Good morning, everyone. Day three, we're at the end of it. We've dealt through rainy weather, some crowded spaces, but also, I hope, some good memories. I really do appreciate everyone attending. My name is Akash Tewari. I'm a pharma and biotech analyst at Jefferies, and we have the pleasure of hosting the Merck management team. Joining us is Joe Romanelli, Marjorie Green, and Pete Dannenbaum and we're going to have a broad-based discussion about some of Merck's ex-US portfolio and their oncology strategy, and maybe some stuff that's going on from an administrative perspective as well. I'll start off with, I think, the question that every large-cap pharma is getting right now. It was obviously unexpected, I think, for the market with the RFK announcement, and then Dr. Oz, so Merck, obviously, you've operated under different administrations. You have a very large vaccine franchise.
I know your team's been looking at this. Are there any early comments that you can provide about the impact of some of the recent announcements on Merck's business?
Yeah, so first, it's great to see everyone, and thanks for showing up. I would say, in terms of how we work with governments around the world, and we're consistently working with those governments, irrespective of who's sitting in the seat. And the goal is always straightforward: how do we increase access to our inventions? And when you look at the prior administration, we've done that even prior to that when Trump was president the first time. We'll continue to do that this time around. And what I would say is that it's been great to see the healthcare community step up and talk about the value of our inventions, particularly vaccines, and the value that vaccines have provided to society over the past 50 years.
So, I think there's a lot of stakeholders that want to make sure that we continue to have access and that we continue to make sure we move as quickly as possible to get those inventions to patients. So, I would say we will continue to work with the administration, the current administration, until they leave, and the new administration when it comes in, and confident that science wins the day.
That's usually the right take. Now, stepping back, and I think it's been really interesting to see what Merck's done in the VEGF space, and obviously, you had a deal recently with one of the PD-1/ VEGF bispecifics, which I think are all the rage right now in oncology, but you've done another deal as well, which was the collaboration with Exelixis with Zanza, so to me, Merck is saying, yes, there are ways that we can explore the relationship between PD-1 and VEGF, and there might be ways that we can actually increase the therapeutic window. I actually wanted to start off with the Zanza deal. Now, right now, that's been announced for head and neck and renal cell carcinoma. That makes a lot of sense.
But my suspicion is, given that there's a likely go-forward dose on Zanza that you're quickly going to be able to see, if, let's say, that PD-1/ VEGF signal ends up being bigger than maybe the market realizes, you could expand that collaboration beyond just those two indications and explore other areas where they've shown biology, including NSCLC. Is that the correct read?
Yeah, thanks for the question. Part of the collaboration is combining with our HIF-2 alpha inhibitor, and so even more so of a focus than with Keytruda. But I think that definitely we've seen historically with Keytruda, if you look at our development plan, what we've done over the past decade, Keytruda combines well with many, many therapies. And we know the VEGF pathway and hypoxia are both important in malignancies. And so we have a partnership with Eisai that [audio distortion] . We've had combinations in renal cell with multiple other TKIs. And this is a natural progression of that because it's an important pathway. And the same thing with our acquisition, our in-licensing of the LM-299, is that it all fits together. So I can't speak to Exelixis's drug. I think they've got a really nice product, and we're happy to collaborate and partner with them.
Understood. Now, maybe going to the LaNova drug, let's put it this way. You've gotten, I'm sure, a million questions ever since that HARMONi-2 top-line data came out. Your team's been pretty consistent. You said, look, we're not running that trial against the U.S. standard of care. It's not Chemo Pembro. It's in an Asian population. Then I think the third part you've talked about is, look, we have to see how the side effect profile evolves over time. That's where I kind of want to talk about. You probably have more data than this than almost any company because you've run the LEAP studies. When you look at the discontinuations that happened historically with either Avastin or, of course, LENVIMA, when did they usually occur? Because if you look at the HARMONi-2 data, it's out to eight and a half months right now.
I think the question a lot of investors have is, OK, they have a low product discontinuation rate, but will that accelerate with longer duration? Any comments on that?
