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Thank you for standing by. Welcome to the Merck & Co. Q2 Sales and Earnings Conference Call [Operator Instructions]. 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 Dannenbaum, Senior Vice President, and Investor Relations. Sir, you may begin.

Thank you, Brad. And good morning, everyone. Welcome to Merck's second 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 Li, 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 we have excluded these from our non-GAAP results there was a reconciliation in our press release. I would 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 US 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 speakers' prepared remarks. These slides, along with our 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. Our business is demonstrating strong momentum as we exit the first half of the year. We remain guided by our purpose of harnessing the power of leading-edge science to save and improve lives around the world. Our ambitious and dedicated teams are working tirelessly to reach more patients with our broad commercial portfolio and advance our deep pipeline with the goal of delivering future innovations that solve for additional unmet medical needs. Through excellent scientific, commercial and operational execution, we’re achieving significant milestones for our company and for patients. This quarter, we’re proud to have successfully launched WINREVAIR, which has introduced a novel mechanism to treat adults suffering with pulmonary arterial hypertension. We’re also pleased by the recent FDA approval of CAPVAXIVE, the first approved pneumococcal conjugate vaccine specifically designed for adults, as well as the subsequent ACIP recommendation. Both of these important innovations demonstrate our unwavering commitment to creating value for patients and shareholders. And we remain committed to the execution of strategic business development to further augment our pipeline. We recently announced and have now closed the acquisition of EyeBio, which expands our effort in ophthalmology and brings to Merck a novel, late-phase candidate for the treatment of retinal diseases. This promising new mechanism adds another substantial potential commercial opportunity to our expanding pipeline in an area of significant unmet medical need. In addition, our Animal Health business closed the acquisition of Elanco’s aqua business, which establishes Merck as a leader in this important production animal category. 3 years ago, I was honored to step into the role of CEO, and it remains my top priority to uphold and build on Merck’s legacy as a premier science-driven, patient-focused biopharmaceutical company. At that time, I affirmed Merck’s strategic commitment to the research and development of innovative medicines and vaccines as the source of long-term value creation. I communicated our intention to be appropriately aggressive in making the necessary investments to both advance our broad internal pipeline and augment it with the best external science through business development. Since then, we’ve made substantial progress in expanding and evolving our pipeline to the benefit of future patients. We have the potential to bring as many new drugs to market in the next 5 years as we launched over the last 10 years, across a greater number of therapeutic areas and modalities, and with a significant proportion having blockbuster-plus potential. We’ve made tremendous progress building on our past successes, enabling the creation of a sustainable engine that will drive future innovations for patients. And we continue to leverage our scientific prowess to identify new therapeutic targets where we can add value through our expertise in clinical development and regulatory affairs, and our global commercial scale. I’m also proud of the substantial improvements we’ve made across our sustainability focus areas. We’re reaching more people with our medicines and vaccines across a greater number of countries globally than ever before, and doing so with a dedicated, highly talented and diverse employee base. Finally, we’re driving increased innovation and productivity through widespread integration of data, digital and analytics in all areas of our business. Going forward, I’m committed to ensuring our actions remain aligned with our strategy, and I’m confident that we are well positioned to deliver value to patients and shareholders long into the future. Turning to our second quarter results, we achieved strong growth, reflecting continued demand across our broad portfolio, which is reflected in our updated full year guidance, which Caroline will speak to in just a moment. Turning to our broader research efforts and new launches. In cardiometabolic, we’ve seen very favorable reception by physicians, patients and payors to the availability of WINREVAIR. While still early, the U.S. launch has gone very well, in line with our own high expectations. We’ve deployed a focused, customer-centric rare disease model and are pleased to see an increasing number of prescriptions being written and patients obtaining access. We’ve also received a positive CHMP opinion and look forward to potential regulatory approval in Europe in the near future. We continue to see a tremendous opportunity to positively impact the lives of patients living with this devastating disease. In vaccines, we continue to bring forward innovations for both adults and children. We are proud of the recent FDA approval of CAPVAXIVE for the prevention of invasive pneumococcal disease and pneumococcal pneumonia in adults, and the unanimous ACIP recommendation. Given its compelling clinical profile, we expect that CAPVAXIVE will achieve a majority market share in the adult setting. We were also pleased to announce positive topline results from the Phase 2b/3 clinical trial of clesrovimab, our investigational monoclonal antibody for the prevention of RSV in infants, and we are moving swiftly to bring this important option to market. Finally, at our ASCO investor event, we highlighted the significant broadening of our oncology pipeline and the progress we’ve made in building on the success of KEYTRUDA. We presented data for multiple novel candidates, demonstrating our commitment to advancing standards of care and maintaining leadership over the long term. As a company, we remain highly focused and continue to work with urgency to bring forward these innovations, and others, for the patients we serve. In summary, I want to again recognize the tremendous efforts of our global team. Together, we’ve made significant progress across our diverse pipeline and portfolio. As a company, we’ve been advancing science for the benefit of patients for over 130 years, and I’m confident that Merck is well positioned to deliver value to patients, shareholders and to all of our stakeholders well into the future. With that, I’ll turn the call over to Caroline.

