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

Thank you so much for attending our Global Healthcare Conference. Today, I have the pleasure to host Joe Romanelli, President of Human Health International; and Peter Dannenbaum, Head of Investor Relations. My name is Charlie Yang. I'm the -- one of the biopharma analysts here at BofA.

So Joe, I know it's been several years since we last kind of met in New York City. I think it was 5 years ago in 2019, Merck had the last Analyst Day. So maybe just talk about like what has changed for Merck, especially from an international front. Like what has been the expansion, the commercial presence here?

Yes. So first, Charlie, it's great to see you again. I would say, first, I'll talk about just how we're doing this year before I talk about our international business and how we compare to 2019. I think we're off to a really strong start this year. And certainly, I think that's both from an operations perspective and from our pipeline perspective. If you look at where we are today compared to where we gave guidance back in February, we've made steady progress. In fact, in the second quarter, we grew 11% year-over-year ex exchange. And because of that, we've narrowed and raised our guidance for the full year to hit 8% to 10% on the top line. Now what's more exciting is the progress we've made in our pipeline. And I think the work that Rob and Dean have done to really transform our pipeline has been quite profound. We sit here today, we probably have one of the best Phase III pipelines we've had at our companies, certainly, our recent history. We have 21 assets in Phase III. Eight of those assets have come from partners outside, so the BD work that Dean and Rob have been driving. If we compare that back to 2021, that's almost a tripling of the number of assets that we have. And so from a commercial perspective, the reason I get excited is because the impact we can have on society is profound. And when I look at the next 5 years, compared to the last 10, we have almost as many assets to launch in the next 5 years compared to the number of assets that we've launched in the past 10 years. So as a company, whether it's in the U.S. or international, we've made great progress. And then I think to address your question, going back to New York City in 2019, we certainly made steady progress internationally over that period. My #1 benchmark is patients, and we've doubled the number of patients that we reach over that time. Because of that, we've been able to drive growth from about $17 billion on the top line in 2019 to, last year, we were just under $27 billion, so a 12% CAGR during that period. Now because of that, we've risen in the ranks in terms of international. So we're now #3 globally of the international business. We've done very well in the emerging markets, both China, outside of China. So I think that's also helped this growth. And certainly, our 2 key drivers have been KEYTRUDA and GARDASIL. And when I look at KEYTRUDA back in 2019, internationally, we only had 12 indications. So over that time, the clinical development work and the regulatory teams at MSD have done a fantastic job. We're now at 28 indications. Still not quite where we are in the U.S. with 40, but 28 indications. And a lot of our progress over that time is transitioning from -- back in 2019 was all metastatic business to transition to both metastatic and early stage with some of the more recent launches. And that's driven a lot of our growth. If I go back to 2019, for KEYTRUDA, we're about a $5 billion business in that period, and now we're, last year, $11 billion. So doubling of the impact we're having on patients in the company. And then for GARDASIL, that, again, once is a doubling of the volume. So where we were in 2019, there was some capacity constraints on our manufacturing supply. The team under the direction of Sanat and MMD have done a fantastic job to build more supply so that we can reach more patients. We've almost doubled the number of national immunization programs. We're up to 189 now. Half of those are gender neutral. So a really great job of going after the public market as well as expanding in the private market. And that's really driven our revenue growth. So back then, we're about $2 billion for GARDASIL. And then last year for international, just under $7 billion. So almost a fourfold increase of where we were back in 2019. So making steady progress. But what I'm also equally excited about is the expansion and diversification. So we launched VAXNEUVANCE, V114, last year. We're now in 31 markets, competing really well in the marketplace for patients with pneumococcal disease. And likewise, we just recently received approval for sotatercept, so getting back into cardiovascular space, which is a place where we've built back in the 1980s with MEVACOR. So really excited. With sotatercept, WINREVAIR is its brand name. We received the approval. We're launching in Germany and Austria as we speak. We just had the first patient receive a script in Hamburg this week. So very exciting for us. Fantastic data with the STELLAR data that achieved this approval. So excited about the opportunity for diversification. I think we will look a lot different even the next 5 years compared to we were the last 5 years.

