All right, so we might kick off our conversation with Merck today. My name is Courtney Breen. I am the U.S. biopharma analyst here at Bernstein. I am very privileged to have Rob Davis and Dean Li from Merck here with me today. I'm extra privileged because I used to get to work at the company. This is hopefully going to be a wonderful conversation and hopefully enlightening for lots of investors. We're going to start and let Rob set the tone, set a little bit of this conversation up, and then we'll spend some time diving through questions that I've prepared. Just as a reminder, there is the Pigeonhole app.
Please do add questions into that so that we can integrate them into the conversation today and make sure that all your questions are answered and you walk away feeling like you've got a really good understanding of the company. With that, Rob, I'll hand over to you and take us away.
Great. One, thank you for having us, and thank you for everyone who's in the room and those who are listening online. Obviously, it's an interesting time right now in the pharmaceutical industry, and I'm sure we'll have ample opportunity to get into that. What I'd like to focus on for just a minute is kind of the journey we've been on at Merck since I took over as CEO going on just almost four years ago. Or CEO, did I say CFO? Did I get it? All right. Yeah, I used to be CFO. I forget.
Pretty unfortunate.
Caroline thinks I still try to be CFO at times, but I try to stay away from that. Obviously, Dean came into his role as Chief Science Officer and Caroline stepping in as CFO. At that time, if I go back to 2021, what we set out to the company was a simple strategic framework tied to how are we going to deliver on the purpose of the company anchored in four key priorities. I won't get into all the priorities, but I'll get into the most important priority, which was the priority up in the upper left still on the slide we show today, and it's guided us consistently with focus and intent ever since.
That was we needed to invest in, accelerate, and augment our pipeline because we have both the privilege of having what likely will be the largest pharmaceutical, put aside maybe some of the COVID vaccines in history, which has had profound impact on patients with cancer, but it's created an interesting challenge, which is how do you manage through that. We knew we needed to move with focus and urgency to address that, and we've been dedicated to that ever since. I can say that I'm quite proud of the progress we've made. If you look today, we have nearly tripled the number of phase III assets we have in that time period.
We now have over 20 assets, 20 unique assets, almost all of which have blockbuster potential in phase III, so in late development that we'll be launching over the next three to five years, two of which, frankly, are already in the midst of launching: WINREVAIR and CAPVAXIVE that are both off to a strong start. I feel very good about the late-stage pipeline and where we are. We have seen good progress in our early-stage pipeline. We have 50 different programs that are going to be moving from phase I into phase II, and you'll have soon line of sight to those as we move forward over the next couple of years. A lot has been done within the pipeline to invest in it. We've put all of our resources behind this. We've looked to every opportunity to accelerate it.
We can give examples where we've done that. Enlicitide, which is our oral PCSK9, we think will be a first-in-class, best-in-class treatment for arteriosclerosis or lipid lowering. We've greatly accelerated that program by a few years from where it originally was, where we were at a starting, basically a standing start a few years ago. More to do. I in no way believe we're done, but I look and feel that if we can do in the next three years what we've done in the last three years, we have a real possibility to achieve what I aspire to do, which is to grow through the Keytruda LOE. Obviously, that is a tall hurdle, but we see it in our headlights to maybe be able to do that. As I said, more to do. We need more business development. The augmenting is going to continue as we've done.
We've deployed over $70 billion into business development over the last few years and brought in many meaningful assets. More activity. As I sit here today, given the strength of the balance sheet, the strength of our margins, the legacy we have in oncology, the portfolio we can build from, and now as we move into a much broader and diversified portfolio of products, we're well positioned. Obviously, a lot in the macro environment we're going to talk about and have to deal with, but I believe as long as we stay focused on innovation as the core of who we are, that's the path to long-term sustainability, and I feel very good about what we're doing to this point.
Fantastic. Thank you so much. I think that frames up a lot of the Merck story. For a second, we're going to zoom back out and talk about some of these sectoral pressures because I think these are kind of of the moment and certainly impacting where all stocks are trading for the entire sector right now. In many ways, this is a multi-headed beast. We've got tariffs, we've got MFN, we've got Medicaid cuts, we've got PBM reform, we've got HHS changing strategy and organizational structure. How do you rank some of these on a relative risk and size of impact basis? What is it that you focus on when it comes to the noise that we're all living through?
Yeah. I would say really from what I see as the big policy questions of the whole list you laid out, clearly first would be MFN, the reference pricing executive order that came out for most favored nations. We can get into that because I think there are still a lot of questions around what that will be. As a policy matter, that is obviously significant. Then the tariffs and how do we think about that and addressing that to make sure we can onshore and reshore manufacturing, the structural elements of that. I would say on that one, we can go into it in more detail. We have made great progress. Actually, we as a company, we are already moving down a path to move to a strategy where we would do U.S. for U.S.