Thank you, Rob. Good morning. As Rob noted, we delivered another excellent quarter, with growth driven by robust global demand across our innovative portfolio. These results are enabled by the excellent execution of our teams and reinforce the conviction we have in our science-led strategy. We remain confident in our ability to continue to deliver strong results in the near-term, and are committed to making disciplined investments in compelling science to drive long-term value for patients, customers and shareholders. Now, turning to our second quarter results. Total company revenues were $16.1 billion, an increase of 7%, or 11% excluding the impact of foreign exchange. The following revenue comments will be on an ex-exchange basis. Our Human Health business sustained its momentum with double-digit growth of 11% primarily driven by Oncology. Our Animal Health business also delivered solid performance, with sales increasing 6%, driven by growth in livestock products. Turning to the performance of our key brands. In Oncology, sales of KEYTRUDA grew 21% to $7.3 billion driven by increased uptake from earlier stage cancers and continued strong global demand from metastatic indications. In the U.S., KEYTRUDA grew across a broad range of tumors. In the earlier-stage setting, the increase was largely attributable to uptake from KEYNOTE-671 and KEYNOTE-091 in non-small cell lung cancer. KEYTRUDA has now achieved market leadership in the neoadjuvant and adjuvant settings, building on its existing leadership position as adjuvant therapy. In metastatic disease, we saw continued strong uptake in first-line advanced urothelial cancer following the recent launch of KEYNOTE-A39. KEYTRUDA plus Padcev has now surpassed platinum chemotherapy-based regimens in new patient starts. Outside the U.S., KEYTRUDA growth was driven by increased use in certain earlier stage cancers, including high-risk, early-stage triple negative breast cancer and intermediate-high or high risk renal cell carcinoma as well as continued strong demand from patients with metastatic disease. Inflation-related price increases consistent with market practice in Argentina also contributed to growth. Alliance revenue from Lynparza and Lenvima each grew 4%. WELIREG sales more than doubled to $126 million driven by increased uptake in certain patients with previously treated advanced renal cell carcinoma. Our vaccines portfolio delivered solid growth. GARDASIL sales increased 4% to $2.5 billion. In the U.S., sales benefitted from price as well as demand and favorable CDC purchasing patterns. Outside the U.S., higher demand across many international markets was partially offset by the timing of shipments to China. In pneumococcal, VAXNEUVANCE sales increased 16% to $189 million. Growth was driven by ongoing launches in international markets. As Rob noted, we are very excited by the opportunity to positively impact the lives of adult patients with pulmonary arterial hypertension following the recent U.S. launch of WINREVAIR. Recall, we received FDA approval on March 26th, with the first patients receiving therapy about one month later. Initial patient and physician feedback has been favorable, and we recorded $70 million of sales in the quarter. We estimate that approximately 40% of sales were attributable to doses administered to patients, with the remainder due to distributors building inventory in support of increasing demand. The launch is off to a strong start. As of the end of June, more than 2,000 patients received a prescription for WINREVAIR. Our experience to date with those prescriptions, would suggest that approximately 75% to 80% will receive commercial product. Of those, more than 1,000 patients started treatment in the quarter, largely reflecting prescriptions written in April and May, as it currently takes approximately one month to complete the steps necessary to commence therapy. More than 500 physicians have written at least one prescription, with many looking to gain experience with the product as they prioritize treating the most advanced patients, who are in greatest need of additional therapy. Most prescribers are from either large academic centers or larger private practices. We are pleased that payors are recognizing the value of WINREVAIR and are already providing access to patients. Many payors have established coverage policies consistent with the label or STELLAR study criteria, while others are in the process of developing their policies. In summary, we are pleased with the strong start and look forward to continued progress in enabling access for appropriate patients over the coming months. Our Animal Health business delivered another solid quarter, with sales increasing 6%. Livestock sales grew 11% driven by higher demand for poultry and ruminant products as well as price. Companion animal sales grew 1%, reflecting price partially offset by a reduction in distributor inventory. We are also excited to have launched a long-acting BRAVECTO injectable in a number of international markets during June. I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis. Gross margin was 80.9%, an increase of 4.3 percentage points driven by reduced royalty rates for KEYTRUDA and GARDASIL as well as favorable product mix. Operating expenses decreased to $6.2 billion. There were no significant business development expenses in the quarter, compared with a $10.2 billion charge a year ago. Excluding this charge, operating expenses grew 8%, reflecting strategic investments to realize the promise of our robust early- and late-phase pipeline and support the promotion of our key growth drivers. Other expense was $108 million. Our tax rate was 14.1%. Taken together, earnings per share were $2.28. Now turning to our 2024 non-GAAP guidance. The continued operational strength of our business has enabled us to raise and narrow our full year revenue guidance. We now expect revenue to be between $63.4 and $64.4 billion, an increase of approximately $200 million at the midpoint. Our increased guidance range represents strong year over year revenue growth of 5% to 7%, including an approximate 3 percentage point negative impact from foreign exchange using mid-July rates. Our gross margin assumption remains approximately 81%. We now expect operating expenses to be between $26.8 and $27.6 billion. This range reflects an incremental $1.5 billion of charges related to the one-time cost to acquire EyeBio and ongoing expenses to advance the assets, as well as investments to progress our innovative pipeline. As a reminder, our guidance does not assume additional significant potential business development transactions. Other Expense is expected to be approximately $350 million, which now includes financing costs for the acquisitions of EyeBio and Elanco’s aqua business. Our full year tax rate is now expected to be between 15.5% and 16.5%, which includes an unfavorable impact related to the EyeBio acquisition that is not tax-deductible. We assume approximately 2.54 billion shares outstanding. Taken together, we expect EPS of $7.94 to $8.04. This range includes a negative impact from foreign exchange of more than $0.30, using mid-July rates. Recall our prior guidance range was $8.53 to $8.65. Including the one-time charge of $1.3 billion, or $0.51 per share, related to the acquisition of EyeBio and an estimated $0.09 to advance the assets as well as finance the EyeBio and Elanco aqua business transactions, our prior guidance range would have been $7.93 to $8.05, with a midpoint of $7.99. Our current guidance midpoint remains the same as our higher revenue estimate is being offset by increased investments to support our business. As you consider your models, there are a few items to keep in mind. We look forward to the opportunity to help protect certain adults from invasive pneumococcal disease and pneumococcal pneumonia following the recent FDA approval and ACIP recommendation of CAPVAXIVE. We are now working toward the achievement of certain milestones that will enable commercial uptake. These milestones include publication in the morbidity and mortality weekly report, which typically lags an ACIP recommendation by a few months, as well as obtaining payor coverage and contracting with customers. For GARDASIL, over the past few years we’ve benefitted from extremely strong demand in China, including from the expanded indication for GARDASIL 9 to the 9 to 45 year age cohort in late 2022. In the second quarter however, there was a significant step down in shipments from our distributor and commercialization partner,

