Merck & Co., Inc. (MRK) Earnings Call Transcript & Summary

Yes. So I think PARP inhibition is a still incompletely understood field. I think the prevailing theory of mechanism of action relates to synthetic lethality, and obviously then you get into all the questions of loss of heterozygosity and that as a key underpinning. What's interesting is, if you actually look at the cellular signatures of a patient on PARP inhibition, they actually look to all the world like platinum. And so there is a counterview that indeed PARP inhibitors are indeed a orally available, potentially less-toxic form of platinum-type therapy. I think it's well described that a number of the settings where PARPs have been quite active are in the settings where patients were initially platinum sensitive, and that would certainly be consistent with an alternate hypothesis. We do have some early Phase II data that have spoken to the efficacy in certain tumor types unrelated to loss of heterozygosity. And so I think the question has to be answered that it's clearly a very tolerable approach, and I think it's a very worthwhile question to ask. And so consequently, we are conducting a few randomized trials to try and get a definitive answer.

And there's an ongoing trial called PIPSeN out of Gustave Roussy. It doesn't have a checkpoint in it. It's chemo doublet followed by PARP maintenance versus chemo doublet. Were that trial -- and it's been running for a while now -- but it's a proper trial that's sizable and well run, et cetera. Were that trial not to show benefit for PARP maintenance, to what extent does that influence your opinion? Or you think the fact that there is no checkpoint agent within PIPSeN mean that actually it's not a useful data point in weighing the probability of success.

Yes. I think we'd have to look at the data and understand it and obviously understand the size of the trial, the patient selection. And clearly, ours are all combined with checkpoint inhibitors. So that's the other sort of idea here which we've added into the mix.

So let's take a break from oncology for a second and go to gefapixant, which doesn't get much attention. You recently presented the data. It's clearly an unmet medical need. The magnitude of improvement in the primary end point isn't huge, but obviously, as I said, it's a material unmet medical need. And there is the metallic taste. How -- do you think this is enough given the paucity of treatment options that are available is the first question. So what's your level of confidence that it's good enough to make a dent in a unpenetrated market?

Yes. So I think that the whole area of chronic cough is nearly a field which is emerging. And obviously there are many different names applied to the syndrome, but for clarity: These are folk who no underlying cause has been found for cough, that sort of high rates of coughing through the day have been a fairly debilitating symptom. As you rightly say, there are no really approved agents. There's been very little progress in this field. And treatment is generally with off-label applications of either low-dose opiates or alternatively other nerve modulators. So the P2X3 pathway is a purinergic nervous system pathway. There is some evidence and actually quite persuasive evidence that quite a lot of the patients who have this entity of chronic cough, which is not due to some secondary cause, have a hypersensitive purinergic nervous system and it's believed that the P2X3 pathway is important. So we've actually conducted 2 Phase III studies, and we have shown unequivocally that there is a very meaningful reduction, at the 45-milligram dose, of cough rates. The absolute reduction is on the order of 60% to 70%. It's important to recognize -- this has been known for many years. This was also known from our Phase II program, that there is a placebo effect in this which is fully understood, but despite that, we have an effect size which clearly is superior to simply the placebo effect observed. It is also important to note that, as was presented, the median duration of coughs in these patients was on the order of 11 years. That's a remarkable disease burden for patients to have to carry around, namely chronic cough that is sort of endless and ongoing. We knew from our Phase II program that, once patients have been in the Phase II, when a second Phase II opened, they were clamoring to participate because clearly the drug had a salutary effect [ on their symptomatology ]. So we're very encouraged by this. We have 2 Phase III studies we -- with positive primary end points. They also have very strong support of quality-of-life data going with them. And these are clearly trials which are in a lead position. The competition is quite a ways behind. The taste perseveration is clearly an adverse effect, but the fact that a majority of patients with taste perseveration decided to stay on therapy speaks to the perceived benefit-risk that patients experience with this agent. So it is a new field. Clearly there's a lot of work to be done to flesh out the detail of that field, but this is a very large number of patients. The current epidemiology of this suggests that as many as 10% of patients in the world -- or people in the world have chronic cough. And about 1/3 of those, there's no identifiable cause, so we're talking about a fairly substantial patient population for whom the available therapies are really simply inadequate. And we're very encouraged by the Phase III data, which as you say were presented last weekend.

So from a -- I would imagine, if I was at the agency, I would have -- yes, my significant concern would be, given this is a diagnosis of exclusion, the risk is that it could be given to patients who have some sinister organic disease which may camouflage that. And obviously one thinks of non-small cell or small cell or other diseases which results in chronic persistent cough which might be masked in the same way as a PPI might mask gastric cancer. How does Merck deal with that? And what is the -- what can Merck do? What does the regulator do? And who is the principal prescriber? Is it the pulmonologist? I'm guessing it's not the primary care practitioner, but that whole infrastructure as you go from where you are now through the regulator and to the market, how do we -- could you help me along that journey?

