Q4 2023 Earnings Summary
- Merck expects strong growth in 2024 driven by demand for its key products and anticipated launches of impactful new products such as sotatercept and V116.
- Merck is expanding its antibody-drug conjugate (ADC) platform and plans to acquire Harpoon Therapeutics, enhancing its portfolio with novel T cell engagers and strengthening its position in oncology.
- Merck continues to see significant opportunity for GARDASIL in China, including plans to expand to males, and expects no change in growth potential despite competition, highlighting robust demand and growth prospects for their vaccines division.
- 1. Increasing competition for key products in important markets:* In China, local competitors have introduced HPV vaccines, potentially impacting Merck's GARDASIL sales growth in the region.
- 2. Dependence on new product launches for future growth:* Merck's revenue guidance for 2024 relies on strong launches of new products like sotatercept and V116, which may face regulatory delays or market challenges.
- 3. Ongoing need for significant investments in business development:* The company acknowledges it needs more acquisitions like Prometheus and Acceleron to sustain long-term growth, which could strain financial resources.
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Sotatercept and V116 Launch Expectations
Q: Do you include significant revenues from sotatercept or V116 in your guidance?
A: Caroline Litchfield stated that they are very confident in the underlying momentum of their business and are excited about the potential launches for sotatercept and V116. For sotatercept, they expect a strong launch due to significant clinical data and many patients already identified who can benefit. For V116, they anticipate that its impact will come toward the end of the year after FDA approval, ACIP recommendation, and MMWR publication. -
Margins Outlook Beyond 2024
Q: Is this year's margin guidance reasonable until KEYTRUDA LOE?
A: Caroline Litchfield noted that they expect operating margins to improve in 2024, driven by strong top-line growth and revenue mix due to the roll-off of royalties on KEYTRUDA and GARDASIL. They aim for an operating margin greater than 40% in 2025 while continuing to invest in their expansive pipeline to drive long-term growth. -
Business Development Plans
Q: Will you prioritize deals like Acceleron or Prometheus?
A: Robert Davis affirmed that they are interested in deals similar in size to Prometheus and Acceleron, ranging from $1 billion to $15 billion. They will continue to prioritize business development, including acquisitions and collaborations, to grow their portfolio. -
V116 Market Opportunity
Q: What's the peak opportunity for V116 given a shrinking adult market?
A: Robert Davis believes that V116, offering significant incremental coverage of 83% versus competitors' 50%, will impact catch-up vaccinations and potentially expand to patients 50+ years old. They see the pneumococcal vaccine market growing from $8 billion in 2023 to over $10 billion later in the decade, with the adult segment being 30% of that. They remain confident that V116 will have majority share and be a meaningful contributor. -
RSV Monoclonal Antibody Opportunity
Q: When could your RSV monoclonal antibody be on the market?
A: Dean Li confirmed that their RSV monoclonal antibody is a single-shot, non-weight-based vaccine for the pediatric population, covering a longer season. They are excited about its potential and expect to be in the market in 2025. Robert Davis added that it covers the full prevention season of 5 to 6 months and is differentiated by its fixed dose and low risk of resistance. -
Subcutaneous KEYTRUDA Economics
Q: How will payers accept subcutaneous KEYTRUDA economically?
A: Dean Li emphasized that subcutaneous KEYTRUDA with hyaluronidase is an innovation demanded by the field, especially for earlier-stage cancers. Robert Davis explained that the quality-of-life benefits justify a premium price, but they will price it competitively to drive volume and conversion, considering the context of a generic IV version. If classified under Part D, new catastrophic coverage and caps should lower patient burden, aiding conversion. -
China's HPV Vaccine Market
Q: Does the 2-dose regimen approval in China pose a revenue problem?
A: Robert Davis stated that although there are local competitors, Merck maintains the vast majority of share in the private market. The eligible population in China is over 200 million urban females, with only about 30% vaccinated—leaving around 120-130 million unvaccinated. Caroline Litchfield added that they have submitted data on GARDASIL for males, expecting to expand their market further. -
ADC Platform Expansion
Q: Do you plan to expand your ADC platform or add radiopharmaceuticals?
A: Dean Li affirmed interest in expanding their ADC platform, including new payloads, linkers, and specificity in tissue targeting. They are also exploring peptide drug conjugates and non-chemotherapy payloads. In tissue targeting, they are interested in the IO space, as evidenced by their proposed acquisition with Harpoon, which has assets in tissue targeting and immune engagers. -
Immunology Platform Development
Q: What's the update on your immunology plans after the Prometheus acquisition?
A: Dean Li explained that they are progressing with trials for the TL1A antibody in ulcerative colitis and moving forward with a Crohn's disease trial. TL1A may affect fibrosis, which is important in diseases like Crohn's with strictures. They are also advancing other assets acquired from Prometheus and are interested in other platforms, including exploratory work in cell therapy for immunology. -
TROP2 ADC Strategy in Lung Cancer
Q: Does competitor data affect your TROP2 ADC lung cancer strategy?
A: Dean Li stated that their TROP2 ADC has a manageable adverse effect profile, particularly regarding lung toxicity. They believe TROP2 ADCs will have an impact in lung cancer and are considering how best to combine it—whether with chemo or PD-1 inhibitors. They are mindful of the standard of care (e.g., KEYNOTE-189) and are thinking deeply about advancing TROP2 ADC through different lines of therapy. -
Need for Biomarker Strategy
Q: Will you need a biomarker strategy for TROP2 ADC in lung cancer?
A: Dean Li acknowledged the importance of a biomarker strategy, especially since it's unclear if any ADC can have as broad an impact as KEYNOTE-189 or KEYNOTE-671. To have substantial advantage, they may need to focus on biomarker-selected patient populations. They emphasize the need for a prospective biomarker strategy that is actionable globally. -
V116 ACIP Recommendation and Market Share
Q: What does the potential to reach majority market share with V116 imply about ACIP recommendation?
A: Dean Li mentioned that they will present STRIDE-3 and STRIDE-6 data in March, covering both naive and previously vaccinated individuals aged 50+ and 65+. This data will guide the ACIP decision post-FDA approval. -
MK-5684 in Prostate Cancer
Q: What gives confidence in MK-5684's broad benefit in prostate cancer?
A: Dean Li explained that MK-5684 is upstream in ablating androgen-fueled growth in prostate cancer. They are interested both broadly and in patients with AR LBD mutations, and will advance trials to look at both subpopulations. Statistical analysis specifics are best discussed with clinical teams. -
KEYFORM-007 Trial Interim Analysis
Q: Has there been any interim OS analysis in the KEYFORM-007 trial?
A: Dean Li noted that there's interest in demonstrating that a checkpoint inhibitor could have a meaningful impact in MSS colorectal cancer. Regarding interim analyses, they generally share data when there's information worth sharing. -
Sotatercept Self-Administration Plans
Q: Are there plans for sotatercept self-administration?
A: Dean Li stated they are in conversations with the FDA about the best way to treat patients with sotatercept. He highlighted that an auto-injector is moving quickly through their pipeline, suggesting a move toward self-administration.