The operator welcomes participants to the Merck & Co. Q2 Sales and Earnings Conference Call and introduces the speakers. The speakers include the Chairman and CEO, the CFO, and the President of Merck Research Labs. The presentation will include a reconciliation of GAAP and non-GAAP results. The speakers may make forward-looking statements, but the company's SEC filings and risk factors should be considered. A slide presentation will accompany the remarks.

In the second paragraph, Rob Davis discusses Merck's strong business momentum and commitment to improving lives through innovative science. He mentions the recent launch of WINREVAIR and FDA approval of CAPVAXIVE, as well as the company's strategic business development, including the acquisition of EyeBio for their potential retinal disease treatment.

The CEO of Merck discusses the company's recent acquisition of Elanco's aqua business and reaffirms their commitment to research and development of innovative medicines and vaccines. They have made significant progress in expanding their pipeline and have the potential to bring many new drugs to market in the next 5 years. The company also focuses on sustainability and has a dedicated and diverse employee base. They are driving innovation and productivity through the use of data, digital, and analytics.

In the fourth paragraph, the speaker expresses their commitment to aligning actions with their strategy and delivering value to patients and shareholders in the future. They also mention strong growth in the second quarter, with an updated full year guidance. The speaker discusses the successful launch of WINREVAIR and the positive reception from physicians, patients, and payors. They also mention a positive CHMP opinion and potential approval in Europe. In the vaccines division, they highlight the recent FDA approval of CAPVAXIVE and positive results from a Phase 2b/3 trial for clesrovimab. Finally, they mention the expansion of their oncology pipeline and progress with KEYTRUDA.

In the fifth paragraph, the speaker presents data for multiple novel candidates and emphasizes the company's commitment to advancing standards of care and maintaining leadership over the long term. They also recognize the efforts of their global team and express confidence in the company's ability to deliver value to patients, shareholders, and stakeholders in the future. The speaker then hands the call over to Caroline, who discusses the company's strong second quarter results, with total company revenues increasing by 7% and double-digit growth in the Human Health business driven by Oncology. They also highlight the strong performance of KEYTRUDA, with a 21% increase in sales.

In the U.S., KEYTRUDA saw growth in various tumors, particularly in earlier-stage lung cancer. It also achieved market leadership in the neoadjuvant and adjuvant settings. Outside the U.S., KEYTRUDA saw increased use in certain cancers and Alliance revenue from Lynparza and Lenvima also grew. The vaccines portfolio, including GARDASIL and VAXNEUVANCE, delivered solid growth. The recent launch of WINREVAIR for pulmonary arterial hypertension in the U.S. is expected to have a positive impact on patients.

The initial launch of WINREVAIR has been successful, with $70 million in sales recorded in the quarter. Approximately 40% of sales came from doses administered to patients, with the rest from distributors building inventory. Over 2,000 patients have received a prescription for WINREVAIR and 75-80% of those are expected to receive the commercial product. More than 500 physicians have written prescriptions and payors are recognizing the value of WINREVAIR. The Animal Health business also had a solid quarter, with sales increasing 6%. A long-acting BRAVECTO injectable was launched in international markets during June.

The remainder of the P&L is discussed on a non-GAAP basis, with gross margin increasing due to reduced royalty rates and favorable product mix. Operating expenses decreased compared to the previous year, with no significant business development expenses. Other expense was $108 million and the tax rate was 14.1%, resulting in earnings per share of $2.28. For 2024, the company has raised and narrowed its revenue guidance, with expected growth of 5% to 7%. Operating expenses are expected to be between $26.8 and $27.6 billion, and the tax rate is expected to be between 15.5% and 16.5%. Other expenses now include financing costs for acquisitions.

The company expects approximately 2.54 billion shares outstanding and an EPS range of $7.94 to $8.04, which includes a negative impact from foreign exchange. The prior guidance range was $8.53 to $8.65, but with a one-time charge related to an acquisition, the range would have been $7.93 to $8.05. The current guidance midpoint remains the same due to increased investments. The company is working towards milestones for the recent FDA approval and ACIP recommendation of CAPVAXIVE. There was a significant decrease in shipments of GARDASIL in China in the second quarter, resulting in above normal inventory levels. The company is working to understand the cause and bring inventory levels back to normal.

The company may not be able to ship all contracted doses of their HPV vaccine by the end of the year if shipments from Zhifei do not increase. However, there is still a large opportunity for growth in China and the company is committed to investing in resources and patient education. The potential approval for use in males is also seen as a significant opportunity. The company is confident in the global potential for their HPV vaccine and expects sales to reach over $11 billion by 2030. The launch of their new drug, WINREVAIR, has been successful and will continue to be supported globally. The company's capital allocation strategy remains focused on investments for growth.

The company plans to invest in their pipeline of novel candidates, increase their dividend, and pursue business development opportunities. They are confident in their outlook and committed to using science to improve the lives of patients. The second quarter saw progress in vaccines, oncology, and cardiometabolic disease, with the recent approval of their 21-valent pneumococcal conjugate vaccine receiving a unanimous recommendation for use in certain adult populations. This vaccine is designed to protect against the most common serotypes responsible for invasive pneumococcal disease in individuals 65 years and older.

