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. 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, Zhifei, over the past couple of weeks, in particular regarding their most recent financial disclosure and working capital levels, we’ve made the decision to take a new approach and temporarily pause shipments to China beginning this month and through at least mid-year. We believe taking this action now will facilitate a more rapid reduction of inventory and help support the financial position of our important and valued partner. Importantly, we believe China still represents a significant long-term opportunity for GARDASIL given the large number of females, and now males with our recent approval, that are not yet immunized, and we remain both committed and well-positioned to maximize this potential for the long-term. Outside of China, demand for GARDASIL remains robust, and we expect strong growth this year and well into the future. Our overall business remains very healthy. In fact, irrespective of the performance of GARDASIL in China, we expect the Company to deliver strong growth in the second half of this year, as well as in both 2026 and 2027. Longer-term, our confidence in our ability to successfully navigate the KEYTRUDA LOE period is unchanged, which is based on the strength of our pipeline, the excitement we have for our ongoing and upcoming launches of innovative new products, and the commercial opportunity they represent. Next, I’d like to turn to our research efforts. We’re making remarkable progress across multiple therapeutic areas in our late-phase pipeline. In the fourth quarter, we announced FDA acceptance for our filing of clesrovimab, our long-acting monoclonal antibody to protect infants from RSV disease; and positive topline results from three programs, including for subcutaneous pembrolizumab; for islatravir in combination with doravirine in the treatment of HIV; and for WINREVAIR from the ZENITH trial. We also executed value-enhancing business development that is both science-led and portfolio informed. We licensed promising investigational assets including in oncology with a clinical-stage anti-PD-1/VEGF bispecific antibody from LaNova, and in cardiometabolic, with an oral GLP-1 receptor agonist candidate from Hansoh. Merck is anchored today by a robust set of commercial products addressing important medical needs, and we’re rapidly moving to a future with a much more diversified portfolio. We have amassed an expansive pipeline, with tremendous potential to further advance the practice of medicine around the world. You can expect a steady cadence of data readouts in the coming months and years leading to potential new launches as we seek to bring much needed innovation to patients. In fact, we have 20 potential new growth drivers, almost all of which have blockbuster opportunity. These include WINREVAIR and CAPVAXIVE, our adult pneumococcal conjugate vaccine which is now launching in the U.S., as well as many innovative assets currently in Phase 3 development. Over the past three years, we have nearly tripled the number of assets in late-phase development across a broad range of therapeutic areas and modalities. Based on the significant progress, we see over $50 billion of potential revenue opportunity from these programs. We are positioned for long-term leadership in oncology as we continue to diversify and deepen our pipeline. We are excited about cardiometabolic as a future area of growth, including with our oral PCSK9 inhibitor program where we have important Phase 3 readouts this year. In immunology, HIV and ophthalmology, we have opportunities to bring forward first-in-class and/or best-in-class, blockbuster medicines. Further, we expect to benefit from promising programs in our infectious disease and vaccines pipeline, strong growth in our Animal Health business, and many early-phase programs that will enter Phase 2 over the next few years. And we remain well positioned to pursue additional science-driven value-creating business development. In summary, I have increased confidence in our long-term future. While the rapid change in the Chinese market for GARDASIL has caused a short-term headwind for our company, our overall business is healthy and growing. We remain strongly positioned to successfully navigate the KEYTRUDA LOE period, as we continue to deliver on our purpose of saving and improving lives. I want to again recognize the commitment and efforts of our global teams. Together, we remain focused on delivering and sustaining value for patients, shareholders and for all of our stakeholders today and well into the future. With that, I’ll turn the call over to Caroline.

