Merck & Co., Inc. ($MRK)

Good morning, everyone. My name is Akash Tewari. I head our pharma and biotech efforts here on the research side for Jefferies. Joining us is Merck, a company that really global company with focused on multiple disease areas, but we have Marjorie, who heads their oncology efforts, and Merck is certainly a leader there, and we're fresh from coming from ASCO. So I'm really excited for this conversation. Marjorie, maybe I'll hand it off to you for some opening remarks, then we'll get the...

Yes. No, great. Thanks so much. ASCO was an exciting time for Merck and for us. Our partners Kelun Biotech presented data from OptiTROP-Lung05, which is a Phase III global study looking in non-small cell lung cancer as a combination of SAP TMT combined with KEYTRUDA versus KEYTRUDA alone showing clinically meaningful improvements in progression-free survival and a trend noting immature data and overall survival for those people who have non-small cell lung cancer or TPS greather than 1%. We also had updated data sets from KEYNOTE-942, which is a combination of pembrolizumab and IMT and individualized neoantigen therapy as treatment of people with certain -- certain melanoma on Stage 2 and 3, and that 5-year durability data was quite compelling. We also had compelling data from the 5-year update from KEYNOTE-522 looking at people who have triple receptor-negative breast cancer as well as other updates across the oncology portfolio. So it was a great meeting for Merck, and there's a lot of really exciting external data as well, which made it a time helps us to be excited about our continued path forward.

Understood. And I certainly agree. It was definitely a good ASCO for Merck. I wanted to start on lung, and I'll take it from a different angle, which is the question we'll often get for investors. And frankly, I've asked on investor calls this as well, why hasn't every study in lung started yet. And I can sense that your team has consistently very diligent and you have mentioned data driven. I think that's right. But there's a dynamic on this, which I don't think is well appreciated, which is pembro in lung may actually end up having a much more diversified revenue stream then I think people appreciate. People think about KEYNOTE-189 as a massive driver, but you guys have run adjuvant studies and maintenance studies. And so this idea frontline lung in that traditional sense is [indiscernible] may not actually end up being the case. Could you give some color on that in terms of when we think about Pembro revenue drivers today in lung, how diversified is it in the United States.

Yes. I am not the best person to speak to this. So I apologize already, but I should have these numbers and I do not. It is not the #1 revenue generator for Merck. I can't speak to where that comes from. But you're right. We now have multiple studies in the adjuvant setting, including 6 that have overall survival. And more of the revenue, particularly future-looking revenues coming from QTS and we anticipate in those setting less so in the 189 regimen.

Understood. Now maybe going into ASCO and I'd like to give you -- you obviously have a PD-1 VEGF in development. That's truly ready. And your team has been very prudent in terms of where you want to develop that asset. But I'd love to get your take as you've said, we want to get more data from the field externally before we figure out our own development program. Obviously, we've got some important data sets from HARMI-6. The ROSETTA data from BioNTech and then also the lack of a PFS hit on HARMONY 3. How is Merck's view on where PD-1 VEGFs fit a roll, particularly in lung change post ASCO.

This is such an interesting development for all of us is think about how to optimize therapy for people with different kinds of legacies. Through the KEYTRUDA program, we have more than 20 studies that we have done with different combinations of KEYTRUDA with VEGF inhibitors, including bevacizumab where we have 2 approvals, lapatinib, where we've seen some compelling data in endometrial cancer as well as in renal cell and other VEGF TKIs. And so we've learned a great deal about the combinations over time. And historically, it's not been one size fits all approach for these kinds of combinations. And what has really been the question, and I think people are more excited after ASCO is could the bispecific of putting these 2 together and potentially improve the therapeutic index by putting them together because the safety appears to be a little more tolerable and maybe you can increase the efficacy actually the PD1 as well by the structure is that going to be what it takes to open up VEGF more broadly across multiple tumor types. And I think we're still left with more questions and answers. So HARMONY 6 was great data. I want to congratulate Kesso the investigators it is clinically compelling information. It's the first Phase III randomized data set we've seen with the bispecific that shows consistency between PFS and OS. But open questions remain regarding the translatability to global studies, the translatability into different subsets of non-small lung cancer referring back to [indiscernible] even look at Harmony and you look at Harmony 2, where you didn't necessarily see that same correlation between PFS and OS. There are also open questions about in that particular Herme 6 study about the differences in age that was seen or you most of the benefit for those people who were less than 65%. I'm in a different magnitude, people keep talking about 407 and KEYNOTE-407. And I'd like to point out that, that study, the control arm is 60% crossover. I don't know if people remember that, 60% of the control arm crossed over to pembrolizumab and the age hazard ratios, there was a small difference, definitely between those who were less than 65 and those were older, but the magnitude of difference was not the same that we've seen in Harmony 6. And so I'm excited because the curve separated and they stayed separated. Will they continue that way? I don't know the answer to that. When we look at the Harmony, the Harmony 2, they didn't seem to do that from the data we know today. So I'm curious, and it's where we want to continue to develop and explore. But how these agents will combine in different tumor types is to be determined. So we're always, as you said, we're data-driven. We're very disciplined and we will go where there's opportunity where we think the science and the clinical need makes sense.