The company's marketing authorization application for CAPVAXIVE is being reviewed by the European Medicines Agency, and they are also evaluating a new preventative antibody for respiratory syncytial virus. They recently announced positive results for this antibody and plan to file with global regulatory authorities. In the oncology sector, the company has made progress in their three-pillared strategy of immuno-oncology, precision molecular targeting, and tissue targeting. They received FDA approval for the combination of KEYTRUDA and chemotherapy for endometrial cancer, and have seen overall survival benefits in other studies, including triple negative breast cancer.

KEYTRUDA has received approval for nine earlier stage indications, with four showing a significant overall survival benefit. The drug has also demonstrated positive results in a Phase 3 trial for HER2-positive advanced gastric cancer and has received approval in China. The FDA has granted priority review for KEYTRUDA in combination with chemotherapy for the treatment of malignant pleural mesothelioma. KEYTRUDA has received approval for 40 distinct indications in the U.S. and has shown a significant overall survival benefit in 25 trials. The company has also exercised an exclusive development option for opevesostat, an oral nonsteroidal inhibitor, and is conducting two pivotal Phase 3 trials for its use in metastatic prostate cancer. The European Medicines Agency has recommended approval for KEYTRUDA in combination with Padcev for the treatment of urothelial carcinoma.

The company is working on a variety of antibody-drug conjugates with Kelun-Biotech and Daiichi Sankyo, and also has its own internal programs. They recently received a Complete Response Letter from the FDA for patritumab deruxtecan, but are working to address the feedback. They have also received a positive opinion from the European Medicines Agency for WINREVAIR and are awaiting a decision from the European Commission. Additionally, they have acquired EyeBio, which includes a potentially first-in-class antibody candidate for retinal diseases.

The company has a strong pipeline and has successfully diversified in various therapeutic areas. They have made progress in oncology and other areas. The team is eager to work with EyeBio to advance promising candidates. The CEO looks forward to providing updates on their progress. In the Q&A, they discuss the dynamics of GARDASIL in China and the potential impact on their 2024 guidance. China represents 60-70% of GARDASIL sales. There was a decrease in 2Q, but the company remains confident in their guidance.

The market opportunity for GARDASIL in China is still very attractive, with a large number of eligible females yet to be protected against HPV. The company has also filed for the male indication, which adds to the potential market. However, during the second quarter, there was a significant decrease in shipments from the partner company, which was unexpected and not in line with previous trends. The company is currently trying to understand the reasons behind this and believes there may be multiple factors at play. However, overall, the HPV market in China has experienced this step down, and GARDASIL's market share remains stable or even increasing.

The company believes that China's anti-bribery and anticorruption drive has affected the HPV vaccine market, resulting in reduced scientific engagement and fewer immunizations. This has also led to reduced promotional support for the vaccine, but the company is working on increasing awareness and education efforts through its partner Zhifei and its own resources. Despite these challenges, the company remains optimistic about the long-term growth potential of the vaccine in both China and other regions.

The company is confident in their $11 billion estimate for 2030, despite challenges in China this quarter. They have considered a range of scenarios in their guidance, including the possibility of shipping less than the contracted amount of GARDASIL doses to China. The company remains confident in their overall business, including oncology and animal health. There is an anti-bribery, anticorruption drive in China which may be causing shipment delays, but the company is committed to maintaining price integrity for GARDASIL in the long term.

The speaker reiterates that market dynamics and competitive intelligence do not suggest the introduction of a 9-valent competitor in the near future. They expect a flattening of demand for the current indication in China, but anticipate a male launch in the first half of next year. They are confident in China's role in their GARDASIL business and their ability to reach their stated $11 billion goal.

Rob Davis discusses the impact of anti-bribery and anticorruption measures in China on the company's business. He explains that there has been a dampening effect on scientific discussions and driving for vaccination, possibly due to criminal charges against a senior scientific representative of a local player. He also mentions the sustainability of new starts for WINREVAIR and the delay in prescription to start, which could be due to payer or nurse training issues.

Carter provides an update on the progress of WINREVAIR, stating that as of the end of June, over 2,000 patients have received a prescription for the drug. He expects a conversion rate of 75% to 80% from prescriptions to commercial sales. In the quarter, 1,000 patients have started treatment and they anticipate the majority of the 2,000 prescriptions to ultimately convert to sales. The difference in numbers is due to access and patient dropouts. The time frame from receiving a prescription to insurance approval and nurse training is about 2-3 weeks, with room for improvement.

Rob Davis, the CEO of Merck, is discussing the sales projections for GARDASIL in China with Tim Anderson. He reiterates the $11 billion figure and explains that there may be periods of year-on-year sales contraction due to pricing and the slow launch of male indications. However, they expect the curve to flatten as the female indication becomes more saturated and then ramp back up with the launch of the male indication. Davis also mentions that GARDASIL is a highly sought after vaccine in China, especially in Tier 1 to 5 cities where there is a cash pay market.

