Thank you for standing by. Welcome to the Merck & Co. Q2 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. 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, Vice President, Investor Relations. Sir, you may begin.

Thank you, Cedric, and good morning, everyone. Welcome to Merck's second quarter 2023 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 a few items. You will see that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items. You should note that we have excluded these from our non-GAAP results and provide a reconciliation in our press release. I would like to 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 United States 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 and the 2022 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. We continue to make great progress in bringing forward compelling science to help address the world’s most urgent unmet medical needs. Thanks to the unwavering commitment and discipline of our global teams, we’re advancing our innovative pipeline and executing operationally in support of our key growth drivers. Our science-led strategy is generating innovations that save and improve the lives of patients and animals around the world and is delivering strong underlying growth for our business. We’re building on our strong track record and advancing our strategic priorities. We’re progressing our deep pipeline, including sotatercept for which we have completed our FDA submission, and augmenting it with further strategic business development where we can add value by applying our clinical expertise and leveraging our global scale to accelerate broad access to patients. An excellent example of this is our acquisition of Prometheus Biosciences, which we completed in June. We’re now actively integrating the talented team and are moving with speed toward initiation of a Phase 3 clinical trial. The addition of Prometheus significantly strengthens our presence in immunology, an area with substantial unmet medical need and builds on the significant scientific insight we have gained in immuno-oncology. It also brings us a potential first-in-class, best-in-class novel TL1A inhibitor, which provides us the opportunity to transform the standard of care in a patient population suffering from debilitating immune-mediated diseases with a foundation of great science and a legacy of commercial excellence, we’re well-positioned to deliver sustainable value over the long term. Focusing now on the short term. We delivered strong underlying growth, excluding the year-over-year decline in LAGEVRIO sales, led by robust demand across key growth drivers in Oncology and Vaccines. We remain confident in our outlook for the remainder of 2023, which Caroline will address in a moment. Moving to our research organization, our promising late-stage pipeline continues to demonstrate tangible and impactful benefits for patients across a broad range of diseases. In oncology, we highlighted data from our expansive pipeline at ASCO, including for KEYTRUDA in earlier stage lung cancer. The strong results of KEYNOTE-671 for the neoadjuvant and adjuvant treatment of patients with non-small cell lung cancer support our aspiration to fundamentally shift the way cancer is managed by developing treatment regimens in the earlier stage setting, where the potential for better outcomes is higher. Additionally, we’re leveraging KEYTRUDA’s wide-reaching benefit across a range of cancer types to identify and bring forward promising new candidates. At ASCO, we shared positive data for KEYTRUDA in combination with V940, our investigational individualized neoantigen therapy in collaboration with Moderna, in the adjuvant treatment of melanoma. And promising data was also presented by our partner Kelun Biotech for MK-2870, our TROP-2 ADC in non-small cell lung cancer. Each of these novel candidates offer a glimpse into the future of cancer care and the potential to meaningfully improve outcomes for patients. We have also made progress outside of oncology. We’re advancing our population-specific approach to pneumococcal vaccination and are very pleased to have announced positive topline results for our adult vaccine candidate V116. If approved, V116 would be the first pneumococcal conjugate vaccine specifically designed for adults. And Dean will speak to our progress in cardiometabolic disease including positive data we recently presented for our GLP-1/glucagon receptor dual agonist. I commend Dean and his team on the significant work being done to advance our broad pipeline and their commitment to Merck’s purpose. Innovation is the core of who Merck is and it’s what our company strives to achieve every day. We’re grounded in the relentless pursuit of advancing science and raising the bar of innovation to deliver value for patients. With that in mind, I‘d like to speak for a moment about the Inflation Reduction Act. We’ve consistently communicated our support for elements of the law that improve patient affordability and access, such as the Medicare Part D reform, but which do so without damaging the very promising long-term innovation potential of the biopharmaceutical industry. Through the complaint we recently filed in U.S. District Court, Merck is taking a principled stand against the negative long-term impacts of the price negotiation provision of the IRA which we believe amounts to unconstitutional price setting that violates several provisions of the U.S. Constitution. This misguided policy does not strike the right balance between incentivizing investment in innovation and improving affordability and access. That said, we remain committed to working with the U.S. government to find a better approach to improve affordability and access while protecting further drug breakthroughs that benefit patients facing unmet medical needs. We know it is critical that we provide broad access both to our current portfolio of medicines and vaccines, and to our future innovations, in order to serve the greatest