Manufacturing, Europe for Europe, Asia for Asia, coming out of the pandemic because we recognize the need for more resilience in our pipeline and in our supply chain of how we bring our products to the patients. That was a path we were on. In fact, coming out of 2018 with the Tax Cut and Jobs Act, that allowed us to access foreign capital. We did deploy that largely into the United States. We've deployed $12 billion between 2018 and 2024, all into manufacturing capital in the United States, as well as building new R&D facilities and building pilot manufacturing, which is really what you need to do the conversion from clinical into commercial. A lot of investment in that $12 billion. We've just announced a groundbreaking of a billion-dollar facility in Wilmington, Delaware, to be an all-purpose biologics facility.
We feel very good about that. We have deployed other capital with the intention of having an incremental $9 billion plus as we look out between now and 2028. I think we are well positioned to be able to produce in the United States. More to do. I think we are as positioned there as we can be. As you look at kind of everything else, the rest you talked about, FDA changes, all of what has happened at the CDC and NIH in the near term, those are obviously important. I would say we are not seeing those have yet in the short term the direct impact to us. I think there are some long-term structural questions that those things could have depending on how they play out to the industry and the broader ecosystem of how R&D drug development is done.
In the near term, it's not having much of an impact. Probably the most important thing for us is what we're seeing with the FDA, who is continuing to move on all of our important programs.
Fantastic. That's really helpful to understand. I think you really hit on MFN and tariffs being critically important. Maybe just to spend a minute on those, I think Merck has actually been very transparent in some of the actions that you've taken to mitigate the near-term tariff risks. I think we heard at the quarterly earnings, the work that you've done on Keytruda in terms of bringing that inventory here into the U.S. Was that a hard decision to make? Can you talk a little bit about kind of is it just Keytruda or are there other parts of the business that you've been able to kind of minimize that potential impact of tariffs?
Yeah. No, I appreciate the question. No. As, and maybe this gets to a broader approach we're taking to a lot of what's happening right now in the broader environment, I tend to try to first remind myself and remind the team, you know, this feels like a lot, and a lot has come at us. It feels like we've been living in this for a while. The reality of it is it's 100 days. We've talked about the fact, I mentioned earlier I was in a meeting and someone said, "Can you tell me all the strategic changes you've made because of MFN?" That was a week and a half ago. We're in a business that operates on 10-year plus timelines.
What I've said to the team is what we can control is what's in front of us, which is executing on the pipeline we have, continuing to make sure we bring forward breakthrough products that if we can commercialize successfully and win in the marketplace, will make a difference for patients and will give us a sustainable profile for the company. Stay focused on that. Where we see no-regret moves, let's make them. I would put your question on Keytruda as a no-regret move. We already had, as I mentioned, started to strategically shift the manufacturing. We had initially not intended to bring all of the IV production of Keytruda to the U.S. because of the fact that it's approaching its LOE and we felt like we'd be better to focus on the new products coming.
As the situation unfolded, though, we saw the opportunity to pivot and to be able to know that if we make an adjustment and just look to bring in first contract manufacturing to fill some of the gap and then build the capability at the Delaware facility I mentioned, which is a broad-based biologics facility, it was easy to bring Keytruda into that for both drug product and drug substance. That solves the problem longer term. In the shorter period of time, we brought inventory in of finished goods which have us positioned to be able to source for 2025. Importantly, we've also continued to both produce drug substance in the United States. We have two contract facilities where we do a small amount of production. Most is done in Europe, but we do have some in the U.S.
We're going to leverage that drug substance from our U.S. contract manufacturing for 2026. We've already signed up a drug product contract manufacturer. We'll be producing both drug product and drug substance in the U.S. beginning in 2026 and then set up for the long term. That's an example of a no-regret move. There is some cost associated with it. We will mitigate that cost as much as we can. Structurally, it fits with what we were trying to do anyway, and it satisfies the desire to see more production of key products in the U.S. That's one where I felt like it was not a hard decision. We've made the same decision for the rest of our pipeline. Where we can, we will source from the U.S.
We were already down a path today where the majority of our new products were already intended to be sourced in the U.S. As it relates to IP, for most of our new stuff, frankly, the IP is largely in the U.S. That is not an impediment going forward. For Keytruda, the IP is not in the U.S. There will be a little bit of tax leakage, but again, that is something I think we can continue to mitigate and optimize around.
Wonderful. That's really useful to understand kind of the steps that you've taken and certainly the various trade-offs and no-regrets moves feel like the right thing to do in this uncertain environment. On MFN, because this is the other really big one, this is drug price reductions here in the U.S. Have you had any direct engagement with the administration since we got the executive order and then the CMS press release last week? There seems to be light on details so far. All of us are out there looking and saying, well, do the companies know more than we do, or do they only know as much as we do? Do you have any perspectives you can share on that?
