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Thank you for standing by. Welcome to the Merck & 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. [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, Investor Relations. Sir, 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 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 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 speakers' 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 KEYTRUDA, which continues to benefit more patients with cancer globally, the successful launch of WINREVAIR 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,

Thank you, Rob. Good morning. As Rob noted, we had another year of strong growth, reflecting continued robust demand for our innovative portfolio and demonstrating the importance of our products to the patients we serve. Growth was driven by oncology, Animal Health and new product launches, which more than offset the GARDASIL headwinds in China. These results demonstrate the strength of our business and give us confidence in our outlook. Our commercial and operational execution enables us to deliver value in the short term, while we invest in new innovations and deliver our pipeline for the long-term. Now, turning to our fourth quarter results. Total company revenues were $15.6 billion, an increase of 7%, or 9% 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 sales increasing 8%, driven primarily by Oncology. Our Animal Health business also delivered strong performance, with sales growth of 13%. Turning to the performance of our key brands. In Oncology, sales of KEYTRUDA grew 21% to $7.8 billion, driven by continued robust global demand from metastatic indications and increased uptake from earlier-stage cancers. In the U.S., KEYTRUDA grew across all key tumor types. In metastatic disease, we saw increased uptake for KEYTRUDA in combination with Padcev in first-line, locally advanced urothelial cancer, supported by the strong results from KEYNOTE-A39, as well as KEYTRUDA in combination with chemotherapy in first-line endometrial cancer, based on the compelling data from KEYNOTE-868. In the earlier-stage setting, growth was driven by increased use in resectable non-small cell lung cancer as well as triple negative breast cancer. Outside the U.S., growth was driven by increased uptake in earlier stage cancers, including high-risk, early-stage triple negative breast cancer, as well as continued demand in metastatic disease. Inflation-related price increases consistent with market practice in Argentina also contributed to growth. Our broader oncology portfolio achieved strong growth including WELIREG with sales more than doubling to $160 million driven by increased uptake in certain patients with previously treated advanced renal cell carcinoma in the U.S. In vaccines, GARDASIL sales were $1.6 billion, a decrease of 18%, due to lower demand in China. In the U.S., sales benefitted from price and demand, partially offset by CDC purchasing patterns. Outside the U.S. and China, double digit sales growth was driven by higher overall demand, including the catch-up cohort in Japan. In pneumococcal, CAPVAXIVE sales were $50 million, driven by demand from the retail pharmacy channel. We have made great progress in achieving the commercial milestones necessary to ensure a successful launch and are well positioned to help protect adults from invasive pneumococcal disease. VAXNEUVANCE sales decreased 9%, as growth from launches in international markets was more than offset by competitive pressures in the U.S. In Cardiovascular, we are seeing steady growth from the ongoing launch of WINREVAIR, which contributed $200 million of sales, predominantly in the U.S., where we saw some impact to prescription volumes due to the holiday season. Approximately 1,500 new patients in the U.S. received a prescription, bringing the total number of new patients prescribed to approximately 5,200 since launch. Access remains strong, and our experience continues to indicate that approximately 80% of those patients who receive a prescription will receive commercial product. Notably, we continue to see the vast majority of patients remain on treatment. The breadth of physicians and depth at which they prescribe continues to grow. We are also seeing an increase in the percentage of prescriptions for patients not on prostacyclin background therapy. Outside the U.S., initial launches are progressing well. In summary, we remain confident in our growth expectations for WINREVAIR, as we look forward to positively impacting more patients with pulmonary arterial hypertension. Our Animal Health business delivered another quarter of strong growth, with sales increasing 13%. Livestock growth reflects higher demand for poultry, sales from the recently acquired aqua portfolio from Elanco, and price. Companion animal sales growth reflects price. 