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 on 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 ZENITH trial evaluating WINREVAIR in patients with pulmonary arterial hypertension, who are at high risk, demonstrated a statistically significant reduction in the risk of morbidity or mortality events compared to placebo, both on top of background PAH therapy. Based on the overwhelming efficacy, the trial was stopped so that all participants have the option to receive WINREVAIR. Detailed results will be presented at the American College of Cardiology’s ACC.25 conference in late March. Following a review of the totality of efficacy data from the WINREVAIR clinical program, including positive results from the ZENITH trial, the External Steering Committee and Merck unanimously concluded that the Phase 3 HYPERION study should stop early. We discussed this with the FDA and have notified study investigators. Based on the strong clinical benefit WINREVAIR demonstrated in the STELLAR and ZENITH trials, it was determined that the HYPERION study had lost clinical equipoise. The study will remain blinded, and all participants will have the option to receive WINREVAIR as part of the open-label, long-term extension study, SOTERIA. We anticipate data will be available later this year, and we will present at a future medical congress. This reinforces growing recognition that WINREVAIR, the first and only activin signaling inhibitor for the treatment of PAH, has the potential to change the practice of medicine and be transformational for patients with this progressive and debilitating disease. WINREVAIR has now been approved in more than 35 countries globally. Recently, we submitted an application for approval to regulatory authorities in Japan. More broadly in the cardiometabolic space, in December, we entered a licensing agreement with Hansoh Pharma for an investigational preclinical oral small molecule GLP-1 receptor agonist, now known as MK-4082, which will be entering the clinic this year. With our extensive experience in incretin biology, we are well-positioned to advance oral small molecule GLP-1 agonist-containing combinations with next-generation agents for weight loss, as well as those that target cardiometabolic disease. Next, infectious diseases. The FDA has set a target action date of June 10th for clesrovimab, our prophylactic long-acting monoclonal antibody for infants entering their first RSV season, when the risk of serious illness is greatest. If approved, clesrovimab would be the first and only single dose passive immunization for infants irrespective of weight with the potential to protect babies for the full RSV season. Turning to HIV. We announced topline results from the two pivotal Phase 3 trials evaluating the investigational, once-daily, oral combination of doravirine and islatravir in adults with HIV infection that is virologically suppressed on different antiretroviral therapy regimens. Detailed findings from these studies will be presented at an upcoming scientific congress, and we plan to submit the data as part of a package for regulatory approval. Islatravir, a potentially first-in-class Nucleoside Reverse Transcriptase Translocation Inhibitor, is also being evaluated in multiple late-phase clinical trials in combination with other antiretroviral therapies for the treatment of HIV. This includes ongoing Phase 3 trials in combination with Gilead’s capsid inhibitor, lenacapavir, as a once-weekly oral treatment option. We are also evaluating MK-8527, another investigational NRTTI candidate, as a potentially important once-monthly oral option for pre-exposure prophylaxis which we expect to advance to Phase 3 this year. Next to vaccines. The National Medical Products Administration of China approved GARDASIL to help prevent certain HPV-related cancers and diseases in males 9 to 26 years old. In November, at the International Papillomavirus Conference, we presented new clinical and real-world data for GARDASIL 9 that examined the prevalence of oral HPV infection, the burden of HPV-related head and neck cancers, as well as rates of HPV infection in females. This evidence reinforces the importance of gender-neutral HPV vaccination with GARDASIL in adults up to age 45. More recently, the American Cancer Society’s annual report on cancer facts and trends noted an increase in cervical cancer diagnosis rates in females ages 