Great answer, and there's a few threats I want to kind of pull on. I mean, a, you mentioned -- I think there is this perception, well, squamous is slightly easier than non-squamous. You mentioned there's a lot of -- there was actually a lot of crossover in the 407 study. So maybe just generally, this idea that pembro chemo in non-squamous versus pembro chemo squamous, there's a difference in terms of how difficult it would be to beat that regimen. It sounds like you're saying that's not actually the case. Both are going to be equally difficult to surpass. Is that maybe the right?

I think that people, KEYNOTE-189 has set a really high bar. And that's great news for patients. It's at a very high bar. And the other thing that we know is over time, clinicians get better and better at keeping people on therapies as they learn how to identify who best benefits from treatment, how to modulate side effects, so dose at tens is better. It's doing a really good job for patients. So huge unmet need, so you want to develop things. I don't know that I would say that the bar is different as a barrier to entry for squamous versus non-squamous. They're different biologic subtypes generally the effects are somewhat similar for checkpoint inhibitor between the 2 installed -- there is huge meta analysis. There are more neoantigens in squamous and so you might get a little more robust response there. So that may be where you're saying [indiscernible]. The other aspect is that nonsquamous, there's more division of that histology into subgroups, such as RAS mutations are more present in those who have add -- and so it's more about how this is the biology and the current therapy and thinking where the future is going, how then do you want to develop in these different spaces. And so again, we still have more questions than we actually have answers at this time.

Understood. Now one of the data sets that I think iSense is going to be incredibly important. I'm curious if you shared the viewers I think [indiscernible] has an 06 trial with sac-TMT and less than 1% NSCLC. You got the 1% to 49% data from '05. And my view was that it did look incredibly strong. But it sounds like the less than 1% is an important part of that puzzle. Why is that, right? What are you going to learn from that 06 trial and you're hoping to see with SAC TMT and NSCLC?

There are a couple of questions there. The first question is related to does the expression level have an influence on the activity of SAC TMT. And there's not a biologic reason to expect that to happen. I think is when you look high PD-L1 expression in tumor scores, the KEYTRUDA does better and better and other checkpoint inhibitors improve their activity as you get higher PD-L1 expression. And so the bar to beat and improve upon that is higher. So the magnitude of benefit tends to be a little bit less. The question that is going to come from this is related to, can you increase the benefit of the combination where people do use KEYTRUDA for the less than 1%, but it's not uniform. And we have a lot of data showing that there is a benefit in this population. So can you enhance that from an ADC combination. I think it's one of the questions. We've seen some suggestions for triple receptor negative breast cancer that, that could happen that using an antibody drug conjugate, we've seen it in bladder cancer as well with a different antibody drug conjugate -- and so that, to me, a question that I'm most curious about is, do you think that you can get something that is at least additive, if not better, by that combination and that is what I am hoping to see.

That is a fascinating answer because I will say, even talking to column, they strongly believe that there is an inherent synergy between pembro and SAC TMT. And then there's also this dynamic of versus just traditional chem therapy, you have a better durability of effect. So that's quite interesting, which kind of leads me to another perspective, which is KEYNOTE-189 was such a transformative trial because not only did you give great patient outcomes, but it was also the simplicity. I mean there's no QCS, there's no TMB. This is something that every doctor it's histology, people understand this, and it can get used and talked about this concept of workhorse regimen. What's interesting to me is when I look at the OptiTROP-Lung05 data, I see a consistency of response. When I asked you about less than 1%, you're saying, I hope I see a consistency of response. And when I even look at the development strategy you had with Kelun, a lot of times, you ran studies in subpopulations, but you're ultimately actually running trials pretty much everywhere. So to me, the read is actually we went conservative, but then we're seeing this drug is actually working more broadly. So that kind of brings me to ultimately what your strategy could be in long -- could it be that it's not separate trials in different sub courts, but it actually could be another KEYNOTE-189 regimen whether it's a PD-1 VEGF [indiscernible] that you could have a broad-based improvement across lines of therapy, and that's really ultimately words is headed. I'm curious.

