Merck & Co., Inc. (MRK) September 2026 Conference Transcript

Thank you for joining us for the afternoon session today. We have Team Merck with us. So with us, we have Carolyn Lishfield, the CFO of the company. We have Dean Lee, the head of R&D, president of Merck Research and everything. So thank you very much for joining us today.

Thank you for having us.

So I will turn it over to you, Carolyn, to give us the overview of all the great things you are doing at Merck. And yeah, let's just start there.

So thank you all for being here today and thank you for your interest in and support of Merck. Since we were here a year ago, we've made tremendous progress and that progress is all anchored towards driving our long-term growth ambition. This time last year, we were talking about 20 or so human health products that had the promise of delivering impact for patients and more than $50 billion in non-risk-adjusted revenues by the mid-2030s. At the start of this year, we announced at the JP Morgan conference, we see more than $70 billion of non-risk-adjusted revenues from this suite of human health products. So the transformation of Merck's portfolio is underway. We've launched several new products. We've seen progress across our clinical book of business, and that's across oncology, cardiometabolic, ophthalmology, immunology, HIV. On top of that, we continue to augment our pipeline with value, creating scientifically focused business development. That includes the acquisitions in this last year of both Sodara and Terns. And we've got an animal health business that continues to exhibit strong growth. So we're excited and confident in our future. And we're going to fully invest behind the opportunities we have with our expansive pipeline and our launches to drive growth into the future we've got many clinical readouts coming and I'm sure we'll talk a lot about that but overall we are confident in the execution of our strategy and we're confident in our future so we look forward now we are also looking forward to it right now so last year we have earlier here and I kept asking you what's at TMT that you have all these trials going on what gives you confidence to make such investments and his response was that we

appreciate that you have not seen that what we have seen with Kloon data that are generating in China now we are seeing some glimpses of that so talk a little bit about in last one year or so what we have learned with SAC TMT and what is still underappreciated for the asset at this point yeah so for SAC TMT itself if you could argue it's the third trope to ADC's and whenever you're coming in with a third trope to ADC the minute you say it and like why are you doing that and the concept for us is that we had already seen some data just from preclinical that made us think that this ADC the linker payload was going to be a cornerstone and would have a different benefit risk ratio especially in combinations the other sort of thing that was really important is that we've had a close relationship with Keelan, and so we trust them implicitly in relationship to how they conduct their trials in China. And the reason why that's important is we almost use it as a reconnaissance force to figure out where we should play. So our initial focus was when we looked at everyone else's Trope 280C, we're actually very surprised how focused they were on breast and lung and how not focused they were in other indications. So we put in 17, and 13 of them were not in breast and lung. But we said in breast and lung, we would be thoughtful, and we would strike when the time was right. And what you've seen in the last year is that strategy coming out, our endometrio is likely to be the first Troc-2 ADC, and those 13 trials are moving. But in lung and breast, you know, those data are coming through. You saw in Keelan, in China data, in phase three data, very compelling data across the PD-L1 standard. And so I think that gives us great confidence in moving RSAC-TMT into lung and being more aggressive about it. You'll probably see data about breast cancer that will allow people to do a comparison. But the other sort of thing is we think the data for SAC-TMT is substantially differentiated that not only does it give us an opportunity to be in lung and breast with SAC-TMT, but it has us be in a differentiated position to consider things like PD-1-VEG-M. Right.

And a lot of us are actually seeing SAC-TMT as a replacement for Keturah, but it does seem like it's like a targeted chemo, basically, so it could go much further than that. So how do you internally see this as an asset which, like, in terms of just, like, protecting lung cancer versus, like, broadening?

Yeah, I mean, essentially our initial strategy was not to protect lung and breast and to go everywhere else because we were a little bit surprised that other people hadn't done that. And you've seen, let's say, where the growth of Keytruda and other agents have been outside of lung and breast. It's been in women's cancer. It's been in those sort of places. So we thought that that was ideal. More recently, we're now, you know, the eye of Sauron is moving back into lung and breast. And that's where we're focused on. And I think people have asked, you know, are you going to try to do the whole Keynote 189 with SAC-TMT? And the bottom line is we intend to go with SAC-TMT in the breadth of PD-L1 indications. But one of the things that's available to us is that we believe in many of those indications. We just need to use Pembro. Right. But in some of those indications, we may have a unique position to drive a PD-1 VEGF.