Yes. So I think the professional societies that recognize the entity of this chronic cough syndrome have been quite deliberate in how they thought about this. They have put a time window around this, and there's a strong recommendation that the major secondary causes are excluded during that time. So in our discussions with regulators, there was an agreement that we would put a time window around the inclusion in the study. And that would be a very meaningful surrogate for patients, having had appropriate clinical workups and potentially therapeutic trials, to interdict some of the known underlying causes. The fact that the median duration of patients on this trial was on the order of 11 years speaks to the fact that there is indeed a substantial cohort of patients who actually have chronic cough and where all these secondary causes have been largely excluded. So I think that time window is of some importance. That begs the next question, and that is, is that time window too stringent? Because chronic cough clearly starts at some point along the way. And what is the minimum time it should be explored? And we are doing some additional work to try and define a time window which might be even more appropriate for patients with this debilitating cough syndrome. As to the prescriber, I think there's no single answer to this. In various jurisdictions there are various degrees of awareness of chronic cough. There are chronic cough clinics in many countries. And in your own country, chronic cough is a well-recognized entity. And the phenotype of the physician looking after these patients varies. This includes, for example, pulmonologists, allergists, asthma specialists. Because ultimately a lot of folk with chronic cough get referred to one of the specialists categories that actually are responsible for some of the underlying cause excluding. So the typical things that you exclude are obviously concomitant medications such as ACE inhibitors. You exclude gastroesophageal reflux disease, upper respiratory issues of a postnasal drip variety and hypersensitive airways as in asthma. So all of these things get worked up, and so you can imagine there is some heterogeneity of the physician cadre that actually looks after this patient population. And obviously we have to work very closely to address those groups. I will just say that the trials enroll very quickly. And in our experience, at least my experience, rate of enrollment is a good proxy for pent-up demand. And so leveraging the folk who have participated in our clinical programs will be very important as we begin to map out what that patient journey really looks like.

So when -- it's a drug that doesn't and hasn't historically received much focus from the investor community because of the diagnosis exclusion perhaps; the unfamiliarity; and perhaps some awareness of the adverse event burden, although not serious, troublesome and unpleasant or could be unpleasant for the patient, but listening to you, it sounds like the commercial and medical importance of it is perhaps far greater than is externally perceived by the market. Is that a fair conclusion?

I think, for that percentage of patients, that's a very true statement. Again just to emphasize: If you've been troubled by troublesome cough continuously through the day for 11 years, that's a pretty major burden to walk around with.

Yes. I understand. So we're in the sort of the last innings of the call, so over the last 10, 15 minutes or so, we should talk about COVID, which here again, despite Merck's legacy in antivirals and as a vaccine manufacturer, you singly are overlooked by the market. You have been relatively quiet in your disclosures over the progress of your various vaccines. And obviously it's a deliberate choice. It's not accidental. But starting with the 2 vaccine and the vector -- virus vector vaccines that you're using, first question. In light of the case of transverse myelitis reported to Astra yesterday and assuming it is transverse myelitis and assuming it is triggered by the fact they were using an AAV-based vaccine, is that of a concern for you? Or is your experience with Ebola make you relatively relaxed that actually this is not something that's necessarily going to be problematic for you? So thoughts on [ safety and platform ].

Yes. I certainly wouldn't make that overarching statement. I mean this is why you have to do large Phase III clinical trials, why they have to actually address meaningful numbers of patients. Because, remember, we are vaccinating, in any cases, patients who would otherwise be normal, and so perceived safety is obviously really important. And I think we have to proceed with very deliberate caution and ensure that we indeed have a safe profile. You do make the point that both of our vaccines are based on established platforms. So one candidate, V591, is based upon a measles vaccine platform. And we know that this vaccine has been into literally tens of -- or hundreds of millions of patients, so it's not like this is a first starting for this particular replicating viral platform. The other one, as you rightly comment, is based upon our vesicular stomatitis virus platform. And again, that is a well-validated platform. It is the basis of our Ebola vaccine. And so when we decided to look at deploying potential COVID vaccines, we really wanted to work with platforms that we have a lot of confidence around. And as a consequence, we picked these 2. The other idea here is our hope is that we might have a single dose exposure. As you can imagine, with a raging pandemic, multiple doses are less desirable than single dose. So that was another idea behind the 2 platforms that we have chosen, and we are progressing both of these platforms.