number of patients possible, now and for years to come. Our upcoming annual Impact Report will highlight accomplishments across our four priority areas, including access to health, where a portion of employee compensation will now be driven by metrics linked to our progress. In summary, our science-led strategy is working. We’re driving significant scientific, commercial, and operational momentum which we expect will enable strong full-year growth. I want to thank our talented, dedicated and diverse global team for their hard work and commitment to delivering value for patients, shareholders, and all of our stakeholders. With these efforts, I’m confident we will continue to drive sustainable success 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 very strong quarter, with underlying growth driven by demand across our innovative portfolio. These results reflect the profound impact of our medicines and vaccines globally and reinforce the confidence we have in the health of our business, and in the outlook for continued strong underlying growth. Now, turning to our second quarter results. Total company revenues were $15 billion. Excluding the impact from LAGEVRIO and foreign exchange, the business delivered very strong growth of 14%. The remainder of my revenue comments will be on an ex-exchange basis. Our Human Health business sustained its strong momentum. Excluding LAGEVRIO, growth was 17%, driven by Oncology and Vaccines. Sales in our Animal Health business increased 2% across both companion animal and livestock products. Now, turning to the second quarter performance of our key brands. In Oncology, KEYTRUDA grew 21% to $6.3 billion driven by increased utilization from approvals in earlier stage cancers and continued strong global demand from metastatic indications. In the U.S., KEYTRUDA grew across all key tumor types and continues to benefit from usage in earlier-stage cancers including triple negative breast cancer, as well as in certain types of renal cell carcinoma and melanoma. We are encouraged by the positive feedback from healthcare providers and initial uptake of KEYNOTE-091, reflecting the significant impact KEYTRUDA is having on patients with earlier stage non-small cell lung cancer. Outside the U.S., KEYTRUDA is maintaining its leadership in non-small cell lung cancer. Growth was driven by demand in metastatic renal cell carcinoma and certain types of head and neck cancer, as well as in earlier-stage cancers, including high-risk, early-stage triple negative breast cancer and renal cell carcinoma, which saw continued uptake in recently launched markets. Lynparza remains the market-leading PARP inhibitor. Alliance revenue grew 15% driven by increased demand in certain international markets. Lenvima alliance revenue grew 6% due to increased demand for the treatment of certain patients with advanced renal cell carcinoma and endometrial cancer in the U.S., partially offset by lower sales in China. Our vaccines portfolio delivered exceptional growth, led by GARDASIL, which grew 53% to $2.5 billion. Performance was driven by strong global demand, especially in China, where we are benefiting from the expanded indication of GARDASIL 9 for girls and women 9 to 45 years of age. Vaccine sales also benefited from increased uptake of VAXNEUVANCE following the ongoing pediatric launch, particularly in the U.S. In our Hospital Acute Care portfolio, BRIDION sales grew 19%, driven by increased market share among neuromuscular blockade reversal agents in the U.S. Sales in our Animal Health business grew 2%. Livestock sales growth reflects price actions as well as higher demand for swine and poultry products, partially offset by lower demand for ruminant products, due in part to reduced herd sizes. Companion animal growth reflects price actions, including for the BRAVECTO line of products partially offset by supply challenges for certain vaccines. 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 76.6%, an increase of 1.9 percentage points due to favorable product mix, including a benefit from the lower sales of LAGEVRIO. Operating expenses increased to $15.9 billion, including a $10.2 billion one-time charge related to the acquisition of Prometheus. Excluding this charge, operating expenses grew 10%. This growth reflects increased investments in support of near-term opportunities for our in-line portfolio and disciplined investments for the future as we advance our exciting early and late-phase pipeline. Other income was $19 million. Our tax provision was approximately $800 million. As a result of the Prometheus one-time charge, we had a pre-tax loss this quarter. This one-time charge is not tax-deductible. Our tax rate is therefore a negative 18.4%. Taken together, we reported a loss of $2.06 per share, which includes a negative impact of $4.02 per share from the one-time charge related to the Prometheus transaction. Turning now to our 2023 non-GAAP guidance. The underlying strength of our business has enabled us to raise and narrow our full-year revenue guidance. We now expect revenue to be between $58.6 billion and $59.6 billion, an increase of $800 million at the midpoint. This range reflects strong underlying year-over-year revenue growth of 10% to 11%, offset by the expected lower sales of LAGEVRIO, which we continue to estimate to be approximately $1 billion this year, and an approximate 2 percentage point negative impact from foreign exchange using mid-July rates. Our gross margin assumption is unchanged at approximately 77%. We now estimate operating expenses to be between $34 billion and $34.6 billion. This range includes $11.6 billion of acquisition and upfront collaboration research and development expenses associated with Prometheus, Imago, and Kelun. Our guidance does not assume additional significant potential business development transactions. We now assume other expense of approximately $100 million, which includes incremental financing costs related to Prometheus. Our full-year tax