The operator begins the Merck & Co. Q3 sales and earnings conference call and introduces the speakers. The company's Vice President of Investor Relations reminds listeners that certain items have been excluded from the non-GAAP results and that some statements may be considered forward-looking. The company's SEC filings identify potential risk factors and cautionary statements. A slide presentation will accompany the speakers' remarks.

In the second paragraph, Rob Davis, the speaker, thanks everyone for joining the call and acknowledges the efforts of the global team in bringing innovation to save and improve lives. He emphasizes the importance of scientific innovation and how it drives everything they do. He also mentions the company's collaboration with Daiichi Sankyo for three potentially groundbreaking antibody drug conjugates and their belief in the programs' potential for significant commercial revenue.

The company is focused on developing transformative treatments in various therapeutic areas, including pulmonary arterial hypertension and inflammatory bowel disease. They have strong commercial execution capabilities and are confident in their continued strong performance. Progress has been made in their late-phase pipeline, particularly in oncology with the recent FDA approval of a KEYTRUDA regimen for non-small cell lung cancer. They also presented important data at a recent medical conference and are confident in their oncology leadership for the future. Progress is also being made in their cardiometabolic pipeline.

In the fourth quarter, the FDA accepted a filing for priority review of sotatercept, a potential treatment for pulmonary arterial hypertension. The company also initiated Phase 3 trials for an oral PCSK9 candidate for elevated cholesterol. The company is pleased with their progress and remains committed to addressing unmet patient needs. They are confident in their ability to deliver value to patients, shareholders, and stakeholders. In the third quarter, total company revenues were $16 billion, driven by strong underlying demand for their innovative portfolio. The company is making disciplined investments to sustain strong growth in the future.

The business saw strong growth of 8% when excluding the impact of LAGEVRIO and foreign exchange. The Human Health business had a growth of 10%, driven by Oncology and Vaccines. Sales in the Animal Health business increased by 2%. KEYTRUDA had a growth of 17% due to increased usage in earlier stage cancers and strong global demand. In the U.S., KEYTRUDA saw growth in both metastatic and earlier stage cancers. It has also achieved brand leadership in non-small cell lung cancer and has a recently approved indication for neoadjuvant and adjuvant treatment. In bladder cancer, there is potential for expansion to cisplatin-eligible patients. Outside the U.S., KEYTRUDA saw growth in earlier stage cancers and certain types of head and neck cancer. Lynparza remains the market leader in PARP inhibitors with a growth of 6%.

The Lenvima alliance revenue had a 30% growth, driven by increased demand for the treatment of certain cancers in the US and strong global demand for GARDASIL. The Vaccines portfolio saw strong growth, led by GARDASIL, while the Hospital Acute Care portfolio saw flat sales and the Animal Health business saw a 2% growth. The P&L was consistent with last year, with a 77% gross margin and a 4% decrease in operating expenses. The recently announced strategic collaboration with Daiichi Sankyo was briefly mentioned.

The company has a new strategic collaboration with Daiichi that follows a successful and disciplined financial structure. They have raised their full year revenue guidance and expect strong double-digit revenue growth. Operating expenses will be higher due to acquisition and collaboration expenses with Daiichi, but they do not anticipate any other significant business transactions. The company's tax rate and EPS are also expected to be impacted by their business development activity.

The company's one-time charge and collaboration with Daiichi have affected their prior guidance range, which would have been $1.21 to $1.31. However, their current guidance midpoint of $1.36 represents an increase due to strength in their business. The company remains committed to investing in their pipeline and prioritizing business development. They also plan to increase their dividend and execute modest share repurchases. Overall, the company is confident in their business outlook, driven by global demand for their medicines and vaccines and their strong pipeline.

The company's oncology strategy is focused on leveraging KEYTRUDA and developing a diverse pipeline of candidates with novel mechanisms and modalities. This includes immuno-oncology, precision oncology, and tissue targeting approaches. The company has also entered into a collaboration to accelerate the development of three clinical stage potentially first-in-class candidates. These include an anti-HER3 ADC, an anti-B7-H3 ADC, and an anti-CDH6 targeted ADC.

