Merck & Co., Inc.

Good morning. My name is Grace Lacroix, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Merck & Co. Q4 Sales and Earnings Conference Call. All lines have been placed on mute 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. To withdraw a question, press the pound key. Thank you. I would like to turn the call over to Peter Deinenbaum, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Grace, and good morning. Welcome to Merck's fourth quarter 2021 conference call. Speaking on today's call will be Rob Davis, President and Chief Executive Officer, 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 GAAP results, such as acquisition-related charges, restructuring costs, and certain other items. You should note that we've 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, identified 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. 2021 has been a year of significant achievement and meaningful progress for Merck in the face of what has been a challenging environment for all of us. We deliver on our strategic priorities and took important steps to set a foundation for success in 2022 and beyond. We achieved strong operational performance, accelerated our broad pipeline, including MoMA peer peer, completed the spinoff of Organon, and acted on key strategic business development activities. We enter 2022 with strong momentum and are pleased to reflect this in our initial revenue and EPS guidance. We continue to evolve as a more focused, more efficient, and faster-growing company with an increased urgency to bring forward innovations to address critical unmet needs. This remains the core of our strategy to benefit the patients we serve and, in turn, create long-term value for all stakeholders, including our shareholders. Our business achieved strong revenue and earnings growth. Total revenues increased 24% in the quarter and 17% for the full year. Commercially, we have executed extremely well across all of our key performance drivers, including Keytruda, Sardisil, and Animal Health. We delivered initial multi-perioder shipments to customers around the world, and following the FDA emergency use authorization that was granted in late December, made meaningful progress towards our commitment to the U.S. government. Our dedicated teams worked diligently, including through the holiday season, to deliver 1.4 million courses of therapy to the United States, United Kingdom, and other countries by year end. Throughout 2021, we invested in the discovery, development, production, and commercialization of medicines and vaccines, furthering the long-term sustainability of our business, all while delivering meaningful operating leverage and strong EPS growth. In total, 2021 was a year of strong execution, of our strategic priorities across all fronts, operationally, commercially, clinically, and financially. As we look at 2022 and out to 2025 and beyond, we expect to achieve continued strong growth. Our oncology portfolio will benefit from the uptake of numerous recent approvals and the expected launch of many additional indications, including in earlier lines of therapy. Underlying global demand for Gardasil remains robust, and further growth will be realized through the investments we are making to increase manufacturing capacity. And our animal health business remains very well positioned to grow faster than the market well into the future. Overall, we expect another year of strong revenue growth in 2022. While we will continue to make investments in our pipeline, we are confident that we can achieve a leveraged P&L and significant long-term operating margin expansion. Longer term, we are intensely focused on successfully navigating the headwind created by likely biosimilar competition to Katruta at the end of the decade. We aspire to grow through and beyond this period, but at the very least, we will look to minimize the headwind and shorten the time it takes to return to strong growth. We have multiple levers to achieve this task, driving sustained growth well into the next decade. First, we intend to strengthen our leadership in oncology broadly and leverage that position for sustained long-term success. We've done an excellent job of establishing Keytruda as a foundational therapy, and we intend to maximize its opportunity and patient impact. In addition, we have an expanding portfolio of commercial and developmental oncology assets beyond Keytruda, which offer meaningful growth opportunities beyond 2028. Second, we have many important franchises beyond oncology that we expect can drive durable growth into the next decade, including Gardasil, which we believe can potentially double by 2030, as well as our pneumococcal portfolio and our animal health business, to name a few. Third, we expect to generate very strong cash flow, which we intend to deploy and to value enhancing business development to augment our pipeline and bring additional drivers of longer-term growth. And fourth, we will advance our internal pipeline and the opportunities we see in vaccines, cardiometabolic, neuroscience, and other disease areas. We are making extensive investments in discovery research as well, which we believe will be the source of longer-term innovation. As part of our commitment to provide more transparency into these efforts, we will host an investor event focused on our cardiovascular portfolio and pipeline in the spring. In addition to accelerating our internal pipeline, as I noted, a key part of our strategy will be to deploy our cash flow towards value-enhancing business development. We will continue to be appropriately aggressive in pursuing compelling external innovation, and we will supplement our pipeline with an approach that is science-led but portfolio-informed. Last year's acquisitions of Pandion and Acceleron are good examples of our approach. We are taking calculated risks and will continue to focus on creating value in areas of unmet need. We have the operational capabilities, financial capacity, scientific prowess, and sufficient runway before the end of the decade for business development to play an important role in our goal of achieving long-term sustainable growth. While we have a strong track record of business development, we know we need to do more. Finally, we've taken further steps to integrate important environmental, social, and governance goals into the core of our business. In December, we completed the inaugural issuance of a $1 billion sustainability bond. We intend to use the net proceeds to support projects and partnerships in the company's priority ESG areas and to contribute to the advancement of the United Nations Sustainability Development Goals. We've also acted to accelerate global access for Molnupiravir through our groundbreaking access strategy, including a recent agreement with UNICEF for up to 3 million courses of therapy to supplement supply available for distribution in low- and middle-income countries. In addition, this morning, we announced plans to host our initial ESG investor event on February 23rd. We believe that strong performance across key ESG metrics aligns well with Merck's core values and mission, and we look forward to providing insights into our commitment to this space. Now, before I turn the call over to Caroline, I want to take a moment to recognize Frank Wyburn. Following 14 years of significant contributions, Frank will be leaving Merck to become CEO of IFF. I want to thank Frank for the strategic vision and operational excellence he's provided in helping establish Merck as a global leader in oncology and for his strong leadership of our human health business. We wish Frank and his family all the best as he embarks on his new endeavor. While Frank will be missed, we are well positioned to continue our strong momentum with the deep and talented team we have in place, and we expect to announce new leaders shortly. With that, I'll pass it over to Caroline to provide details into the performance of our business, as well as our financial results and outlook. Caroline?