The operator introduces the Merck & Co. Q4 Sales and Earnings Conference Call and turns it over to Peter Dannenbaum, Vice President of Investor Relations. He reminds listeners of the exclusion of certain items from non-GAAP results and the potential risks and uncertainties associated with forward-looking statements. A slide presentation will accompany the speakers' remarks.

In the second paragraph, Rob Davis, CEO of Merck, discusses the company's strong performance in 2023, including reaching 500 million people with their medicines and making substantial investments in research and development. He also expresses confidence in the company's future momentum and highlights their focus on key strategic priorities. Davis mentions important clinical programs and business developments, such as the acquisition of Prometheus and collaboration with Daiichi Sankyo. He concludes by stating that their science-led strategy will lead to sustainable benefits for patients and long-term growth for shareholders. Davis also briefly mentions their excellent underlying growth in 2023 and provides an initial outlook for 2024.

The company expects strong growth in 2024 due to demand for key products and is making progress in research across diverse therapeutic areas and modalities. They have two upcoming launches with blockbuster potential in cardiometabolic and vaccines. They are also expanding their oncology pipeline and have achieved diversification with late-stage programs. The speaker is confident in the company's ability to provide innovation to patients and maintain leadership in oncology.

In paragraph 4, the writer expresses confidence in the progress and success of Merck's science-led strategy and their commitment to putting patients first. They highlight the company's progress in expanding their pipeline and diversifying their areas of focus, particularly in oncology, cardiometabolic, and immunology. The writer also mentions promising late-stage programs and the potential for future innovation through business development. They thank their global teams for their dedication and express confidence in their ability to deliver value to stakeholders. The paragraph concludes with a summary of the company's strong revenue growth in 2023.

The company remains confident in its ability to deliver strong results in the near-term while investing in innovative science for long-term value. In the fourth quarter, total company revenues were $14.6 billion, with strong growth in the Human Health and Animal Health businesses. KEYTRUDA sales grew 22% globally, driven by increased uptake in earlier stage cancers and positive feedback from healthcare providers. Alliance revenue from Lynparza and Lenvima also saw growth.

The company's sales for WELIREG and Vaccines saw significant growth, driven by increased demand and new approvals. However, BRIDION sales declined due to generic entrants in international markets. The Animal Health business also had a solid quarter, with strong sales in the companion animal segment. Gross margin increased due to favorable product mix, but operating expenses grew due to investments in the pipeline and key growth drivers. Other expenses were $174 million.

The company's tax rate was 114% due to a charge related to Daiichi Sankyo, but excluding this charge, the underlying tax rate was 13.1%. Earnings per share were $0.03, including a $1.69 negative impact from the Daiichi Sankyo charge. The company expects strong growth in 2024, with projected revenue of $62.7 billion to $64.2 billion, representing a 4% to 7% increase. The gross margin is expected to be 80.5%, with operating expenses of $25.1 billion to $26.1 billion. Other expenses are estimated to be $200 million, with a tax rate of 14.5% to 15.5%. The company expects EPS of $8.44 to $8.59, including a $0.26 charge related to the acquisition of Harpoon Therapeutics. The company's capital allocation strategy remains unchanged.

In 2024, the company will prioritize investments in their business to drive growth and increase their dividend. They plan to initiate more late-stage clinical trials for their novel candidates and pursue business development opportunities. The company is confident in their outlook and has a strong pipeline. The R&D team has made significant progress in various therapeutic areas, including oncology, and is focused on immunooncology, precision molecular targeting, and tissue targeting.

In the field of immunooncology, the company is dedicated to developing KEYTRUDA and improving cancer treatment for certain patients. In the fourth quarter, they received approvals for two gastrointestinal indications and are now focusing on earlier stages of disease. The FDA recently approved KEYTRUDA for the treatment of cervical cancer and it has shown significant overall survival benefits in earlier stage cancers. The American Cancer Society has also released new guidance for lung cancer screening.

The company is excited to help patients and identify those at risk. New data from clinical trials have shown benefits for KEYTRUDA in various types of cancer, including urothelial carcinoma and melanoma. The company is also conducting Phase 3 trials for adjuvant treatment in melanoma and non-small cell lung cancer. The FDA has approved a new HIF 2 alpha inhibitor for advanced renal cell carcinoma, and additional studies are being conducted for this drug in combination with other treatments. The company is also focused on tissue targeting in their research.

The paragraph discusses recent FDA approvals and collaborations related to the use of KEYTRUDA and ADCs for the treatment of urothelial cancer and non-small cell lung cancer. It also mentions the acquisition of Harpoon Therapeutics and the potential of T cell engagers in treating various types of cancer. Additionally, the company's vaccine pipeline for pneumococcal disease is mentioned as a notable advancement.

The FDA has accepted for priority review the new biologics license application for V116, a 21-valent pneumococcal conjugate vaccine designed for adults. Results from multiple Phase 3 clinical trials evaluating V116 in both pneumococcal vaccine-naive and vaccine-experienced adult patient population have been presented at various conferences. If approved, V116 would be the first pneumococcal-conjugate vaccine to address the serotypes responsible for 83% of invasive pneumococcal disease in adults over 65 years old. The FDA has set a target action date of June 17 for approval. In the cardiometabolic disease pipeline, the company is eager to bring sotatercept to patients as a treatment option for pulmonary arterial hypertension. The FDA has set a target action date of March 26 for this drug. The company has also made significant progress in other therapeutic areas and modalities, as well as multiple business development transactions, with over 25 regulatory approvals in major markets in the year.