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 80.8%, an increase of 3.6 percentage points driven by reduced royalty rates for KEYTRUDA and GARDASIL, as well as favorable product mix. Operating expenses decreased to $7.4 billion. Charges of $700 million related to the license agreements with LaNova and Hansoh Pharma this quarter were lower than the charge of $5.5 billion a year ago related to the collaboration with Daiichi Sankyo. Excluding these charges, operating expenses grew 10%, reflecting strategic investments in support of our robust early- and late-phase pipeline and key growth drivers. Other expense was $5 million. Our tax rate was 16.2%. Taken together, earnings per share were $1.72. Now turning to our 2025 non-GAAP guidance. We expect revenue to be between $64.1 and $65.6 billion, representing growth of 2% to 4%, excluding a negative impact from foreign exchange of approximately 2% using mid-January rates. For GARDASIL in China, our guidance assumes no further shipments at the low-end and less than $1 billion at the high-end. Excluding sales of GARDASIL in China in both 2024 and 2025, and the negative impact from foreign exchange, total company growth is expected to be 7% to 9%. Our gross margin assumption is approximately 82.5%. Operating expenses are assumed to be between $25.4 and $26.4 billion. This range includes a $300 million payment related to the license agreement with LaNova which will be recognized upon completion of the technology transfer for MK-2010. As a reminder, our guidance does not assume additional significant potential business development transactions. Other Expense is expected to be between $300 and $400 million. We assume a full year tax rate between 16.0% and 17.0%. We assume approximately 2.53 billion shares outstanding. Taken together, we expect EPS of $8.88 to $9.03. This range includes approximately $0.09 related to the expected payment to LaNova and a negative impact from foreign exchange of approximately 35 cents, using mid-January rates. As you consider your models, there are a few items to keep in mind. In 2025, we are expecting to see the benefit of a more diverse commercial portfolio with continued strength in Oncology and Animal Health as well as contributions from new product launches. During the first half of the year, we expect roughly flat year-over-year revenues as the headwind in China is offset by high single digit growth across the rest of our business. During the second half, we expect strong year over year growth. Looking at GARDASIL longer-term, while we believe there continues to be a path to the $11 billion, we feel it is prudent to withdraw this target given the uncertain timing of an economic recovery in China. Our growth expectations outside of China for this important vaccine remain unchanged, and we are well-positioned to protect more lives and drive strong growth beyond 2025. For KEYTRUDA, U.S. sales benefitted from approximately $200 million of wholesaler inventory buy-in during the fourth quarter, which we expect to reverse in the first quarter. We expect Medicare Part D redesign to have a negative impact to sales of approximately $400 million, primarily affecting WINREVAIR and our portfolio of small molecule oncology products, including WELIREG, Lynparza, and Lenvima. At the beginning of 2025, we lowered the list prices of the JANUVIA family of products in the U.S. to more closely align them with net prices. The lower list price will reduce the rebate amount Merck pays to Medicaid and as a result, we expect higher net sales for these products in 2025. Now turning to capital allocation, where our strategy remains unchanged. We will prioritize investments in our business to drive near- and long-term growth. We will continue to make disciplined investments in our key growth drivers and expansive pipeline. We remain committed to our dividend, with the goal of continuing to increase it over time. Business development remains a priority and we are well positioned to pursue additional science-driven, value- enhancing transactions. We recently increased our authorization for share repurchases by $10 billion to $12 billion in total. Given the opportunities to invest in our business and augment our pipeline through business development, we expect to maintain a modest level of share repurchases this year. We remain committed to not having excess cash build on our balance sheet and the higher authorization provides flexibility to increase share repurchases, if appropriate. To conclude, we enter 2025 with confidence in the outlook for our business, driven by global demand for our innovative medicines and vaccines, as well as our exceptional pipeline. Our long-standing commitment to leverage leading-edge science to improve the lives of patients has put us in a position of financial and operational strength. With investment in innovation and our ongoing focus on execution, we are well positioned to deliver value to patients, customers and shareholders now and well into the future. With that, I’d now like to turn the call over to Dean.

