.

in you a yet respect My bit you that XXX first, on very – quarter, don't I Congrats So, know obviously, adoption little the third what you with characterize would Merck haven't any about is questions the Europe were but is the the to-date. quarter. me, XXX results to just in understanding impressive. excuse adoption certain are talk My Europe? could in in booked of XXX how countries sales just in inning

And the KEYNOTE-XXX and cancer market Thanks in and cancer? triple-negative then Roger, cell very for discuss please KEYNOTE-XXX small second, much. in timing lung opportunities you breast could

Peter Dannenbaum

Frank, off? want you start to do

Frank Clyburn

European David. Germany had been almost last in morning, to are approximately regards With It's year we Europe launched XXX, mid-Europe. have in and very now the when was reimbursement in we That reimbursement we in that of Good got Sure. all received Germany We pleased reimbursement. year. a markets. major in

have for Italy France. which as now reimbursement, this past and place taking well Spain we just quarter, this reimbursement month just is added as with onboard came

we in with XXX. the markets of are innings So early some in regards to

for we've while. mentioned, now that Germany a I As and had mid-Europe in product reimbursed combination

Peter Dannenbaum

And Roger?

Roger Perlmutter

major encouraged KEYTRUDA of the and clearly to well breadth cell are the non-small well as the meaningful activity is But to ambiguous XXX Right. we of in will lung there in cancer believe trial. lung small on David, as small cancer. cancer in opportunity and that cell look cell opportunity is important cancer so encouraged be are based think we're lung lung

neoadjuvant the For triple-negative complete where KEYNOTE-XXX improvement breast quite quite a would rate is the dramatic circumstances really really cancer, optimal highlight therapy under response I mean, impressive. demonstrate again, is in and I trend that pathologic data given

That's has our outcome had set high like. look mean, there's statistical that complete well had a pathologic remarkable. for ratio and of roughly really although I in quite there the I XX% data a response; test And extremely the -- bar improvement event-free measures meet point, at subsequent we said X.XX. survival will augurs didn't an as it, certainly what

will some we time, think with the breast not a of who those forward the how big data Over that at individuals offers on regimen treated. I future. wait cancer KEYNOTE-XXX is to real treated are looking And a kind that triple-negative we're really Obviously, have a point effect opportunity. in for have and seeing to the neoadjuvant

Peter Dannenbaum

Great.

Jerome question, Next

Operator

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

your ask may question. You

Chris Schott

the very I you we operating margin my on some improvement. I question know operating much first on quarter. but previously et year-over-year based margin Thanks Great. making, cetera, you're expansion. near-term seeing guess are moderated and was just had investments congrats strong expectations on

year as we to So continued in we mind trends? strong about assuming there out need into margins we be line improvements next investments can about of look as or step-up XXXX solid the margin we another top keeping and over Or think is XXXX think two?

My GARDASIL this at on second was question point. capacity

think left moderate just capacity on you us XXXX. color think at a that give we how much as bit Can this more you you noted may how have about just I point, in you us think just should then of of Thank expansion give update quantify we GARDASIL that substantial to more that as of when can slowdown? kind an to longer-term, a capacity? you. about follow-up And growth

Peter Dannenbaum

you Great. off start Thanks. want margins? on Rob, to

Rob Davis

revenue growth really you've we've expectations. year revenue power about the of Yeah. what as what operating Yeah. for growth. happens our year-to-date the I XXXX seen get at you're seen you Good own of frankly, third morning, just way Chris. from question been the is even see as when outpacing guidance To the quarter is raising your you think results accelerated And we've the in margins, looking

improvement So, as of expected. we seen than we XXXX have margin actually in that, result a stronger operating

vaccines As look really do every pipeline operating of other behind upon. but view we we in increases sure where both continue expect growing as and and a in look see is is margin to at year, XXXX that oncology make we a forward to we has still invest Roger exciting we hasn't fully areas what and opportunities that touched to our continue changed that investment of year

be to to as slow in And then XXXX operating and the see we see than really lower growth expect to do R&D look we sales. beyond meaningful of we as then margin more rates rate

strength really overall because the is just view XXXX our hasn't we're of in So, changed exceptional seeing the topline.