Thank you, Caroline. Momentum continued in the second quarter with several clinical and regulatory milestones, as well as progress in our science-led business development strategy. Today, I will speak first to programs in vaccines, then cover oncology, followed by cardiometabolic disease. As Rob noted, last month the FDA approved CAPVAXIVE our 21-valent pneumococcal conjugate vaccine, and we subsequently received a unanimous recommendation from the CDC’s Advisory Committee of Immunization Practices, for its use in certain adult populations. CAPVAXIVE is the first vaccine specifically designed to help protect adults against pneumococcal pneumonia and invasive pneumococcal disease and, as such, provides an important new public health option. It has been designed to address those serotypes responsible for approximately 85% of the incidence of invasive pneumococcal disease in individuals 65 years and older, based on CDC generated surveillance data. The CAPVAXIVE marketing authorization application is also under review by the European Medicines Agency’s Committee for Medicinal Products for Human Use. We continue to evaluate novel approaches to alleviate the burden of infectious disease. Recently, we announced positive topline results for clesrovimab, our investigational respiratory syncytial virus preventative antibody, a single, fixed-dose option to help protect infants from birth through their first full RSV season. In the Phase 2b/3 trial, clesrovimab met its primary efficacy and safety endpoints as well as its secondary endpoint regarding RSV-associated hospitalization. Detailed findings of the study will be presented at an upcoming scientific congress and we plan to file these data with global regulatory authorities. Globally, RSV infection is a leading cause of hospitalization for otherwise healthy infants under one year of age. The historically high surge in incidence in the 2022, 2023 season reinforced the need for more effective preventative measures. Now to oncology. During the investor event at ASCO, we detailed how we have leveraged our foundational position with KEYTRUDA to create a diverse pipeline by executing on our three pillared strategy comprised of immuno-oncology, precision molecular targeting and tissue targeting candidates. This quarter, tangible progress has been made across each of these pillars. In immuno-oncology, we received FDA approval for the combination of KEYTRUDA and chemotherapy for the treatment of primary advanced or recurrent endometrial cancer regardless of mismatch repair status, based on the Phase 3 KEYNOTE-868 study. Data continues to flow from the KEYTRUDA clinical development program including from studies which achieve an overall survival benefit, the gold standard for many oncology trials. We announced an overall survival benefit in high-risk, early-stage triple negative breast cancer based on the KEYNOTE-522 study. KEYTRUDA is the only PD-1 or PD-L1 to date to receive approval for nine earlier stage indications, of which four have now demonstrated a statistically significant overall survival benefit including in non-small cell lung cancer, renal cell carcinoma, cervical cancer and most recently, triple negative breast cancer. We were pleased to announce that KEYNOTE-811 met its overall survival dual primary endpoint for the first line treatment of patients with HER2-positive advanced gastric or gastroesophageal junction adenocarcinoma. These results build on the previously reported positive data that formed the basis for the FDA approval last year. A similar approval was received from the National Medical Products Administration in China this quarter. Also in immuno-oncology, the FDA granted priority review for KEYTRUDA in combination with chemotherapy for the first-line treatment of patients with unresectable advanced or metastatic malignant pleural mesothelioma based on the overall survival benefit demonstrated in the KEYNOTE-483 trial. The FDA has set a target action date of September 25th. KEYTRUDA has now received approval for 40 distinct indications in the U.S. and has demonstrated statistically significant overall survival in 25 trials. Next to precision molecular targeting, we exercised the exclusive development option to advance the program for opevesostat, an oral nonsteroidal inhibitor of CYP11A1, through our collaboration with Orion. Two pivotal Phase 3 trials evaluating opevesostat in combination with hormone replacement therapy for the treatment of certain patients with metastatic prostate cancer, OMAHA-1 and OMAHA-2, are ongoing. Lastly, in the tissue targeting space, The European Medicines Agency’s Committee for Medicinal Products for Human Use adopted a positive opinion recommending approval for KEYTRUDA in combination with Padcev for the first-line treatment of adult patients with unresectable or metastatic urothelial carcinoma. We are also advancing a broad portfolio of diverse antibody-drug conjugates with Kelun-Biotech and Daiichi Sankyo, as well as our own internal programs. Last month, together with Daiichi Sankyo, we announced receipt of a Complete Response Letter from the FDA for the Biologics License Application for patritumab deruxtecan, for the treatment of certain adult patients with locally advanced or metastatic EGFR-mutated non-small cell lung cancer previously treated with two or more systemic therapies. The letter was issued based on findings from an inspection of a third-party manufacturing site. We are working with Daiichi Sankyo to provide appropriate support as they work with the FDA and the manufacturer to address the feedback in a timely manner. Of note, the findings identified in the CRL have no bearing on either ifinatamab deruxtecan nor raludotatug deruxtecan. Turning to cardiometabolic disease, as Caroline indicated there is strong interest from physicians and patients for WINREVAIR in the U.S. Building on this momentum, we were pleased to receive a positive opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use recommending the approval of WINREVAIR as a treatment option for certain patients with pulmonary arterial hypertension. The European Commission’s decision on the marketing authorization application is expected in the third quarter. Finally, we continue to execute on our science-led business development strategy with a focus on seamlessly integrating efforts across our internal pipeline with the best external science through our One Pipeline approach. We recently closed the acquisition of EyeBio that includes Restoret, MK-3000, an investigational, late phase, potentially first-in-class tetravalent, tri-specific Wnt antibody candidate for diabetic macular edema and neovascular age-related macular degeneration, as well as additional preclinical assets targeting retinal diseases. There remains a significant medical need in this space and our teams are eager to work alongside the talented EyeBio team to advance these promising candidates. In closing, over the past 3-plus years, we have successfully built on the solid foundation established by the previous leadership team to assemble one of the strongest pipelines in recent memory. We have diversified in oncology while strengthening and expanding in other therapeutic areas including cardiometabolic, immunology, infectious diseases, neuroscience and vaccines. We have strong momentum and I look forward to providing further updates on our progress. And now I turn the call back to Peter.