Thank you, Caroline. Good morning. We are making progress in early and late phase programs across multiple therapeutic areas. Today, I will cover major updates since the last earnings call and provide a summary of highlights from 2024. Starting with cardiometabolic disease. The Phase 3

Thank you, Dean. Shirley, we're now ready for questions. I'd request that analysts limit themselves to one question to get to many questioners as possible. Thank you.

[Operator Instructions] Our first question comes from Umer Raffat with Evercore ISI. Your line is open. You may ask your question.

I realize that there's a lot of folks GARDASIL this morning, but allow me to focus on another growth driver, which tracked a slightly weaker versus consensus, WINREVAIR. And my question really is, as we think about the cadence of growth into '25, there's been some question marks off of some clinical data suggesting maybe the start of the year might have been slightly weaker versus some of the growth expectations. So, do you feel reasonably comfortable that WINREVAIR can grow about 100% year-over-year from the fourth quarter trends into end of '25?

Yes. Umer, thanks for the question. And this is Rob. I would just say, overall, our confidence in WINREVAIR and the potential benefit for patients with PAH, and in turn, its importance for growth are unchanged. And as we look at what's happening in January, actually, we're seeing January returning to the levels we would have expected it to be. And so, as we look at 2025, we do actually see this as a strong growth contributor, and all of the fundamentals we see support that.

Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open. You may ask your question.

Was just wondering if the change in outer-year GARDASIL sales impacts at all how you're thinking about either the size, the type or the cadence of your M&A and business development strategy here. Does this open the door to maybe larger deals now?

Yes. No, thanks for the question. As we look forward, and I think as we've been pretty consistent, the long-term expectations we had at the Company, especially as we get into the LOE period, were never counting on GARDASIL as a growth driver because we always had an expectation that eventually, it would start to plateau as we got through all of the cohorts. And really, we're back to just the birth cohort. So, as we look forward, our expectation for what the post-LOE period looks like is frankly unchanged from what I previously communicated. That said, as we've also communicated, while I feel increasingly confident about that period, we have always said we do believe we need to do more to continue to augment the pipeline we've built. And so, we will continue to do -- to drive business development and we're looking at business development in a full range, always with science being the leading question. But if we can see value and a tie in to our strategy where science intersects, we will be willing to move. And it will still be in that zero to $15 billion range is our sweet spot, but obviously, open to looking at deals. And as we've also said, we're open to commercialized assets as well, if they fit the overall profile I laid out of science and value.

Thank you. Our next question comes from Luisa Hector with Berenberg. Your line is open. You may ask your question.

Perhaps on the oral PCSK9, could you just add a bit more color around what you're targeting for cholesterol lower, whether we might need to see all three trials in-house before you issue a press release? And I think you mentioned before potential combinations. Obviously, you have now optionality on the oral GLP. So just perhaps some color around where you could go with further development.

I'll take that. Thank you very much for the question. This is Dean. Yes, we have three Phase 3s that are ongoing that should be reading out April, July and August of 2025. I would imagine that there is a possibility that given a prominent conference at the end of the year that we would hope to be able to present publicly that data. In relationship to what we're trying to achieve with oral PCSK9, I would just look at what the antibodies can do and just say, we want to achieve a very similar profile of the PCSK9 antibodies in an oral molecule because we believe that there is a great unmet need. 70% of people on STEMS are not at goal. So, we think that this will be an important set of data. And if it reads out positive, we're eager to get this out to the general population just in the United States, but throughout the globe. In terms of combinations, there are a number of combinations that one could do. And I like how you put it because it ends up being something that's really important as a singular drug, but it also is a platform to add other important cardiometabolic assets onto it or compounds that could give even greater cardiovascular outcomes. And so, we will probably be providing that data a little bit later after we've cleared the Phase 3s for the oral PCSK9 inhibitor, enlicitide.

Thank you. This question comes from Mohit Bansal with Wells Fargo. Your line is open. You may ask your question.

Sorry, I joined a little bit late, but if the question -- have you commented on how much inventory

Yes. Mohit, thanks for the question. We have not commented specifically on how much inventory

Thank you. Your next question comes from Daina Graybosch with Leerink Partners. Your line is open. You may ask your question.