And the decision not to use a protein subunit vaccine, was this because you believe that it's you need CD8s and these -- a viral vector is better positioned to get CD8s? Or entirely a different set of reasons.

I think these are both well-validated platforms well recognized to produce both humoral and cellular immunity. Most of the vaccines that you're seeing developed are targeting the spike protein, which is thought to be fundamental to the cellular uptake of the virus. And so the idea here was, as I said, to use well-validated platforms that create broad immunity that potentially lend themselves to single-dose application.

The only reason I was asking is because the majority of protein subunit vaccines don't typically produce high-CD8 titers. And I was trying to -- I was wondering whether this was you thought this element of immunity was particularly important versus humoral immunity, but I understand that. That's fine. And then on the Emory-Ridgeback antiviral, could you update us on when we will get data from -- well, I've lost track of -- I think you're running the Phase II, so I think we're pending data from the Phase II, but you tell me. And when we expect to hear.

So this molecule known as MK-4482 was in-licensed and partnered with Ridgeback. This molecule is in a series of Phase II studies right now. We have not disclosed any data from those; and we are moving ahead into a larger Phase II/III trial. One of these will address an outpatient population. One of these will address an inpatient population. And we are optimistic that we will be able to have this up and running toward the end of September or early October.

And how large will that be?

These will be Phase II/III trials and they will be of significant magnitude. We haven't disclosed the absolute size yet, but that will obviously be posted when these trials come online. And obviously we've been working with regulators to get agreement on the protocols.

So potential data for Q1 of -- early part of Q1 2021.

Yes. This will obviously be driven by the rates of enrollment. And clearly, execution of these trials is going to require really top-notch on-the-ground information because, as you know, the sort of outbreak sort of waxes and wanes in different jurisdictions. And so ensuring that you're maximally deployed to enroll patients is going to be pretty important.

Let's just step sideways and talk strategy for a second. So look, on the basis of KEYTRUDA, you've -- clearly from not having had a legacy in oncology, you've become the dominant player or certainly one of the dominant players in the space. The rise of immunology as causal in many noncongenital diseases at oncology has encouraged many of your peers to intensify their efforts in the space, helped by a favorable commercial environment. You had some autoimmune drugs, but you divested many of them some years ago. What is the appetite to reengage within autoimmune either on the biologics side or on the small molecules side? So that's one question. And then in a similar vein, whilst you do have a presence in hematology in Hodgkin's and now the acquisition of the -- or ArQule in CLL, it's very small. And obviously Bristol Myers, your competitor, is -- dominates that field. And it's still a substantial chunk of the oncology market, so what's the strategic commitment to increase your footprint in hematology either through BD or organically? So autoimmune and hematology.

Right. So firstly, just to be clear: While we may have divested certain molecules that we saw as been potentially not first in class or not necessarily industry leading, we have retained a very substantial discovery effort in the immunology, inflammation areas. So we remain very active in the autoimmune and inflammation area. I think, the hematology question, just to clarify. Actually, it wasn't BMS that have the hematology profile. It was really Celgene that...

I'm -- new Bristol, let's call it.

New Bristol, okay. And having said that, our philosophy has always been one of go after great drugs rather than necessarily try and build franchises. I think our view is always that great drugs will build great businesses. Great businesses don't always necessarily build great drugs. So again, our view of the world is, if we come across meaningful targets that look as though they could be first in class and have unambiguously large effect sizes, we will build a capability around that. As you rightly comment, we have a very active position in Hodgkin's and in primary mediastinal B-cell lymphoma. In that regard, the 204 data were really quite spectacular. And as you commented, we did bring in the noncovalent BTK inhibitor, which is looking quite promising in addressing the area of BTK-resistant B-cell malignancies that have developed specific mutations. We will continue to look at potentially important first-in-class molecules that are likely to have an ambiguously large effect sizes. So we don't preclude anything, but the whole idea here is finding great drugs.

And just since you mentioned the BTK inhibitor. I was with Jake Van Naarden of Loxo, who was claiming that the specificity of their molecule results in what they believe is a superior or broader therapeutic window than you see with the ArQule molecule. And I was just interested in your observations, whether -- I would be surprised if you agree, but I'll pause...

In God, we trust. Everyone else must show data. So when we see the data, we'll comment.

Very good. All right. So listen, I think we've reached our allotted time. Roy, it was a pleasure. Peter, thank you for joining. And then to investors, thank you for your interest. [Operator Instructions] Next session, with Novartis, starts in approximately 5 minutes. Many thanks to both of you. Have a great week.

Thank you, Andrew.

Thank you, Andrew.