Perfect. And I do want to follow up on that. So maybe just talk about kind of like the -- on the international front, the markets are kind of the biggest Merck's contributor right now and versus kind of where you see in the next kind of 5 years. How would that kind of change?

Yes. I think it depends on the therapeutic area. So if I look at where we are today, the 2 products we just talked about are very different. So if I think through KEYTRUDA, roughly around 60% of my business is from the EU. And then as you expand into the emerging markets and Japan, you sort of get the bulk of the rest of the 40% of that business. And for GARDASIL, it's actually flipped, where you see a lot more of the business is coming from outside the EU. It's more of a 60-40 in terms of volume. So it's almost the exact opposite. So I really -- it really depends on the therapeutic area. And what I think we have done really well is, irrespective of that therapeutic area, finding the right payer solutions, working with our customers, so the health care providers, the hospitals, to make sure that we have the right value proposition in the marketplace.

Got it. And how about like the down the road in the next 5 years, do you see that ratio kind of change over time? Or...

Well, we tend to launch in Europe first. And I think this is what you're seeing with sotatercept or WINREVAIR. And when I look at that CV space, if you look globally, the number of diagnosed patients around the world is just about between 150,000 to 200,000. What's great about this market and the opportunity with sotatercept is we know exactly where those customers are. So if we're sitting here in the U.K., we know it's a very centralized system. I have 7 CoEs with 35 customers that operate in those CoEs. So a very small team that can work with those health care providers. Having the patients who are already diagnosed, getting them on triple therapy or moving them up to continuum as we do more studies is something that we work on. In Germany, as I just referenced, we have about 71 centers and around 220 physicians that we're working with. So very different than a traditional primary care launch. So as I look at sotatercept, I would say the bulk of the revenue early on is going to be coming from Europe, and then we'll expand into the emerging markets. I think the one thing that the emerging markets have going for them and why I get very excited is the demographics. So you think about the number of infants that are born every year. And if you're playing the long game, the bulk of the 120 million that are born every year, 110 million of them are coming from the emerging markets. So not only where we are today, but where we're going in the next 5, 10, 15, 20 years as a company. So we have to do well at both.

Got it. Okay. Perfect. And we'll talk about WINREVAIR just in a slightly later, but let's talk about KEYTRUDA, right? So coming out of WCLC and ESMO, right, there's a lot of talks around bispecifics. So maybe just walk us through like how Merck is thinking about -- based on that data set, how is that going to potentially compete with KEYTRUDA? And is that something that Merck have kind of looked at in terms of that kind of approach before?