Right.

And so we're being very thoughtful in relationship to that. So it's actually we went outside of lung and breast and now we're moving back in.

No, it's funny, right? I mean, like the discussion has moved from why are you running 14 trials to why are you not running? Why are you only running 14 trials?

Right. We want to strike when the time is right in it.

It's to our advantage got it completely makes sense So, I mean you have an event at asthma as well as you'll see a lot more data there How far are we from seeing a budget PD 1 plus a TMT kind of those combination trials starting at this?

So so I think in the clinical trial side of the government. It becomes very clear to people that we are exploring indications of a PD-1 VEGF with SAC-DMT and that we are clearly exploring PD-1 VEGF with Wellerreg. And I think people can immediately calculate, okay, there's 50 plus indications for PD-1s and PD-L1s. There's maybe six to seven indications with VEGF. and then of those the question is does Merck have a third arm where it's truly distinguished that they can go in in combinations and so what we've said is those two agents your SAC TMT and our Wellerig look different than other people's agents and so that's a place where we're wondering hey can we use it to to really amplify what PD-1 VEGF can do got it got it so some of that I mean I think ASCO, you talked about it.

In due course, you'll have, you'll give us the strategy. Those trials and the clinical trial, I mean, they're posted. All right, okay, got it. Helpful, thank you. So, going to the strategy side of things and then looking at the, I mean like, all the success that Dean's group has had in the last 12 to 18 months here, and then M&As and all, when you look at the model like four or five years down the line like how do you see the pattern playing out in your internal model like well like is it is it because the few years ago Rob had this ambitious goal of growing through the LOE so how close are you to realize this team so our ambition over the last several years has been to diversify within oncology and diversify outside of oncology and as you've just discussed in

oncology we're feeling very good about the progress we're making with a number of great assets and similarly outside of oncology we feel extremely good as Rob has described as we look forward to the LOE period of Keytruda we do not see a cliff right in terms of how revenues may evolve instead we see more of a hill with a quick return to strong growth. Now, that's on a risk-adjusted basis. If we were to look at our own numbers on a non-risk-adjusted basis, the path to growing through the Keytruder LOE is something we continue to aspire to and could become a reality. But the reality is we're not running our business to achieve a certain profile in a single year. what we're doing is we are prosecuting this expansive pipeline in a way to enable us to have sustainable growth into the future and that remains the priority of our company got it very very helpful thank you so going back to oncology so INT so success we have seen in melanoma again I think phase two like it does look like I mean I don't know data will reveal themselves but with the

early success in melanoma how comfortable should we feel about other indications you are also pursuing here so all in all even though INT is not a conservative program the way that we've actually prosecuted is reasonably conservative we have focused INT where Coutruda works and works in early stage So that's where we focused, and then the other place we focused is in a span of tumors that have varying tumor mutation burdens, we've done that. So in the situation with melanoma, it's highly sensitive to IO agents and has a high tumor mutation burden. I think that when people see the data, when it gets presented, hopefully at a meeting this fall they will they will study the phase two and ask how close is this to the phase two because if you can replicate something close to the phase two which as a sort of oversimplified way of looking at it what you had is you you almost double the number of people were cancer free on top of Keytruda right and it isn't like Keytruda doesn't do yeah right it does do something right So that's pretty good. But the also important sort of thing is, you know, from a phase two, that if you look year one, year three, year five, those people responded, stay responded. So when people see the phase three, I think it's not a reasonable to sit there and say, how close is this to the phase two? And they may extrapolate and say, this probably will look like this in five years, seven years, maybe. So I think that will be an important point. The stronger that data is, it's no different than when Keytruda and Optivo came out. The stronger the data was for Optivo and Keytruda and melanoma, the more likely you thought it was going to work in lung, which would make it more likely. So I think it wouldn't be unreasonable that if you saw something close to phase two versus not seeing something close to phase two, seeing this, if you saw something close to phase two, your pretest probability, at least in some of these IO-sensitive and higher tumor mutations, I think many people will calculate in their brain that becomes more likely.

Got it. So, like, I think you talked about, you know, like melanoma is probably more immune-sensitive, IO-sensitive tumor versus RCC is probably on the other spectrum. In an event that it works in phase two RCC trial, like, how big an opportunity does it open up for you?