Peter Dannenbaum

GARDASIL capacity? And Frank on

Frank Clyburn

Chris. Sure

And so we increasing done GARDASIL, growing in significant existing and are put quarter highlighted was we place U.S. growth have which XX% our once are and is seeing our outside What continued again strong the this from underlying for demand plants. production we

we commissioned Investor the in hope as to Day, two on which XXXX. we of we manufacturing new construction bulk bring mentioned facilities And GARDASIL online

be the when able ex-U.S. XXXX, supply in expect to that meet demand. is to ramp will So, we up to our

vaccinations borrow comments, in the mentioned other as for of doses make to to really to stockpile, manufacturing Rob in capacity U.S. up some from parts to the well as world. decided support We his the as routine free

believe and significantly years we match continue to over supply additional our around grow match We we anticipate can GARDASIL do demand to the coming in supply several still So, move as onboard XXXX. next the world.

Peter Dannenbaum

you. Thank Great.

question Next Jerome.

Operator

Anderson Tim Wolfe of question comes Research. the Your line with next from

You question. may ask your

Tim Anderson

of couple you. Thank A questions.

on first rate. your tax is The

KEYTRUDA and those up rate favorable the tax-advantaged it that favorable well continue specifically And Merck mix tax product beyond way could very in is one Is mix the in tax the for rate a year quarter. this guidance of the product to drivers? it for in continues drift is lower as XXXX? where do such You mentioned impacting to set

has in in you area. X Second roll expect KEYTRUDA. sets on lung. Checkmate-XLA is showing Yervoy Merck KEYTRUDA this Phase CTLA-X starting activity Data a can When from we sets in on plus that Poseidon, to question program have lung? in data Data like and

front-line coming And models you analyst capture that that Astra comment competitive kind threats just fears perception something we've whether the can in accurately of and then market's your more from got broadly that's KEYTRUDA in Bristol on to and and lung view?

Peter Dannenbaum

Rob Tim. off you, with Thank tax will rate. start the

Rob Davis

Tim. morning think product With due good made mix. in on comment the Yes, as to favorable that are And is well your that regard just the clarify as actually I earnings to geographic the I'd reason question, is both based it's that mix. prepared I remarks mix

both So, although than a just it's what more it's you is in jurisdiction. see and with tax-favored KEYTRUDA, produced KEYTRUDA

from seeing benefit So, it. growth we in not but KEYTRUDA, the do get only driving thing it's

to quarter, some of drove as points look did discrete rate that couple lower. highlight items have this rates we tax our in you would at year's the you that a I and first remind just

from are as So, benefiting well. that we

been. in you And as sure we I look make view forward so would positive of and finalized where around where give guidance. plans I'll keep into thinking that But your XXXX to you your trend we mind have kind are relative we've forward as official balance our we not only just

Peter Dannenbaum

competitive on on And the to maybe dynamics. Frank Roger and CTLA-X

Roger Perlmutter

Yes.

programs do enormously that treatment will of that of that it's cell already non-small and So, an of cell that out provide should expect studies lung for many many, foundation that that try we lung performed time over I address point be cancer there have we and cancer. strong non-small different set important the course, happen. will

XXX. an similarly monotherapy greater that's with strong at the PD-LX KEYNOTE-XXX data and look data extremely than set, with XX%, you XXX When similarly

So, see enormously strong and the the that's platform reflected you what in is market.

support But are don't I eager we data us think that. could else KEYTRUDA. anything understand that all whether of to added have far to really any be thus

is the KEYTRUDA provide, will compared study, actually improves addition antibody to alone. ipilimumab KEYTRUDA seen our with ipilimumab whether definitive as of study XXX with and what monoclonal information own on we Our results CTLA-X-directed hope,

mixed thus from bag Now, we see. can kind far a what it's of

we XLA respect the look have to Of data with don't at course really or Poseidon. to

of these and we'll And and make on judgment to a a the treat best risk to profile look patients. Frank? have so those chance about how data basis that to benefit, at

Frank Clyburn

eight a have a And the and what in or of monotherapy in XX a KEYTRUDA right every standard U.S., receiving lung either first-line is care that of very regimen patients we eligible KEYTRUDA couple a in I'll in marketplace non-small strongly of Approximately out things add combination. separate the established are cell now as I'll cancer.