I'm thinking about what's been publicly disclosed is the discontinuation rate of any drug in a pembro-LENVIMA combination is about 35%, 36%. We haven't talked as much about time to discontinuation. That's shared data, and I can't sort of break that out here publicly. These bispecifics, what's really attractive about them is that, and we see this with other molecules, is iterations on known pathways and technologies can improve the therapeutic index. We've seen data really from China right now with two assets. Our collaboration compound, which hasn't closed yet, is in phase I studies in China. The toxicity rates do look numerically better than what's been historically published with bevacizumab combined with a checkpoint inhibitor or with TKIs and checkpoint inhibitors.
If that iteration has truly improved the therapeutic index, it could be exciting in tumors that have sensitivities not only to a VEGF inhibitor, but also a PD-1 or PD-L1.
Understood. Now, it's interesting, and we're going to talk about the TROP-2 ADCs, and your team's made a huge bet there that I think is pretty underappreciated, but what was really notable about your strategy with Kelun was you were maybe two years behind Gilead and AstraZeneca, and suddenly, it ended up being biomarker-driven populations, and if you actually look at the timelines of your phase III studies, you're neck and neck with your peers. You were able to catch up really quickly, so there's a proven execution ability Merck has to come from behind and actually succeed here. This is going to likely be a biomarker game when it comes to PD-1/ VEGF, whether it's squamous, non-squamous, CPS expression. Talk about how quickly Merck can move from a phase I asset to potentially phase III if your drug starts to show a promising signal.
You mentioned sac-TMT and what we've done there. I think that illustrates what we're able to do internally. We have everything in-house. We don't rely on CROs as much. We have an extensive depth of knowledge in our organization about how to develop drugs. I've said when I joined Merck that part of my attraction to MSD is that we are an execution machine, and we really can get things done. So we've got the clinical knowledge, and we have the skills and capabilities of doing it. This is not the first time that MSD has come from what is perceived as behind, so you think about Keytruda's entry into the market. We're not first, and so I think I can't give you specific guidelines and goalposts as to what to look forward to, but we're very science-focused and very much data-driven on what we do.
We have a lot of knowledge internally based upon how we've developed Keytruda with so many drugs, about where opportunities are and how we can accelerate.
Understood. Maybe just lastly, when you think about, because you'll hear this from investors, they're like, look, Akash, I don't know how real this signal is going to be. It's either going to replace pembro in all these tumor types, or maybe it's a great drug for renal cell carcinoma. We just don't know the range of outcomes. I'll ask you the same question that I think we're asking ourselves. When you think about the potential of an agent like this and the fact that you actually have it in hand, where on that spectrum is it? This can actually replace pembro across multiple tumor types outside of just NSCLC, or this is really going to be a niche drug for a few biomarker-selected populations?
I think we're early in that time course. Part of what the attraction was for us, if you think about what our pipeline and our portfolio looks like, I think sometimes it's underappreciated. We have a carefully curated set of drugs, and we have more than 27 of them that are either in phase II or phase III studies. That's because cancers are very heterogeneous. It takes usually combinations of drugs either together or sequentially to get the best anti-cancer effect. And so we want tools that can improve our ability to address the heterogeneity of multiple cancers. And this is another tool that we can then combine with drugs that we have in our portfolio. So I'm super excited from that perspective.
The question about whether the sort of theoretical in vitro daisy chaining and these other kind of aspects have been called out can lead to improvement beyond tumors where there's known activity of both a checkpoint inhibitor as well as an anti-VEGF targeted pathway is uncertain at this point, and so I think that we'll all be learning a lot over the next decade, but we are going to leverage our internal knowledge and public data to inform for our development plans, but I'm really excited about our ability to combine and advance for patients.
Understood. Now, I hosted the Bristol team earlier this week, and it's been interesting to kind of see the commentary around subq Keytruda versus subq Opdivo, and I felt like I almost noticed a tone shift from the Bristol team when we were in London, and I think this is an aspect of the subq treatment that's not appreciated. Now, you guys have talked about, look, 50% over time could be eligible to switch with the subq. Those are going to be indications where a patient's taking an oral therapy. It's probably going to be in an adjuvant setting, and obviously, the product mix of Keytruda is very different than Opdivo, so maybe it's because Opdivo is approved in a lot of metastatic settings, but the way that Bristol talks about it, it's not just about adjuvant.