I want to ask another one on WINREVAIR and the HYPERION trial. Can you help us understand what outcomes you may be able to provide from that trial given the enrollment and follow-up? Is it possible to hit on the primary? Or any of the trends that you think would support use in these less severe patients, where I think physicians are more worried about the risk of the toxicity?

Thanks for that question. So, if I could just take a step up and then address your HYPERION question directly. So, the aspiration of WINREVAIR was that it would be a first-in-class mechanism action of an active-in-signaling inhibitor, and the molecular design was to address the fundamental human genetic basis. And what we're trying to do is build the evidentiary wall of data that this novel mechanism can change the practice of medicine. So, for STELLAR, that's already got an FDA and a global approval. And it's clear that it increases exercise capacity, increases functional class and decreases risk of clinical worsening.

Thank you. Our next question comes from Geoff Meacham with Citi. Your line is open. You may ask your question.

Sorry to continue to harp on GARDASIL. But just, I guess, given the situation in China, you guys are less willing to predict the timing of recovery. But I guess the question, Rob, is there an inventory threshold that you need to see to start shipping again? I wasn't sure what the -- what kind of the tipping point would be for that. And maybe more broadly, just given the political climate towards vaccines overall, maybe just talk about where this TA falls in your BD or internal R&D priorities, if that's changed at all?

Yes. Geoff, thanks for the comments. So, on China, in particular, there's not a -- I don't want to commit to a specific inventory level. Obviously, we need to see it come down meaningfully from where it is. And I think by taking this action, to stop shipments given the demand that's there, we're going to see that happen. We just have to let it work itself through. Because the economy there still is soft, and that has led to the fact that we are seeing consumer demand continue to be weak. And so, as that situation resolves, I think that will determine the speed with which all of this happens. But I think it's important to just reemphasize, going forward, by rebasing this now out, this is upside. This is not a core to our growth story going forward. And so that is also what we want to make sure people understand. I recognize it's a big change. And we want to do and we will do everything -- we are very committed and positioned well to drive growth in China. But to me, at this point, that will be upside for the Company. And beyond that, the breadth of what we have will drive the growth in oncology, in Animal Health and with our new launches. To the vaccines business more broadly, we continue to believe in vaccines as an important area. Obviously, we have CAPVAXIVE, which is launching as we speak. We have palivizumab, a monoclonal antibody for RSV, that we hope to get approval and see come before the RSV season this year. And then we have other programs in development, including dengue is probably one of the most significant other ones. So, we continue to focus there. I wouldn't say that vaccines is a big focus of our BD strategy primarily because we just haven't seen that many opportunities in the space. But we are continuing to be committed to driving the R&D we're doing in this space going forward and continue to believe there's opportunity for it.

Thank you. Our next question comes from Chris Schott with JPMorgan. Your line is open. You may ask your question.

Another one on GARDASIL. Specific to the long-term guidance, I totally understand the near-term dynamics need to reduce inventory, but the removal of the $11 billion target is -- how much of this is conservatism just given the dynamics of China versus this being a more permanent reset of your view on the Chinese market? I'm trying to get my hands around that. And then as part of that answer, maybe just talk about GARDASEL ex-China. Has there been any change in your longer-term views on the global opportunity ex China for the product?