rate is expected to be between 30.5% and 31.5%, reflecting an increase due to the Prometheus transaction of approximately 15 percentage points. We continue to assume approximately 2.55 billion shares outstanding. Taken together, we expect EPS of $2.95 to $3.05, which includes the one-time charge for Prometheus and a negative impact from foreign exchange of approximately 5 percentage points versus 2022, using mid-July rates. Recall our prior guidance range was $6.88 to $7, which we noted at the time excluded Prometheus. Had we included the $4.02 one-time charge and an estimated $0.14 to advance the assets and financing costs, our prior guidance range would have been $2.72 to $2.84 with a midpoint of $2.78. Our current guidance midpoint of $3 represents an increase resulting from the strength in our business of approximately $0.24, partially offset by an incremental headwind from foreign exchange of approximately $0.02. Our guidance reflects our continued confidence in the strength of our business driven by our key pillars, enabling us to deliver robust underlying growth while investing in our promising pipeline. As you consider your models, there are a couple of items to keep in mind. KEYTRUDA growth has been exceptional in recent quarters, outperforming our expectations, driven in part by robust uptake of recently launched earlier stage indications. We continue to expect strong year-over-year growth of KEYTRUDA, but not quite at the levels experienced in recent quarters, as a result of lapping launches and the impact of continued pricing headwinds, particularly as we launch new indications in key European markets. In addition, there was a small benefit from wholesaler purchase timing in the U.S. in the second quarter, which we expect to reverse in the third quarter. As we look out to 2024 and beyond, we continue to expect strong growth including the impact of additional approvals. And as a reminder, while we expect the pace of growth of GARDASIL to be higher in 2023 than 2022, the rate of second half growth is anticipated to be below the first half, due in part to the timing of shipments to China. Now turning to capital allocation. We will continue to prioritize investments in our business and growing pipeline to drive near- and long-term growth across our portfolio. We remain committed to our dividend, with the goal of increasing it over time. Business development remains a priority. We remain well positioned to pursue the most compelling external science through value-enhancing business development to augment our pipeline. We continue to expect to execute a modest level of share repurchases this year. To conclude, as we enter the second half of the year, we remain very confident in both the strength of our underlying business, driven by global demand for our innovative medicines and vaccines, and the excellent execution of our dedicated teams across all areas of our business, which will enable us to continue 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, everyone. It’s my pleasure to provide an overview of the significant pipeline progress across multiple therapeutic areas since the first quarter call. Today, I will start with oncology, followed by vaccines and infectious diseases, and finally onto our broader pipeline. Starting with oncology. The development of meaningful treatment options for patients with earlier stage disease, where there is greater prospect to improve outcomes, continues to be an area of significant progress. Last week we announced, the Phase 3 KEYNOTE-756 trial evaluating KEYTRUDA in combination with chemotherapy, in patients with high-risk, early-stage estrogen receptor-positive, HR positive, HER2 negative breast cancer, met one of its dual primary endpoints of pathological complete response following the neoadjuvant part of the neoadjuvant/adjuvant study. This is the first Phase 3 study to demonstrate a positive result for an immunotherapy-based regimen in early-stage breast cancer for this patient population. Further, in women’s cancer and building on our progress in earlier-stages of disease, we announced that the Phase 3 KEYNOTE-A18 trial met one of its primary endpoints of progression-free survival for treatment of newly diagnosed patients with high-risk locally advanced cervical cancer. This is the first study of KEYTRUDA plus chemo-radiotherapy or radiotherapy to show statistically significant and clinically meaningful improvement in progression-free survival. At ASCO, as part of our investor event, we provided an overview of our clinical development pipeline and highlighted relevant data presentations. We have strong momentum as we evaluate the opportunity for KEYTRUDA in earlier stages of disease. Detailed results were presented from the ongoing KEYNOTE-671 study, evaluating KEYTRUDA with platinum doublet chemotherapy as neoadjuvant therapy, followed by adjuvant KEYTRUDA in patients with resectable stage II, IIIA, and IIIB non-small cell lung cancer. Treatment with KEYTRUDA and chemotherapy before surgery, followed by KEYTRUDA monotherapy after surgery, reduced the risk of disease recurrence, progression, or death by 42% versus preoperative chemotherapy alone. Subgroup analysis showed a consistent response regardless of PD-L1 expression, histology, and stage of disease. The PDUFA target action date is October 16. With the approval of KEYNOTE-091, as treatment after surgery and adjuvant chemotherapy, along with the potential approval for KEYNOTE-671 as treatment before and after surgery, KEYTRUDA will provide the optionality to benefit more patients with earlier-stage non-small cell lung cancer. Further data were also presented for KEYNOTE-942 from our Phase 2b study of KEYTRUDA in combination with V940, an investigational individualized neoantigen therapy in collaboration with Moderna. The study showed a 65% reduction in risk of distant metastasis or death in patients with resected stage III / IV melanoma compared to KEYTRUDA alone. We are eager to build upon these