Merck & Co., Inc.

Good morning. My name is Grace Lacra, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Merck & Co. Q3 Sales and Earnings Conference Call. All links have been placed on me to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. Till we draw your question, press the pound key. Thank you. I would like to turn the call over to Peter Deinenbaum, Vice President of Investor Relations, sir.

Thank you, Grace, and good morning. Welcome to Merck's third quarter 2021 conference call. Speaking on today's call will be Rob Davis, our Chief Executive Officer, Frank Clyburn, President of Human Health, Caroline Litchfield, Chief Financial Officer, and Dr. Dean Lee, President of Merck Research Labs. Before we get started, I'd like to point out a few items. You will see that we have items in our gap results, such as acquisition-related charges, restructuring costs, and certain other items. You should note that we have excluded these from our non-GAAP results and provide a reconciliation in our press release. I would like to remind you that some of the statements that we make today may be considered forward-looking statements within the meaning of the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are made based on the current beliefs of Merck's management and are subject to significant risks and uncertainties. If our underlying assumptions prove inaccurate or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Our SEC filings, including item 1A in the 2020 10K, identify certain risk factors and cautionary statements that could cause the company's actual results to differ materially from those projected in any of our forward-looking statements made this morning. Merck undertakes no obligation to publicly update any forward-looking statements. During today's call, a slide presentation will accompany our speaker's prepared remarks. The presentation, today's earnings release, as well as our SEC filings are all posted to the investor relations section of Merck's website. With that, I'd like to turn the call over to Rob. Thanks, Peter.

Good morning, everyone, and thank you for joining today's call. I'm very pleased to report significant progress across our key growth and strategic priorities in Merck's first full quarter as a more agile and focused science-driven company. We have strong momentum in our business. We've achieved notable clinical milestones, acted on a significant business development opportunity consistent with our strategy, and executed commercially to drive strong performance this quarter. We're also working with diligence and urgency, which is reflected in the speed with which we were able to bring forward our investigational COVID-19 antiviral, molnupiravir, and to rapidly file for emergency use authorization with the FDA. It's an exciting time at Merck, and we are determined to build on our recent successes as we pursue our mission to deliver innovations that save and improve lives, and as we seek to create long-term value for both our patients and our shareholders. Dean will speak to the significant pipeline advancements we're making in a minute. But I first want to congratulate him and our research colleagues, as well as our partners at Ridgeback Biotherapeutics, on the meaningful clinical results we recently reported regarding the development of Molnupiravir. From the onset of the pandemic, Merck has sought out opportunities to apply its scientific expertise in the global fight against COVID-19. and we are very pleased to now be in a position to make a meaningful difference. As you are aware at a planned interim analysis of our phase three trial in at-risk non-hospitalized adult patients with mild to moderate COVID-19, molnupiravir reduced the risk of hospitalization or death by approximately 50% compared with placebo. Based on these results and in consultation with the FDA, we stopped our trial early. We are now working with the FDA as the agency reviews our EUA application, and we look forward to next month's advisory committee discussion. I'm pleased with the progress we're making to enter supply and purchase commitments with numerous governments and healthcare systems around the world, and with the success of our effort to rapidly build supply. I'm also proud that we will be positioned to provide access to patients around the world through voluntary license agreements, tiered pricing based on country affordability, and through our agreement with the medicine's patent pool. We've also taken a meaningful step towards augmenting our pipeline through business development, a key strategic priority. The announced acquisition of Acceleron is a perfect example of our effort to identify and bring in the strongest external science to supplement our own work. Acceleron's lead product candidate, Cetatercept, has the potential to become foundational as an add-on therapy the treatment of pulmonary arterial hypertension, where there is a strong need for a new agent that can potentially address the underlying illness and not just the symptoms of this grievous disease. We look forward to the completion of our tender offer in the near future and to receiving the necessary regulatory approvals that will permit us to close the transaction. With its multi-billion dollar peak sales potential and commercial exclusivity well into the next decade, Cetatricep can contribute meaningful revenue growth in the Cotrudo LOE period, an important attribute of this and potential future targets. Dean and I will continue to work with our team to identify additional scientifically compelling business development opportunities while also continuing to pursue a robust and growing internal pipeline. Our business performed exceptionally well this quarter, and the team continues to display superior and focused execution. We achieved very strong commercial and financial results with meaningful growth across our oncology, vaccines, and animal health businesses, and even greater growth in earnings. As expected, Gardasil sales were particularly robust as we benefited from a sharp improvement in manufacturing output and availability of more doses to help address ongoing strong underlying demand. We are confident that the momentum we are seeing will continue through the end of the year, setting us up for continued growth over the next several years. We remain focused on our efforts to transform the way we work by evolving our operating model to be leaner, nimbler, and more digitally enabled. My leadership team is fully aligned behind the need for Merck to work with more speed, urgency, and agility across all aspects of our business. We must stay ahead of the evolving external environment to ensure we are able to make the significant investments required to deliver future innovations that will address unmet medical needs across the globe. In doing so, we aim to deliver important medicines and vaccines to patients while continuing to drive long-term sustainable growth and value creation for all of our stakeholders. Finally, I want to highlight the recent publication of Merck's Environmental, Social, and Governance Progress Report. This year's report highlights important updates on metrics and goals around our four ESG priority areas, which include access to health, our employees, including their health and safety, as well as engagement and diversity, environmental sustainability, and ethics and values. These ESG efforts are grounded in the core values that have always guided our mission and support our business strategy. We look forward to providing ongoing updates on these important efforts. With that, I will pass it to Frank to review the details behind our human health performance.