Merck & Co. (MRK) 27 Oct 202020 Q3 Earnings call transcript

My name is Laura, and I will 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 lines have been placed in mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like Peter the Relations. Dannenbaum, now your over host today, Vice to would call turn to I President, Investor go ahead. Please

and XXXX Chief Dr. and Clyburn, Officer; Chief Dean Thanks Merck's of Officer; Labs; Rob Dr. joined morning. Frank good Chief Executive Marketing President Ken conference Financial Mike Discovery of our quarter Research Officer; by Chairman Laura Commercial I'm Perlmutter, Head call. Nally, our our Welcome Frazier, Officer; Chief Davis, our Today Roger and Li, third Research. to Merck

I'd Before we to get few a items. started, like point out

You will costs, results and have in restructuring such items. other our see GAAP that we certain charges, as acquisition-related items

our excluded we note You press from should in have these non-GAAP results our that release. and reconciliation provided

our remind a release products. of the the significant of If underlying XXXX. of forth that in based actual materialize, assumptions meaning materially those management the forward-looking the have understand Reform you inaccurate statements quarter of to differ belief provided within and the from the Act business that call in make subject the Private statements Safe uncertainties. units set are in help provision like you Harbor considered We sales made also Securities also Such during statements. on are and uncertainties be or Merck's to risks current U.S. the and the to Litigation of today's I we may prove our some results statements would for press table may forward-looking

any actual made Merck that of statements. projected risk Item could the our materially from any update factors statements those forward-looking cautionary to undertakes identify results forward-looking including XX-K, differ in certain XA filings, statements publicly obligation morning. SEC to Our cause no this the company's in and XXXX

Ken. over filings, to our and With the I'd call are with today's of like that, earnings an turn on results highlights SEC posted release to presentation some investor all merck.com. Our

efforts to Peter. you want are all for today's joining you, the of call. experts start challenge to rising morning biopharmaceutical who Thank and Good across and extraordinary thank scientific to I the the acknowledging by is COVID-XX end industry contributing expertise support solutions to science We its pandemic. over Merck and efforts. and will that to of find working prevail committed resources tirelessly scientific the worldwide remain these help in confident

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the experience its more I Discovery regulatory future of look Sciences Senior of Dr. and transformational has time, to Research at XX. Medicine strategy other scientists around and Perlmutter and here to the his world-class and company in sustain down pipeline. Dean appointed medicine of health technologies patient to of improved contributions team science, at Translational forward the will and his Merck. made wellbeing I who momentum R&D Under Merck. and effective vaccines and Dr. of practice for January his [indiscernible] us stellar he Roger and our contributions help of knowledge, transformed pursuit legacy currently Head strong medicine our from Lab be Dean's globally and in Merck leaves and build portfolio leadership President him is important and am Vice that role Merck's for been I execution grateful this discovery our to has Research leadership has And by the approvals than extraordinary meaningful this strong Roger scientific the succeed senior the purposeful as the and as to received during of that immuno-oncology breakthroughs current world, a Merck Roger at am made many people Laboratories of team. of result the advance Merck a energy the successful and all XXX of new as well of clinical have Roger the of behind has confident will outcomes. revitalized historic welcoming pipeline end broad Li, many year. stepping fields leadership on deep Our at

growth despite Now, EPS third and very moving quarter pandemic strong impacts delivering ongoing revenue on we the continued of to growth. our while priorities performance, our some strategic year-over-year again executing once in

business with continuing momentum. exited the quarter we Importantly,

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impact most vaccine of those in on delivery. portfolio are recovery healthcare we seeing parts pandemic's also encouraged and the are We the by by the affected

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hire to an experienced will talented continue success Organon's We and help as drive who leaders independent company.

in our our despite Let to by the pipeline posed by challenges the advance business and expressing me the conclude confidence pandemic. ability my

on our inspires who Additionally, I to workers mission affected express now in health relentlessly patients healthcare our threat Merck details to committed pursue my to to future. I'll to around Their performance help the employees sincere both remain and COVID-XX. And to at of gratitude by help the the for greatest innovative Rob to of and science and worked the us outlook. our that, now all dedication the and with prepare review clock the frontline our call pass

good morning Ken and Thanks everyone.