KEYTRUDA from they a of I that we're physicians academic community established care what or as really say has both lung. hearing the should And itself is now and academic believe the in community physicians standard

that I KEYTRUDA our think there's have real lung. experience also significant world importantly, first-mover with based we note on in advantage to

So our competitive space, know, this be it'll while we feel position. on very eventually we in confident

look HTA magnitude positioned-well data of perspective also have done in And If care that significant look the note at reimbursements compared but do the you're well time. bodies of U.S., the I other standards takes note Europe. we bringing received, is outside I also the I as that approvals now important reimbursement think extremely we from not effect mentioned have. and and a to to that to the of And it's important we really it the regulatory only HTA

with established are in now in advantage also very well-positioned very lung KEYNOTE-XXX also first-mover based in of monotherapy. and off Japan. we And XXX well China our we're

continue grow world, and to our we'll cancer. very the confident going position. have look additional see forward, our lung confident very we're Roger as in mentioned the I feel to some ability of sets. So around Clearly in to lung But I grow KEYTRUDA wait overall as data continue about and to

Peter Dannenbaum

Great.

Next question please.

Operator

of comes Guggenheim. Fernandez line with question the next from Seamus Your

ask question. may You your

Seamus Fernandez

for the Thanks Great. question.

give an at some might able So that in us were thoughts be data presented combination with Roger on I was to bladder drug in cancer. ESMO antibody hoping, conjugate

bit Just difficult just, at along linkers -- ADCs, on presence. ability is? to time? your are your which broader And thoughts as data area it's get has an a historically technology of how little lines? improved, this of, to manage think obvious about point thoughts love sort have ADC just ADC has how the not as thoughts an I'd where validated technology have know been what Roger those wondering improved I on your the Merck on Specifically, in you

other So -- be what there. be might just Merck might work wondering doing

cash And needs then the some thoughts we thoughts have Rob continue deploying a continues second on Merck sheet context on had the question, just to as Merck numbers certainly it focused I that And most imagine terms to give the and the expand, call on KEYTRUDA conversation Can to Merck going of increasing see we're have of in to you your starting that of in far building Thanks. narrow we've see the that cash a where forward? GARDASIL accumulate, balance forward is and so the the that around concentration today. around future capital very in deployment. us to

Peter Dannenbaum

ADCs. take Roger

Roger Perlmutter

work, to better monoclonal more Alan Jonathan Southwestern attempt couple Butetah out to toxins respect point technology, as to goes long history that on cells the have refinements deliver period in anybodies first to done there's now, at selective and idea to with over a tumor with decades a antibodies, [ph] of well example, [ph] one mind of could selectively years the substitution a Seamus, place so toxins here the linker taken you technology. Texas ADC back Noah by nearly with XX for

toxins, hydrolyzable convention with ricin used. back. choice toxins toxins more out non-hydrolyzable started and it were and point And out -- initially, the then you As more and of conventional

And selectivity. of we're I to some beginning think see evidence

I think there to points make. a are few

still toxin. keeping worth in it's pretty administering this a conjugate, significant that of mind burden you're First, is when there body toxin

carefully second selective is the targets that is risk And setting. And has the we've benefit, matters really lot. very to examined And target is so tumor the of time a extremely such be what that finding profile important. over learned in choice antibody

conjugate data they've way that using we that as have They obtained that that I really a at in it is with Seattle gained abbreviate a I'll and they combination colleagues quite background, our developed, be can monotherapy With would the impressive. really where looked that kinds additional made KEYTRUDA the And were presented all with in on collaboration ourselves which results, toxin of at pass, EV, say very looking certainly areas asking things and we're those intriguing. those with which combination KEYTRUDA? leverage in are first genetics of impressive

Rob Davis

cash on doing the generating are cash business Thanks which flow, can the Seamus. overall you is To that a flow correct we testament quite see job is nice the in the question of really strength to business.

as at you capital you're As look going unchanged. it's forward, really our allocation

and continue foremost, will operations. to fund the First we

growing invest continue know to we of meaningfully portfolio you As our within R&D opportunities.

meaningfully We Health vaccines are investing to business see oncology Animal and in our we in business capacity expansion address growth the our business.

will do we to continue so that. And

business than we development, your goal it's KEYTRUDA. to would do a committed very think KEYTRUDA excess be about on one realize invest continues our while Beyond I is product, truly important to are narrowly still call foundational that are to you a more focused KEYTRUDA. just being that we comment I continue the But people point out dividend. lot to in as that, our look at the cash to beyond flow

We in Lenvima broader have have we the pipeline we excitement over development in oncology that the about the has Roger with Lynparza have mechanisms growing past. talked XX about