30 to 44. There remains a need to protect more individuals from HPV-related cancers. In Europe, the Committee for Medicinal Products for Human Use of the European Medicines Agency recommended the approval of CAPVAXIVE for active immunization for the prevention of invasive disease and pneumonia caused by Streptococcus pneumoniae in adults. Moving to oncology. Our Phase 3 trial evaluating the investigational subcutaneous fixed-dose combination of pembrolizumab and berahyaluronidase alfa, in combination with chemotherapy, compared to intravenous KEYTRUDA with chemotherapy, met its dual primary pharmacokinetic parameter endpoints of noninferiority. If approved, this route of administration would be a meaningful option for patients. We plan to share detailed findings of the study at an upcoming scientific congress. Consistent with our growing, and increasingly diverse, pipeline of oncology candidates, more than twenty abstracts from studies evaluating treatment options for a range of hematologic malignancies were presented at the American Society of Hematology Annual Meeting. This included early results from the Phase 2 waveLINE-007 study evaluating zilovertamab vedotin, an investigational antibody-drug conjugate targeting ROR1, in patients with diffuse large B-cell lymphoma. On the regulatory front, in China, we received three approvals for KEYTRUDA-based regimens including a neoadjuvant/adjuvant treatment regimen for patients with resectable non-small cell lung cancer based on KEYNOTE-671, the treatment of certain types of locally advanced cervical cancer based on KEYNOTE-A18, and first-line treatment of patients with urothelial carcinoma, in combination with Padcev based on KEYNOTE- A39. In addition, WELIREG was approved for the treatment of adult patients with VHL-associated renal cell carcinoma based on LITESPARK-004. In Japan, The Ministry of Health, Labour and Welfare approved two KEYTRUDA-based regimens including the treatment of advanced cervical cancer based on KEYNOTE-A18 and for primary advanced or recurrent endometrial carcinoma based on KEYNOTE-868. In the U.S., the FDA granted Breakthrough Therapy Designation to sac-TMT, our investigational TROP-2 directed antibody-drug conjugate, for the treatment of certain patients with previously treated advanced non-small cell lung cancer. Sac-TMT is being developed through a collaboration with Kelun-Biotech with ten ongoing Phase 3 studies across multiple solid tumors. Finally, in December, we completed an exclusive global license agreement with LaNova Medicines for a novel investigational PD-1/VEGF bispecific antibody, now known as MK-2010. We plan to explore the full potential of MK-2010 across multiple tumor types in a global patient population. As Rob mentioned, 2024 was marked by significant pipeline progress. Greater than 20 Phase 3 studies were initiated spanning cardiometabolic, immunology, infectious diseases, oncology, ophthalmology and vaccines. We received more than 25 regulatory approvals in major regions, including for WINREVAIR and CAPVAXIVE. At the same time, we successfully executed on our one pipeline strategy, by leveraging our clinical expertise and business development capabilities to identify and secure external opportunities where science, medical need and value intersected to expand, complement and diversify the pipeline. Acquisitions of Harpoon and EyeBio as well as an asset from Curon added important new biologic candidates in oncology, ophthalmology and immunology, respectively. License agreements with Hansoh and LaNova secured rights to potentially important candidates for cardiometabolic disease and oncology. Notable milestones to look out for in 2025 include detailed results from the ZENITH trial for islatravir-based regimens in HIV and in oncology for subcutaneous pembrolizumab as well as KEYTRUDA in earlier-stage head and neck squamous cell carcinoma are all scheduled to be presented at upcoming medical meetings. Results from three Phase 3 registration-enabling studies evaluating our oral PCSK9 inhibitor candidate enlicitide for the treatment of hypercholesterolemia are anticipated, and the primary completion date of the Phase 2 CADENCE study, evaluating WINREVAIR in pulmonary hypertension due to left heart disease, is scheduled for the Fall. I look forward to providing further updates on our pipeline progress. And now, I will turn the call back to Peter.