The company has initiated over 20 Phase 3 studies in multiple new classes of assets, including oncology, immunology, and cardiometabolic disease. They are planning to initiate even more Phase 3 trials in 2024 and credit their colleagues for their hard work. The company is executing on their science-led strategy and will provide updates on their progress throughout the year. There is a trial due later this year for LAG-3 with pembrolizumab in colorectal cancer, and the company is confident in its success due to their strong presence in MSI high.

The primary completion date for the HYPERION study on sotatercept has been moved up to August 26, three years earlier than previously stated. The reason for this change is related to the FDA's potential decision for approval based on the STELLAR trial in the second half of 2024. There are also other Phase 3 trials, ZENITH and HYPERION, which are based on events.

The speaker discusses the tracking of events for the company's projects, noting that ZENITH is set for September 2025 and HYPERION for August 2026. They mention ongoing discussions with the FDA about the best place for patients to be treated, and highlight the fast progress of an auto injector in their pipeline. The next question is about an asset in Phase 3 for prostate cancer, and the speaker confirms that they are looking at both a broad population and a specific mutation subpopulation. They defer to their clinical team for more details on the statistical analysis.

During a recent conference call, Dean Li, the CEO of a pharmaceutical company, discussed the potential for reaching a majority market share with their product V116. He mentioned that the FDA may take action in June 2024, followed by ACIP and MMWR recommendations. The company will be presenting data on the product in March, including data on vaccination of different age groups. Another analyst asked about the company's guidance for the year and whether it includes revenues from sotatercept and V116, to which Caroline Litchfield, the company's representative, confirmed that they are confident in the momentum of their business and excited about the potential launches of these products.

The company is expecting a strong launch for sotatercept and is waiting for FDA approval and recommendations before launching V116. A competitor's disappointing data with their TROP2 ADC in later line lung does not impact the company's development strategy for their TROP2 in lung, but they believe a biomarker strategy may be necessary to beat the standard of care. The company also emphasizes the importance of biomarker-selected patient populations in order for an ADC to have a substantial advantage.

A question was asked about the impact of a 2-dose regimen for GARDASIL being approved in China. The Merck representatives stated that there are already Chinese competitors in the market and that the approval does not change their view of growth potential. They also mentioned that there is still a large eligible population in China and that they are continuing to target this population. Additionally, they mentioned that they have submitted data for GARDASIL for males to regulatory authorities in China.

The speaker discusses the potential introduction of a new product in the Chinese market and then answers a question about the market size for another product, V116. They mention Pfizer's recent comments about the shrinking adult market and how their vaccine, with its high coverage rate and unique serotypes, could still have a significant impact and be a large opportunity. They estimate the market size to be around $8 billion in 2023 and anticipate growth in the future. They also mention that the pediatric segment makes up 70% of the market, while the adult segment is 30%. They express confidence in V116's potential success.

Chris Schott from JPMorgan asks about Merck's business development strategy and whether they are still interested in deals similar to Acceleron or Prometheus. Rob Davis responds by praising the progress made in both their internal pipeline and through business development. He states that they will continue to prioritize business development and are still interested in deals of that size, while also considering smaller deals like Harpoon. The range of deals they will look for is between $1 billion to $15 billion.

The speaker discusses the company's openness to acquisitions and collaborations, and mentions their interest in a wide range of deals. They also mention the potential of their TROP2 ADC drug in combination with KEYTRUDA for non-small cell lung cancer, and the manageable adverse effect profile of the drug. They acknowledge the importance of recent academic papers on TROP2 internalization, but stress the need for clinical experiments to determine the drug's efficacy.

The speaker expresses confidence in the impact of TROP2 ADC in breast and lung cancer. They consider factors such as combination with other treatments and line of therapy. The next question is about subcutaneous KEYTRUDA and the potential economic benefits for patients and how payers may view this new delivery method and potential biosimilars after 2028. The economic benefits are related to the innovation provided.

The speaker emphasizes the demand for an alternative way to administer KEYTRUDA, specifically in the form of subcutaneous pembro with hyaluronidase. This innovation is expected to have a premium price due to its quality-of-life benefits, but it will also have to compete with the generic IV version of the drug.

The company expects to improve operating margin in 2024 due to strong revenue growth and disciplined expenses. However, beyond 2024, the operating margin is expected to be greater than 43% in 2025.

The company's focus is on fueling the pipeline and supporting the portfolio of products to drive long-term growth. The Merck RSV monoclonal antibody Phase 2/3 study is expected to read out this year and could potentially be on the market in 2025. This product is differentiated from others as it is a single shot and has a longer season. The company is also excited about the results of their dengue and HIV data, which will also be coming out this year.

The speaker discusses the company's plans for the 2025 season, including their coverage for RSV and their single fixed dose administration. They also mention their excitement for the dengue program and the breadth of their portfolio. The next question asks about the company's reentry into immunology with the acquisition of Prometheus and the speaker provides an update on the Phase 2 maintenance data for UC and the status of the Crohn's disease program. They also discuss the potential for immunology to be a significant area for the company in the future, particularly with advancements in cell therapies and oral treatments.

The speaker discusses the progress of the TL1A antibody in clinical trials for ulcerative colitis and the importance of moving forward with trials for Crohn's disease. They also mention the potential for TL1A to affect fibrosis and its potential in treating lung disease and scleroderma. They highlight other assets acquired through the partnership with Prometheus and express interest in exploring other platforms, including cell therapy in immunology. The speaker also addresses the question of expanding or adding to their ADC platform.

In response to a question about tissue targeting, Dean Li discusses the development of antibody-drug conjugates (ADCs) and the potential for other types of payloads and linkers. He also mentions the possibility of peptide drug conjugates and non-chemotherapy-based payloads. Additionally, he mentions the company's interest in tissue targeting in the field of immuno-oncology, which is supported by their proposed acquisition of Harpoon.

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