Merck & Co., Inc. Q3 FY2024 earnings call

• Merck is addressing unmet medical needs with innovative science, with a diversified portfolio and Phase 3 pipeline nearly tripling in 3+ years to over 20 assets. • Third quarter revenues up 4% or 7% constant currency, benefiting from KEYTRUDA usage, new launches like WINREVAIR and CAPVAXIVE, and Animal Health growth. • GARDASIL sales declined in China but grew double-digits in most other regions; working with Zhifei to increase promotional efforts. • Clinical milestones include positive Phase 2b/3 results for clesrovimab, ACIP expanding CAPVAXIVE recommendations, and KEYTRUDA regulatory approvals. • Business development included acquiring a bispecific T-cell engager, EyeBio, and Elanco aqua business.

Total company revenues were $16.7 billion, an increase of 4% or 7% excluding foreign exchange. Human health business sales increased 8%, primarily driven by oncology. Animal Health business sales grew 11%. KEYTRUDA sales grew 21% to $7.4 billion. GARDASIL sales were $2.3 billion, down 10% due to China, but up double-digits in most regions outside China. VAXNEUVANCE sales increased 13%. WINREVAIR global sales $149 million. Animal Health sales grew 11% with companion animal sales up 17% and livestock sales up 7%.

• Expect revenue between $63.6 billion and $64.1 billion, down from prior guidance due to foreign exchange impact. • EPS expected to be $7.72 to $7.77, down from prior range. • Capital allocation focuses on investing in business growth, dividend increases, business development, and modest share repurchases.

• Uncertainties related to GARDASIL inventory levels in China and the time needed to work down inventories and drive demand. • Potential impact of competitive products and market dynamics in China. • Risks associated with forward-looking statements and underlying assumptions not materializing as expected.

Q: Just on GARDASIL, given elevated inventory levels, how to think about dynamics into 2025?

A: Expect continued decline in shipments to China in 2025, with China opportunity in $2B to $3B range, driven by male approval.

Q: On WINREVAIR, what's seen in terms of safety and patient dosing?

A: No profound safety signals, predominantly sickest patients on triple therapy, with about 80% on single vials initially, expecting transition to double vials over time.

Q: Outlook for 2025?

A: Expect solid growth with KEYTRUDA in earlier-stage cancers, new launches like WINREVAIR and CAPVAXIVE, but headwinds include GARDASIL China decline and REMICADE/SIMPONI agreement expiration.

Q: On pneumococcal opportunity, incremental market size from age 50 expansion?

A: Around 60M people in 50-64 age group in US, providing opportunity, with strong data supporting CAPVAXIVE.

Q: On GARDASIL China sales, comparison to 2024 and impact on $11B target?

A: 3Q and 4Q 2024 China shipments around $500M, $2B to $3B range in China over next few years contributes to $11B target.

Q: On WINREVAIR stocking and patient progress?

A: Small inventory build, over 80% revenue supports demand, 80% of patients on background triple therapy, making progress in activating patients.