are growth As growth to Ken and year-over-year pandemic. a we to despite In strong performance guidance. patients the their addressing very reflected medicines continuing develop strong ongoing close by the to of demand pillars turning up the employees to in year our us once for organization again ensuring and pipeline, solutions products and from as important be in the vaccines, recovery to delivered noted, our our quarter, business medically saw continue the Merck pandemic. efforts our the while we have across to encouraged underlying access resiliency updated as our work, strength portfolio, contributing industry-wide the the important we and across impacts key

long-term including capital strategy, our priorities. on our execute to allocation continue We

development behind Teijin two a strategic gain assets are to candidates augment with successfully oncology pipeline. We entered have we our further on including quarter active investing our Of to this the that COVID agreement collaboration into our front. deep and access business pipeline been note,

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portfolio. an minimal The by pandemic in Now, revenues $XX.X approximately increase our negatively of foreign health from results. Total turning health. There quarter $XXX human were negative currency. impacted animal excluding or billion, impact our impact to X% vaccines year-over-year the third X% results was mostly third to our million, quarter company

focused comments and term our been have would remainder impact estimated performance X% the on this exchange. of an underlying my basis. near and X% excluding growth on be The drivers growth of ex revenue be ex Our exchange approximately will or will trends key

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forward. seller continues leadership with weekly the now United of helped represent caused bladder States, KEYNOTE-XXX in KEYTRUDA the lung uptake outside regimen of cell patient roughly is new dosing maintains is the the Uptake qX our market the first cancer. and endometrial growth. States these the lung KEYNOTE-XXX notably indications the will of of with penetrate of growth leadership It and volume class starts our add from momentum to adult We by pandemic. uptake now increasing in head the prostate cancers, over the early carcinomas. combination and XX% as growing where competition the remain XX% U.S. metastatic continue in Outside indications in carcinoma, going and the in with to see continue continue an strong and in the cancer, more quarter performance respectively of strong of the the launches two first Japan, penetration. XX% first year the IO, growth to broadening combined half are launch and endometrial of In Lynparza's adjustments from continues to the line time we offset in in and In meaningful to indications worth incremental setting, reduced our melanoma, a growth. driver launch outside ovarian KEYTRUDA in States. remain Lynparza neck we indications be the lung in carcinoma, leading across United and new setting hepatocellular underlying line and strengthening in in PARP cancer offset of the year-over-year. indications driven to and the sales than noting of and continue and following impact huge expanded contributions to United demonstrate further renal impact pricing indication in oncology EU cancer leadership Lenvima the despite in the growth strong array reflect the broader grow our by Lenvima contributors that regimen and of in portfolio,

Turning to vaccines.

growth XX% declined impacts particularly key offset States. in made visits States. of particularly in in neutral second As vaccination adolescents. impacted by Hong Europe, Kong. the amidst awareness our heightened delayed while driven from the and below continued the were driven volume growth reduced to were mentioned, impacted importance of United offset more season partially in negatively by delivered general ex-U.S. expansion by heading markets XX% the disease by year-over-year in levels the growth as also were protection PNEUMOVAX Ex-U.S., by portfolio purchases. in pneumococcal the partially normal an and a programs back-to-school decline. quarter, of United offsetting Volumes the sector continued sales public strong into year-over-year against wellness the below season comparisons GARDASIL normal pandemic Sales pandemic among China GARDASIL demand was strong flu recovery in was vaccines of the due

in confident prospects variability, of in of underlying is quarter-over-quarter the published cancers, important to growing term future subject We of continue role reinforced particular GARDASIL always While out our recognition trends to certain global business vaccines for Sweden. the strengthen. longer to demand GARDASIL in by recent due preventing its growth remain and data

grew also BRIDION procedures performance second from levels. surgical which Most hospital the year-over-year. recovery elective quarter Our improved benefited in XX% notably,

ongoing Our launch XX%. growing also PROVAMES favorably contributed

ruminants well XX% of of has sustained line $X.X billion for Livestock XX% of health achieving business products strength reflecting year-over-year. portfolio vaccines. human sales technology grew delivering as the our animal products. Our as and our grew products poultry companion and growth reflecting across demand line and animal upward X% growth from underlying Companion contributions our BRAVECTO from

business in encouraged are resilience has our challenging We of our health outperformed by environment. this expectations which animal the