I'd say largely my estimation would be we know about the same as what you do. We have had, maybe stepping back more broadly, we have had ongoing discussions with the administration, really going back to when they were transitioning into office, including myself with members of the cabinet, with the president himself, and others with members of Congress, both the House and the Senate, particularly on the Republican side to understand the agenda and what they were trying to do. We have had a continuing dialogue as Merck and as the industry. I would say it's been very constructive. Clearly, this administration has strong priorities they want to achieve. My own experience, and I think the experience that we've seen, is if you're working to try to work with them on those priorities, they're willing to listen and they're willing to take your input.
That has happened. I don't want to get into the specifics of what's happened with the executive order itself and those discussions. Needless to say, as Merck, we remain willing and interested in engaging ongoing with the administration on the MFN issue, on trying to find a path to meet what we agreed to in principle. Maybe that's important to say, both as Merck and as the industry. In principle, we agree that the prices in the United States need to be addressed. We think the best way to do that as an industry, and I'm sure it's a broken record to everyone else who's been up here, but it's true, is for every dollar spent on a pharmaceutical, over $0.50 goes to someone in the middle. They have nothing to do with the innovation. They take no risk to the discovery of the drug.
They take no risk to the development, no risk to the manufacturing. They negotiate price and they distribute. Find anywhere else in the world where the person who is a negotiator and distributor takes $0.51 of every dollar.
You take about 2% or 3%.
Yeah. Yeah. I mean, we need to address that. That's the fastest way to bring down prices in the United States. By the way, that changes the economics of our industry zero because we only get the 49 cents today. My view and the view in the industry is if we do that, we both can preserve the innovation engine we have, which is a world leader. We lead in this. We're an exporter of this and also address the price issue in the United States. That's half of it. We also in principle agree that we have to do something about the fact that there's an imbalance between what the U.S. pays for drugs and what the rest of the world pays. That's acknowledged.
We think the best way to do that is both through our voice as an industry, which we're doing, do everything we can to communicate the need to see this addressed. Frankly, it's going to need beyond just the industry. You need government-to-government action because in most of the countries outside the United States, there are social systems where you're negotiating with the government. They set the price using health technology assessments. It's not necessarily a negotiated price. It's largely a set price. We need help. We think through trade and tariffs, there are ways for the government to help us. I think you've seen that being reflected even in the executive order itself. There was a reference to having the Secretary of Commerce do just that. We support all of those actions.
Across that, we're willing to engage and try to solve those problems. Let's find the best path to do it that preserves the industry but addresses what we need, which is lowering the prescription costs for patients at the pharmacy counter and getting better balance for the value of the innovation we bring globally.
It certainly sounds like the industry is working in a concerted way together to do this. I think we're hearing very similar messages across all of the countries.
Yes. Yes.
Dean, I think we heard just from Rob that, and this is the final broad question before we really get into the Merck story. We heard from Rob that perhaps there hasn't been any disruption to your interactions with the FDA or other pieces of the agencies so far. Is there anything that you're looking out for that would start kind of waving red flags and say, "Hang on, this is getting a little bit close for comfort. We're going to need to start making sure and reinforcing those engagements"?
There's a lot of statements that are made, and it sometimes can distract people from actually what's happening on the ground. So far, when we look at it, I mean, we have important, as he's talking about, these launches are important for patients, and it's also important for Merck. We have a subQ pembrolizumab, which we think is really important for patients. We have not seen any issues with the PDUFA date that's been laid out. We have clesrovimab, which is an antibody against RSV, which we think is really important for the U.S. health system. We are in engagement in relationship with the FDA. We have not seen any movement in that PDUFA date. Those are all great examples. We've talked about Islatravir Doravirine , which we think is critically important, laying out a new anchor medicine for HIV.
That file is moving appropriately through the FDA. We'll probably be talking about WINREVAIR or Sotatercept. We had really excellent data. And that data, we have indicated to people that we're very interested in getting the first time a label in PAH where we're talking about mortality, survival in this. We have conversations. All of that has not gone off track. I think looking forward, what we'll have to just see is there has been the exit of some relatively senior people. That gives some degree of stability as to what the expectation is. And we'll just have to see how much of that expectation, because this is a, we set up trials now in collaboration with the FDA.
All of a sudden, when you read it out later on, if everything dramatically changed, you're like, "You know." We have not seen that, but that would be something that we would keep our eyes out on.