Thank you, Dean. Brad, we're ready for Q&A now. And I request that analysts limit themselves to one question today. Thank you.

[Operator Instructions] And our first question will come from Chris Schott of JPMorgan. Your line is open.

Hi, great. Thanks so much for the question and congrats on the progress. I just want to kick off with just a question on GARDASIL dynamics in China. Maybe just a 2-part question here. First, can you quantify what percent of your international sales are coming from China? And just any additional color on what drove the step down in 2Q. I'm trying to get my hands around this. And maybe as part of that, the 2024 guidance update is the potential for shipments to come below the 2024 contracted doses now reflected in that guidance? Or would that represent an incremental headwind to numbers to the extent that played out? Thank you.

Great. Thanks, Chris, and thanks for the question. And I'll maybe take the first part and then ask Caroline to comment on guidance. To your question, China represents about for GARDASIL about 60% to 70% of the numbers. So that kind of gives you a sense of it. But maybe to give some context on what we saw in the quarter and as we look to the full year and where we see things going. So let me start maybe by talking a little bit about the dynamics. The opportunity that exists for GARDASIL in China remains very attractive with more than 120 million eligible females in China yet to be protected against HPV, which represents about 60% to 70% of the eligible population. And I think we all recognize the benefits of protection against HPV-related diseases is clear and importantly, aligns with China's Healthy 2030 initiative. So the underlying support, we continue to believe is there. In addition, we have filed for the male indication, which has been accepted and represents another significant opportunity. So as we think about China, I just want to set the context because I think it's important to understand, we continue to have a very meaningful opportunity in the China market. What's unclear to us and what we're trying to understand is that during the second quarter, we saw a significant step down in shipments from

Thank you, Rob. So Chris, in terms of our guidance, we've assumed a range of scenarios from providing the fully contracted 2024 doses during this year to providing something less than that. If I anchor to the midpoint of our guidance, we have been measured in assuming a scenario that has less than the contracted 2024 GARDASIL doses shipped to China. And even with that, we were able to raise our guidance at the midpoint by $200 million. And that's really as a result of the underlying momentum that we have in the rest of our business, including oncology, with KEYTRUDA and WELIREG. It includes in animal health with the launch of BRAVECTO in injectable, as well as the acquisition of the Elanco aqua business, and we remain confident in our outlook for WINREVAIR and the opportunities to drive patient impact and growth consistent with our high expectations.