XX.X% a X% will a our XXX non-GAAP my combination of were pricing the of in and rest selling COVID margin lower laboratory, meeting foreign antiviral income basis expenses The spending and in gains XX.X% unrealized promotional write-offs, increased and programs. by with research decreased offset was due $XXX basis. security in X.X year result collaboration significant by offset tax driven favorably driven primarily impacted expenses, and by be COVID-XX increase largely indirect by direct year-over-year exchange holdings and favorable year-over-year of travel, spending partially our comments inventory in total, of in advance tax Gross a and amortization along by mix. quarter Turning costs vaccines driven our to to a mix. to pressure, other our as lower Operating billion. part investments assumed full In Moderna. P&L, to earnings for decrease administrative lower rate effective was rate a quarter, by the approximately on effective points was product The reflecting million the

share, of well as reflecting than other increase performance as contributions XX% from COVID an strong we that our earned $X.XX headwinds together, more Taken operational income. overcame per

of increase guidance, the billion, our Now, of of our expect business. turning our previous from now confidence to the $XX.X $XXX in strength which guidance midpoint. revenues our updated an We reflects $XX.X to million billion reflects underlying

now of guidance year using a increase full negative the roughly to growth assumes our the billion. rates. the We from of billion exchange an assumption guidance prior in October of roughly Overall, for our X% excluding points Our assume mid foreign percentage $X.XX COVID impact impact of $X.XX revenues exchange. headwind year, X.X for from X% implies

is by consistent year-over-year with to underlying impact GARDASIL to the largely the the back-to-school anticipated, on is strong Excluding we of but our with direction, recovery being season, exception. XX%, which X% reflecting original has the products. States. particularly recovery the the right in expectations, the guidance GARDASIL in than pandemic business, our of range encouraged of continued Broadly, the for of largely phasing of trending our the pandemic, primary growth impact United our demand slower implies we're the due been the

in parts to importantly, our remained seeing are offset We the the and negative certain into has world, the impacts Europe markets. pandemic and some and also quarter, of residual emerging pandemic. impact of performance some strong extend us the from Most primarily fourth enabled operational

by As the by and our value our around into we end products of the the year systems and and deliver head medically patients. delivery important ability of healthcare XXXX, to adapt confidence is world care further reinforced the to the

growth As continue believe which Street. the a remain by prospects, in we our long-term result, to underestimated

We pandemic of equity by now expect roughly now a expense in million earnings digit mix. the to securities. management. strong and expected reflecting Operating expect at higher be investments to XX.X% be rate margin other year-over-year, continue We gross tax decline XX%. expect $XXX full to improved now to expenses reflecting low are roughly from year single income We driven spending rate to our due income reduced

shares We continue outstanding. billion to anticipate X.XX

we roughly non-GAAP negative now points. EPS to of range reflects foreign between of from together, our impact $X.XX, our be previous increase $X.XX Taken to X.X a exchange which midpoint. $X.XX an includes This percentage from expect

expansion. That and rate management, higher investments other the leverage pipeline, an same continues to results through time equity while growth margin tax for in continue our gains P&L drive expense allowing improved our strength benefit delivering in to to revenue and said, from meaningful the robust due from our Our holdings. operational income at

to improvements, of We our find physicians operating pandemic. organization. our digital This important drive evolve become patients to increasingly and with have the which in efficiency engage leveraging model through order throughout the to we strategy and to occurring is progress and productivity process in ways new on make continue capabilities, as new this