Absolutely. I think that makes a lot of sense given the long cycle time for not only the clinical trials, but from discovery all the way through. You touched on a couple of drugs that I think we're going to dive into. For first, let's start with Keytruda because I think this is the big one. In an earlier presentation that I had today, I showed a graph that represented the fact that consensus peak expectations for Keytruda back in 2016 were only $5 billion. It then shifted over the next 10 years up to being $35 billion in terms of the expectations of where that peak will be by 2028. There is obviously a large patent cliff that comes with a large blockbuster. You have been doing a lot of work to set out for that with subcutaneous and some of these other opportunities.
Dean, can you remind us on the subcutaneous product, kind of why this is a clinically relevant kind of opportunity?
We think this is a really important opportunity. One of the things that I think happened in the transition from 2020 to 2021 is Merck really pivoted to get into the curative setting in the early stage. We have hopefully 10 approvals shortly. Four of them have OS. This is a place where our growth is. It is not just economic growth. This is where you can cure patients. We think it is critically important. We think especially in that patient population, but really in all patient populations, if you can give it subQ and if you could give it subQ in two minutes, that would be really important. No one likes to stand in queue at an infusion center. It is not the most uplifting thing for anyone who has ever had cancer. We think this is really important.
It dramatically changes access in the inner cities and in the rural areas. We think this is really important. That is moving forward. It's an injection. I can do it Q3 weeks or Q6 weeks. It's two minutes. There is nothing out there of any other PD-1 that is like that where you're giving it in two to three minutes. We think this is important.
Which must mean more volumes.
That's why it can be given so much. I mean, I hate to say this, but the minute you talk about putting things through a port and all of this, and I'm an attending physician, the last person you ever want to touch a port, a chemo port, is an attending physician. That's the last person you want touching it. I can give subQ pembrolizumab.
There's a reduction in the risk of patients to be required to give it.
That is exactly right.
Rob, I think on the subQ piece, you've also alluded to kind of concepts around how you're going to price this relative to the IV. Can you talk us through kind of what that might look like at launch relative to where the subQ might be as you go through IRA and then as you go through the patent expiry?
Our strategy, and it gets a little bit to what Dean was laying out, that given the unique portfolio that Keytruda has and the number of indications, we now have 41 indications across 18 tumor types plus two that are tumor agnostic and more coming. As Dean said, in early stage cancer, we have nine, currently soon to be 10, four with overall survival. The ability to try to bring value to patients and in turn continue to lead in cancer for us is unique relative, I think, to any drug that's ever come before it because of the size of what it is and the strength of the data and the commitment behind the use of Keytruda. We very much are focused on getting the maximum number of patients who are eligible to adopt the subQ form at launch.
We believe if you look at the total patient population that is out there, 30-40% will choose to be on subcutaneous either as the patient and then working with their provider. It brings provider benefits where you're in clinics that are capacity constrained. It brings quality of life benefits to the patient. We think that will be so important. We are quite confident in that ability to drive the adoption. We recognize the one thing that could stand in the way of that is if access is limited because of how we price. We are going to price for share.
We're going to price to drive the volume, which means we are going to price, I don't want to get into specifics, but let's say the price we would expect to generally follow the IV price because that's what's going to ensure the maximum adoption over time. That would be true as we move into the IRA and potentially as we move into the launch of the LOEs as well. Always focusing on first and foremost maximizing access and adoption and value under the curve because we think that can sustain a tail for the benefit of Merck while bringing in a significant medical benefit for the patients that are counting on it.
Absolutely. I think that concept that you've just laid out is really important because if your price on your subQ ends up a lot higher in that post-patent period, your volume just switches back to the IV setting, which becomes then a highly competitive space and much more challenging to defend. Thank you for walking us through that. I think WINREVAIR is a particularly exciting opportunity that's kind of mid-launch at the moment. We're seeing kind of real patient impact with this product as well. What drives the growth ahead as you think about kind of moving, continuing to move? I think if I remember in our models, we see kind of WINREVAIR being about 10% of your overall revenues by the end of our forecasting period. How do you think about kind of that future and trajectory with WINREVAIR?
What dimensions do you push on to achieve it?
Yeah, maybe I'll start and then Dean can add from a clinical perspective. Right now, the launch is going very well. We had high expectations coming into this. We're meeting those expectations. I feel like we were aggressive and we're delivering against that. If you look at where we are today, we're still fairly early. We're still primarily focusing on bringing the sickest patients. Those would be triple therapy patients, patients who are on therapy, looking at really the sickest you can see out there. The ability now increasingly to see other doctors start to move into with people on two drug regimens. They've come off the prostacycline. That is starting to move. The potential of the ramp is still strong for a trend of growth. We're not expecting an inflection point, hockey stick. We think steady growth.