Our vaccines portfolio nicely. continues grow to very

I in comments Rogers think we antibiotic that our RSV. mean, and upon space in saw prepared excitement and his grew growth Health. the great vaccines. then a A our our dengue, we of in CMV, obviously HIV GARDASIL have with I quarter. broader portfolio pediatric around have touched lot And you with XX% good overall vaccines pipeline obviously Animal

But cash deploy any efforts through generate to we that's to the extent those continue augment our be to a are with shareholders. internally to lot we'll we return that over to left that cash excited will we after flow it that. to to So And have development. have then obviously about. said, looking And just we business the hope

So pretty that and been. is our strategy where consistent we've with

Peter Dannenbaum

please. question, Next

Operator

Your next question with Graybosch of the Daina SVB from Leerink. line comes

question. You your ask may

Daina Graybosch

KEYTRUDA and question. few you I a Hi, evolve setting I-O early-stage the how may thank the on for have there. and

KEYNOTE-XXX You a have that other. among KEYNOTE-X -- neoadjuvant like several studies XXX component have adjuvant and

the The expect release do the from first you to question neoadjuvant these is, results analysis? interim

The will think is, indications? triple approval as do and for required second in neoadjuvant what cancer settings in breast question hormone other regulatory be you positive as negative well

And that your approval KEYTRUDA in physicians will expectations use? that settings? finally for KEYTRUDA think Do adjuvant wait get will Or use neoadjuvant do you adjuvant the for then in they are you also what data setting? for

Roger Perlmutter

lots Well there. questions of Daina

Let break me and try them out.

neoadjuvant observations. do a all, in and lot studies of of by have studies fundamental driven we First those are

is to we've that response think there is recognize tumor. the come in KEYTRUDA settings works I where what inflammatory in a well

result presence clinic improves in death And has we out place driven or models even of augmented the inflammation chemotherapy of by tumor it's in the preclinical that the result surgical it's potentially is that thinking studies. result takes of see or that the responsiveness. caused, cell the -- played as of of radiotherapy wounds and whether our a combination however and KEYTRUDA lot And which well about are that's

on led studies. results perform some studies we're And we provide data in Phase neoadjuvant all stage which in the early data beginning can were and I have And and neoadjuvant see in And talked so suggest these triple-negative I-SPY naturally of which began we course of responses. the ago. neoadjuvant that time built III us earlier to KEYNOTE-XXX to X that breast about good even cancer

as will data we to clearly need them. those important those And people though asked release of analyses. interim from -- data release are that hear about and and about data You specifically we

in we we the we data just these we investor tend And a in of function meeting generally present want it's presentation. at important meetings, as So to in generally -- setting an context get. to we really tend what results the September. scientific so see that information the don't But in scientific present European as did we Society provide a of these detailed to

they're of believe outcomes the the be Now that approval have evidence validated of regulatory a they is for the to agency to the surrogate treatment want in traditional respect going a with and is requirements those to profile that of interested endpoints. benefit/risk is requirements in favorable or kinds are going either here to

that have the as under our extremely to for which adjuvant are adjuvant way. past. seen is true an studies indicated as neoadjuvant studies that currently why I've studies and think area And expectations we've is we neoadjuvant be prove be I in to many so And this going important that the and will

XXX something in settings. of on them order the different have various altogether of We

it's quite area important really an us. for So

Peter Dannenbaum

Great.

get We are to hoping to everyone’s question.

So everyone ask if to great. like two I’d be limit that could one would or it

Jerome. Next please, question

Operator

Your line next Raffat question Umer from comes of with Evercore. the

question. your ask may You

Umer Raffat

this quarter, operating Hi. is more my much. higher operating I'm up touch actually than materially And by margin, seeing I wanted Thanks stood a is, so XXXX? is which consensus to it expect XXXX margin next And do specifically. on where be XQ Rob, little and of years in XXXX couple math, to as well. question in you the where versus margin in XX.X% my operating lower

And over years And of much. Health couple secondly, going what's now timing change It to revenues next years. your of different Health for then Animal Trio strong my is, several reported driver last has into how Trio. Animal you launching maybe - BRAVECTO potential a with very seemed you been the their do filing? like second. a question Zoetis very And Thank a your expect