success. value in value capital to position provide and dividend key remains on in of remain more help our portfolio third our fundamental allocation provides. potential second ability assets realize top strength our to medically to We drivers around world we fully patients to and and innovative the will balance the for the will growth to that key we on focus for robust attention execute long pipeline and serves experienced Our well positioned confident are derisked Organon strong to medicines portfolio and Merck and sheet our the investments growth and us spinoff the the our Fully driving growth conclude, deliver investing an its our to will committed are in pipeline important enhancing patients priorities. to of we vaccines future. and the that growth growing and products development remains and of of priority it enable our world into of products as the swift of allow business significant the business quarter quarter, and runway now our indicator the the drivers in long-term true Further To recovery execute. around the our to

I over Before I'd been patients you. I'd to benefit With personally to many also come. the pleasure Merck, to to for turn which we for contributions our a learning working like thank Roger years his that, like company many and to from and you alongside Roger It's serve close, call the will

Thank you much, Rob. very

approvals, data, development, R&D advances drug During advancing the new laboratories third applications, clinical new fronts, forging product meaningful of and new including on opportunities our obtaining regulatory into quarter, many made filing new important alliances.

of Our rapid at but convey press advancing. tabulates pace which cannot are programs these the accomplishments, many release these

for [ph] blocking modern of treatment on the or and from TOWER in neoadjuvant KEYNOTE-XXX patients combination treatment a cancer, X have based a the androgen in setting the expanded based label positive on an date study study. CHMP that negative based classical during indication just PD-LX therapy. of line this opinion with vedotin as & Results In an received relapsed our underlying previously metastatic triple results the been breast the of for acceptance Products of of we Phase brentuximab Administration approval score Committee of KEYNOTE-XXX first for Lymparza quality reflection treatment by the from development our that adjuvant received presented. of line bevacizumab monotherapy second the United of KEYTRUDA treatment with PDUFA triple following greater, study recurrent based on XXXX. treatment high the quarter clinical KEYNOTE-XXX for recombination And mutant, also PD-LX, for March I the our compared combination data in Medicinal third on agent. chemotherapy of operable study metastatic note treatment and of KEYTRUDA example, also with for to XX, have our date was after with But Human for the the advanced results BRCA or a the monotherapy tumors with these regulatory Food maintenance lymphoma, approval untreated the review prostate of KEYTRUDA refractory Use the recommendations cancer KEYTRUDA cancer, studies study. in our Europe, positive the or approved of based Drug ovarian XX. deficient negative proportion three previously cancer favorable Meanwhile, work cancer, the As of Hodgkin in of for castration-resistant in months the Lymparza standard line who under treatment or homologous a also combined with progressed adopted at first is Japan file, of colleagues. obtained States XX on for November a the in KEYNOTE-XXX locally with esophageal PDUFA of breast expressing results

our KEYTRUDA approval all six document for around for for approach programs they highlighted Medical mg durable adult world, treatment in European for We the early States. in I across long-term KEYTRUDA At registration COVID-XX and Lymparza also mentioned on the in by KEYTRUDA in the approvals these XXX for the the the Oncology weeks partnership the received every broad indications, is the in based the our an and continued United of because disease. malignant meetings adopted challenges each data Society progress already imposed Japan of conducted regimen Europe impact with despite AstraZeneca of demonstrating we September, pandemic. of which

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the The therapeutic areas. third gave variety in of drug us other many quarter new to other opportunity a advance candidates

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during Finally in we've directed quarter, the third our progress made substantial programs. COVID-XX

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vaccine also trials quarter. candidates during third Our COVID-XX the were clinical advanced into directed

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trends guess until missed to much to or normal normalize Thanks go do so to think guess and their need to just of question being And should we back the to sort normalize this a GARDASIL of luck up can we've success for all cadence What to for congrats normal Great, vaccination My and I that a think things normalize, bolus take here? catch start about kind thanks with back-to-school year on my vaccine? today? very that of another this we results do going is question season on even is, with was everything in to who going COVID patients the environment Roger, like do it's we're years. there of we much. think I to wait get the get over or best U.S. you what this historically back when seen the some in operating you

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there a Phase thanks X clearance. trial, was noticed I Hi, Roger, X, viral dedicated taking the antiviral, COVID my so for question. much Phase for evaluating

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Thank you, Umer.