Well, I think what people will do is they'll consider them as bookends right they'll sit there and say melanoma okay RCC is IO sensitive but it's a lower tumor mutation so they'll go everywhere between melanoma and RCC and say okay non-small cell lung cancer becomes more likely head and neck becomes more likely sir that's how they'll calculate it they'll sit there and say well RCC has around the same tumor mutation as MSS-CRC but MSS-CRC doesn't have it so I think what someone will do is they'll look at that bookend and they'll do the Keytruda story over and probably probabilize that bookend and I think that's how people will interpret the data and to be very honest that's probably how some of us would interpret the data.

Got it, makes sense. With all that clinical success you are creating a good problem for your CFO so in terms of you know like so obviously with the success you have to invest heavily in the R&D as well which is the right thing to do but like so this is this is a question we get from investors a lot and now that the pipeline is really vibrant and growing you did some deals as well how what are the puts and takes when you think about the the the guidance for next year how should we think about expenses and revenues for next year and I don't want you to give me guidance but obviously like can you help us understand that of course so we're not giving guidance at this stage but to give some themes as we look at our business in 2027 2027 will be

another year of investment for our company because we will as we've noted invest in this expansive pipeline and we will invest in our launches so that we are successful in the marketplace as you look at the P&L on the top line we would expect modest growth. We'll have increasing contributions coming from our launch products. They will be partially offset by some headwinds we anticipate on products that face generic competition or will face generic competition. Notably, we have Bridion, we have Genuvia and we have a Dempus that loses LOE at the end of this year. Keytruda remains such an important product for our company for the world but growth is slowing as you would expect given its current phase in its life cycle. We are looking for some pricing pressures in the world specifically in Germany where we've seen some policy changes that will impact I think growth for Keytruda next year and we expect our animal health business to continue to have strong growth. As we look at gross margin we're expecting some improvement in gross margin as there's the roll-off of a royalty on Keytruda. From an expense perspective as you rightly note we are in a fortunate position that in a disciplined way we will invest fully behind our business and we would expect our investments to grow at a similar rate as what we've seen in 2026 when you normalize for any of the BD up fronts or the funding we received for SAC TMT so we're expecting expense growth of around mid to high single digit and then the only other line to call out would be on other income expense we'll see interest expense tick up a little given the debt that we issued during this year for the business development that we've done but in summary a year of modest top-line growth driving expenses to support our pipeline to enable long-term growth for our company very helpful thank you very much for that so now I want to move beyond oncology because you have a lot going on beyond oncology as well maybe starting with the iBioAsset.

I mean, you'll have data this year in one of the trials. So the question here is, it's a trial, non-inferiority trial versus Lucentis. However, do you entirely believe that you have potential to demonstrate superiority there?

Because the argument is that you are going after the weakest drug there, but it's a little bit refractory setting, so you're going after different market there how should we think about how did you think about the commercial opportunity when you design the trial and yeah so we had the fortunate concept is that when we're designing that trial for MK 3000 we also know that we have MK 8748 right so the two of them together although we're prosecuting each one independently makes us think about the field a little bit differently. So all the anti-VEGFs, whether you go from Lucentis to ILEA to Babismo, they've all been non-inferior trials, right? And so what we're hoping is with 8748, which is not MK3000, but it's an anti-VEGF TIE2 agonist, we are hoping that that one will be a best-in-class anti-VEGF. So that to us is like going right down in the belly of the beast and saying, of all of these molecules, this one will be the best. In relationship to this Wnt agonist, all of the other major medicines have been VEGFs. There haven't been another sort of non-anti-VEGF. And people recognize, and ophthalmologists recognize, that anti-VEGF is really important, but anywhere between 30% to 40% of people don't respond or stop responding. So what we wanted to do is create an option for them. So all of a sudden, they have two hands to fight. They have the best anti-VEGF, and they have the first non-VEGF pathway. And we believe that in true practice, what will happen is ophthalmologists will begin to mix and match them on their own. So for us, it was just really important to have a really clear signal that if, right, no one's had a new mechanism of action, and we're hoping that MK3000, Remig-Remig, is that first non-VEGF pathway. And if we can do that and also come up with 8748, I think we could really create a situation where ophthalmologists will think about their field for diabetic macular edema and for neovasker amd the two of the major places very differently with both agents in their hands is there a reason to believe wint would also work in amd i think you would say that there is a chance that wint would be it and it's more from the anti-vegf sort of field in general things that have worked in neovasker amd have worked in dme and dme and neovasker amd i think for 87 48 you'd very on very strong because there's so much precedent right what people would push back is well that's great you have a new mechanism of action prove it to me right so the issue is that whenever you have a new mechanism of action I do think that you have a high standard to convince people and it's behooves us to prove that to people.