What drives it is the experience that the physicians are having. They're increasing confidence that the safety profile is proving to be quite good. We continue to have very good results from a safety perspective. We've started to publish increasingly the real-world evidence around what we're seeing on the safety profile, including you're going to see extended data from HYPERION, the ZENITH study, STELLAR study, and how we track these patients longer term. That is all looking good. Obviously, as we start to see the readout from, for instance, ZENITH, which was unbelievable, the results that came with ZENITH. Maybe because I know there are some generalists, pulmonary arterial hypertension is not well known. It is a devastating disease. It tends to hit women more than men. It hits them in midlife. You're often dealing with child-bearing, child-age-bearing women.
If you're diagnosed with this, one, it takes a long time to be determined this is what it is. Effectively, you're suffocating because you cannot get blood pumping enough because you're getting so much tension into hypertension, you will, into the lungs and into the heart. 50% roughly will be dead within five years. The mortality is high. This drug is the first drug through the ZENITH study to show a mortality benefit, all-cause mortality benefit, statistically significant benefit through the ZENITH study that was stopped early because of overwhelming efficacy.
That's powerful because obviously, if you're a patient, even if you're a patient who is on therapy and is feeling okay and is being steady at the point you're at, you have to challenge when do you need to be put onto WINREVAIR because if it brings the mortality benefit, you would assume you'd want to be on it sooner than later. If you look at the curves in the study, they separate almost immediately. It is very important to understand that. We expect, hopefully, we'll see. We had to stop the HYPERION study as well because of the same issue. It would be unethical to not give patients WINREVAIR because of the results we were seeing. That's important because that was an earlier population of patients earlier in their disease progression.
It helps reinsure physicians that this is for the less sick patients as well as the sicker patients. All of this is building the momentum that drives us to believe that this will have steady growth as we move forward. That is before we talk about things moving maybe broadly into PAH-related heart failure that Dean can speak of. Dean, I do not know if you maybe if you want to go there.
Yeah, I would just emphasize, people are going to later on ask about BD. We like BD that gives us the access of doing something first, best, and next, whether it be EyeBio, whether it be Prometheus, or whether it be Acceleron. With Acceleron, with WINREVAIR, you see it. This is the first time any medicine that isn't related to vasodilation, which is all the other medicines, but is focused on the basic genetic cause of a disease, this is the first one. It's the first activin signaling inhibitor. I would remind everyone, I don't know of any other activin signaling inhibitor that is in any clinical trial anywhere in the world. This is first. It has given best results. This is the first time a trial has been stopped early because of overwhelming efficacy. This is the first time that people have had hard outcomes.
This is the first time that I know that not only did the trial get stopped for ZENITH, but the steering committee refused to proceed with the other trial. I've never been in that situation, not even with Keytruda. This is first, best, next. It reformulates the field. One of the things that are next is that we're going to experiment and see whether there are certain patients with pulmonary hypertension who don't have pulmonary arterial hypertension but have pulmonary hypertension due to heart failure. We'll see those results sometime this 2025, 2026 to decide whether we go to phase three. We're excited and eager to see those results to figure out whether we can even do more good for even more patients.
Those results will be quite instructive because the biology is a bit different, right?
It is. The biology is different. The patient population with heart failure that we've taken is the one that from a physiology standpoint looks similar to PAH. It is not the broader heart failure, but it is a relatively smaller patient population among the heart failure. It is a patient population in heart failure who have the mortality and the life expectancy and the life morbidity similar to those patients with PAH.
Unmet need looks similar.
The unmet need is tremendous.
Perhaps just jumping around because we're on cardiovascular. I know in an earlier meeting that I got to experience, and you mentioned it before, enlicitide, which is your oral PCSK9, is an exciting readout that's upcoming this year. I think it's one of the key markers, key milestones that many investors are looking at and waiting to see. Can you talk a little bit about what this ramp and opportunity might look like? Let's assume that this is positive. We look at the other PCSK9s. What we've seen with them has been a very slow build. That penetration is very, very low in the market. Cardiovascular generally takes a long time to launch a new product. Will that be true for this particular product? Kind of what is it about this product that might mean that we need to do something different?
I'll let him talk about the commercial ramp up. I am very excited about this. I am a cardiologist. I did internship residency when statins came out. I was an attending when the first PCSK9 antibodies came out. Those first antibodies came out at $15,000 a year, which just so that you know, as a cardiologist, we used to snicker and say, "You're charging the same as what we'd charge for percutaneous coronary intervention." Right? What people want is they want easy access to the lowering of their LDL cholesterol. We want to democratize the PCSK9 pathway because that is the most potent way to lower LDL cholesterol. We have a medicine that we dream that this medicine can be given in the morning, no different than your statin, your Aspirin, your antihypertensive in the morning. You don't go to the hospital to get a shot.
