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 Q1 Sales and Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And 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. And to withdraw your question, please press the pound key. Thank you. I would like to turn the call over to Peter Dannenbaum, Vice President of Investor Relations. Please go ahead.

Thank you, Grace, and good morning. Welcome to Merck's first quarter 2022 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 have excluded these items 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 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 and the 2021 10-K, 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 FTC filings are all posted to the Investor Relations section of Merck's website. With that, I'd like to turn the call over to Ron.

Thanks, Peter. Good morning, and thank you for joining today's call. Before I get started, let me take a moment to speak about the ongoing crisis in Ukraine. We're hopeful for an immediate and peaceful resolution to the Russian invasion of the country, and we support the Ukrainian people and stand with them. and recognize what a terrible tragedy this represents. Merck is making every effort to protect the health and safety of our employees and to ensure essential medicines and vaccines continue to reach patients. In addition, we are dedicating meaningful resources to address the humanitarian crisis in the country through multiple channels. Turning to our business, we continue to deliver across our key strategic priorities in the first quarter. We're sustaining the strong business momentum we delivered in 2021 with robust top and bottom line growth. We've also achieved significant clinical advancements across our research pipeline and successfully integrated Acceleron. Now moving to our results. We've had a strong start to 2022, achieving very strong top and bottom line growth. Commercially, we continue to execute well across a broad set of key growth drivers, most notably Catruda, Gardasil, and Animal Health. Our performance reflects robust underlying demand for our de-risk innovative portfolio and reinforces the importance of our science-led strategy. Ligebrio, our COVID-19 antiviral treatment, was a significant contributor as well, but even excluding these sales, our top-line growth was still a very healthy 19% versus last year. On Ligebrio, We've accelerated broad global access, and it's now established as an important tool for patients and healthcare providers to address the ongoing pandemic. Since receiving emergency use authorization in December, we've delivered approximately 6.4 million courses to more than 30 countries. The success we are achieving is reflected in our updated 2022 guidance, which demonstrates our expectation for another year of strong growth and overall business momentum. Our oncology business is benefiting from the continued rollout of new and important indications, including in earlier lines of therapy. Global demand for Gardasil remains strong, and growth will benefit from increased supply as a result of the significant investments we are making to expand manufacturing capacity, and our animal health business remains positioned to grow at above market rates. Longer term, we remain confident in our ability to deliver strong revenue growth and operating margin expansion through 2025. We're preparing for the post-Katruta LOE period by continuing to strengthen the levers we have and building upon them in order to deliver long-term growth. In oncology, we remain committed to building on the foundational position that we have achieved with Katruta, and we aim to expand our presence in this key therapeutic area and to establish an enduring leadership position. In addition, we'll continue to maximize the opportunities we see for our durable growth drivers, such as Gardasil, our pneumococcal portfolio, and animal health through our proven commercial execution. Beyond our existing portfolio, business development remains a key priority. We remain highly focused in our pursuit of the best external innovation and will be appropriately aggressive when great science and value align. We have a strong track record of business development but we know we need to do more, and we believe we are well positioned to quickly deploy capital towards the right strategic assets as they present themselves. And finally, we'll continue to advance our broad pipeline across key therapeutic areas in order to deliver medically important innovations to patients. We've taken important steps to provide increased transparency into the opportunities we see in our portfolio and our business, including through two recent investor events. Earlier this month, we provided a detailed description of our growing cardiovascular portfolio and pipeline. At Merck, we're focusing our efforts where the needs are greatest and where we have the best opportunity to positively impact patients' lives, including in heart failure, pulmonary arterial hypertension, thrombosis, and atherosclerosis. We've made significant advancements across our CV pipeline and believe our broad, differentiated portfolio can have meaningful impacts on patients' lives with at least eight potential new approvals by 2030. We're confident that these important innovations have the potential to be meaningful growth drivers for Merck well into the next decade. And in February, we hosted our inaugural ESG event, which highlighted our activities in our four priority areas of access to health, employees, environmental sustainability, and ethics and values. Our ESG efforts are grounded in our company's values, and we look forward to building on Merck's legacy of operating responsibly going forward. Before I close, I'd like to take a moment to recognize Dr. Roy Baines, who has announced his retirement after eight years of Merck. Roy has been instrumental in helping Merck become a leading oncology company, particularly through his leadership and the development of Petruda. We wish Roy the best in his future endeavors, and we're confident that he leaves behind an outstanding team and program. I'm pleased to report that Dr. Elliot Barr was appointed to succeed Roy. Elliot not only has deep experience having served in several research capacities throughout his more than two decades at Merck, but also has an unwavering commitment to patients consistent with Merck's purpose to save and improve lives. In summary, we've begun 2022 with strong operational momentum, and I want to express my sincere thanks to our employees worldwide for their continued focus and commitment. We remain confident in our fundamental strategy, our growth prospects, and in our ability to deliver significant benefits for patients and value to shareholders well into the future. With that, I'll turn the call over to Caroline.