findings and have started enrolling patients into the registrational Phase 3 trial for adjuvant treatment of high risk, stage IIB to IV melanoma, with plans to expand the program to additional tumor types, including non-small cell lung cancer. Finally, data presented for MK-2870, our investigational anti-TROP-2 antibody drug conjugate, licensed from Kelun Biotech showed encouraging anti-tumor activity in patients with relapsed or refractory locally advanced or metastatic non-small cell lung cancer, regardless of TROP-2 expression level. We are advancing the broad clinical development program for this candidate with global Phase 3 trials scheduled in lung cancer and additional tumor types. On the regulatory front. Lynparza in combination with abiraterone and prednisone was approved by the FDA for the treatment of adult patients with BRCA-mutated metastatic castration-resistant prostate cancer, an important area of unmet need. In addition, our supplemental Biologics License Application for KEYTRUDA in combination with chemotherapy for patients with locally advanced unresectable or metastatic biliary tract cancer, based on findings from KEYNOTE-966 was accepted by the FDA for review. The PDUFA target action date is February 7, 2024. We also announced new data from KEYNOTE-811, which demonstrated KEYTRUDA in combination with trastuzumab and chemotherapy showed a significant improvement in progression-free survival for the first-line treatment of HER2-positive advanced gastric or gastroesophageal junction adenocarcinoma in patients whose tumors were PD-L1 positive. Merck has discussed these findings with the FDA and is working to update the current indication for KEYTRUDA. In addition, based on the data from the KEYNOTE-811 study, we received a positive opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use. Turning to vaccines and infectious diseases. We have taken a thoughtful and evidence-based approach to establishing a pipeline of pneumococcal vaccine candidates to address the specific needs of different populations, including infants and children, healthy adults, and at-risk subgroups, starting with VAXNEUVANCE and now continuing with V116, our investigational 21-valent pneumococcal conjugate vaccine for adults. V116 has potential to expand disease coverage to help protect against invasive pneumococcal disease in more than 85% of individuals 65 and older, based on 2019 pre-pandemic CDC data. V116 includes eight serotypes not currently covered by approved pneumococcal vaccines, which are responsible for approximately 30% of invasive pneumococcal disease in individuals 65 and older based on the same data. Last week, we announced positive topline results from two Phase 3 trials evaluating V116. The STRIDE-003 trial demonstrated statistically significant immune responses in vaccine-naive adults compared to PCV20 for serotypes common to both vaccines, and the STRIDE-006 trial demonstrated that V116 was immunogenic for all 21 pneumococcal serotypes in the vaccine among adults who previously received a pneumococcal vaccine at least one year prior to the study. We are eager to share these findings and plan to present detailed data at an upcoming medical conference. As Rob noted, if approved, V116 would be the first pneumococcal conjugate vaccine specifically designed to address the serotypes that represent adult pneumococcal disease. In Infectious Diseases, we received FDA approval for PREVYMIS for prophylaxis of cytomegalovirus disease for adult recipients of kidney transplant who are at high risk of CMV infection. Since 2017, PREVYMIS has been an important preventive option for CMV infection and disease in adult seropositive recipients of an allogeneic hematopoietic stem cell transplant and we are pleased to build on the benefits it provides with this new approval. Progress continues in the cardiometabolic space. As Rob mentioned, following the remarkable results from the STELLAR trial, we have completed the submission to the FDA of the biologics license application for sotatercept, for the treatment of adults with pulmonary arterial hypertension. Sotatercept has been granted Breakthrough Therapy designation by the FDA, and we look forward to working with the Agency on its review. We are advancing our broad cardiovascular program. Enrollment in Phase 3 trials for MK-0616, our oral PCSK9 inhibitor, is anticipated to start later this month. In June, at the European Association for the Study of the Liver meeting, positive results were presented from the Phase 2a randomized, active-comparator-controlled, open-label study of efinopegdutide, our investigational GLP-1/glucagon receptor dual agonist, in patients with non-alcoholic fatty liver disease. Based on the findings from this study, efinopegdutide was granted Fast Track Designation by the FDA. We have now started a Phase 2b study to evaluate efficacy and safety in adult patients with pre-cirrhotic NASH. Lastly, the FDA has accepted our resubmission of the New Drug Application for gefapixant, our P2X3 receptor antagonist, for the treatment of refractory or unexplained chronic cough in adults. The PDUFA target action date is December 27, 2023. This follows the positive opinion from the CHMP in the European Union. And finally, as Rob mentioned, this past quarter we were delighted to welcome our new colleagues from Prometheus to Merck. The team is focused on advancing the clinical development program for MK-7240, formerly PRA-023, and leveraging our combined strengths and expertise to better serve patients with immune-mediated diseases. In closing, we have established a regular cadence of late-phase pipeline progress and are proceeding with speed and rigor to advance a promising portfolio of diverse candidates, guided by science and focused on patient needs. Moving forward, we are well positioned to build on this momentum with further regulatory milestones, data readouts, and clinical catalysts across therapeutic areas. And now I turn the call back to Peter.