Great. Thank you, Chris. Next question, please, Brad.

The next question comes from Umer Raffat of Evercore. Your line is open.

Hi, guys. Thanks for taking my question. Can I just dial down the GARDASIL point just a little more. Rob, I know you mentioned there's an anti-bribery, anticorruption drive going on in China, which started last year. But it also feels like some of the shipment delays are happening, perhaps a few months ahead of potential competition hitting the market as well. So could you speak to whether there's any future contracting happening and whether your long-term price integrity will stay intact on GARDASIL in China? Thank you.

Yes. No, thanks for the question. So everything we're seeing in the marketplace, I would just reiterate, would point to dynamics that we don't see the competition, the future potential competition. And I think you're referring to the fact that we very well could see a 9-valent sometime next year come into the marketplace. So I don't believe from anything we've heard in the marketplace from competitive intelligence as well as what we're hearing from

So what I would add is we have always contemplated that we would have a 9-valent competitor within the Chinese market. As such, the current contracted doses with

Yes. And maybe, Umer, just to give one little bit of color because it's probably worth pointing out, I'm assuming people understand when we talk about the anti-bribery and anticorruption what is happening. And one question that could be there is this has been going on since late last year, and we did not see impacts early on, what's changed and how do we see it evolving. And what I would point out, first of all, one, just reiterate, as we think about what's happening in China around the anti-bribery and anticorruption we very much support those activities because it means we have a fair, open and transparent market. So we're very supportive of what the Chinese government is trying to do there. But as we see how this is impacting us at the CDC, we have seen some dampening in them engaging in scientific discussions and driving for vaccination. We believe some of this could be due to the fact that there was criminal charges brought against a senior scientific representative of one of the local players related to a COVID vaccine that we believe has had a dampening effect overall. And how long this lasts, how it will continue to play out, we'll have to see. But I thought I would provide additional color because I don't want to assume that you all are aware of what really is happening there.

Great. Thanks. Umer. Next question please, Brad.

The next question comes from Carter Gould of Barclays. Your line is open.

Good morning. Thanks for taking the questions. Maybe just switch gears and talk about WINREVAIR a bit. Can you maybe characterize or maybe going to -- in terms of the pace of new starts, do you see that sort of as sustainable or surpassable? And as we think about the sort of that 1-month delayed time line from prescription to start, can you maybe characterize how much of that is sort of payer versus sort of the nurse training driven? And if there's a chance that might evolve? Thank you.

Yes. No, thanks for the question. So to give you a sense of what we've seen as of the end of June, we've had more than 2,000 patients receive a prescription for WINREVAIR. So that's -- obviously, we feel very good about that. And right now, what our experience would tell us is that about 75% to 80% of those receiving a prescription will convert to commercial product. So that gives you a sense of what's happening. Right now, actually, in the quarter, driving the revenue you saw was about 30 -- about 1,000 patients actually on treatment had started treatment. So as we sit here today, you have 1,000 patients who have started treatment in the quarter, the 2,000 total scripts, and we would expect that the 75% to 80% of those 2,000 scripts will ultimately convert to the commercial sales. And so if you look at what's driving that difference, some of that is due to access, but also some of it is due to patient dropout and the fact that you will have some patients who despite getting a script after they go through blood [ph] work and go through the medical evaluations don't qualify. So you have all of those dynamics happening. If you look at the 30 days and specifically that you're referring to, we think that probably the total period from when a person gets a script to when they get their approval for -- from an access perspective is about 2 weeks to 3 weeks. So there is obviously opportunity to improve that. But just remember that in addition to going and getting a blood test, getting your insurance approval, you then have to schedule to have a nurse come to your home to go through the initiation and training around administration -- self-administration of WINREVAIR. So all of those elements are contributing to that time frame, how much of that time over time we'll have to see.

Great. Thank you, Carter. Next question please, Brad.

The next question comes from Tim Anderson of Wolfe Research. Your line is open, sir.

Oh, thank you very much. Just going back to GARDASIL. I know you're reiterating your $11 billion figure, at least $11 billion in 2030. The shape of the curve over that time in China specifically, which is only a part of that number, are there likely to be periods where year-on-year sales actually contract beyond 2024 in the inventory issue? Because it does seem like pricing is really going to be a risk here, the way pricing works with vaccines in China and some of these other offsetting indications like males are going to take time to launch. So it seems like there may be periods there where you could have year-on-year declines in sales over the next, let's say, 5 or 6 years. So if you could just describe the shape of that curve, please?

Yes, sure. So as we look at it, we do expect you will see a flattening of the curve as we see the female indication, be more fully penetrated. Obviously, more to go there, given what we believe is still the addressable population. And then it will ramp back to growth as the male population comes on in full. So that is what we're expecting to happen. And on the pricing point, I think it's just important to understand the way this market works and how we operate in the market. We sell into

Thank you. Tim. Next question, please, Brad.

The next question comes from Steve Scala of TD Cowen. Your line is open.

Thank you. How does clesrovimab compare on hospitalizations to Beyfortus [ph] which has 85% to 90% effectiveness on hospitalizations. I appreciate you're not going to give out data specifics. But for instance, would you say your product is highly competitive. And I'm just curious, how does it achieve longer durability given that it has a shorter half-life than Beyfortus? Thank you.