It's about the fact that you're actually reducing infusion capacity for hospitals and that you're actually providing value to the healthcare system. And certainly, what we've seen with Europe in the Tecentriq subq launch, I think there's signs it's not just a product in the U.S. It could be a product internationally. How should we be thinking about subq Keytruda? Obviously, you had a positive phase III. But could this be a product beyond just the adjuvant oral setting, but actually across the board where Keytruda is approved in solid tumors?
Yeah. So clinically, I think that people are not necessarily on chemotherapeutics the entire time of their metastatic journey, depending which disease they have. And so decreasing the amount of time you spend in an infusion center, in a chair, Q6 weeks, coming in less frequently, depending upon the stability of someone's cancer, those are really attractive things for a patient and for a clinician as well. If there was a patient doing really well with therapy and you don't need to see them as frequently, having that flexibility means a lot in the metastatic setting as well as in the curative setting. There are oftentimes people who will be on Keytruda maintenance for their malignancy in the metastatic setting. And this really does give them an option that increases their time away from the hospital.
I think it really depends, too, on where you are in the world. So if you look at the first launch and you think through the different markets, we've seen pretty low adoption in the U.S. And when you think of the U.K. versus Germany, so in the U.K., because of the NHS, they're going to try to advance more patients into the subq setting to keep them out of the hospital. If you transition that to Germany with the sick funds, they're going to want more patients into the hospital. So it really depends on the healthcare system. And then when you think about the wall of data that we built in the early stage or curative, where we talk about nine indications, four with OS, I think that's your target at first. And then could you go after other indications well in the future? Of course.
But I do think it really depends on the healthcare system and what the goal of the healthcare system is to determine how much adoption you're going to have or how much conversion you'll have.
Understood. Now, touching on the TROP-2 ADCs, I feel like the buzz around that class has just dramatically decreased since we had more negative news from AstraZeneca's product in terms of second-line NSCLC. And I feel like we're missing something here. Your team understands oncology better than, I mean, almost any company. You're running 10 phase III trials with the Kelun asset. And I think there's things that we don't really understand. Why do some drugs work squamous and non-squamous? Why do certain drugs behave differently in certain histologies post-pembro, PD-1 refractory? There are nuances between these TROP-2 ADCs that I don't think are appreciated right now. Why has Merck made such a commitment to the TROP-2 ADC space? And where do you feel like your strategy differentiates from, let's say, Gilead or AstraZeneca?
I think that our level of investment reflects our excitement about this asset. Not all ADCs are the same. They're not. They're differentiated based upon the antibody used, the linker, the payload. All of those create differences in the therapeutic index of an ADC. And for those who are familiar with the Goldilocks and the Three Bears, I think we've got it just right with this particular ADC. And so when we look at the toxicity profile of neutropenia, GI toxicities, ILD, they're quite favorable. And then that gives your ability to deliver a drug. It enhances it for patients. We have a great partnership with Kelun, and there is a significant amount of data that is being generated in China that is not necessarily public that has been used to help inform for our phase III programs. And so we always are data dependent.
And so where there are high levels of TROP-2 expression, where we think there's going to be sensitivity to payload and we're seeing clinical activity is where we have gone into our phase IIIs. And so we have tried to differentiate either based upon going into tumor types where other people's haven't necessarily gone there, where we could be first movers. The development strategies have been different. We sometimes will look. People have gone into combinations of therapies, for example, in non-small cell lung cancer, and that has significant toxicity and may limit your therapeutic index because of dose modifications and dose reductions, where we've done a maintenance strategy instead. So I think it's a multifactorial way that we've developed our drug based upon the differentiation of the ADC itself, as well as how we're developing it.