Thank you, Dean. Cedric, we're ready to take questions. We would appreciate analysts limiting themselves to one question, so we can get to as many as possible today. Thank you.

Thank you. Our first question comes from Geoff Meacham with Bank of America. Your line is open.

Hey, guys. Thanks so much for the question. Rob, you opened up the call with some comments on the IRA suit, so I wanted to ask you a little bit on that. I know it's hard to talk specifics on your strategy. But at a higher level, how important is it to get more companies to join the fray with Merck? And are there any milestones to watch for this fall on the suit beyond the initial 10 drugs being named next month? Thank you.

I appreciate the question, Geoff. Regarding the IRA, our main concern reinforces what we see as a significant obstacle to innovation in the industry, which is the primary reason for our lawsuit. As you mentioned, there are now four drug companies, including Merck, that have filed suits, all making similar arguments, along with a suit from the chamber and the trade group pharma. We believe that the negotiation provision of the IRA violates both the fifth and first amendments of the constitution and is poor policy. This belief prompted our lawsuit. Moving forward, we plan to pursue this case thoroughly, taking it through district court and, if necessary, to the circuit court and ultimately the Supreme Court. That's our strategy. I won't comment on other companies potentially joining us beyond the four currently involved. As for milestones, there aren’t any significant indicators to watch for in the short term. Although there are set dates for initial discovery and hearings, this process will take time. We think it’s very likely that this will be resolved by 2026, and we’re prepared to navigate through various courts as required. However, I don’t expect any major indicators in the near future; this is a long-term effort.

Thanks, Geoff. Next question please, Cedric.

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

Okay. Thanks very much for taking my question. My question is regarding the one-time items. So Caroline, you mentioned regarding China for GARDASIL, as well as KEYTRUDA in the U.S. Would you be able to quantify this a little bit? Just trying to understand the magnitude of how much is impacted by those one-time items. Thank you.

Yes, of course, Mohit. Thank you for the question. So first, talking about GARDASIL, there were no one-time items in the quarter for GARDASIL. We had exceptional growth, that growth was driven by every geography around the world. As we think about the second half of the year though, we do expect shipments to China to be less than they were in the first half of the year and therefore expect the second half of the year growth to be slower than what we've achieved in the first half. For KEYTRUDA, we had a very strong quarter, and that strength was across all indications, including the earlier-stage cancer indications that we’re launching. In the United States, we had sales of $3.9 billion, a growth of 21%. Now that growth included approximately $50 million of benefit because wholesaler buy-in in the second quarter of 2023 was slightly higher than the buy-in we saw in the second quarter of 2022. One of the distributors who has brought in has indicated that they expect to buy out in the third quarter. And the quantum of that buyout has been indicated to be $150 million. That said, we continue to expect strong growth from KEYTRUDA given the current indications we have as well as new launches to come.

Thanks, Mohit. Next question please, Cedric.

Yes. Our next question comes from Louise Chen with Cantor. Your line is open.

Hi. Thank you for taking my questions. I just wanted to ask you on your Prometheus Phase III clinical trial, if you could give more color on the trial designs and then when you'll start those. And then if you'll pursue any other indications outside of IBD. Thank you.

Yeah, so I'll take that. Thank you very much for the question in relationship to the Prometheus. Again, I just want to level set, for inflammatory bowel disease, there's a lot of cycling of anti-cytokines and then other mechanisms. Some of them actually have a black box. So we're very enthusiastic about moving forward with MK-7240 or the TL1A. In relationship to the start of Phase III, the integration is going extremely well. We anticipate to be starting that Phase III this year for ulcerative colitis. And as other data comes in terms of Crohn's disease and other diseases, we'll adjust appropriately. So the start of the Phase III, we are targeting this year and the integration with our colleagues at Prometheus has gone extremely well.

Great. Thanks, Louise. Next question please, Cedric.

Yes. Your next question comes from Seamus Fernandez with Guggenheim Investments. Your line is open.

Great. Thanks. My question actually is on the pneumococcal vaccine, V116. Dean, just hoping that you could clarify for us what statistically significant means and if that actually implies superiority on individual serotypes, superiority on a new metric that perhaps could be an overall superiority to prevent our 20 in the STRIDE-3 results or if this is simply implying that it was statistically significant because it met the non-inferiority margin. Just trying to get a little bit more clarification there. And as a follow-up to that, just wanted to get a better sense of if you believe the data, as it sits today, opens up a meaningful opportunity in international markets where national immunization programs have been reluctant to use pneumococcal vaccine in the adult setting largely because of herd immunity. Thanks.