Yes. So this is Dean. Thanks for the question. As you point out, there is a significant global unmet need both for the healthy and at-risk infants. And as we've said, from the PKPD studies as such, this is something that can be given as a single dose. It's not weight-based, so single dose broadly. And we are very comfortable in relationship to the PKPD in relationship with the half-life in relationship to the affinity that's the prevention, which was studied would cover the entire RSV season, which is 5, 6 months. We did announce the top line. We're not going to get ahead of the public presentation of these that we hope to have at some session in the second half. I do point out that what you highlight is really important, which is the RSV associated hospitalization will be a really important point in relationship to looking at this vaccine versus others, and we are very confident in that profile.

Great. Thank you, Steve. Next question, please, Brad.

The next question comes from Mohit Bansal with Wells Fargo. Your line is open.

Great. Thank you very much for taking my question. And just to trying to understand the long-term growth path for GARDASIL, it seems like and correct me if I'm wrong, a lot of it, it would depend on raising awareness in those Tier 1 to 5 cities and male vaccination. So the question is, of those Tier 1, 2, 5 cities, where do you think there is bigger opportunity because, I mean, going to Tier 4 and 5 could be challenging. And then based on your main vaccination experience in the developed world, how should we think about China in that context? Thank you.

Yes. So if you look across the Tier 1 to 5 cities, we're actually -- when we quote that we're 30% to 40% penetrated, and again, this is just to the females. So this is -- we're only speaking to females right now. We're 30% to 40% penetrated. We're a little bit less penetrated, I think we're around kind of, say, 30th percent in the 4 and 5 Tier cities, and we're around 40% into 1 to 3. So there's not a huge spread between the Tier 1 to 3 and the 4 to 5. So we will continue to focus efforts across all of those areas as we have been to date. And then it's a whole different exercise to activate the male population across that same area, which is, frankly, doesn't -- isn't there today because of the fact that we don't yet have the indication. As you think about how all of this fits into the broader global picture, I think it's also important just to remind everyone that the total penetration of GARDASIL on a global basis to the eligible population is approximately 10%. So our opportunity to activate patients globally as we bring on additional capacity is significant. And as we've talked about in the past, we were going to continue to look to activate the mid adult segment in the private market. We're doing that today in Europe, and that's part of when I comment that we're driving double-digit growth across the rest of the world outside of China. Part of it is we are starting to see uptake in that private market activation, both in Europe and across parts of Latin America and Asia Pacific more broadly. We're going to continue to drive into the low and middle income markets, we see that as a meaningful opportunity going forward, and we are well on our way to getting our costs in a position to be able to compete in that space quite effectively. We will continue to drive that. And then obviously, while China is the best example of where we need to get a male indication to drive for gender-neutral vaccination if we truly want to eliminate cervical cancer and increasingly address the other cancers we know related to people with HPV, including head and neck cancers, which are very prominent, especially if you look across the Asia Pacific area. That is work we will continue to do, but not only in China and across Asia but also across Europe and other parts of the world where there still is a lot of opportunity to drive for gender neutral. And then lastly, Japan is a market where we are continuing to see growth driven by the fact that we've had a renewed NIP program there with both initial NIP and a catch-up phase and longer term opportunities for males there as well. So the opportunities are significant. The context of how we will drive growth has multiple levers for us to look at to do that. And that's why we are confident in the $11 billion number long term. And I think that's important as we shape the overall context of the discussion.

Great. Thanks, Mohit. We have availability to go a bit past 10, so we'll continue on with questions. Next question, please, Brad.

The next question is from Luisa Hector of Berenberg. Your line is open.

Good morning. Thanks for taking my question. I wanted to follow up on RSV antibody, please. Can you confirm that you can file in all major markets this year? And then I just wondered about China in this context, is that a market where you'll be filing soon? And what the opportunity is there? How much education is required to access the private market? Thank you.

Yes. So let me just level set in relationship to clesrovimab, and the RSV antibody. So we have the data, and that data will be presented at some time in the second half of this year as the different plenary sessions of different conferences occur. In relationship to filing, our plan is to file such that it would be available, not for this season, but for the next season within the United States. And so that's the sort of next wave in relationship. So I want to make sure that there's no concept that this is coming out this RSV season. We're targeting next RSV season in relationship to when we're seeking approval and licensure.

Yes. And maybe just on the broader question, could this be an opportunity in China. We are continuing to look at all global markets. And I would point out, as Dean points out, we're looking at the '25, '26 RSV season, so next year. And then beyond that, we will go globally thereafter. And China is a market we are looking at.

Great. Thank you, Luisa. Next question, please, Brad.

The next question comes from Dana Graybosch of Leerink. Your line is open.

Hi, thank you for the question. I want to ask about the recent ODAC that was on periadjuvant [ph] development in lung cancer. I wonder, let's assume FDA takes a hard line on requiring the contribution of the neoadjuvant and adjuvant phases. And you look forward to the current KEYTRUDA development program. Do you see any risk to that hard line to any of your label extension plans? And how are you going back to looking at your development, especially of novel combos in the early stage given that discussion. Thank you.