Yes. No, thanks for the question, Chris. So, as you look at China, as Caroline said in the prepared remarks, we continue to believe there's a path to the $11 billion, but feel it's prudent really to withdraw the target right now because it is uncertain, both the timing of the recovery in China and the extent. That being said, if you look at the underlying dynamics that had always caused us to believe in the growth in China, they're still there. We still have the 100 million-plus women, 120 million women who have yet to be vaccinated in the Tier 1 to 5 cities. We have the male indication where we are the only company with that indication, and we're launching that as we speak. And obviously, that is a population about the same size as female. It's about 200 million if you look in the total potential once we're in that marketplace. So, the opportunity is there. We have the near-term dynamics of the inventory and the near-term dynamics of the economy we need to adjust. That is why I think it's prudent to just say until we see that, because China was a meaningful part of the $11 billion, that's why we made the decision to say, let's pull back on the $11 billion. As we look at every other market around the world, for the rest of the world, our view remains unchanged. And as Caroline pointed out, if you exclude GARDASIL China, we had strong double-digit growth this year, again, in the rest of the world. And as we look forward, if you exclude China, we have strong growth coming in GARDASIL every year, year-on-year. So, nothing has changed in our long-term view. We need to get the China situation figured out. We need to lap this market dynamic and figure out what the actual growth and opportunity is in China. And until we do that, I just want to remove this from the dialogue because by continuing to always come back to this, I feel like we missed so much else we have in the strength of our pipeline and in the growing breadth of our business. That is really the fundamentals of our growth long term, has been and will continue to be. And I want to get people focused there because that's where we're focused.

Thank you. Our next question comes from Tim Anderson with Bank of America. You may ask your question.

A couple of questions on KEYTRUDA. So, I don't think GARDASIL would have impacted the stock as much as it has over the last six months had it not been for these underlying concerns about KEYTRUDA going into the IRA in '28 going off patent at the end of '28. So, my first question is, when can we expect Merck will be in a position to talk about longer-term forward-looking guidance like a lot of other companies that address this period? At the moment, you're saying, you can successfully navigate period, there's no quantification. And I would argue that the latter is needed. And then a second question is near-term KEYTRUDA, investors worried about two competitor readouts in '25 that take on KEYTRUDA head-to-head. The first is Astro's AVIN

Yes. Tim, thanks for the question. And as you pointed out, I recognize the focus is on what happened post the LOE. And we've tried to give direction. I think if you go back to what we said at JPMorgan, we were pretty clear in what we see. And that is if you look at the combination of the business development and the advances in our pipeline across oncology, and this is excluding anything to do with KEYTRUDA. So, these are small molecules, the individualized neoantigen therapy and our ADC portfolio, combined with ophthalmology, with what we see in HIV, with cardiometabolic as -- you can see the whole list there. We have $50 billion-plus of what we see as potential. So, that's why we continue to talk about a hill versus a cliff and that my confidence in that growth trajectory we showed is still there. We have not decided if and when we will give long-term guidance. That's always a two-edge sword, and I think we need to be thoughtful about that. But I also recognize as we move through time, we need to continue to give proof points like what we're seeing with CapEx, like what we're seeing with WINREVAIR and like what we are confident you're going to see as enlicitide and the data for that start to flow through and other products we have been coming down the pipe. Those proof points are what are going to bring confidence over time. But I hear you on the guidance, and we will reflect on that, but we do not have a plan right now to do that.

Yes. This is Dean. I'll just answer in relationship to the Daiichi Sankyo TROP2-ADC that you referenced, we're very comfortable about our TROP2 program. As you might know in our Phase 3 clinical trials, we have 10 ongoing. And so, we're very eager to have those move forward and we're confident in them. In relationship to the VEGF PD-1 that you spoke about, I mean, I would just say combination PD-1 and VEGF independently have been extensively studied by us in combination with Eisai and by other companies as well. And there is a general sense that there are many examples of improved progression-free survival that don't have a pattern of consistently hitting translatability to OS. And I think important work by others suggest that maybe there's increased PFS for PD-1 or PD-L1 VEGF. And that needs to demonstrate OS. But the way that we look at that is that Merck is uniquely positioned to explore this and an advantaged company that could really figure out whether VEGF PD-1 is going to give you OS benefit. And if it does, we have the infrastructure based on 41 indications in 18 tumor types, nine in earlier stage and four with OS, to really rapidly bring this innovation should lead to OS to many patients and many cancers.

Thank you. Our next question comes from Akash Tewari with Jefferies. Your line is open. You may ask your question.