Yeah. Thank you so much. So I'll just add a top line, just say I am pleased with the data and it gives me confidence in the path forward for V116. It's not just the data that's going to be presented, but this is going to be presented relatively soon at an international conference, but it's also the path to regulatory approval and eventually in the U.S. to ACIP. So this data is strong. And I just would recount that if approved, as you point out, it would be the first adult-specific pneumococcal vaccine and it covers 85% of all pneumococcal disease in adults older than 65. The way that I think about the vaccine is a 21-valent, is that there's 10 shared with PCV20 and there's 11 uniques with PCV20. And as one looks at the data that will be coming out, one would see that in the shared one there, right, the question always in the shared one is, how does it compare with the shared ones with PCV20? And in that situation, it has met the non-inferior boundaries. And so I want to be clear about that. Clearly, the 11 unique serotypes are unique to V116. And so the issue for that is whether they're statistically significant, whether they are clinically meaningful. And I'm confident as we move forward that, that will become clear. It's really hard to talk about superiority or anything like this when you're talking about the 11 unique serotypes. But I just want to step back because you've sort of touched on it a little bit. It validates the strategy of having an age-appropriate serotype coverage. Just to remind everyone, V114 is 15 valent. It has 22F, 33F and has improved immunogenicity for serotype 3. And most importantly, it provides impotence protection within the first year of life. So that's how we thought about that age-appropriate serotype coverage. And then V116 clearly is 21-valent invasive pneumococcal disease and then is driving towards the adult market. But I'll turn it over to Rob to give some view of the prospects commercially, how we see it.

Yeah. No, thank you. Thanks, Dean, and thanks, Seamus, for the question. As Dean just summarized, the data is pretty much about as good as you could expect. So as we sit here today, we're very confident in what this vaccine can offer both in the United States, and we do believe there is a meaningful opportunity for us to take this internationally. So we're going to have to see how it plays out. But as we sit here today, we are excited about this product and ready to launch as soon as we get approval to do so because we do think, as Dean pointed out, we give 85% coverage. That's 30% better than Prevnar 20. It's also better than any other vaccine currently in development. So we think this is an important drug. And when you combine it with what we have with VAXNEUVANCE, our pneumococcal franchise is a significant opportunity that we think could be multibillion as we go out into the future. So this is something we're invested in and we're going to continue to drive aggressively.

Thanks, Seamus. Next question please, Cedric.

Yes. Our next question comes from Akash Tewari with Jefferies Group. Your line is open.

Can you hear me?

Yes.

Okay. Good. So prior to Prometheus, you guys had a pretty limited presence in immunology. Is there any urgency to build out that part of the business externally via BD? And does your team have any view on the FcRn inhibitor class, how large it may end up being over time and how maybe one of those assets could fit strategically with your plans in this category? Thank you.

Thank you for the question, Akash. I'll let Dean address the scientific aspects, but from a business standpoint, we have had a presence in immunology. You may remember that we sold Remicade across Europe and outside the United States, so we have experience in this space. Currently, we do not see a significant commercial opportunity to build upon. We believe that we can utilize our existing capabilities and will invest in this area for success. Dean can also mention that we've been progressing on the scientific front. We completed the Pandion acquisition and are applying insights from immuno-oncology to the immunology sector, along with Prometheus, and we've recruited some exceptional talent in both discovery and development in this field. I believe we are well positioned to grow this business. We are always open to exploring additional business development opportunities, but we don't feel it's necessary to do so to address a gap; rather, it's about how we can enhance our growth.

Yeah. I will just answer scientifically. I mean, what we've done with external partnerships or, I should say, acquisitions with Pandion and Prometheus, it should be very clear how interested we are in those fields. I would also note that each one of them has a lead compound that the focus is but there are also follow-on compounds that come through that will be important. And especially in relationship to both of them, Prometheus and Pandion, we've been blessed by the fact that many of those top talents have chosen to continue with us. So we're very confident in this build. The other point is that separate from those external, there is an internal pipeline that is moving reasonably fast and will become more clear in the clinical space in the next few years as well.

Thanks, Akash. Next question please, Cedric.

Yes. Our next question comes from Chris Schott with JPMorgan. Your line is open.

Hi, thank you. I just wanted to clarify an earlier question and follow up on KEYTRUDA and the expected growth moderation in the second half. In addition to the U.S. wholesaler dynamics, I believe you mentioned some price pressures in the EU. Could you clarify if this is an incremental factor you anticipate in the second half, or is it more a continuation of the pressures you've encountered in the first half of the year? Additionally, regarding business development, the company has been quite active over the past 12 to 24 months. What are the current priorities, and should we expect a slowdown in activity following Prometheus, or are you still moving forward with more transactions? Thank you.

Thank you for the question, Chris. This is Caroline. In terms of the KEYTRUDA expectations for the remainder of the year, as we noted, we do expect continued price pressure in Europe. Two elements to that. The first is as we continue to launch new indications, we will see likely price reductions as we launch those new indications, but we'll see volume growth as we impact more patients and therefore drive revenue. We also do have the impact of some austerity measures or changes in reimbursement measures in some of our European countries, specifically in Germany with the shortening of the AMNOG review timeline as well as in the U.K. with the changes. So as we look forward, we do see that those pricing headwinds sustain, but we are confident in the continued growth that we will drive for KEYTRUDA.