Next question, please?

from next will Gregg come from Truist. the Gilbert line of Your question

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Gregg. Thanks,

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yours, to My but as the trials of Hi, achieve the feasible also currently taking specifically you sterilizing if the focus most Obviously congrats it's immunity. wondering for think of question. generally a Roger, thanks vaccine, for well to COVID if but a just immunity reduction the herd able and that open, importance the to in is in back amount aren't mean the of vaccines immunity what given discussion infection? fully achieve symptoms, herd around reduction economy significant for opening does Roger. of

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Navin. Thank you,

Next question, please?

Your line next from from of question of Bank Meacham come America. will the Geoff

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details been It's Amgen. at to both just you with perspective wanted get on an question. it Merck Question on I on you great want retirement. at from the to Good as that does working and newly Thanks congrats but your for SAEs? had your the or Phase patients. given And seem see morning, X molnupiravir, at mild such if more the it's any oral, you. AEs for ideally time suited common that. Roger, Thank infected guys.

Yes, of what above five-day Thanks it -- actually studies b.i.d. molnupiravir the replication are Geoff? viral catastrophe small Right, much. well required the in in virus. number who tolerated drug be X received have again, from extremely or and we aero a Phase essentially believe X very and of in that seems are subjects the now elimination in doses to Phase studies the course result suppress well to is

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Thank you, Geoff.

please? Next question,

from Flynn the of Your next from come question will Goldman line Sachs. Terence

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you've luck, question you Hi, of for best and the done thanks for Roger. the Thank for everything taking field.

for You guys co-formulation X of KEYTRUDA into CTLA-X your advancing cancer. a and are Phase lung

co-formulation strategy you also your broad possible, and is if co-formulate how anti-TIGIT. with KEYTRUDA Thanks. it's wondering could your Just

but checkpoint found effects now the therapies very Well, generally than on find working as that to see. is, others, to anyone PD-X KEYTRUDA be a have many and KEYTRUDA, particular, for that would in Right? but nor easy We reality are something have even long more better time has dramatic a else thing. neither directed hope such we've inhibitors we been

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Right, thank you Terence.

please? question, Next

Fernandez come Seamus line will from Guggenheim question next of Your the from Securities.

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diagnosis as the of I are growth lot kind really care a offices, primary return and of in you of a in to of We're impacting Thanks to to drive and are see 'XX? very on return efforts working what it's ask get wanted to by promotional Roger, pharmaceutical with question. track it wondering in back a best and Merck that relates doing How years. physicians' many on drive you commercial growth commercial of just to you necessary much, much XXXX? the a believes I'm to luck, doing great seeing is to other the been and last right business what to disease. and obviously kind over of visits, side, companies and us your is starting

Seamus, this hi Frank. Yes, is

of I putting and effort. that's really a we're important think lot

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our world, here morning. that of educational sure physicians are to Roger speak make you've engage this a see well we can with as about programs around new And in lot the activities. continuing continuing consumer are markets that aware healthcare put also behind are we professionals, heard You to that and of of lot as with a data effort in KEYTRUDA many well campaigns to the

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Seamus. And for it Great Thank thank limiting one I'd yourselves question. like questions. you closing Ken over turn to for you, comments. to all to

Thanks, Peter.

promising our on as As pandemic, other that highly growth. solving and we're opportunities solid by will us. research at R&D to We upcoming pipeline, and life believe the We remain the sharpening before scientific motivated by you've this remain being strategy saving of heard, our focus essential well will forefront challenges. launches, commercial confident committed our track drive extremely record to we as bringing leadership, and be in of for Merck mission execution healthcare ongoing long-term alive

us I thank healthy. and hope you today. your for and family that stay you So safe joining

so and thank you, presenters, disconnect, today's a day. you lovely This much, now everyone Thank you may have stay again, participating. for concludes safe conference, and