You don't do anything like that. It will lower your LDL 60%, just like the antibodies. Because what this medicine is, is we have the technology to take an antibody and reshape it using a different technology, the cyclic peptide, and make a biologic in a pill. We are excited about this for the broader implications. The concept that we want is not just to lower LDL by 60%. That is the biomarker data that will come out this year. Our aspiration is not just to be first and best in terms of that. We intend to have an outcomes trial that will read out two to three years later that has an outcome of a reduction, not a 15% cardiovascular outcomes, which is what all the antibodies for PCSK9 have achieved. We intend to achieve 20%.
That's very exciting because 70% of individuals, especially in the United States where cardiovascular is still the number one, do not have their LDL in the right place. But commercially?
Yeah. I mean, the commercial opportunity obviously we think is significant. I think some important points Dean hit on. 70% of patients, despite being on a statin, don't reach goal. Cardiovascular disease continues to be the number one killer, 85% of which is related to people having problems with arteriosclerosis or hardening of the arteries and blockages. There still is a huge unmet need. If we can bring a drug that is oral that you can take and, importantly, price it competitively because I would say something we brought and where we focused our capabilities is in two places. Obviously, this is using macrocyclic peptide technology for the discovery and development, which, as Dean said, is new and it's important. This is one of the most complex areas that has been used with the oral PCSK9. Frankly, others have that capability.
What we think is unique is we have invested equally in our manufacturing and CMC capabilities so that we can produce macrocyclic at low cost. One of the biggest barriers for macrocyclic have been they're very expensive to make because they're highly complex to produce. We've been able to drastically reduce the number of steps it takes in the manufacturing process through know-how that is unique to us. That will allow us to be very competitive in how we price, which we think is that's the democratization that Dean's speaking to, both in the United States and around the world. If we come out in a lower price and drive for volume to address the need of the world, we think that's been one of the biggest barriers to why you're not seeing adoption that we can overcome given the clinical benefit that he's talked about.
It's important to note that when we launch, we'll be launching with the biomarker data, which we'll see the readouts of those phase three studies, three of them later this year. As we look at that, because of the fact that this is a biologic in a pill that follows the key structural elements of the monoclonals that are out there, we think that our ability to get a favorable label consistent with the biologics will be there no different than what happened with Inclisirin. Obviously, we will follow on with the outcome study in the next couple of years, as Dean said. We expect this to have a strong launch from the beginning and to carry it through with the outcomes data. We'll be probably two years ahead of any competitor.
Our expectation is we'll be having outcomes data as you start to see competitors come in. I think what Dean should comment on is what's next because we're not stopping with the mono just as a single agent and want you to speak about the combination.
There become obvious combinations that you would combine. You would think about a statin. You would think of other non-statin LDL cholesterol-lowering medicines. Probably really exciting to us is there is a cohort of patients whose LDL is high and have a high Lp(a). The way that I treated those patients right now is I lower their LDL to zero. There could be evidence in the next year that lowering Lp(a) will also be important. Naturally, you sit there and you go, "The perfect medicine for this patient population could potentially be a PCSK9 Lp(a) combination." As I talked about having PCSK9 with towards 20% cardiovascular outcomes reduction in the high Lp(a), we could dream of having a pill for that patient population where we're driving their cardiovascular risk down by 30%. I mean, those numbers are the numbers I like here.
20%-30% reduction in cardiovascular outcomes.
You can certainly hear your passion as a cardiologist coming through as you talk about this topic. Perhaps jumping to combinations and kind of the rest of the pipeline. TL1A, I think, is an interesting one. This is an immunology product that you have in the pipeline that is in phase three right now for the IBD space. I think in many ways you hear from some of the other companies kind of, "We're only going to bring forward our TL1A in a combination." How do you think about kind of the path forward? Perhaps is this a place for M&A for Merck going forward to find partner molecules to the TL1A?
Just so that we step back, the type of market or biology that TL1A would play in is the place, for example, HUMIRA and SKYRIZI and STELARA. There is TNF as an important node. IL-23 is an important node. What we're hoping to be is, again, I hate to be a bad recording, first, best, next. We intend to be the first TL1A. And we believe we will be the best TL1A. That TL1A node will be as important, if not more important than IL-23 and TNF. We are advancing with speed in inflammatory bowel disease. We will be opening it up in other diseases over this year. The minute you can be first and best there, you immediately go next. The next is you would begin to combine with the other major nodes, such as IL-23 or TNF or others.
You can achieve that by doing combinations that you're talking about. You could potentially also achieve that by making, for example, bispecific antibodies. You would also immediately start asking yourself, "If you can make enlicitide and a PCSK9 antibody in a pill, could you do the same thing here as well?" It is a creation where we do BD, where we can have the hope of being first, best, and it opens up a pipeline of next.
We have internal agents already to do for the combination as well as continuing to look external as well.