Yes, Chris, regarding business development. As Caroline mentioned earlier, we still have plenty of resources to pursue deals. I'm confident, as is the team, about the advances we are making with our internal projects and past business development efforts. Looking ahead, we have recently announced or will announce several significant Phase III assets in oncology, alongside developments in cardiometabolic and vaccines, plus important upcoming launches. We have discussed V116 data and sotatercept, and I am optimistic about our progress. That said, we remain committed to business development and don't expect any slowdown. Whenever valuable scientific opportunities arise that align with our strategy and present potential for value creation, we are ready to act. We continue to seek deals because, while I feel positive about our current position, we aim to build a sustainable engine for the future. We want to enhance our capabilities stemming from our own discovery and development efforts as well.

Great. Thanks, Chris. Next question please, Cedric.

Yes. Our next question comes from Dana Graybosch with Leerink Partners. Your line is open.

Hello. I have a question about KEYTRUDA. Could you discuss the potential for growth of KEYTRUDA in some of the early-stage markets you've mentioned, including triple-negative breast cancer, renal cell carcinoma, what I believe is stage 2 melanoma, and lung cancer, both in the U.S. and internationally?

Yeah. So I'll start and Caroline can add in if I miss something here. But the high-level answer is we see a lot of room for continued growth both in early-stage cancers, the ones where we have current indications, and importantly, ones that are still coming. So kind of running through the list, triple-negative breast cancer obviously has driven important growth, both in the adjuvant, neoadjuvant, and metastatic setting. It was a big driver of growth last year in the United States. It's a driver of growth in the U.S. this year. That will slow into next year in the U.S., but we're seeing it picking up outside the United States because we're at an earlier phase in the launch across the world. So that will continue to be an important area. And then you saw today, we announced important data in KEYNOTE-756. So that is promising for a future indication that we could potentially see coming down the path in early-stage breast cancer as well. If you look at lung cancer, we continue to expect growth. In fact, we're growing in lung cancer now, both internationally and in the U.S. But importantly, what's going to drive growth longer term is as we continue to penetrate into earlier lines of therapy, obviously we're early in the launch of KEYNOTE-091 in the United States and in certain markets outside the U.S. We're very excited about what KEYNOTE-761 could be and how that will help drive growth in non-small cell lung cancer. And then across RCC, continued good growth in the adjuvant setting, good growth in metastatic. We have what's coming with WELIREG, which is going to continue to broaden our opportunity there. Great growth coming in bladder cancer. I'll stop there, because I could go on but we want to get to other questions. The short answer is a lot of growth, a lot of opportunity with KEYTRUDA. We're going to make a big difference in a lot of patients' lives as we move forward with this drug.

Great. Thanks, Dana. Next question please, Cedric.

Yes. Our next question comes from Tim Anderson with Wolfe Research. Your line is open.

Hi. Thank you. I have a question for Dean on the TROP-2 asset from Kelun. Kind of a key debate and a newer debate has been the role of the TROP-2 biomarker and whether higher expression predicts better response. And it's come into focus more recently, partly because of Astra's top line on their lung trial as well as the Phase III trial they started earlier this year. So I'd like to get your views on the role of this biomarker. And specifically, do you plan to include that as a stratification factor in any of your upcoming Phase III trials?

Thank you for the question about TROP-2 ADCs, particularly in the context of lung cancer. Initially, our focus will be on metastatic cases, and depending on the outcomes, we may explore earlier stages of cancer in a broader sense. A key challenge in the field is whether we can replace KEYNOTE-189. We are all aiming to surpass Merck's established treatment of pembrolizumab plus chemotherapy for first-line metastatic non-small cell lung cancer. Many have attempted this, including us, and it is a significant hurdle. The crucial issue for us is finding a way to achieve this, as demonstrating an ADC's capability to do so would be vital for the field. We are confident in our safety data, but we believe it's essential to maximize the potential of the TROP-2 ADC to offer a substantial benefit over KEYNOTE-189. The role of biomarkers could be significant if the goal is to outdo KEYNOTE-189, given its challenging benchmark.

Great. Thanks, Tim. Next question please, Cedric.

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

Thank you very much. With sotatercept, you acknowledged the progress of the filing completed in the third quarter here. Could you just remind us in terms of what your expectations are for potential label? Any nuances here in particular with regard to secondary endpoints that you think would be meaningful from a commercial standpoint? And then recognizing that you have had some commercial footprint, what should we think about in terms of what's going to be required with the potential launch in 2024? And similarly, with reimbursement for a new product, what should we think in terms of the cadence? We do recognize that physicians have been quite aware and enthusiastic about the data. Thank you.

Yeah. So let me take the science part of that, Chris. In relationship to sotatercept in the STELLAR trial, I think the label in the U.S. will be reasonably clear and follow that of what the STELLAR trial is. I think one of the things that was really important is that when we declared it, we didn't just declare a 6-minute walk. We declared a time to clinical worsening and death, which was really important because I think that creates a different scenario for us than what we had predicted previously in our ability to go-to-market outside of the U.S. So I think that will be in the label within the FDA. But I think where it's important is it may change the speed with which the international markets adopt sotatercept. I hope that gives you that general sense. But as we move this forward, we are looking, and I think we've said previously that we would have the file complete. And I think given the general sense, we thought that we would be launching, at least within the U.S., in the earlier part of 2024.