Yes. So I think, first of all, we've made tremendous progress, and I said earlier about expanding into new indications. And if you look at our second quarter performance, just in the international markets, we sold $3 billion. It was 19% growth year-over-year ex exchange. As we think about what's driving that growth, a lot of that is coming from the early-stage business. So triple-negative breast, yes, triple-negative breast. You referenced -- well, you said WCLC, but ESMO, we just had 5-year overall survival data published, I think it was in NEJM, with 0.67 hazard ratio. So again, another validating factor for payers and clinicians who are looking for the right solution for their patients with triple-negative breast. Adjuvant RCC is another one that has really helped us to drive growth in the near term. And if you look at the overall profile of our business, about 50% of it is still lung, first-line lung, whether I'm in Europe or ex Europe and other markets. But we've expanded in the metastatic space to include RCC and head and neck, and that has been a key driver for our metastatic business. Likewise, we're also expanding into the early stage with triple-negative breast, adjuvant RCC as well as melanoma. And in some cases, like Japan, esophageal and metastatic as well as cervical. And we also saw data from KEYNOTE-A18 at ESMO, the hazard ratio of like [ 66 ], which is fantastic as we think about taking that to payers. So I think we have a breadth, a wall of data that really allows us to go out and continue to push around those 20 indications to try to do more in international. We're also trying to push the science. So we applaud anyone that is trying to push the boundaries of science. I think you asked specifically about the Akeso data. I would say encouraging for them to then start a Phase III study. We'll see what happens. Typically, our experience in anti-PD-1 combined with an anti-VEGF, generally, there are disparities between regions. And we've seen that with anti-VEGF. Certainly, it seems to work better in East Asian population. I mean this is one country. It was in China where they had the study. Again, can you replicate that study internationally, do multinational clinical studies, do the Phase III? And what's important, particularly for payers for where we are in the world right now, is you need overall survival. And so making sure that you set up the studies, do you prove overall survival? The other issue is KEYNOTE-189, our combination of KEYTRUDA and chemo creates a very high bar. And I know that in this particular study, it was just KEYTRUDA. So KEYNOTE-189, whether it's for them, so anyone that's trying to develop combinations bispecific or if it's us using KEYTRUDA with one of the ADCs that we partnered with, whether it's Kelun or Daiichi Sankyo. And we're very excited about our entire portfolio ex KEYTRUDA. So the products that not only have we partnered and brought in, but also we're developing through our own pipeline. In fact, we've said that we look at -- the outlook and the guidance that we provided is that, that will add additional $20 billion to the top line by the mid-2030s. So we're also looking to do the same to expand upon the impact of KEYTRUDA is having on patients.

Got it. What's your view on the -- probably the KEYTRUDA, how -- profile, how heading into the -- well, ex now the LOE at the end of this decade and maybe into 2030? Like how is that going to look like maybe in terms of as proportional of Merck's whole revenue?

We haven't given guidance, but I would say, obviously, we look at experiences of other competitors around the world, how they've transitioned from pre-LOE to post-LOE, learning from that. And what I'd say, we also have our own experience, maybe not in oncology, but in other therapeutic areas like immunology, around how do you -- what's your go-to-market strategy when you have biosimilars, and we have a lot of experience here in Europe with that. The other issue we talked a lot as a company is transitioning from not just an IV solution but also a subcu, and that's in combination. So I think when we look at the addressable market, we think that's about 50% of the addressable market could be converted to a subcu formulation. Likewise, we also look at how can we add on to KEYTRUDA, and while KEYTRUDA is the backbone, and then you can add on an ADC, TROP2, et cetera, to improve the efficacy or the response rates and potentially the overall survival of patients. Typically, that's come with a biomarker strategy. And so we think through how can we develop the right experiments to get there. And then lastly, I would say is that making sure that we have the right type of manufacturing footprint to reduce COGS, to make sure that we can be competitive in that environment. And again, not all countries are going to go at the same time. Tremendous focus on the U.S. But we sit here in Europe, and we think of the LOE kind of timing of 2031. So I don't think it's a one size fits all in any market.

Got it. So you mentioned how ADC, right? So we've seen kind of recent data ADCs from competitors in the second-line lung cancers. Obviously, those probably haven't done as well as what people thought that could be. And Merck is not running the ADC in that space. I'm just wondering like what's your view of the TROP2 ADC in the second line? And perhaps more importantly, like what does those data set from the competitors kind of potentially read through to your kind of first-line strategy and thinking about the differentiation versus the existing results?

Yes. So when you look at what we've done in partnership with Kelun-Biotech out of Chengdu, so we've been working with them for a very long time. We felt they had great capabilities around building the right type of ADCs, particularly around TROP2. And we know that TROP2 is expressed across many tumor types. Probably what impressed us is -- impressed us the most was kind of data in lung and potentially in triple-negative breast. Need to run those experiments. Likewise, KEYNOTE-189 sets a very high bar. So how can we find the right type of patient? Thinking about biomarker testing, genotyping, et cetera, to make sure that we find the patients. So as we go to the payer, we can define who's going to benefit beyond what we've already done. So a lot of opportunity. I can't speak to other data from other companies, but I think we're pretty excited about the TROP2 opportunity.