The company has announced a collaboration with Daiichi Sankyo and is excited to work with them. They also have an ongoing alliance with Kelun Biotech and have presented new data for their TROP-2 targeting ADC at ESMO. They are planning to initiate larger studies for this ADC and are also advancing development of an ADC targeting Claudin 18.2. They are exploring the combination of ADCs and immunotherapy, and presented potentially practice-changing survival data at ESMO for a combination of KEYTRUDA and enfortumab vedotin. Additionally, positive data for KEYTRUDA in earlier stage cancer treatment was presented at ESMO.

The FDA has approved a new indication for KEYTRUDA in non-small cell lung cancer, making it the sixth indication for this treatment. Positive data was also presented for KEYTRUDA in earlier stage cancer and the FDA has granted priority review for its use in breast and cervical cancer. The drug has also shown promising results in combination with V940 for non-small cell lung cancer. Additionally, WELIREG has been approved for certain cancers in patients with a rare genetic disorder and is being studied for use in other patient populations. Data presented at ESMO showed significant improvement in progression-free survival for WELIREG in advanced renal cell carcinoma.

This paragraph discusses the findings that support the supplemental new drug application for WELIREG, the progress of additional Phase 3 studies for renal cell carcinoma, preliminary efficacy data for MK-1084 in combination with KEYTRUDA, and the initiation of a Phase 3 study for bomedemstat in essential thrombocythemia. It also mentions recent approvals for KEYTRUDA in the European Union and Japan, and the progress of the pneumococcal conjugate vaccine program.

V116, an investigational pneumococcal conjugate vaccine for adults, has shown a strong immune response in studies and will be presented at a conference in November. If approved, it would be the first vaccine to target the most common serotypes responsible for adult pneumococcal disease. The company also has expertise in immunology and is enrolling patients for a Phase 3 trial for MK-7240 in ulcerative colitis. In cardiometabolic disease, data for sotatercept was presented at a conference and showed promising results for the treatment of pulmonary arterial hypertension. The FDA has accepted the Biologics License Application for sotatercept with a target action date of March 26th.

The company has completed the submission to the Committee for Medicinal Products for Human Use in the European Union and has initiated studies for their oral PCSK9 inhibitor in cardiology. They have also made significant progress in advancing their pipeline in oncology and other disease areas. The company is focused on creating innovative medicines and vaccines and has set a goal of $10 billion in cardiovascular revenue in 2030. The company is also confident in their capital allocation decisions and the impact they have had.

Rob Davis, along with Dean and Caroline, feel confident in the progress that has been made in the past couple of years with the assets brought in, specifically in the areas of cardiometabolic, immunology, oncology, and the durable growth drivers of vaccines and animal health. They expect to have over $10 billion in revenue potential by the mid-2030s, and their confidence in achieving this goal has only increased due to the success of STELLAR and the potential launch of sotatercept. They see the animal health business as an important and lasting part of their portfolio.

The company believes that their acquisition will contribute to their long-term growth and provide strategic value through synergies with their existing science. They remain committed to this belief and regularly evaluate its impact. Additionally, they acknowledge the significant unmet needs in cardiovascular and metabolic diseases and are committed to addressing them. In terms of KEYTRUDA, the company is ahead of their original expectations for migrating revenue to earlier lines of therapy.

The company is expecting 50% of their growth to come from earlier stages of disease in oncology, but they are currently tracking ahead of their expectations. This is due to strong results from KEYNOTE-671 and continued strength in adjuvant and RCC and melanoma. The company is also excited about the potential for growth in other indications, such as bladder cancer. The recent results from KEYNOTE-671 are seen as a watershed moment for the field and are expected to catalyze changes in how early-stage lung cancer is treated, detected, and screened.

Dr. Mara Aspinall discusses the importance of treating patients with Stage 2 and 3 cancer early, as it can reduce mortality by 28%. This will lead to a shift in thinking about which patients should receive treatment, not just in Stage 3 but also in Stage 2. She also emphasizes the need for early detection and follow-up for incidental findings on chest scans. In terms of screening, there will be a push to simplify and broaden guidelines as the data shows a lower mortality reduction than previously thought. The focus on immunotherapy in lung cancer is not limited to late stage, but also includes efforts to move into earlier stages, as lung cancer is the leading cause of death for both men and women.