The other aspect that I think has been an evolving story for all of us is how do you identify who best responds to therapies? We did this with Keytruda in parallel to our phase III studies, as you saw us launch in lung cancer originally in a biomarker-selected population, and you'll see we have a lot of work going on both with IHC and digital pathology to best identify how we can improve that therapeutic index, so we see the potential. I think that the data that you've seen published from Kelun about overall survival in multiple tumor types has been presented. It reflects the strong activity of this drug.
Understood. Now, touching on the Daiichi deal, and that was, I think, the largest kind of upfront, some of the largest upfront payments, some of the largest potential milestone payments with those three ADCs. I feel like your team has historically talked about the B7-H3 molecule, but that is a fairly competitive space. And it had encouraging data, but I still feel like where product differentiation there is TBD. The one I really wanted to talk about was the CDH6. And you have a phase II, III study enrolling. Part of me thinks phase II, III is accelerated approval opportunity like we've seen with ImmunoGen.
But can you talk about where do you think a CDH6 ADC could differentiate versus the folate receptor alpha approaches that we've seen right now, not only just from ImmunoGen, but with Profound, where they can potentially work in folate receptor alpha high and low expression?
That's a complicated question, so we're talking about R-DXd, which we're developing in collaboration with Daiichi Sankyo. The initial data that's been presented so far in very late-line ovarian cancer has demonstrated quite high response rates and durable responses in patients with ovarian cancer, and so the phase II study, when you look at what's posted on it, part of it is dose selection, too. And so it's to optimize the dose to ensure we've got the best therapeutic index as we go into our phase III studies, and so that's part of that study. We haven't commented on how we would use data from the phase II for any kind of health authority engagement or to understand sort of how we would take that further. Our main goal is to get phase III data as fast as we can so we can get global access to patients.
This is a really promising drug, definitely. The question about how you differentiate the marketplace depends a bit about where the activity of the drug is. So some ADCs have very potent bystander effect, as well as the target expression is high enough where you may not necessarily need to, in some malignancies, to select on a biomarker. And so that's something that we're working through with Daiichi, and as data emerges, we'll refine our strategy further. But right now, as you saw on publicly presented information, is that we see quite broad activity with R-DXd, and that is a way potentially to differentiate. It may be helpful for some patients for us to figure out in some settings to do a biomarker selection. But we're still working through it. It's still fairly early in our program.
Okay. Understood, but as in all comers is really.
That's more where I was coming from.
Understood.
Thank you.
Now, Joe, on Gardasil, it's funny. Wall Street, we always go ahead of ourselves, and I think so did we. I mean, you had such a strong launch in China, but the entire time, Merck only said one thing, $11 billion, 2030. That's what your team has said. You never changed that even when you started to see very strong uptake with your partner, Zhifei. Your team did a great job kind of laying out the puts and takes, $2 billion - $3 billion on a go-forward basis in China. So pretty market step down from, let's say, $4.6 billion-$4.8 billion to $2 billion- $3 billion run rate. And it sounds like it's in the lower two range. Tell me this.
If there is that step down in China, is it fair to say that probably Gardasil is not necessarily a growth driver product over the next couple of years, and then it can start to return to growth as we see male expansion in China and other ex-US territories start to grow? Is that the correct way investors should be thinking about this?
I think, first of all, thanks for the question. I think when you look at the commitment we have to $11 billion, that's very strong. And there are multiple ways that you can get there. And when you think about the three different segments that we have, the U.S., rest of the world, and China, now you go back to China. We launched G4 in 2017, had a fantastic launch. It was so accelerated that we then, without phase III data, launched G9 in 2018, grew to be the fastest growing product in China and ultimately the biggest product outside the U.S. for any company in any one market. Over that time, we knew that we would get to the bolus of female patients, and we vaccinated roughly 50 million. Now, there's still a pretty big cohort.
A lot of that has occurred in the tier 1, tier 2 cities where we have fairly high VCR rates, 40%-50% depending on the city, and 90%-95% market share. So we always knew that at some point we would start to trail off as we expand into tier 3, tier 4, tier 5 cities, and we would bring in the male indication. And so what did change is kind of the timing around that. Yeah. And so that has been accelerated. Multiple reasons. I think we've talked about it and been transparent about what has happened. One is we've seen anti-bribery, anti-corruption hit the vaccine space. It's affected all vaccine manufacturers as the CDC POVs have lowered their inventory. Second was our partner, Zhifei, who had done a phenomenal job over the past eight years, took on another partner. So there was some distraction.