Got it. And you mentioned about the biomarker, right? But TROP2, I guess, so far the data hasn't shown the expression level to be any meaningful correlation with the efficacy. But does Merck have a slightly different view on that? Or is there any way to potentially stratify on that for the Phase III results?

Well, we've stratified quite a bit, and we have upwards of 10 studies, right? So...

We have Phase IIIs.

And Phase IIIs that we're looking at. So I think we'll get the answer there.

Okay. Great. Then on subcu, the other one that you mentioned earlier, so subcu formulation. I think there's some thoughts maybe that there was a delay in terms of the readout. Maybe just talk us through like, was that really the case, where like -- and if so, like when can we expect the data? Is it like early next year still? And then if -- what's your kind of view on the probability of success on that? And is there any other alternative kind of strategy if that doesn't work out? I know I'm throwing a lot of questions here, but hopefully you could...

No, I would say, I think, kind of as we look at ClinTrials.gov (sic) [ ClinicalTrials.gov ], those -- that study is ending soon. And I think what we've said is kind of a readout in kind of the first half of next year. But I think we'll wait to see the data. There's nothing to suggest that there's anything that would tell you that, that wouldn't happen. So I think that we'll wait to see what we get from the data.

And that does not represent any delay. So just to be clear, there's no delay in the readout of these trials. We've always said primary completion date is September of 2024. It would take time to get the data analyzed and ready for a release to all of you.

Okay. And sorry, just to clarify, is that early next year? Or is that...

We said in the early part of next year, yes.

Perfect. Maybe switching gears to GARDASIL. I mean this is -- I mean you're the Head of the China market there. So...

Not anymore.

You were. But I'm sure you're still like very familiar with the market still like, I mean. So just walk us through, right, like there's confusion around the contracting with Zhifei. Maybe just kind of let's set the record straight on how -- is this contract binding? Or is it nonbinding? And what's the expected delivery for this year and through the end of the contracting period?

Yes. So thanks for the question. I would say, first and foremost, we had another great quarter with GARDASIL, $2.5 billion in revenue. $2 billion of that comes from international. And we continue to look out into 2030 and anticipate $11 billion in revenue. So a lot of work to do irrespective of China. We have a lot of work to do here in Europe, in the emerging markets, Japan, where we launched both on the public side as well on the private side. Now specifically to China, I think Rob clearly laid out, during our second quarter call, the impact of CDC buying patterns that we're having on the market. We've seen -- we saw a compression of all the HPV vaccines in the second quarter. And there were 3 things highlighted. The one thing that I -- we can focus on really is Zhifei. So you asked about Zhifei. So yes, it's a binding contract. What we did see is if we go back to 2017 and 2018, when we launched our 4-valent in China and then 9-valent GARDASIL in 2018, is we saw tremendous growth. The only thing that really limited that growth was supply. And as more supply came on -- available through our partners in MMD, we were able to ship more into the market. And largely, we were able to ship more than even the contractual volumes because there is so much demand. During that time, Zhifei had the opportunity to also partner with another multinational company, GSK, for SHINGRIX. They launched that this year. They had kind of admitted to in their earnings release that they were distracted. So we saw that distraction in the form of a shift of our sales reps. So the FTEs in the market that went from kind of the GARDASIL line over to SHINGRIX. So we work very closely with Chairman Jiang. We have a great relationship with Chairman Jiang. Work closely to make sure that we improve the reach in the marketplace, both FTEs or sales reps in the market. We've now made progress, probably 10 points above where we were back in the second quarter, but still more work to do. It does take time. You have to hire the reps, you have to train the reps, get them in the market, and they have to be effective. Likewise, we have to go out to a broader set of customers. So historically, we've gone to about 20,000 POVs. These are points of vaccination centers. Think of them as a small clinic where they treat primary care disease, and they also do vaccinations, primarily for pediatrics, but they also do adult vaccinations. So going from 20,000 up to 30,000 by the end of the year. So reaching more customers. And then lastly, what we would like to see is Zhifei to work through some of their inventory before we ship more inventory into the marketplace. So what Caroline shared in -- on the earnings call is that based on the shipments from the first half of the year, it's likely that the shipments in the second half of the year will be lower as we look for them to lower their inventory through shipments to the POVs. Now irrespective of that, we have said that, that number is in line with the midpoint of our guidance for 2024. So I would say from a Zhifei perspective, we've been working hand in hand. We have weekly meetings with Chairman Jiang and his team. We have a new business unit director in the market working with my managing director in the market to make sure that we're all on the same page and going after the same solution. Now to take it up a level, we still have 1,000 women in the world that die of cervical cancer every day. There are about 100 per day in China. So we have a lot of work to do, not just in China, but also outside of China. We had a great quarter ex the China. We grew 16% year-over-year. And so I think we have opportunity both in the public sector as well as the private sector. The other things that give us confidence in China is that we have the male indication coming. So we filed the male indication, and that will help to differentiate us compared to some of the local competition. Today, we have the 2-valent, 4-valent. Eventually, we'll have a 9-valent competitor. We've expanded our indication, 9 to 45. We also have a narrower indication on number of doses for 9 to 14, so you only need 2 doses for that cohort. So we feel really good about the differentiation we have in the market. But certainly, we want to see the demand kick back in. The other thing we look very closely at is the volume in the CDCs and the POVs. And so today, what we see is that the CDC POV inventory is very similar to where it was last year. So again, I think we still have a lot of work to do with Zhifei, but it's a very close partnership, and we feel good about that partnership.

