Merck & Co., Inc.

Thank you for standing by. Welcome to the Merck and Company Q3 Sales and Earnings Conference Call. At this time, all participants are in a listen-only mode until the question and answer session of today's conference. At that time, to ask a question, press star 1 on your phone and record your name at the prompt. This call is being recorded. If you have any objections, you may disconnect at this time. I will now return the call over to Mr. Peter Dannenbaum, Senior Vice President, Investor Relations. Sir, you may begin.

Thank you, Shirley, and good morning, everyone. Welcome to Merck's third quarter 2024 conference call. Speaking on today's call will be Rob Davis, Chairman 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 that we have items in our GAAP results, such as acquisition-related charges, restructuring costs, and certain other items, and that we have excluded these from our non-GAAP results. There is a reconciliation in our press release. I will also 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 and the 2023 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. These slides, along with the earnings release, today's prepared remarks, and 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, and thank you for joining today's call. At Merck, we're confronting some of the world's most challenging unmet medical needs with innovative science and differentiated solutions. And we're delivering on our key strategic priorities. The strong progress we're making across our business increases the confidence I have in our ability to achieve long-term success and create sustainable value for both patients and shareholders. We're launching important new products that solve for unmet medical needs and which have significant commercial potential. We're advancing novel clinical programs across a pipeline of diversified therapeutic areas and modalities. And we're adding to our internal research and development efforts through value creating business development transactions. As a result, Merck is moving toward a future with a much more diversified portfolio. Our phase three pipeline has nearly tripled over the past three plus years to more than 20 unique assets. This will fuel a substantial set of new medicine and vaccine launches over the next five years. In fact, approximately equal to what we've launched over the past 10 years. And we believe the majority have Blockbuster Plus potential. We've improved long-term visibility and are intensely focused on ensuring strong clinical execution across our diversified set of pipeline opportunities and future growth drivers. As always, we remain science-driven and patient-focused as we work to bring these medicines and vaccines to those who need them most. Turning to our third quarter results, commercial execution is a top priority, and we're highly focused on delivering in the near term. The strength of our overall portfolio puts us on track to achieve strong four-year growth. For the quarter, revenues increased 4% or 7% on a constant currency basis. Our results benefited from increased usage of Keytruda globally, contributions from new launches, including WinRever and CabAxiv, and strong growth in our animal health business. I'm pleased with the launch performance of WinRever, which is consistent with our high expectations, and remain confident in the long-term opportunity it represents for patients and for Merck. As anticipated, Results also reflect the decline in Gardasil sales year over year. Notably, however, we achieved strong double-digit growth for Gardasil in almost every major region outside of China. In China, consistent with the expectations we discussed on our prior earnings call, we shipped less to our commercialization partner, Jerfei, and we expect fourth quarter shipments will be at a similar level to the third quarter. Overall, channel inventories of Gardasil have decreased. which is directionally encouraging, while inventory at GERFE remains above historical levels. We are highly focused on this market and are making progress with GERFE to increase promotional resources and patient education efforts. We expect these efforts to translate to increased patient activation and demand, but as we've said, this will take time. Taking a step back, we're proud of the role that Gardasil is playing in helping prevent certain HPV-related cancers. There is a wide range of long-term growth opportunities around the world due to the tremendous remaining need to protect more individuals, with less than 10% of the global eligible population vaccinated and meaningful opportunities to improve vaccination completion rates, gender neutral vaccination rates, mid-adult coverage, and access in low and middle income markets. This includes in China, where there is an attractive long-term opportunity given the significant number of females yet to be immunized and the potential approval for males next year. We're highly focused on using our scale and strong capabilities to drive education and awareness of the benefits of HPV vaccination and to reach and protect more patients globally. As such, we remain confident in our goal of achieving greater than $11 billion of sales by 2030. Turning to our research efforts, we achieved important clinical and business development milestones this quarter. Starting with our clinical advancements in vaccines, we presented positive phase 2B3 results for clozrovimab, our investigational monoclonal antibody for the prevention of RSV in infants. Based on its differentiated profile and robust clinical data, we believe this opportunity is underappreciated. We're moving swiftly to make this important prevention option available in the U.S. during the 25-26 RSV season. In pneumococcal, ACIP voted to expand vaccination recommendations for catvaxiv to include adults ages 50 to 64. We're pleased to bring catvaxiv's effectiveness in protecting against invasive pneumococcal disease to this new cohort of patients, and this recommendation reinforces our confidence in its blockbuster commercial potential. In oncology, it's been 10 years since Katruta's first U.S. approval, and we remain highly focused on advancing standard of care and maintaining durable leadership in oncology. At ESMO, we presented overall survival and long-term follow-up data for Katruta, and data also were shared from our innovative ADCs, underscoring our commitment to building a broad and diverse oncology pipeline. In infectious diseases, we shared Phase II data from our collaboration with Gilead for the combination of once-weekly oral islotravir and lenacapravir for HIV treatment in treatment-experienced adults. This data represents just a portion of our broad HIV development efforts to further advance the field. In immunology, we shared positive Phase II maintenance data for our investigational TL1A candidate, Tuliso Kibart, in ulcerative colitis and Crohn's disease that adds to positive prior clinical results. Both our HIV and immunology programs address patient populations with significant remaining unmet need despite available therapies. Our investments in these therapeutic areas reflect our belief in the opportunity to deliver additional value to patients and fortify our sustainable innovation engine for the long term. Regarding business development, we continue to leverage our scientific expertise to identify promising therapeutic targets that can further broaden and fortify our pipeline. This quarter, we acquired a novel investigational bispecific T-cell engager from Curon with potential applications in both oncology and immunology, complementing our efforts in each of these areas of high unmet need. And we closed the acquisitions of iBio and the Elanco Aqua business. In summary, we remain highly focused on strong commercial and operational execution to enable access to our medicines and vaccines. We're also continuing to make strategic investments in our pipeline that we're confident will lead to important innovations for patients and future growth drivers for our company. I want to again recognize the commitment and efforts of our team across the world. Based on our continued progress, I'm more confident in our longer-term future today than I was a year ago, And I believe that Merck is even better positioned to deliver value to patients, shareholders, and to all of our stakeholders long into the future. With that, I'll turn the call over to Caroline.