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.

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 focus on GARDASIL this morning, but allow me to focus on another growth driver, which tracked 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 the 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.

I 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 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 now have 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 in 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 have you commented on how much inventory Zhifei had at this point with GARDASIL? Would the decision to stop shipments for the first half take care of the inventory? I'm just trying to understand the demand situation in China as well.

Yes, Mohit, thank you for your question. We haven't specified how much inventory Zhifei currently has since they are a public company and it's best for them to comment on that. The key point here is that we aim to increase the drawdown of that inventory. We plan to withhold shipments until midyear or longer, depending on how inventory levels change, allowing the existing demand to help absorb Zhifei's inventory and enhance their financial position and working capital. If we can resolve the inventory situation, we believe we can establish a more normal market dynamic where, coupled with underlying demand and the upcoming male indication, growth can resume. The pace at which we reduce the inventory remains to be seen. Additionally, I want to provide context: GARDASIL in China now constitutes about 1% of our total revenue. This is important to note, as we expect strong growth for the overall Merck business in the latter half of this year and into 2026 and 2027 as we navigate the GARDASIL situation in China. At that point, anything that happens in China regarding GARDASIL would be an upside, which is why we decided to reset our approach, acknowledging the shift from our previous direction.

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?

Thank you for your question. I’d like to address your inquiry regarding HYPERION directly. WINREVAIR aims to be a first-in-class mechanism as an active-in-signaling inhibitor, designed to target the fundamental genetic basis in humans. Our goal is to gather substantial data demonstrating how this novel mechanism can transform medical practice. For STELLAR, which has already received FDA and global approval, it’s evident that it enhances exercise capacity, improves functional class, and reduces the risk of clinical deterioration. ZENITH holds significance as it is, to my knowledge, the first PAH trial focused on hard outcomes, and notably, it is the first PAH trial stopped early due to overwhelming efficacy. I believe that during the 2025 ACC, people will closely examine this data alongside lung transplantation, hospitalization, and mortality, as well as how soon these benefits manifest after treatment. Now, regarding HYPERION, it involves a patient population similar to STELLAR and represents an earlier application of WINREVAIR. The trial was stopped early, remaining blinded; however, the investigators assessed the data and concluded it was not the preferred treatment option. We await the unblinded data for further updates. The ZENITH updates are set for the upcoming ACC, and we have ongoing safety data from these Phase 3 trials and subsequent rollover patients into SOTERIA. Our long-term safety experience has been well within the established label, which indicates 4% in treated patients and 1% in placebo, suggesting a net difference of about 3%. We are operating within those parameters, and as we obtain more data, it will be made public this year through presentations and publications by our investigators. Our goal of transforming PAH treatment continues to gain traction. To my knowledge, there are no other active-in-signaling inhibitors currently in clinical development, and we are also actively investigating other types of pulmonary hypertension beyond PAH.

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

Sorry to keep discussing GARDASIL. Given the situation in China, it seems you are less inclined to predict when recovery might happen. My question, Rob, is whether there is an inventory level that needs to be reached before you can start shipping again. I'm curious about what the tipping point would be for that. Additionally, considering the current political landscape regarding vaccines, could you discuss how this therapeutic area fits into your business development or internal research and development priorities, and if there have been any changes in that regard?

Yes, Geoff, thank you for your comments. Regarding China, I don't want to specify a particular inventory level, but we definitely need to see a significant reduction from the current levels. By halting shipments due to demand, we expect to see this reduction happen. We must allow time for the situation to resolve itself. The economy remains soft, which continues to weaken consumer demand. As that situation improves, it will influence how quickly we can address these issues. I want to emphasize that by adjusting our outlook now, this potential improvement is not central to our growth strategy moving forward. I recognize this shift is significant, but we are committed and well-positioned to foster growth in China, which I view as an additional opportunity for the company. Moreover, our diverse portfolio will drive growth in oncology, Animal Health, and new product launches. Regarding the broader vaccines business, we still see vaccines as a critical area. We are currently launching CAPVAXIVE and are hopeful about getting approval for palivizumab, a monoclonal antibody for RSV, before the upcoming RSV season. We have other important programs in development, including one for dengue. We remain focused on this area; however, vaccines are not a primary focus of our business development strategy due to a lack of available opportunities. Nonetheless, we are dedicated to advancing our research and development in this field and continue to believe in its potential.

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

Another question about GARDASIL. Regarding the long-term guidance, I understand the need to reduce inventory in the near term, but the removal of the $11 billion target raises a question. How much of this reflects a cautious approach due to the current dynamics in China, and how much indicates a more fundamental change in your perspective on the Chinese market? I'm trying to get clarity on that. Additionally, could you discuss GARDASIL outside of China? Have your long-term views on the global opportunity for the product, excluding China, changed at all?

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 the period; there's no quantification. And I would argue that the latter is needed. And then a second question is near-term KEYTRUDA, investors are worried about two competitor readouts in '25 that take on KEYTRUDA head-to-head. The first is Astro's AVINZA trial with TROP2. The second is the SUMMIT data with the PD-1 VEGF. It would be great to get any perspective from Dean on these two readouts. What's the realistic worst-case scenario?

Thank you for your question, Tim. I understand that the focus is on what occurred after the loss of exclusivity. We have aimed to provide guidance on this matter. Referring back to our presentation at JPMorgan, we clearly outlined our perspective. We believe that if we analyze the combination of our business development and the progress in our oncology pipeline, excluding anything related to KEYTRUDA, we see significant opportunities with small molecules, individualized neoantigen therapy, and our ADC portfolio, along with advancements in ophthalmology, HIV, and cardiometabolic areas, totaling over $50 billion in potential. This underlines our view of a gradual growth path rather than a sharp decline. My confidence in this growth trajectory remains strong. We have yet to determine when we will offer long-term guidance, as it's a delicate matter that requires careful consideration. Nonetheless, I acknowledge the importance of providing tangible evidence over time, such as our capital expenditures and developments with WINREVAIR, as well as the forthcoming data on enlicitide and other upcoming products. These indicators will help build confidence moving forward. I hear your concerns regarding guidance, and while we will consider this, we currently do not have plans to provide it at this time.