You mentioned about the 10 points improvement versus last quarter. Like what does that 10 points mean?

In terms of they were about 75% coverage, they've gone up to about 85% coverage.

Got it. Okay. And so obviously, like Caroline has communicated that by the -- the expected lower GARDASIL shipment in the second half, that's within the midpoint of the guidance. Like what will drive the kind of upside to that or maybe even downside to that?

Well, I don't want to get into speculation, but we have a range, obviously. And I would say that what I would go back to is we want to see the inventory of Zhifei. We want to see them utilize that inventory.

Okay. Then how about in 2025 and 2026, like that's -- so does that mean like by next year, they will have to ship more? Or is that -- does that mean it's just regardless of the -- I guess what I'm trying to ask is the total volume will be essentially the same. So if there's a smaller shipment this year, then those will be pushed out to next year or 2026. Is that how this works?

So we always look at demand, first and foremost, because if I think about the recipe for GARDASIL in China, it's very similar to the recipe in other markets, so I can ship those doses to other markets. So we want to make sure that all the doses that we make through our manufacturing facilities are utilized in patients. So number one, we want to make sure that the inventory levels for Zhifei come down, and we think about how we forecast '25 and '26. We've always anticipated that from '24, we would have a reduction in the shipments based on the contractual volume or contractual dollars that were put into that contract out to '26. Now with that, I think we'll -- again, going back to we have a lot of work to do in -- not just in Tier 1, Tier 2 cities, but Tier 3, Tier 4 and Tier 5. We've done really well in driving vaccine conversion rates in the Tier 1 and Tier 2 cities. What we want to do is continue to drive further vaccination conversion rates in the Tier 3, Tier 4 and Tier 5 cities. Overall, we're about 35% higher in the Tier 1 and Tier 2, about 40%, a bit lower in the Tier 4 and 5. So we're looking at that very closely, how can we activate those consumers. Again, they're paying out of pocket. Activating consumers to go to the POV, be vaccinated and come back for an additional vaccination. So we'll look at a few different KPIs to determine how we move forward with Zhifei. But we haven't given -- we won't give guidance for 2025 at this point.