Yeah, Chris, this is Rob. Regarding our infrastructure support and launch, we are actually very well positioned. I want to remind you that we are currently marketing Adempas outside the United States for the indication of NPAH. Thus, outside the U.S., we will be able to utilize our existing relationships and infrastructure there. We will also be enhancing it. In the United States, this is our first indication, and since it is more of a rare disease, only about 150 specialty centers in the U.S. have prescribed it thus far. This means we are not looking at a large commercial footprint; it is more of a rare disease launch. We have been focused on building our capabilities, especially in medical affairs, science liaisons, and managing the complex journey that patients with these diseases experience alongside their physicians. A lot of work is already in progress. Therefore, I am quite confident that we will be ready for our launch in both the U.S. and internationally. As Dean mentioned, we believe that the global potential for this drug is much larger than what we anticipated when we first made the deal, considering the expected label we will receive. Regarding reimbursement, particularly in the U.S., this drug is well known; the specialists in this area are already familiar with it, and they are waiting for it. We understand there are patients who need it. Therefore, I think we can expect a rapid uptake of the drug in the U.S. For markets outside the U.S., we will need to push for reimbursement, which will take more time. However, in both scenarios, our expectations and confidence regarding the speed of uptake and the total revenue potential for this drug have significantly increased since the deal, due to the impressive results and what we continue to anticipate. We are very optimistic about this.

Great. Thanks, Chris. We have time for a couple more questions please, Cedric.

Yeah. So next question comes from Andrew Baum with Citi. Your line is open.

Thank you. I have a clarification for Dean and a question for Rob. Regarding the previous question about TROP-2, do you plan to stratify or select for TROP-2 expression in your first-line and second-line outcome trials, particularly for patients without actionable genomic mutations? Will you actually stratify or select within the trials focused on that patient cohort? And for Rob, if your attempts to amend the IRA are unsuccessful, would you postpone the launch of your oral PCSK9 until you have outcome data available? Thank you.

Yeah. So let me just take care. I don't want to get too ahead of what's on clinical trials. But as I've emphasized, especially when we're thinking about first-line non-small cell lung cancer, given what we think is a standard of care, we think that it will be important to review that in the setting of a biomarker selection. And I just kind of want to leave it at that. The precise design will come out as the teams actually roll it out. But we think that, as I've said before, the biomarker strategy will be very important for our push of TROP-2 ADCs into lung cancer.

Yeah. On the question of how we think about the oral PCSK9 and would we delay for an outcome study, I think it's too early to make that kind of decision because, frankly, how we think about the outcome study and whether or not, and what kind of label we get before we have an outcome study is still something we’re working through. So we need to understand the label, we need to understand the timing of the outcome study. And until I know all those points, I wouldn’t want to get ahead of where we would be. So more to come. We’ve got some time on that one.

Thank you, Andrew. So last question please, Cedric.

Yes. Our last question comes from Steve Scala with TD Cowen. Your line is open.

Thank you so much. A question for Dean on the KEYTRUDA data in peri-adjuvant ER-positive breast cancer. Should we expect the EFS to read out well before the KEYTRUDA LOE so the commercial opportunity can be realized? How do you think it stacks up to CDK4/6 inhibitors in the adjuvant setting? And is there potential to file for neoadjuvant approval in the meantime? Thank you.

I'll take a moment to provide some context. KEYNOTE-756 is an earlier stage ER-positive HER2-negative trial that focuses on neoadjuvant and adjuvant treatment. Based on the data we've shared in our press release, it is currently indiscernible in relation to an interim analysis. As you know, event-free survival (EFS) is already based on events, and the key question is how quickly we can accumulate these events. We are optimistic about this, but we need to observe how the data evolves since it is event-based. It's worth mentioning that in KEYNOTE-522, which deals with triple-negative breast cancer and also involves early-stage neoadjuvant/adjuvant treatment, we have shown that a positive pathological complete response (path CR) can predict future outcomes, as indicated by EFS. We will need to monitor this data as it progresses.

Great. Thanks, Steve. Rob?

Yeah. Well, I appreciate everyone investing time today with the call. And just really maybe to conclude, I just want to reinforce how confident I am about how well positioned we are to continue to drive value creation for patients, for shareholders and for all of our stakeholders well into the future. And again, I just really want to thank all of my great colleagues across the globe for their substantial efforts. We really do look forward to building on the progress we have in the second half of 2023 and beyond. And hopefully, what you took from our comments today, both prepared and in the Q&A, is our confidence in the progress we're making and really, the difference we can make for patients across an ever-broadening area of therapeutic possibility. So it's exciting what we have in front of us right now. Thank you.

Great. Thank you all.