We've been very focused with Zhifei to increase the points of vaccination. So we're going from 20,000 vaccination centers to targeting 30,000 vaccination centers. We're increasing the boots on the ground, so to speak, so the FTEs that we have in the market to be able to do the promotion with the CDCs and the POVs. The other piece, and I've been in China twice the past month, is we do need the economy to start to turn around. Obviously, there's been tremendous stimulus driven in, but most of that's debt-side stimulus. We need consumer. This is a consumer vax. Patients pay out of pocket. So we certainly want to see that the economy starts to turn around. And when you think about China, it's one aspect. The other aspect you've mentioned is the rest of the world.
So if you just look at the third quarter earnings call, we talked about $500 million in China. We sold about $1 billion in the U.S. That's around $700 million rest of world. And that's growing strong double digits. In fact, all of our regions except one grew strong double digits in the third quarter. So we've only just started to expand as our colleagues in manufacturing have expanded our manufacturing capacity. So we're now able to go to more markets, particularly low middle-income markets, and expand our operations in those and partnerships in those markets. So if I look at places like India, where we have 44,000 OBGYNs, we really haven't launched in a way that we've launched around the world. Indonesia is another great example where we're partnering with a local company, Bio Farma, for G4. So we're getting great expansion there.
I think there are other opportunities besides China where you can start to look at where we're going to drive growth. Likewise, even in Europe. I really have two markets. One is the public market. The other is the private market. China is completely private, out of pocket. Here in Europe, it's public, and we've done a fantastic job. The VCR rates, the vaccine coverage rates in Europe, 70%-90% for the adolescents. What I need to do is build a private market in Europe. And we have some pockets of that, but we're going to continue to focus on it. And then there are many markets that have both. And so how do we make sure that we optimize both? Because as you've heard from Rob and from Caroline, we've only vaccinated 10% of the world. We still have a lot of work to do.
This is a vaccine that can potentially prevent cervical cancer. 1,000 women per day still die of cervical cancer around the world. There's much work to do, and we're going to continue to strive for that.
Understood, and maybe touching on that. I know there may be competition in the foreseeable future in Gardasil. I mean, obviously, when you create a product this big, competition is going to come. Merck, actually, you have multiple next-gen distinct bets. You have a one-shot approach with Gardasil, and then you also have options where you can hit other valency. And I think so, talk to me about what those products offer to the Gardasil toolkit. A, from the one-shot in terms of ability to maybe free up manufacturing capacity, but really for the one that's hitting more valencies, is there a potential that we can actually have a redosing approach here if you can actually hit some valencies that are covering other cancers that maybe we're not paying attention to right now?
Yeah. So I think on the first comment, in terms of single dose, we've seen many markets around the world, particularly low middle-income markets, because we were constrained, moved to a single dose. We need to have prospective studies that show that a single dose is as effective as a two-dose or three-dose regimen. So as a science-based company, that's what we're trying to accomplish, to make sure that as these countries have moved, that we haven't undervaccinated patients so to get to that prevention and ensure cervical cancer prevention. So that's the primary purpose there. We have the manufacturing capacity. 2026, we will be unconstrained. So we're not as concerned about manufacturing capacity. It's more about the science. Second, as it relates to the patients, we cover 90% of the serotypes that cause cervical cancer with a nine-valent vaccine.
There's still an opportunity to improve that, particularly in certain patient populations, African Asian patients, where we do see other serotypes causing cervical cancer or, to your point, causing other types of cancer, head and neck, for example, so if we can improve that, that's what we're aiming for, and certainly, as you referenced, there are other companies that are also working on an HPV vaccine. We've been competing with two-valent and four-valent competitors in China, outside of China, in many markets, so we feel very confident with the data that we have, the real-world evidence that we have, and if we can continue to push the science, that's what we're going to do.
Understood.