Just kind of building on the last one, your team recently updated your new product guidance for oncology from $20 billion to $25 billion despite the recent failures we've seen from both TIGIT and LAG3. What are the ballpark components of that $25 billion figure, particularly for the TROP2 and the Daiichi ADCs? And Dean, where do you think your TROP2 strategy differs versus Astra with data? Are there any particular biomarker populations where you feel like Merck will win out for both first- and second-line lung?

Akash, thanks for the question. So, as you look at what makes up the $25 billion, to be clear, the IO-IO combinations were never part of that. So those were always supplemental to that. The $25 billion was made up of the antibody drug conjugate programs we have both from Kelun and from Daiichi Sankyo as well as a suite of small molecule deals we did, mostly in target and molecular approaches to cancer. This would be the -- if you will, the LSD1, the CYP11A1, all of those suites of programs we had, the INT, which is the individualized neoantigen therapy which is the partnership we have with Moderna. That made up the numbers. What changed that allowed us to increase our confidence is two things. One, we added the T cell engager from Harpoon, which we're very excited about, both as a stand-alone and potentially in combination as we look at small cell lung cancer. And most importantly, the TROP2 program we have is, we think, going to be even more successful than we originally thought as we continue to see the data read out there. So, we feel very good about that $25-plus billion number. And then separate from that, just to be -- it's important, we still are also very confident in our subcu KEYTRUDA, which as we pointed out at JPMorgan, we will be -- you'll see data readouts. It will be filed this year and hopefully, potentially even launched yet this year. So that is something we continue to also be very confident about. That is not in that $25-plus billion. So that's important. We will be much greater than that in oncology when you look at the totality of what we will have.

Yes. So, I'll just answer as quickly as I possibly can. One of the things I would just be a little bit cautious is when everyone speaks about TROP2 or HER2 ADC that all the molecules are the same. The molecules are quite different. We've already seen that with Catella and in HER2. And the same thing can be true when you look at ADC given the same sort of target. So, we're very confident of our Sac-TMT in the design. But also early on, one of the things that we've always said is it's important to hit the right target population. Chemo plus pembro has a broad impact. And every trial that we do, we ask ourselves what patient population would a Sac-TMT or any ADC will be distinguished from that baseline. In relationship to the other Daiichi Sankyo ones, patritumab, we're very interested in relationship to breast; the B7-H3, we're very interested in small cell lung cancer; CDH6, we're very interested in ovarian; and we're very interested in mixing and matching some of them with T cell engagers. I do just want to make a call-out just in relationship to the design of the Kelun as well as the Daiichi Sankyo, that's really, I think, important molecules that we think if we hit the right patient population and combine them with the right IO strategy, whether it be T cell engagers or PD-1s, that we will have differentiated profiles for patients.

Thank you. Our next question comes from Trung Huynh with UBS. Your line is open. You may ask your question.

I just wanted to ask on the tariff news we saw emerge over the weekend. So, can you perhaps talk about your manufacturing footprint from China, Mexico and Canada? And there were also some discussions on it from the administration on transfer pricing. So, your IP for KEYTRUDA is based out of Ireland. How much of an impact could that have on Merck, if transfer pricing is also targeted?

Thank you for the question, Trung. Our company, like many other companies, has a manufacturing footprint that really enables global supply. We have very low levels of manufacturing happening in China, in Mexico and Canada. So, we'd expect a very immaterial impact from tariffs that were proposed over the weekend for those countries. We will continue to assess the situation based on the different tariffs that are being proposed by the U.S. government, but remain confident in our supply chain and our ability to supply our medicines and vaccines around the world.

Thank you. Our next question comes from Vamil Divan with Guggenheim. Your line is open. You may ask your question.