Got it. Then maybe just kind of looking back at kind of Pfizer's PREVNAR 13, right? We saw they lost quite a bit of shares after the Chinese local 13-valent came into the market. Is that kind of how you think the market will shift in that similar direction? Or do you think the differentiation that you mentioned before will allow you -- Merck to keep the majority of the shares in the next couple of years?

Yes. So a great question. If you look at the past few years, we've already been competing with locals with the 2-valent and 4-valent. And the differentiation, we have a very broad indication, 9 to 45; 2-dose regimen, 9 to 14; potentially a male indication in kind of the first half, midpoint of 2025. I think those points are all great points of differentiation. Likewise, this is a multinational vaccine, so there's tremendous trust there around vaccinating patients in China with a multinational vaccine. So we do think that we have a lot of great experience, the safety, the quality the real-world evidence, a lot of the work that we've been doing in China to make sure that patients understand the value proposition for GARDASIL 9.

Got it. Is there a view on the male indication on how much -- like a high-level kind of view of what portion of that would be as part of the future of GARDASIL in China or ex U.S.?

Yes. So I think we've had a lot of great experience of gender-neutral vaccination around the world, particularly with NIPs. And I referenced that we have half of our NIPs are gender neutral. For adult males, there is certainly, if you look at China, similar to the funnel for females, it's about 200 million that we go after in terms of the top of that funnel and how we drive them to points of vaccination. If we look at males, it's roughly the same, 200 million. Obviously, they need to be activated differently. They're not going for a pap smear. They're not going to see an OB/GYN. So we have to use different points of engagement to identify where males would go. We have great experience from other Asian markets, particularly South Korea, where we have a lot of experience using influencers like BTS, SEVENTEEN. These are all K-pop groups to get -- to help males identify the value and need of not just preventing cervical cancer, but also GARDASIL prevents other cancers. And depending on the label, head and neck and other male cancers that can help us differentiate versus competition.

Okay. That's very interesting. Maybe shifting gear to WINREVAIR. I mean you already talked about some of like the EU kind of launch strategy and how the first person has been dosed in Germany already.

Yes, first script.

First script. Okay. Yes. Maybe just talk about like the cadence, right, of -- in terms of different country activation how that will kind of ramp over the -- for the remaining of the year and into kind of next year.

Yes. I think for this year, in Europe, it's really Germany, Austria. I think we'll wait to see what happens with Swissmedic, but it's a very small end. I think as we look out to 2025, we're submitting the dossiers with all of the payers in each one of these markets. That takes time. Roughly, it takes anywhere from 12 to 18 months. So as you think about, in your models, the forecast for where WINREVAIR is in Europe, I would say you kind of have to think through those stages of reimbursement. Then once it's reimbursed, going to those centers, getting patients on therapy. So I would say for this year and next year, the real gating factor is reimbursement.

How big of the market do you think WINREVAIR can be in the more of an emerging market, like reimbursement and cost-wise?

Yes. I think when you look at what we see in markets like China, where we have 30,000 patients that have been identified, and I talked about the 150,000 to 200,000, a bulk of those patients are coming from the emerging markets. The one thing what we've learned with KEYTRUDA is how to be -- provide the right innovative access solutions. I was just in India. We have a great access solution for KEYTRUDA, where we're working with 2 third parties to really find the right affordability for each individual patient. So we're in a private market in India, and we work with -- and I was at Tata Medical Center (sic) [ Tata Memorial Centre ] in Mumbai. And we work very closely with them and the other 2 third parties to ensure that if a patient needs it, they can get access to it at different price points, basically what they can bear. So finding those innovative access solutions, having this experience over the past 8 to 10 years with KEYTRUDA has really helped us. We've kind of leapfrogged where we would have been if we hadn't had KEYTRUDA. So I do think that, number one, you need a product with unambiguous promotable advantages. You need a very good experience of building the right types of contracts to make sure that health care providers, hospitals, administrators understand the impact and the value proposition of the product. And then lastly, as we think about the field force and the opportunity, we have strong infrastructure in the emerging markets. In 2023, it was about 25% of our business. So we've done a great job of building teams in each one, whether it's Latin America, EMEA, AP.