Completely makes sense. So with tied to the data on OCT and drying the eye, they are pretty strong actually compared to anti-VEGFs as well. So how do you envision this playing hour? Is that the reason you believe it is probably the best in class?

Well, you just see the different VEGFs and you see Vibismo, right? Vibismo is essentially non-inferiority, but there's a sense that it dries the eye faster. We're hoping that whatever that spot number is, ambition is to be superior to it. And that's what that data suggests. And it's not how dry it is, it's how fast. What the ophthalmologists, they want to dry you out fast. Because it's that wet-dry, wet-dry, that thing, that's what disrupts things. So it'll be how dry we can get them, but also how fast we can get them. And so when you look at this, the OCT is how they start thinking about it. So for them, OCT is not just a biomarker, it's how they actually think about treating. They actually use that number.

Yeah, I mean, they treat on the basis of...

That's what they treat. We may talk about heme malignancy. Heme malignancy starts talking about MMR and DMR in some of our trials. People will treat to that number. where people are beginning to treat, in practice, to OCT. So we think that is an important readout.

Very helpful, thank you for that. Moving to TL1A, so, I mean, congrats on the success of ulcerative colitis trial. How, so there are two schools of thought there. Like one is that TL1A, it doesn't have to be superior, or it doesn't have to be numerically better than IL-23 or anything because it is super clean drug it this has a place and it's a new mechanism of action so should have a place and then there's the other one because like with IL-23 is FV and all these guys are going in combinations and all so maybe the bar to move into first line will be higher so it becomes a second line drug or combination will be important how do you envision the market in the next four five years so I would I would separate the different places right so in In our mind, we're trying to make TL1A a really important node.

Other important nodes are TNF and IL-23, and IL-17, and they dominate in different indications. So we'll have to sort of play this out. I think for GI, which is ulcerative colitis and Crohn's disease, I think people start thinking of drugs like IL-23 as they're highly effective and they're reasonably safe. I think some people start talking about other mechanisms like integrins that some people believe are maybe not as effective as the IL-23s, but they're extremely tolerable. So people stay on. Our ambition for whether we're talking about GI or derm or room is that among the biologics, we are the best, if not the best, but we are the safest as well. And that in each different indication will be important. and it will also be important because it gives us a degree of flexibility because if you have one of the most effective if not the most effective and you're extremely safe should you do a combination strategy you're in a very good position then if you don't have that profile so that's the profile we're looking whether it be GI whether it be Durham whether it be room got it very helpful another question I have is the asset which is which I know that you have very you have an expertise in PCSK9 or PCSK9 here so Amgen Regenron

they all try to get into primary care market and statin is pretty much a primary care market right now so to get into that segment so this is an so primary case should be using it, but how important it is to have an outcome data, not only in secondary prevention, but Amgen now has data with Vasilis trial in primary prevention as well. And you've got a really good label actually there. So talk a little bit about like, how do you make inroads into that market?

So I'll have Caroline talk about the commercial push and pull. I'll talk scientifically from it. So just to be really clear, not all PCSK9s are the same. The antibodies, I think, in general, people think of LDL cholesterol lowering of 60%. If you look at the sRNA or other things that affected PCSK9, I think the number is more in the 50%. So not all PCSKs are the same. I think the field and the FDA was very clear. They understood that this was designed to do something very similar to the antibody. and essentially was designed with the concept of can I do the same thing that a biologic does but do it in a pill and what people saw from the biomarker data which is LDL and ApoB and this the profile looks surprisingly similar in a biomarker sense to the antibodies. We still need to do the outcome trial but I think many people in the field sit there and go okay, this was designed to interdict PCSK9 LDL like the antibodies. It gives you a biomarker profile that looks similar. They're going to have to do the outcomes trial, but I think the FDA recognized it, and you saw how they recognized it, because they didn't make any comment in terms of not having cardiovascular outcomes in the label. What they emphasized is this should be as an add-on and statins, and they reminded everyone that statins has outcomes trial, and they also reminded everyone that the monoclonal antibodies, which this was designed to mirror, was also in the label. But we do have to do the outcomes because we have to prove that, but I think for many cardiologists and many people, seeing the profile of the LDL and knowing the history of PCSK9s, I think many people will be very comfortable prescribing it, especially if it's extremely accessible. And then from commercial, I'll have you speak about it.