Thank you very much. So just to provide some context, the recent outcome talked about how much of a PD-1 or a PD-L1 is put in earlier stage, especially in the resectable and there's giving it before the surgery, there's giving it after the surgery, and it's giving it before and after the surgery. And the issue that comes up is in this curative setting, what's the sort of relative benefit risk in, because it's different than in the metastatic. What I would just emphasize is we track and we are in discussions with the FDA in relationship to our clinical trials and such. But I do want to emphasize the ability to show OS especially in the earlier-stage cancers is very difficult. And that's why we always emphasize we have 9 earlier-stage approvals, but we highlight that 4 of them have overall survival, and we, at this point, do not know anyone else who has 4 overall survivals. I do want to point out that in 2 of those over survivals in TNBC and in lung, it is perioperative. So I think the future studies need to consider what the FDA has said, but the FDA has also been very clear that over survival is the gold standard, especially an earlier stage. And as we build our program, we consider both the recent AdCom, but also the recent -- with the continuing interest of the FDA to show contribution of components of a new agent on top of PD-1 and showing overall survival and using platforms that have overall survival to show that when you add something even more, you continue to have increasing benefit in terms of over survival.

Great. Thank you, Dana. Next question, please, Brad.

The next question comes from Akash Tewari of Jefferies. Your line is open.

Hey, thanks so much. And really helpful color on GARDASIL. Just one more here. Looking at the latest

Thank you for the question. So the

Thank you, Akash. Next question, please.

The next question is from Trung Huynh of UBS. Your line is open.

Hi, guys. Thanks for taking my question. Just one on CAPVAXIVE. During the ACIP at the end of June, there was a big discussion on the plus 50 population for the product. They never got around to reviewing it those. So is it possible we can get that looked at in October for a potential updated recommendation?

Thank you so much for bringing that up. There was a lot of discussion. There were a lot of points that the ACIP working group have to vote on. And what they had said is that they were very interested in revisiting this in October. I want to be very clear that we have not had a formal confirmation of that reevaluation. But we did listen to the discussion. And the discussion was very clear that there was an interest in revisiting that in 50 to 64. And the data presented at the June ACIP meeting demonstrated or actually reinforced the ongoing burden of pneumococcal disease, especially in the 50-64 age group, most notably in the ratio of disparities. And I went back to the comments that were made by different individuals, but I focused on some of the points that those who actually vote in the ACIP, one resonated with me when that member said, the burden in 50 to 64-year-old black individuals is comparable to greater than 65 when we're all endorsing universal recommendation for over 65. And that member wondered whether we, which is the ACIP, was missing something too, by not deciding, and that we, the ACIP needed to decide at some point, and I hope we get there pretty soon in part because of the racial and ethnic disparities in the invasive disease. So we are very confident in our data, and we look forward to the ACIP considering this expanded age-based recommendation potentially in October, and we hope to find out at some appropriate time that they're going to formally confirm that reevaluation.

Thanks, Trung. Next question, please, Brad.

The next question is from Louise Chen of Cantor. Your line is open.

Hi, thank you for taking my question here. I wanted to ask you on WINREVAIR, how you think about sales in the third quarter of '24, given some stocking that we saw this quarter? Thank you.

So thank you for the question, Louise. We feel that we're off to a really strong start with WINREVAIR. As we've described, as at the end of the quarter, we have 2,000 patients who now have the prescription for WINREVAIR, of which 75% to 80% historically have been receiving commercial product. So we're confident in what we expect for the profile for WINREVAIR in the third quarter. And we actually expect that the stock level should increase as more patients have prescribed the product. So we remain confident in the outlook for WINREVAIR consistent with the high expectations that we have.

Great. Thank you, Louise. Next question, please, Brad.

The next question comes from Chris Shibutani of Goldman Sachs. Your line is open.

Thank you. On business development, this is typically a question that you get closed in June, you did comment that the company does have an expressed interest in the cardiometabolic space, thinking about second and third generation opportunities potentially in weight management. Can you just provide us with the latest views, house used in terms of appetite, size, therapeutic area in particular noting obesity? Thank you.

Yes. No, Chris, thanks for the question. Obviously, we discussed what we did in the quarter with EyeBio and Elanco aqua business, we're going to continue to follow the same strategy we've been looking at, which is really focusing on the science and looking at how can we best continue to drive where we see a scientific opportunity that matches our portfolio and our skill set to bring that in more on the earlier stage settings and with some mid late but clearly not commercialized products more to build the pipeline. So the continuation of the strategy we've been following. We continue to have the financial flexibility to consider deals of all sizes. But as we've pointed out in the past, we tend to look in that $1 billion to $15 billion, is a good indication of where we would most likely play. And to the obesity question specifically, our view continues to be that if we can find opportunities to look at next-generation plays in that space, those will be things we will continue to evaluate and consider. We don't believe going after today's first generation is the place to play. So it will continue to be looking at second and third generation waves of innovation, whether it be around oral delivery, looking for where there's high tolerability, combinability and or preservation of muscle mass. Those are the areas of focus for us. And if we see something, we continue to have the capacity and the interest to act.