Got it. So I guess private markets will be probably kind of your main kind of target, at least in the emerging markets in the near term.

It depends. It depends. There could be markets where we would go for reimbursement. When you think about bigger markets, there are certainly areas of opportunity there. Some markets like Brazil, it's private insurance. So I think we'll use different -- depending on the market, we'll use different strategies.

Okay. Great. V116, VAXNEUVANCE, right? I mean there's recent competitor data with the -- 31-valent came out. It's Phase II, but I think a lot of people think that you may kind of work in the Phase III as well. How -- what's the, I guess, Merck's strategy to kind of potentially kind of compete on that front over the long term?

Yes. We have a different -- well, number one, I think, again, it goes back to congratulating any company that's pushing the envelope on science. And I think in this the case, we've developed a very different strategy. We have a bifurcated strategy of pediatric and an adult strategy. We launched VAXNEUVANCE this past year or 2023. We're now in 31 markets, and we performed well compared to what's currently on the market today. CAPVAXIVE, we just have gone through ACIP with great -- get the recommendation for 65-plus. There'll be another ACIP coming up, and so we look forward to those discussions. As we think about the Vaxcyte data, what I like about CAPVAXIVE compared to what's currently on the market today or what's coming is that compared to PCV20, we have 85% coverage of what causes disease in adults, pneumococcal disease. And then if we compare that to PCV20, it's about 30% difference. And we have 8 unique serotypes that we target. If -- when we look at the experience we just have at the ACIP, that 30% delta did not drive them to make a different decision on recommendation. If I recall correctly, the only time ACIP has made a decision to give a preferential recommendation to a vaccine was with SHINGRIX compared to ZOSTAVAX many years ago. So we'd have to see if the delta between the 30% to 85%, 85% to 90% or north of that, if that's enough to drive a differentiated recommendation, then we would think differently about the adult strategy and what we would need to do to then add more serotypes into our adult program.

Is there anything in development for adults with higher rate than right now?

We have a Phase -- it's Phase I or Phase II for V117?

Phase I. That's in peds.

That's peds.

Okay. Got it. But I guess are there any prior example of where -- I guess, internal prior example where known preferential -- I guess, apparently, like is there a case where one can gain a more prominent market share because of some other kind of factors? Is that really driven more by the commercial...

Well, I think it's -- I think you're on a level playing fields of commercial contracting, commercial know-how, commercial experience. So I think -- and then again, not forgetting the fact that your unambiguous promotable advantages. So how do you differ? How was your differentiation versus the competitor? So I think that's kind of where we are today with our vaccines.

Okay. I do want to talk a little bit about the pipeline. So there's a recent kind of agreement with Daiichi with their kind of DLL3 partnership. I'm just wondering like, what kind of drove that in terms of the co-commercialization? Is that something that Daiichi has the option to do for all the ADC, if it's something to do with the Merck's molecule in combination for any indication? Or like what was the reason for that?

I think going after small cell lung cancer, which is a challenge. So there's a lot of scientific data that suggests that combining antibody-drug conjugate with a T-cell engager could have a better outcome. And so the science really drove that strategy. And again, trying to make sure that we can reach all tumor types is what's driving it. Very -- we're happy with the Daiichi partnership. We just had HER3 data yesterday that was top line. So I think that we look to these ADCs, and again, it goes back to why we believe that we have potentially the outlook of a $20 billion-plus business in mid-2030, nonrisk adjusted, of course.

Yes. And maybe just to follow up on that, right? So I guess, do you need -- actually need a Daiichi kind of partnership to do that? Because you really have a partnership, right, for the ADC part. But do you need -- but I guess the contract also allowed them to co-commercialize the DLL3 engager. Is that part of the -- is that something that Daiichi can do for all the ADC program or something that with -- in combination with Merck's kind of molecules?

