Merck & Co., Inc.

Thank you for standing by. Welcome to the Merck and Company Q4 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 would now like to turn the call over to Mr. Peter Danenbaum, Senior Vice President, Investor Relations, so you may begin.

Thank you, Shirley, and good morning, everyone. Welcome to Merck's fourth 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 that we have excluded 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 in 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. 2024 was another year of significant advancement across our company, and I'm proud of the continued progress we're making in developing and delivering transformative medicines and vaccines to help save and improve lives around the world. We are impacting patients on a global scale. In fact, in 2024, we reached nearly half a billion people with our medicines and vaccines, including through donations. We remain focused on the pursuit of breakthrough science and innovation as the source of sustainable long-term value creation for patients and shareholders. We're continuing to execute on our strategic priorities. We're progressing our pipeline, launching important new products that have significant patient benefit and strong commercial potential, advancing key clinical programs in our robust early and late phase pipeline, and augmenting our pipeline through promising business development. Our business remains well-positioned thanks to the dedication of our talented global team, and I'm more confident than ever in our ability to advance patient care, fueling Merck's long-term growth potential. Now, turning to our results and outlook. We delivered strong growth in 2024, reflecting demand for our innovative portfolio, including for Katruta, which continues to benefit more patients with cancer globally. The successful launch of WinRevere and strong performance of our animal health business. We also saw higher demand and achieved strong sales for Gardasil outside of China. As we closed out 2024 and entered 2025, the market dynamics for Gardasil in China have remained challenging. Like many other companies, we've seen increased pressure on discretionary consumer spending, including across the vaccine space more broadly. and demand for Gardasil has not recovered to the level we had expected. As a result, overall channel inventory remains elevated at above normal levels. In light of this, and based on further discussions with our commercialization partner, Jurpay, over the past couple of weeks, in particular regarding their most recent financial disclosure and working capital levels, we've made the decision to take a new approach and temporarily pause shipments to China beginning this month and through at least mid-year. We believe taking this action now will facilitate a more rapid reduction of inventory and help support the financial position of our important and valued partner. Importantly, we believe China still represents a significant long-term opportunity for Gardasil, given the large number of females and now males with our recent approval that are not yet immunized. and we remain both committed and well-positioned to maximize this potential for the long term. Outside of China, demand for Gardasil remains robust, and we expect strong growth this year and well into the future. Our overall business remains very healthy. In fact, irrespective of the performance of Gardasil in China, we expect the company to deliver strong growth in the second half of this year, as well as in both 2026 and 2027. Longer term, our confidence in our ability to successfully navigate the Katruta LOE period is unchanged, which is based on the strength of our pipeline, the excitement we have for our ongoing and upcoming launches of innovative new products, and the commercial opportunity they represent. Next, I'd like to turn to our research efforts. We're making remarkable progress across multiple therapeutic areas in our late-phase pipelines. In the fourth quarter, we announced FDA acceptance for our filing of clozrovimab, our long-acting monoclonal antibody to protect infants from RSV disease, and positive top-line results from three programs, including for subcutaneous prembolizumab, for islatravir in combination with durabarine in the treatment of HIV, and for winrevir from the Zenith trial. We also executed value-enhancing business development that is both science-led and and portfolio informed. We licensed promising investigational assets, including in oncology, with a clinical stage anti-PD1 VEGF bispecific antibody from Lenova, and in cardiometabolic with an oral GLP-1 receptor agonist candidate from Hanso. Merck is anchored today by a robust set of commercial products addressing important medical needs, and we're rapidly moving to a future with a much more diversified portfolio. We have amassed an expansive pipeline with tremendous potential to further advance the practice of medicine around the world. You can expect a steady cadence of data readouts in the coming months and years, leading to potential new launches as we seek to bring much-needed innovation to patients. In fact, we have 20 potential new growth drivers, almost all of which have blockbuster opportunity. These include Winrevere and CABVAXIV, our adult pneumococcal conjugate vaccine, which is now launching in the U.S., as well as many innovative assets currently in phase three development. Over the past three years, we have nearly tripled the number of assets in late phase development across a broad range of therapeutic areas and modalities. Based on the significant progress, we see over $50 billion of potential revenue opportunity from these programs. We are positioned for long-term leadership in oncology as we continue to diversify and deepen our pipeline. We are excited about cardiometabolic as a future area of growth, including with our oral PCSK9 inhibitor program, where we have important Phase III readouts this year. In immunology, HIV, and ophthalmology, we have opportunities to bring forward first-in-class and or best-in-class blockbuster medicines. Further, we expect to benefit from promising programs in our infectious disease and vaccines pipeline, strong growth in our animal health business, and many early phase programs that will enter phase two over the next few years. And we remain well positioned to pursue additional science-driven, value-creating business development. In summary, I have increased confidence in our long-term future. While the rapid change in the Chinese market for Gardasil has caused a short-term headwind for our company, our overall business is healthy and growing. We remain strongly positioned to successfully navigate the Katruta LOE period as we continue to deliver on our purpose of saving and improving lives. I want to again recognize the commitment and efforts of our global teams. Together, we remain focused on delivering and sustaining value for patients shareholders, and for all of our stakeholders today and well into the future. With that, I'll turn the call over to Caroline.