Great. Thank you, Chris. Next question, please, Brad.

The next question is from Terence Flynn of Morgan Stanley. Your line is open, sir.

Great. Thanks for taking the question. Just a two part on WINREVAIR for me. I was just wondering if you think you've already worked through the initial bolus of patients in kind of late line or if there's more to go here for the second half? And then any color on background therapy in terms of the patients that have already started on sotatercept. Thank you.

Yes. Maybe I'll start on the second part and then I'll come back to the first part. So on background therapy, you are seeing the vast majority of patients, as you would expect, are some of the sicker patients or who doctors are putting on the drug first. So there is a large amount on triple therapy or double therapy, and you are seeing uses with prostacyclin. So that is and frankly, consistent with what you would have seen in STELLAR as well. So we are seeing that pretty much as you'd expect. And then over time, we would expect to move into the earlier lines of therapy as we go. As it relates to what we see going forward with the bolus, I would say that we're -- it's not necessary that we think the bolus has been worked through. There's what I would tell you more broadly is we're seeing a continued growth in both the breadth and the depth of prescribers who are prescribing, which were at a little over 500 doctors now prescribing. We think there's probably somewhere in the 800 to 900 range of doctors that are doing the vast majority of prescribing out there. So we still have a ways to go to get to what I would consider to be heavy prescribers of the medicine. And as we see that group continuing to come in and as we continue to see access being granted because the other thing I would point out that, one, we feel very good. We have about a third of all lives are covered today under medical plan with a protocol in place for reimbursement related to WINREVAIR. We expect that to continue to grow because I would remind you that a lot of plans actually put in place just by the rule that they will wait 90 to 120 days-ish to put in place a plan -- a coverage plan after a drug is launched. So you have a lot of plans still yet to come. So because of the fact you're going to see increasing access, you're going to see the fact that we have increasing number of physicians, and we're continuing to see the breadth of patients grow, I think you're going to see continued trend for growth upward.

Great. Thank you, Terence. Next question, please.

The next question comes from Evan Seigerman of BMO Capital Markets. Your line is open.

Hi, guys. Thank you so much for the update today. So give me interest in the schizophrenia space with a number of readouts coming in the second half of the year. Can you characterize what we should expect from your Phase IIb trial of MK-8189? It looks like the study completed back in June. Just wondering when we might do the data on kind of how we should be comping this to the novel developments in the space?

Yes. So this is Dean. Thank you very much for that. Neuroscience question for MK-8189. I should just point out that I believe it was just in May that we published the Phase IIa, and it shows its efficacy and relationship to schizophrenia. But what was also interesting was that there was a reduction in body weight of around 6 pounds over just 4 weeks. And the reason why that's important is that oftentimes, it's not simply how efficacious the drug is. It's whether a patient will stay on and what are the adverse effects that will drive a patient not to take the drug. So that Phase IIa was really important that triggered the Phase IIb. So I'll just lay out that if we see things that are comparable to that Phase IIa and our Phase IIb, we would be eager to see such results.

Great. Thank you, Evan. Brad, one more question, please.

Your final question comes from James Shin of Deutsche Bank. Your line is open, sir.

Morning. Thank you for the question. For WINREVAIR the conversion of the 75% to 80% of scripts into commercial embedded within fiscal year '24 guide? And quickly, is there any time line on the INTerpath filing? Thank you.

So the answer to your first question is yes. And the answer to the second question, I would let Dean address.

So in relationship to our collaboration with Moderna in relationship to the INT [ph], that's something that we're focused on getting the Phase III fully enrolled and to move forward as that's really important in relationship to how we will see the program and how the FDA will see that program.

Great. Thank you, James, and thank you all for your good questions today. As always, the IR team is available for any follow-up questions. Rob, any closing comments that you'd like to make.

No. No. I just want to thank you for your interest this morning. Hopefully, you appreciate the transparency with which we try to bring. But I maybe would close by just bringing back the confidence we see in the business, both in the short term and the long term. Obviously, we'll work through what we see happening with GARDASIL in China. But the fact that we see strengthening, and I would call them, green shoots around GARDASIL everywhere else in the world gives us confidence in the $11 billion for that, as we've talked about. But then beyond that, the growing breadth of our pipeline, obviously, KEYTRUDA continues to deliver meaningfully for the business and for patients. But I am growing in my own excitement for the breadth and depth of the pipeline we have coming. Hopefully, it wasn't lost on everyone that we pointed out, we would be launching more drugs in the next 5 years than we've launched in the last 10 many, many of which will be blockbuster plus opportunities. So the pipeline is maturing, and we're starting to see the green shoots of opportunity that continue to grow our confidence as we look to 2028 into the 2030s and beyond. And that's where we will continue to focus. But we will not take our eye off the short term where we are equally confident in the guidance, we raised revenue today. Obviously, we kind of were neutral on earnings, but that's because of the investment we're making into the business, bringing in even more opportunities like EyeBio. So there's a lot out there, and I just want to leave you with that note of what's driving my confidence and my appreciation for your support of the stock. Thank you.