The speaker discusses the potential for combining TROP2 with immune checkpoint inhibitors (IO) and mentions concerns about myelosuppression. They emphasize the importance of considering both monotherapy and combination therapy options, including with other treatments such as chemotherapy, RAS, and hormonal agents. They also mention the success of combining PD-1 with chemotherapy in KEYNOTE-189 and the need to develop a combination that is even more effective. The speaker acknowledges the potential for adverse effects and the importance of keeping patients on the medication.

The speaker discusses the company's plans for margin expansion and the impact of changes in royalty rates on their revenue. They expect continued margin expansion due to product mix and the reduction of royalties on KEYTRUDA and GARDASIL sales. However, they will also be investing in their business.

The company is investing in a disciplined manner in their product portfolio, pipeline, and collaborations, which may result in a $0.25 impact. They are also making progress with other collaborations and acquisitions. The operating margin target for 2025 is still greater than 43%, but they will not sacrifice necessary investments for growth. The speaker also clarifies that the partnerships with Kelun and Daiichi Sankyo are not limited to the indications that have been announced publicly.

The speaker discusses the development of MK-2870 and its potential for broader indications. They mention the lack of serious side effects and their confidence in advancing the drug. The speaker also addresses the design and timing of the KEYNOTE-003 trial for trastuzumab, which follows a similar template to other IO drugs developed by Merck.

The company is not commenting on the timing of interim analysis, but will make significant findings publicly known. They are well-prepared for the launch of sotatercept and anticipate a strong uptake in the market. They have invested in building an organization specifically for managing the launch and expect to see approval in Europe next year.

The company is preparing for the launch of sotatercept in both the United States and Europe, with the expectation that it will be a "watershed moment" for the treatment of pulmonary artery hypertension. Other trials are also in progress, and the positive data from these trials could further increase the uptake of sotatercept. The company has received positive feedback from physicians and anticipates a successful launch in March. There is potential for continued growth for the GARDASIL franchise.

Dr. Dean Li, in response to a question about unmet needs and growth opportunities for the GARDASIL product, states that the company is proud of its ability to prevent cancer and remains confident in achieving its revenue goals. He also mentions investments in manufacturing and identifies three main areas for growth, including expanding into low and middle income markets.

The company plans to drive down manufacturing costs to achieve lower price points and increase revenue. They plan to expand into new markets and age groups, which will require consumer activation and commercial investments. The vaccine is currently seen as a female vaccine, but there is a growing opportunity to market it as a gender neutral cancer vaccine.

The speaker discusses the potential for growth in the head-and-neck cancer market, particularly in male-dominated markets and in China. They also mention the importance of promoting gender-neutral vaccinations, as well as the effectiveness of their vaccine in preventing cervical cancer. They highlight the upcoming PDUFA date for a trial that shows the effectiveness of their product in earlier stages of cervical cancer.

The speaker responds to a question about Merck's investments in building an ADC platform in-house. He mentions partnerships with other companies and collaborations with ADC companies, as well as the potential for advancements in the field. He also notes that Merck has its own ADC platform and will continue to learn from its clinical programs and collaborations.

The speaker discusses the progress of their company's expertise and internal programs, and expects to see further growth in the next few years. A question is then asked about the share of VAXNEUVANCE in the pediatric market, and the speaker clarifies that it is currently in the low 30% range and consistent with their expectations. The speaker also mentions strong performance outside of the US and the upcoming launch of V116.

The speaker explains that the 30% mentioned earlier is an exit share, not the overall share of the year. They also mention that they are trying to drive a precision medicine mindset with VAXNEUVANCE and V116, and that they have a lot of work to do in terms of potential approval and speaking to the ACIP. They then address the importance of MK-0616, an oral PCSK9, and how it can benefit patients in need of an effective cholesterol-lowering medication.

The speaker emphasizes the importance of lowering LDL levels to prevent cardiovascular disease and mentions the difficulty of achieving this with one agent. They discuss the need for a treatment that is readily available and does not require hospitalization. A question is asked about the comparison between TROP2 ADC and HER3 ADC in EGFR mutant patients, and the speaker mentions the importance of biomarkers in determining the effectiveness of ADCs and other combinations.

The speaker discusses the potential of ADCs in precision medicine and highlights the importance of finding the right patient population and biomarkers for maximum benefit. The conversation concludes with a thank you and an invitation for follow-up questions.

This summary was generated with AI and may contain some inaccuracies.