Maybe just going back to WINREVAIR. Obviously, you have the positive news on the

Yes. So, I'll just take the WINREVAIR question in relationship to the different patient population. So, patients who have pulmonary hypertension can have pulmonary hypertension because they have PAH. And what I would say is my confidence of WINREVAIR as to potentially reshaping the standard of care in the treatment paradigm for PAH is very high, especially since this molecule is designed at the genetic cause of the disease. We are looking at broader implications of that because there are other ways that you can get pulmonary hypertension besides PAH, and we are very eager to see what it does in relationship to a heart failure population. And so, we'll have to see those results. The preclinical data that suggests that's an important experiment for us to do, and we're eager to push that forward, and we're excited to see the results.

And in terms of inventory for WINREVAIR, we have not seen anything unusual. Inventory levels were normal as we exited the year. And in the quarter, we did include an adjustment for the value of the inventory in the channel given the Medicare Part D redesign.

Thank you. Next question comes from Courtney Breen with Bernstein. You may ask your question.

I just wanted to clarify two things. The first was just kind of coming back to GARDASIL, and I know there's been a lot of conversation around that. Can you please kind of provide specificity as to whether there's any risk of write-off as we think about the inventory that's sitting in the channel at

Thank you, Courtney. In terms of GARDASIL inventory, we are, as Rob said, forcing shipments to enable

Thank you. Our last question comes from James Shin with Deutsche Bank. Your line is open. You may ask your question.

Can you hear me?

Yes.

Yes.

Sorry about that, just making sure, technical difficulties. Don't mean to belabor the GARDASIL topic, but there is an upcoming February 2025 ACIP meeting, and the agenda suggests there's some follow-up on last October's dosing questions. Can you level set us on the expectations from this February session? And relative to the long-term guide of GARDASIL, did the U.S. market play any role in that change the guidance or guidance being withdrawn?

Yes. Maybe I'll take the second part of the question, and Dean can take the first part. No, no change. So, as we said earlier, if you exclude China, our expectations for the rest of the world, which would include the U.S., are unchanged. So, there's no change in our long-term belief in GARDASIL from that regard. As it relates to the ACIP and the dosing question, we're going to have to wait and see where it is. We continue to believe that the strength of the clinical data supports the two- and three-dose regimen we have today. It's a very high bar, and I'll let Dean comment maybe on some from the FDA and our perspectives. But I think we need to see where it goes, but we continue to feel very strongly that the dosing is appropriate and do not necessarily see that as a risk in the U.S., but I'll let Dean comment.

Yes. So, the way that I would look at it, ACIP is CDC. The label is FDA. Scheduling dose is the FDA. And I would just say that the dosing schedule of GARDASIL has been rigorously vetted by the FDA. And as you've seen, as we've gone from three doses and two doses, the evidentiary proof that is required by the FDA to change scheduling is high. I should also emphasize that we have been in discussions with the FDA in relationship to how do we create and reach a randomized controlled trial that could change schedules for GARDASIL/GARDASIL-9 in men and in women. And the FDA, as you might imagine, has a very high bar for that proof. Now, I would surmise that the remarkable history of efficacy and safety influences the FDA's high standards and rigorous standards for anyone to want to change the label. I can't speak to what will happen, but I might suspect, especially now, that the deep attention and expertise of the FDA on dosing and scheduling might be important to the CDC as they decide how -- decide on this question of creating a schedule that is outside of the label from the FDA.

Great. Thanks, Dean. Thanks, James. Rob, a couple of comments to close the call?

Yes. Well, thank you all for your time on the call. Just maybe to end the call, I just want to reinforce our confidence in the long term. I recognize the GARDA situation in China is a change. I think the right decision we're making now to put this behind us to resolve this inventory situation and move forward. But putting -- that's a short-term event, putting it in context of the long term of this company. As we said, we see strong growth in the second half of the year eating into 2026 into 2027. And importantly, as we look to the period beyond, the strength of the pipeline, the diversity of the pipeline, the progress of the pipeline is profound. And I really believe that once we fully understand all of that, and I recognize it's going to take proof points in time, you'll understand why we have the confidence we do in the long term. And we are committed to demonstrating that, and most importantly, to continue to advance that pipeline for the patients we serve. So, with that, I'll close the call. Thank you.