The speaker cautions against viewing the market in China as a zero-sum game and believes there is still room for market expansion that will benefit both competitors. They also mention the potential for being the only company with the male indication for their product. They are hesitant to attribute the recent trend break in China solely to demand and note strong growth in other markets. A question is asked about how clesrovimab compares to Beyfortus in terms of hospitalizations and durability. The speaker does not provide specific data but mentions competitiveness and longer durability despite a shorter half-life.

The speaker, Dean, responds to a question about the global unmet need for a single-dose RSV vaccine and says that they are confident in its efficacy and plan to present more information in the second half of the year. Another question is asked about the long-term growth potential for GARDASIL, specifically in Tier 1 to 5 cities in China and the potential for male vaccination. The speaker, Rob Davis, responds by saying that they are 30% to 40% penetrated in these cities and only targeting females at the moment.

The company has a 30-40% penetration rate in Tier 1 to 5 cities and will continue to focus on activating the male population. The global penetration rate for GARDASIL is only 10%, leaving a significant opportunity for growth. The company is also working on activating the mid adult segment in the private market and expanding into low and middle income markets. The male indication in China is a key driver for gender-neutral vaccination and addressing other HPV-related cancers.

The company plans to continue working towards gender neutrality in China, Asia, Europe, and other parts of the world. They have seen growth in Japan due to a renewed program and opportunities for males. The company is confident in their long-term growth goal of $11 billion. They will continue to explore different strategies to achieve this goal. The company will file for approval of their RSV antibody in major markets this year, with plans to make it available for the next RSV season in the US.

The speaker discusses the company's plans for global expansion, specifically in China. They also address concerns about the recent ODAC meeting regarding the use of PD-1 or PD-L1 inhibitors in earlier stages of cancer. They emphasize the difficulty in showing overall survival in these settings and mention that they have 9 earlier-stage approvals, with 4 of them having overall survival data.

The speaker points out that two of the recent survival rates for TNBC and lung cancer were achieved through perioperative treatment. They mention that the FDA considers overall survival as the gold standard for evaluating new treatments, especially in earlier stages. They also mention the importance of demonstrating the contribution of new components on top of PD-1 and using platforms with overall survival data to show continued benefit. The next question asks about the projected decline in sales for GARDASIL in 2025 and 2026, and the speaker clarifies that the current contract with Zhifei is focused on the female population and does not include potential sales for a male indication.

The speaker thanks the questioner for bringing up the issue of CAPVAXIVE and the discussion that took place at the ACIP meeting in June. They mention that there was a lot of discussion and points that the ACIP working group had to vote on. The speaker notes that there has not been a formal confirmation of a reevaluation in October, but they listened to the discussion and there was interest in revisiting the recommendation for the 50-64 age group due to the ongoing burden of pneumococcal disease, particularly in black individuals. They highlight a comment made by an ACIP member about the burden being comparable to that of individuals over 65 and the need to address racial and ethnic disparities. The speaker expresses confidence in their data and hopes that the ACIP will make a decision soon.

A question is asked about sales for WINREVAIR in the third quarter, and Caroline Litchfield responds by saying that they are off to a strong start with 2,000 patients already prescribed the product. She also mentions that they expect the stock level to increase as more patients are prescribed the product. The company has expressed interest in the cardiometabolic space and is looking for opportunities in weight management. They recently acquired EyeBio and Elanco aqua business and will continue to focus on science and building their pipeline.

The company continues to have financial flexibility to consider deals of all sizes, but they tend to focus on deals in the $1 billion to $15 billion range. They are interested in next-generation plays in the obesity space, particularly in oral delivery, high tolerability, combinability, and preservation of muscle mass. They are ready to act if they see something promising. In terms of WINREVAIR, the majority of patients currently on the drug are sicker patients on triple or double therapy, with some also on prostacyclin, similar to what was seen in the STELLAR trial.

The speaker, Terence, discusses the progress of their company's drug, WINREVAIR, and its potential for growth. He mentions that they are seeing continued growth in prescribers and access to the drug, and expects this trend to continue. He also mentions that there are still plans in place to increase coverage for the drug. The next question is about the company's Phase IIb trial of MK-8189 in the schizophrenia space, which was completed in June.

The speaker is responding to a question about when data will be available for MK-8189, a drug being developed for schizophrenia. They mention a previous study that showed promise for the drug and mention that the results of the current Phase IIb study will be compared to those of the Phase IIa study. They also mention the importance of the drug's efficacy and potential side effects in determining patient compliance. The speaker also briefly mentions the collaboration with Moderna for another drug, but does not provide a timeline for its filing. The speaker concludes by saying that the IR team is available for any follow-up questions.

The speaker thanks the audience for their interest and emphasizes the company's transparency. They express confidence in the business, particularly in the growth of GARDASIL and the pipeline. The speaker also mentions the launch of new drugs in the next 5 years and the company's focus on both the short and long term. They thank the audience for their support and end the call.

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