So we're very excited about the opportunity we have to bring an oral PCSK9 to really address this epidemic that exists. What we have with Lipfendra is we're entering a market that now has guidelines in place after many years where those guidelines did not exist on treating to a target level of LDL. And so those guidelines will really help unlock some of the inertia that exists in this marketplace. In the US, there's 30 million people who are taking statins who are not at goal. About half of those are secondary prevention, about half are primary. And we think initially we expect utilization to be more in that secondary group, those who have established ASCVD. We're getting really strong feedback at this stage from those who have seen the data, understand the data, understand the accessibility of this oral product and see the pricing strategy that we've had as a company. And initial scripts are looking good. So our confidence in Lipofendra and its ability to be multi-billion dollars in peak revenue is high. We're working hard to break that inertia, and we expect to see good uptake ahead of the CVOT study.

We did a survey. Primary care doctors really like it, actually, so that'll be interesting.

Maybe this is too personal. I actually tested the system because I had a non-cardiologist write me a prescription. I got it. Okay.

So that's interesting. Awesome. Thank you for that. So the last asset on the pipeline side I want to talk about is CD388. So now you're running two seasons in Northern Hemisphere, one season in Southern Hemisphere. just walk us through any change in conviction and confidence in the trial so far and it does seem like you do see Europe also as a market now opportunity as well so talk a little bit about how your thought process has evolved since you bought CD3.

To be honest it hasn't really evolved that much. The critical piece of information for me is the way that you give this medicine, so it's essentially an antibody drug conjugate. That's the simplest way to explain it, where the drug is an antiviral. And the issue that comes up is that you go to your physician and you get three jabs. And there was a view that was held throughout the field that you really shouldn't launch it with three jabs. You should launch it with two jabs. Because at one time, right, you come in, someone gives a leg, leg, and they do your bum or something. I mean, so they really thought that two was really important. So the minute that we do this, that means we have to change three jabs into two jabs. That immediately creates a time of when we can launch. So the concept for me is until that time comes, I'm going to get as much data as possible. because it's not just that I get a label. Remember, this is not going to be sold at the price of the influenza vaccine that I just got from the drugstore. It's going to be more expensive. And so the question that comes up is we think that this is a really important product for the U.S., but also with MFN, we can't have a tenfold discount in Europe. And so we need to find patient populations where we can hold that price in a situation where we have robust subpopulations. For example, it's not just immunosuppressed. You know, if someone has cardiovascular risk, is it on Lefendra? Should they get it? That's the type of data because it's one thing for the label, which is really important. But especially outside of the U.S., how you deal with the HTA agencies will become really important. And the more strain, the more data, the more different subpopulations that we have, whether they're statistically pre-specified or not, will be important for those situations. So we're not delaying the launch in any way. The minute you decide that you're going to do three jabs into two jabs, you create this issue. So my concept is, let me play it out all the way to the end and get the maximum amount of patients in.

Very helpful. There's no mug discussion without talking about BD. And there was a time last year or so, like we were waking up every Monday, waiting for a press release to hit. Mug bought something. So you have been very active. And it shows in pipeline now. Now, where you sit right now, How do you think about, one, the need for BD? Number two, if you do see it, like, how do you think about what would be the asset? What kind of asset or profile of asset would you be interested in?

We're proud of the BD that we've done thus far. We've brought some great assets into our company that have the opportunity to advance patient care and drive growth for our company into the future. As we look forward, that strategy is unchanged. We will continue to look for the best science externally that when brought into market, that will create value, address areas of unmet need, and drive growth for the company. We're not desperate to do any deal, but we will continue to do the right types of deals for our company. What we've talked about in the past, and that's consistent today, a sweet spot has been deals that are in the 1 to 15 billion dollar range and we've also talked about as we look at areas that including oncology including cardiometabolic but we also see immunology so bd will remain an area of focus for any um cash that we have at our disposal but science-led to drive patient impact and growth.

Dean, anything to add? Whatever money she has, I know how to use it.

Thank you very much. On that high note, really appreciate you joining us today. Thank you very much, and all the best.

Thank you so very much.