Rob Davis

Yes, I questions. the appreciate

I On margin, into specific the operating to guidance. don't get want

at if the As this our operating said, had because think, our year I that sales and outpaced look margin frankly of in growth exceptional you spend. is the fact I outpaced we expectations

we get driven as what guidance can revenue of to So And power that's the by XXXX would look line the our really I to specific get forward. that wait till beyond give. we more

and Animal the the from We're as been correct business growth side also business. growth of regard now production coming overall important good are actually driver so an now we're BRAVECTO well. there that though seeing With Health has what for to you seeing

benefits livestock in You quarter brought we in companion the the of by XX% driven the the grew saw that company good growth Antelliq well as as products into animal.

companion will animal well overall products faster we look have. as we driven the we products Animal grow Health in and rate the the forward, we as innovative the have of vaccines portfolio across to at continue other that believe a As broader both market portfolio business than by

the hasn't the changed that our in So strength view of growth long-term. of business

As combo actually we development. in from that's competitors coming programs have look some we at the triple

continue that marketplace match good which be and eventually a will to the commented demand back way and of work We that to through we're in efforts. competitive to we believe XX-week own very in aware is only development see I'd will the It those, and innovation oral through today that is of light we but in that the see on say, safe bring portfolio. BRAVECTO in frankly therapy even specifically we you haven't product. competitive under our But product an own our really our set benefits from evolving

Peter Dannenbaum

Great.

please. Next question,

Operator

the next Your Lynch. Meacham of America Bank line Merrill from Geoff question of with comes

your question. ask may You

Geoff Meacham

Hi. much for the so Good morning, Thanks guys. question.

can level? the couple think the or ones. the trying about the have at broadly, Just when companies pricing I'm the a you you I-O about talk you about to backdrop size of high Rob upcoming of when just given in population, opportunity a understand region? in talk China quick strategy the competitive Frank

but already the second wanted I Roger. I been know, for one you And more XXX is have asked, ask broadly. questions to

success in this cold results at tumors study obviously has an the you look the Thank cold I in pretty in segments in breast of is far underwhelming. individually, of been know Given thus to activity bigger indicator market but the I-O you. tumors? got each triple-negative

Peter Dannenbaum

China? on Frank thanks. Great,

Frank Clyburn

Sure.

feel So on at China, mentioned current this on we Day our and rate. too we pleased Investor growth very

when XXXX. also see very GARDASIL It's Januvia, you we've driven KEYTRUDA, the and NRDL was we to added been and XX% in really quarter year-to-date This Lenvima Lynparza, seen grew in growth China. strong by it

will provinces of China, brands With be on we some of in anticipate based do pressure volume-based and regards some the that in to there of our rollout the some headwinds and to dynamics China. pricing more additional mature pricing off

still that portfolio very what now majority As is the and we mentioned side to confident going of that we're growth because forward. to pivoted the innovation our the with is even is drive going

as both China. to well obviously up but out we reimbursement patients are NRDL how if the -- we encouraged opens are and treat today working our that plays with portfolio. in we're as we a now could of the of and self-pay it significant actually market. receive see KEYTRUDA new all parts then right other still working we that NRDL access amount We'll have As wait through do in And as NRDL process far about China

Peter Dannenbaum

Roger? Great.

Roger Perlmutter

question. And the Geoff, for thanks

response in in is of I burden with while substantial a patients burden, why. are that versus X-axis mutational mutational published think as in as case fraction presented we cancer see population higher MSI burden, high substantial the of fraction terrific you who respond see And which and the KEYTRUDA you tumor a the tumor that but don't related only very that we've settings, extremely in well. with results fraction point data plot especially fundamental respond just question we of still out some issue the is it which inflammatory And leaves sort a -- weakly. is tumors mutational very substantial

fixed are involve agents and is cause we this of trigger can involve question that that in that is them immune that studies – interventions with mutations become can more a how as we that other a responsive of KEYTRUDA populations. that for we're will other will a variety to these populations it. to us that work The a an can responsiveness make tumor foundation take that less at enable whole be less plus responsive that hard asking and whole for access better recognizable variety KEYTRUDA on we're It other frontier. gain important will We pursuing. patient do see things treatment. be Ultimately, combinations But things to

Peter Dannenbaum

Great.

Next question please.