On M&A specifically and more generally, I know you guys have done a lot of deals recently in China. It seems like you've probably got a pretty good team on the ground that are kind of making sure you've got a deep view in there. Can you talk a little bit about what are the parameters that kind of feel like a good deal for Merck to consider at this point in time compared to kind of the last few years?
Yeah. The overall, the parameters that we've brought really haven't changed fundamentally. We continue to be driven first and foremost by the science and always asking the question, "Is there a scientific need that solves an unmet need for a patient that fits within our portfolio? And then does it align with value or not?" If we find that where there's new science that addresses unmet needs, strategically it fits, and we add value, that tends to be where we move. We have been very strategic in thinking about our portfolio to diversify. If you go back a few years ago, we were the Keytruda company. Today, we are a broad-based oncology company. Increasingly, we're going to be a cardiometabolic company, an immunology company, an ophthalmology company, a vaccines company. We have been very thoughtful in leveraging our position to grow out.
We have done that both internally and through business development. The sweet spot of where we have been looking has been that $1 billion-$15 billion range with a willingness to go higher. However, if it meets the scientific parameter I just laid out, we are not going to do a deal just to do the deal. It has to bring great science that brings sustainable value for us long term. We have moved in phase I, phase II. We have done stuff in phase III. We are open to doing things that are commercialized. All of that is areas we continue to be interested in. If you look at what we have done recently in China, those deals were because we saw opportunities to leverage capabilities in the first, best, next that Dean just walked through.
In many of these cases, they're giving us the opportunity to go to the next, what's the combination drug. What we find is high-quality science, good assets. We go for those wherever they are. If the science is there, if the clinicals have high quality, and we feel confident in that, after diligence, we're comfortable with the intellectual property. In the case of China, that we can bring the assets out of China and then do the studies, the ongoing further work, commercialization for the rest of the world outside of China. That is important as we think about the Chinese assets. I've been asked in other settings, "Are you more leaning towards China than everywhere else?" The answer is no. It just happens to be that the recency bias, the last couple of deals have been that.
There's a resonation to the.
It is just because that has happened to be how it played out, not because we have changed our focus. We are looking globally for further opportunities.
We have got very far into this conversation without talking about ADCs and kind of your pipeline. I know we're going to have a lot of chunks and a lot of airtime on oncology over the weekend and over the next few days at ASCO. I look forward to seeing the team there. Although there was an announcement this morning with Patritumab deruxtecan , your HER3 ADC , can you just, as a headline, let us know, is there read across to the rest of the ADCs in terms of either safety or efficacy that we should be aware of? We can definitely focus on the rest of oncology while we're at ASCO over the weekend.
Yeah. I would just emphasize that for us, and you'll see at ASCO, I mean, we have nine antibody-drug conjugates in the clinic. Five of them are pretty deep in the clinic. The first one that everyone focuses on is sac‑TMT, which is the TROP2 ADC. It's in 14 clinical trials.
In phase three.
I'm sorry, 14 phase three clinical trials. Nine of them, if you look at them, it's in a tumor indication that we will be first. The other five, it's a place that we think we can be differentiated. That's with Keytruda, and they've been a great partner. With Daiichi Sankyo, there's three of them. The most important indication for each three of them is the HER3 ADC that you spoke about. Our key interest is in breast cancer. That's where we focus at HER3 ADCs. There was an announcement in relationship to lung, but that HER3 ADC, that's where we're focused on. B7H3, we think that we can change. We think we can bring to small cell lung cancer what we did to non-small cell lung cancer with KEYNOTE-189 . We with Daiichi Sankyo is advancing a B7H3 in small cell lung cancer.
Instead of using a PD-1, we're using a T-cell engager, which is DLL3 T-cell engager. That's advancing very fast. With Daiichi Sankyo, we also have moving forward CDH6 in ovarian. There's many others. I think one of the ones that I think some people have lost track of is the RAW-1 ADC, which we're now moving quickly through heme malignancy. Those are just five. We think that the antibody drug conjugates are really important. We're the company that combined pembrol with chemo. We are the company who should combine a PD-1 with next-gen chemo, which is antibody drug conjugates. We intend to continue to do that.
Fantastic. Super helpful to understand that context. I think we'll get into a lot more detail over the next few days. I want to make sure that we hit a couple of questions in here. One connects to another question that I wanted to ask, which was about margin and kind of where margin goes for Merck because I think there's a lot of leverage that comes from Keytruda. You've got some other drugs that are growing like WINREVAIR that have royalties associated with them too. The question that came through on the message board was referencing the contract manufacturing that you just spoke to, Rob, earlier for Keytruda. Should we expect a hit to margin for Keytruda with that contract manufacturing and those new contracts?
Can you talk a little bit about the pushes and pulls on margin and how that might evolve over the next 10 or so?