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. Your 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?

Thank you for your question, Akash. To clarify, the $25 billion figure does not include the IO-IO combinations, which were always intended as supplemental. This amount is comprised of our antibody drug conjugate programs from both Kelun and Daiichi Sankyo, as well as several small molecule deals primarily focused on targeting and molecular approaches to cancer. This includes programs like LSD1 and CYP11A1, as well as the individual neoantigen therapy program we have in partnership with Moderna. Our confidence in this estimate has increased due to two key factors: first, the addition of the T cell engager from Harpoon, which we believe has great potential both as a standalone treatment and in combination for small cell lung cancer; and second, we expect the TROP2 program to perform even better than our initial expectations based on ongoing data readouts. We are very optimistic about exceeding the $25 billion figure. Additionally, it is crucial to mention that we maintain strong confidence in our subcutaneous KEYTRUDA, which we will present data on and file this year, with a potential launch also this year. However, that will not be included in the $25 billion. Overall, we anticipate significantly greater growth in oncology when considering all our offerings.

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. Your 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 ZENITH and HYPERION. Just curious if it's changed in any way your expectations for Cadence. I think that's maybe underappreciated event later this year and other different indications. But just, I guess, Dean, curious if there's any read-through we should be mean from the success you're having there. And then tied to that, if you can just comment if there's any inventory fluctuation. I think it's impacted the sales number the first couple of quarters. So just want to understand if it impacted WINREVAIR this past quarter.

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 Zhifei and the age of the inventory? And then the second question around Part D redesign. I know you just mentioned specifically about WINREVAIR and kind of the channels' dynamics there. But as you're thinking about 2025 and some of the guidance that peer companies are beginning to give, and we've seen different ranges and different interpretations, can you just give some context as to what you've baked in, in terms of volume relative to price as we think about the $400 million guidance?

In terms of GARDASIL inventory, we are, as Rob said, forcing shipments to enable Zhifei to utilize that inventory in the market, and that's inventory that our partner owns. So, the risk for write-off of inventory from Merck is extremely low. In terms of Part D redesign, what you have are the two dynamics. The first is the price impact. And as noted in our prepared remarks, that predominantly impacts WINREVAIR as well as our oral oncology agents. That think will be partially offset with some volume benefit as patients stay on therapy. But the majority of the $400 million that we noted is really the pricing impact.

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. I view ACIP as tied to the CDC and the label as linked to the FDA. The dosing schedule is determined by the FDA, and I want to highlight that the dosing schedule for GARDASIL has undergone extensive review by the FDA. As we transitioned from three doses to two doses, the FDA requires substantial evidence to make changes to the schedule. Additionally, we have engaged in discussions with the FDA to explore the possibility of conducting a randomized controlled trial that could modify the schedules for GARDASIL and GARDASIL-9 for both men and women. The FDA maintains strict standards for this proof. I believe the strong track record of efficacy and safety may impact the FDA's stringent criteria for anyone looking to alter the label. While I can't predict outcomes, it seems likely that the FDA's careful focus on dosing and scheduling will be significant for the CDC as they consider creating a schedule that deviates from the FDA's label.

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

Thank you all for your time on the call. To conclude, I want to emphasize our long-term confidence. I acknowledge that the GARDASIL situation in China is a change, but I believe we are making the right decision to address this inventory issue and move forward. This is a short-term event when viewed in the context of our company’s long-term outlook. We anticipate strong growth in the latter half of the year, extending into 2026 and 2027. Furthermore, as we look beyond that, the strength, diversity, and progress of our pipeline are significant. I truly believe that once we fully understand these factors, and while it will take time to obtain proof points, you will see why we have such confidence in our long-term prospects. We are dedicated to demonstrating this and to advancing our pipeline for the patients we serve. Thank you.

Thank you. This does conclude today's conference. We thank you for your participation. At this time, you may disconnect your lines.