Operator

of the from with comes Mizuho. question next Goldstein line Mara Your

ask may your question. You

Mara Goldstein

Thanks so much our questions. for taking

some is that this slowdown? quarter. one around then at has Should ask I'm that the is is why a completion I'm projected noticed just wondering in a very of And good be pain want first China the I But estimated out function a the and wondering, sensitivity. of I what of question economic there study. indication? to growth slight XX%-plus this We this endometrial thoughts lengthening on economic if Gefapixant had type rolled there and The recognize was in are ClinicalTrials.gov that

Peter Dannenbaum

Frank, on China?

Frank Clyburn

Yeah.

China, products. some has to four regards are pilots the the happening are there us brands on impact looking to been what industry. seven pilots for So SINGULAIR two in with China more of across tendering much that are that pretty plus under now, the the processes the Cozaar is and Right at way is so mature

as forward mentioned. pricing on that as expand us really some into we time our more I the provinces we mature additional as for process, China, go However, in put anticipate will do XX over pressure it and portfolio will

is our the two-thirds our business. part Just of you a innovative of the the we're because already to is why China perspective, reason give portfolio in seeing significant growth in

procurement believe So some and the of years really to part will very the And which also those several feel to it's products, not volume-based that by long China. us other be of plan. we KEYTRUDA, allow being additional not we but we the grow confident a next will launches rollout, JANUVIA over Lynparza, driven in continue innovative near-term, Lenvima, portfolio term GARDASIL and only

continue good we the our pivot has the So, helped to while innovation the will term. near-term long to that the of headwinds but us there'll really older in portion only be feel portfolio, not help to very in us

Peter Dannenbaum

gefapixant. on Roger

Roger Perlmutter

indications the could the indication mean the be broadly Phase set, We out we of cough this indicated into in because a start syndications wouldn't pursuing more in turn interesting set Mara, anything beyond X. we of are get as we you to useful chronic update read we we – I antagonist gefapixant, I as with where think it When studies. from completion On we're endometrial PXXX will ClinicalTrials.gov information better clinical particularly these estimates But ClinicalTrials.gov. of timing and prosecute out studies, operations. we that trials pain in helps different complete are in because one criteria and not different. rates make a about as get XXX% It's a we're on sites. is not of are where we study sure we tool specifically be we And on of And other going actually areas marketplace. these we update what's think enrollment course, when every to what the feasibility resolve going enrollment guess

Peter Dannenbaum

Great.

please. question Next

Operator

with comes line Jacob question from Navin next of Your UBS. the

You may ask question. your

Navin Jacob

attributing U.S. was Thanks in decline taking that's Two On comp strong last if my questions. Wondering tough quarter QX Great. this to. GARDASIL from partly for the question. despite year. the what a you're

of just the us means work-down modalities And of of think on expected? inhibitor some cell then underlying Thank be out a new $XXX there down relative a checkpoint whether this a demand million think this a there'll patients? much. $XXX refractory was your QX will as for You're and Roger. in question what on Is you of TILs is or for of therapy or maybe million. a to push beyond that I APCs Roger growth just particularly very wondering happen I it's quarter what be Or targeting supposed basis? above part quarter saying any thoughts

Peter Dannenbaum

Frank, GARDASIL? Great. U.S.

Frank Clyburn

X% price growth, So which offset FX. partially or was approximately timing. you if drive Underlying -- GARDASIL grew demand by QX purchasing in CDC in and did excluding growth the exclude U.S.

the quarter call this the compared fourth see to will not fourth which a our of which be growth. that in did CDC in place we expected, is mentioned will will million reduce by take XXXX. year $XXX quarter on or XQ Rob QX as borrowing of that why X% approximately sales earlier we So we purchases saw in borrowing mentioned The you that

Peter Dannenbaum

cell on Roger And therapy?

Roger Perlmutter

less love clear. we solid the how antigens Obviously, tumor-specific where hematologic into therapy, in data tumors it the that cell I if challenges -- On into and and to of patients the translate rid with all live all of the course malignant malignancy CDXX you think can lymphocytes the elimination get the too. including targeting but ones of ones, lymphocytes you're well normal are

If do antigens then tumors that's structures normal which are problematic. solid enormous and you tumor hand in you're to on targeting sufficiently specific damage the not other potentially

on I think areas the are and them carefully. there so with horizon, the you better things And infiltrating some lymphocytes, that tumor improve other are which will mentioned evolving. watching clearly protocols we're

of great area we goes to time clearly want and something incorporate as would better. things an it's and So by get that interest

Peter Dannenbaum

Great.

and try please. We’re questions two get more it going to

question. Next

Operator

Scala question next comes with Steve the Cowen. of from line Your

Your may ask your question.