I'd have to look at the contract and circle back.

Okay. And maybe just the last 4 minutes, I do want to talk about the -- on the business development front, right? I think Merck has certainly done some deals with Chinese molecules as same as other kind of large pharma as well. I'm just wondering like what do you see in the China market in terms of their -- the molecules that they are developing versus picking the ones that's from the U.S. already?

Yes. I think first and foremost, I would say, I think we're agnostic to territory, right? So we're looking for great science. What we think is science and innovation drive value creation. So that's paramount. As we look across all the stages of clinical development, again, we're not looking for a specific stage. And even as we think about commercialization, we would be open to commercial deals as long as those deals meet an unmet need, have scientific value and we can add some value to either that partnership or that acquisition. So that's first. Second would be we've had great experience with Kelun. We've worked with them. We value their expertise. So our experience has been very positive. And I would say that there's a lot of science happening in China. There are a lot of -- it's fast, it's moving quickly. A lot of other companies are also looking at -- in China for rest of world. So we're not alone in that regard. And I would say that we look at every asset and every company on an individualized basis. So I would say, yes, we would evaluate partnerships or deals in China like we have. Likewise, we also look outside. And I think we have some great examples with iBio, Prometheus, Acceleron. And really, Dean and Rob deserve a tremendous amount of credit because we wouldn't be able to give that guidance of $20 billion for oncology, $15 billion for cardiovascular disease and multibillion for immunology with TL1A without all the business development deals that we've done over the past 3 to 4 years.

Yes. Got it. I do want to kind of zone in on the kind of like the data from China, right, versus kind of how that kind of translate to global. I know you mentioned that a little bit earlier, but is there something that has changed kind of in the more recent years in terms of how the investigators run the trials in China that give company -- give Merck or other companies more conviction that the data is essentially translatable to the global population? Like what's -- like what has changed versus 5-plus years ago versus now?

Well, I don't think anything has really changed in the U.S.. I think you still need -- for the FDA, you still need to run a multinational clinical study. It can't just be in Chinese patients only. That's -- you see a difference in EMA with BeiGene and their PD-1 antibody. So I do think there are some regional differences that you would have to look at to see how quickly you could move through different regions. But for us, again, we follow the science. If we find and we do the due diligence on the science, and we take that abroad because ultimately, in order for me to launch something in Europe, I'm going to need overall survival, right? So I'm going to need broader data, data that is more mature than single center or a single country and without OS. So I would say nothing's changed relative to what we're looking at. It's always science and innovation. We have to take into account the regional differences and how we think through how would you launch and how would you build a study around those regional differences.

Okay. Last question. So just talk about the overall kind of acquisition. I know there's a lot of talk about obesity and MASH and the other kind of indication that Merck could potentially diversify away from the KEYTRUDA. But what's the kind of latest thinking here? And how is [ Merck getting help ]?

Yes. I think we -- I think absolutely, the work we've done, we are diversifying. And if you look at where we're going to be in the mid-part of the next decade, we will have a very diversified business, whether it's WINREVAIR, MK616 (sic) [ MK-0616 ] oral PCSK9, other cardiovascular assets that we have, iBio and Restoret, certainly being in the wet AMD, DME space. Likewise, if you think about immunology and TL1A, I mean, just right there, that's 3, and we also have our own internal pipeline in HIV. So just those 4 therapeutic areas providing diversification beyond KEYTRUDA. And in vaccines, broadening beyond GARDASIL, pneumococcal disease, RSV and dengue. So I think we continue to push around diversification in individual therapeutic areas, not just in all of our portfolio. So we're science driven, and kind of portfolio allows us to look for assets, but we're not beholden to those therapeutic areas. So we look for the best science. Science and innovation create value for us.

Okay. Great. Well, thank you.

Thanks. Thanks, Charlie. Appreciate it.