Yeah. Obviously, we've been very focused on trying to drive for the strongest margin possible over the last several years. Frankly, part of why we did that was to make sure that we always were in a position, depending on what would happen in the U.S. pricing environment, to be able to absorb pricing hits and be able to always fund innovation because we continue to believe the best path forward for our company long term is to focus on the science and focus on innovation. Who we are, putting the macro environment aside, people will always want a cure for the next disease if they face it. We want to be there to deliver that for them. There'll be value for that. That's very important. What's driving our margin is, as you said, obviously, product mix.
We've also done very, I think, good cost management. We have the highest percentage of, if you look at from an R&D, I should maybe flip it there. We're going to go the wrong direction. SG&A as a percent of sales, we're the lowest or probably near the lowest in the industry. We are the most efficient in SG&A. We are also the most efficient in cost of goods sold. The contract manufacturing is not going to have a major impact on that. It's in the mix of what we do. That should not worry anyone. As we look forward with the mix change as Keytruda comes off patent, clearly that will create a margin headwind. How much of a headwind will depend on the rest of our product mix. I would say some of the products we're bringing, the new products, do have royalties.
They have their margins are a little bit lower. But some have very high margins because of the way that those contracts were signed up. For just so, for example, if you look at the Daiichi Sankyo agreement, the profit sharing that happens there all flows through basically revenue as net revenue. So the gross margin of all of what we do for the Daiichi products, same thing for Moderna, is 100%. Because now below the gross margin line, you have the R&D expenses and everything else. So obviously, those are very good margin products. Now, that's because the costs are buried into the net revenue. It's the way you book alliance revenue in a partnership. And then we have others that would be wholly owned assets without royalties and then some with. So there's a pretty good mix.
How that all plays out, I think we're going to have to see over time. Clearly, in the short term, we're going to invest behind the R&D we need to be able to deliver the growth of the pipeline we see. A lot of the margin benefit we've seen flowing through gross margin, we've been just redirecting into R&D spend. That gives us obviously flexibility longer term to think about that as well. I think the margin will face a headwind. How it plays out, we'll have to see based on the way the portfolio grows. I'm most focused on delivering top-line growth, which I think if I do that with the product portfolio we have, I'm confident you're going to see earnings growth as well.
Fantastic. Maybe just to end, I know we've got about a minute left, the $50 billion of that top-line contribution that you've spoken to in the past from the pipeline that you have. There's a question that came through with kind of what are the error bars that sit around that $50 billion?
What are the, I'm sorry?
The error bars. How much rain?
Oh, okay. That $50 billion plus, just to give context to what it represents, and this is obviously before we take into account what happens with most favored nations and everything else.
Exactly.
That people understand that this was, but the $50 billion plus is the revenue potential non-risk adjusted that we see coming from oncology, which we think has greater than $25 billion in potential coming from the vast suite of assets that Dean walked through plus others. It is coming from our cardiometabolic business anchored with the oral PCSK9 as well as WINREVAIR and then efinopegdutide , which is our GLP-1 glucagon co-agonist. That is approximately $15 billion. We have greater than $5 billion from immunology and the TL1A platform that Dean talked about earlier, greater than $5 billion in HIV coming from multiple assets we have there that we did not even get to touch upon that we are excited about. We have, what am I missing Caroline, ophthalmology, which we think is a multi-billion dollar opportunity based on the WINREVAIR agonist, a first-in-class, best-in-class deal, very similar.
Dean calls it the WINREVAIR, if you will, of ophthalmology, which we hope to deliver on. All of that. Beyond that, we have the benefits of what's coming from vaccines, from business development. Our early phase pipeline, we have over 50 programs moving into phase II. Some of those, because they're in spaces like oncology, could be delivering in the same time window of the mid-2030s. Those haven't been included. Animal health, that's going to more than double over that period. I need to look to my team because we have so much. It's hard to keep it all in your head. The error bar around that, that you should assume is we're saying that's the if everything hits. I think there's a misunderstanding. People view it as it's toggled on or off. Take oncology. Just use that, the $25 billion.
That's across the nine ADCs where we have 50, five-zero phase III studies underway between the ADCs, the tissue targeting agents we have, the precision molecules we have, the INT therapy in combination with Moderna across. If you look across all of those, the T-cell engagers, bispecifics, it is a broad suite of assets that each have multiple indications. The way you can achieve the $25 billion is through a whole host of different measures. Our error bar there, we feel is pretty tight because it's spread across so many assets. It's not one asset. It's many assets. I think almost that's the trouble of our story where we're misunderstood. We have so much. It's hard to get your arms around it. What you should hear from us and from me, our confidence in that pipeline is incredibly high.
Perfect. Thank you so much. I think that's a great place to end. I really appreciate your time today. Thank you, R&D.
Thank you.
Thank you, Dean.