Steve Scala

you. Thank

chemo? big is you plus if medical strong which for then in where a And to sector. doctor, private in instead cancer patient how QX First buying one a population? Roger Opdivo was PROQUAD plus had lung strong QX were that which prescribe a the of Frank. said caring you a KEYTRUDA And attributed part in followed QX, for first-line you as would Yervoy

row? quarters in So how we've several sustainable now is a seen the Thank strength you.

Peter Dannenbaum

Great. Roger?

Roger Perlmutter

they're the seen some Well it's presentation presented to difficult which cell lung in -- of identify the Opdivo be argument would is Steve been is at patient choice. which our particular PD-LX individuals case and ESMO, those this right less a think looking has But I Yervoy the looking in made that the by in it cancer, in non-small data first-line XXX colleagues in and at there that expression. in data that at combination detail with Bristol-Myers population respect publication at to is whom both we've the is

because also is you'd those data we've think of the think to setting in marketplace combo very carefully quite rollout I being very used look it's data data at in the course the a have that good. in safety as profile I our strong really chemo and PD-LX-negative patients is and to KEYNOTE-XXX

question of sure of actually add combination it. to ipilimumab, little I And better answer a that data indicated of a really help sense antibody. a a XXX bit, for use get study And to refine niche as up see not a might will Yervoy I'm CTLA-X can't specific for the a I our to that to the to with special see own KEYTRUDA. come what just but I'm So where eager I

Peter Dannenbaum

pediatric on Frank And vaccines?

Franklin Clyburn

Yes.

is the being And In quarter quarter some XX%; benefits. so XX%. to growth of the strong demand. third increasing ex-U.S. point growth. the XX% your There U.S., another we saw were in very price was by about The growth driven

into that remain some expect QX. additional take get for place And buyout by continues offset a QX. some demand our overall vaccines there buyout the to we in pediatric strong. did is But to We'll as see

Peter Dannenbaum

and last question please. Great,

Operator

of question line from Flynn Goldman the last Your Terence comes Sachs. with

your ask may question. You

Terence Flynn

PCR for just breast the based for approval going data. planning you're if Maybe XXX if thanks two in are follow-ups, the for question. my EFS neoadjuvant, taking KEYTRUDA, wondering data Great, triple-negative to or you to of wait file on from

particular seeing the in then, what call in pricing you mentioned, and you're Thank quantify And to relative XXXX. you you. XXXX any areas out? impact to there Can pressure Rob,

Peter Dannenbaum

on Roger, XXX? Great,

Roger Perlmutter

regulatory meanwhile of And course see additional And we'll On how together. over data -- XXX, we're will goes And pulled data the time. are the we having exactly agencies. that accrue. discussions in with

get see where we'll to. So we

Peter Dannenbaum

Frank or Rob?

Rob Davis

the Yeah. just in make we in And really is truly in was of I both on to and of as what guided for pricing growth the quarter context was commenting the which question well we XXXX, quarter earnings, the at XXXX revenue exceptional year. pressure full what as had of third look sure as

price I'm models we cognizant about your incremental as to as models directional and as above, specifically but think at it quantify pressure next where be you about to not give think year. have next to look we year, we over do into XXXX. you the your And fact of expect really in and was it, going that thinking see been going to growth for you growth

Peter Dannenbaum

Ken? Great and

Ken Frazier

up We're growth shaping company. to confidence, we're very we're a our exciting for is year our in XXXX, innovate. closing looking confident, great forward of In And be with but ability and to Okay. execute not complacent.

position, well the our opportunity to look an pursuing sustainable the steps and growth as long future, the we're take success best operations, growth, inorganic health in organic operating To contrary, and use Merck's to long-term. across optimize for evolving the to determined as necessary including create ensure the into to our an portfolio, human for for to productivity effort current as to ways avenues all strong drive the model our continued

go as updating much. forward. very we we And you forward our you to Thank on progress look

Peter Dannenbaum

all you thank Great, very much.

Operator

Company's, Thank Conference Sales concludes Third and you. Quarter XXXX, & Merck This Earnings Call.

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Merck & Co. (MRK) 29 Oct 192019 Q3 Earnings call transcript