When we started the global program with SAC TMT, we tried to think ahead to 3 to 5 years from starting these Phase IIIs, what was the therapeutic landscape going to look like? What was the clinical unmet need and where could we at the greatest value. And that's explains where we are today. So for those who normally get pembrolizumab as a monotherapy, often, these are older people who are not healthy, you don't want to give them chemotherapy for very specific reasons, SAC TMT is a cytotype therapy. It's an antibody for conjugate, but it still has cytotoxic activity. So can you improve the efficacy because people, unfortunately, relapse and die in that population because they have metastatic disease can that help. So that's that study. The KEYNOTE-189 regimen when you look at -- you've got people who have squamous carcinoma, and the biggest unmet need we saw was for a maintenance approach there. There isn't a maintenance therapy. There are different ways you could consider that population. It was you could add on to chemotherapy and KEYTRUDA and of -- compromise on the therapy dose or the antibody re-conjugate dose or both, where the benefit is probably from the maintenance approach and that also can make it more tolerable. So we think sac-TMT is a tolerable regimen that could be given for long periods of time and combination with KEYTRUDA. And then when you think about the adenocarcinoma population, we were thinking ahead we knew that RAS was coming into this space, that segment is getting more and more subdivided. I think that the data from OptiTROP-Lung05 like you said for 06 raise the question of, is there the possibility that you will see some kind of SAP/TMT combination across all of these subgroups. And so we don't have studies that we've talked about fully in all of the different populations. But I think we've got a very diverse portfolio, and you can look at the data from ASCO and you can make your own estimates about what we might do there.

Understood. Maybe just ending on sac-TMT. And you mentioned something that I think is incredibly important is it's a tolerable drug. And one of the things that I noticed with the 05 data was that the duration on treatment, which is to be incredibly important, was double that of pembro monotherapy, which is unusual. Usually, you wouldn't think more cytotoxic combo regimen has that. So a couple of things. Can you talk about really how you optimize the dose of sac-TMT and [indiscernible] to their credit 2 when they started at 5 and 5.5 to then going to 4, which seems like a Goldilocks dose, how you guys have learned to keep patients on therapy? How much of an improvement have you seen even from the early studies with sac-TMT to now the trials are running now? And how you expect that to translate into your own global Phase III. Should we expect this durability of response to carry out? It might actually be even better than some of the early trials we've seen out of China? .

There's a lot wrapped up in that question. So let me think about how to approach us. From the dosing perspective, antibody-drug conjugates, they do have cytotoxic payloads. And so there is usually a dose response you see with chemotherapy. And so you do see this with sac-TMT as the higher the dose, you tend to get increased efficacy. You also get increasing toxicity too. So we're trying to look for that best optimal activity versus tolerability or choosing doses. We also wanted to have one dose for combination as well as monotherapy. And we have multiple studies where we're using sac-TMT as maintenance. And so going with the highest dose that is tolerable doesn't always make sense and combinations because combinations increased toxicity. They always do, whether it's a Keytruda combination or any other kind of combination, side effects get worse. And the PK between 5 milligrams per kilogram and 4 milligrams per kilogram heavily overlap. And so it's the totality of data, and we see very consistent sort of durations of response, PFS in the Phase I and Phase II data sets that led us to choosing this. And while you sell milligrams to kilograms combined with pembrolizumab in the OptiTROP-Lung05 study. So that's how we ended up with the dosing regimen that we did. So thinking about this as a call workforce and were called a Cornerstone ABC is that for the clinicians out there, having 1 dose as mono in combination makes their lives a lot easier. It really does. And so that way you don't have to think about it is in your pathways. You don't have to really question that you just can't prescribe it. The AE management, I talked about this in regards to 189. Doctors get better, managing toxicities over time. And the opportunity we had here with our partnership with Helen is they were running studies ahead of us. And so we could learn from what they were doing. So an example of this is stomatitis care, Group 2 is expressed in the intestine. All of the TRP-2 ADCs have some GI toxicity. And for an example, in the colon studies, they do not routinely use steroid mouth washes. We use them in our Phase III datasets. And we have increased the use of it. We also use much more aggressive secondary growth factor prophylaxis because the hematologic toxicity. And it also helps recovery of intestine and so we've been much more prescriptive about that. And these are AE managements that oncologists are very used to giving in their daily practice and don't add significant burden to patients. So if you're able to make experience tolerable, and that's where you get the benefit. How this will translate global studies is to be determined. Global studies inherently are different than single region studies, whether they're China studies or a U.S. only study. There's going to be variability there. And so we are teaching physicians in real time as they are getting used to these drugs. And so my hope is, we have learned a great deal, thanks to our partnership and our very large Phase I/II program. We've done to date. And we continue to iterate and evolve what we're doing in Phase III programs. I'm encouraged by the endometrial readout, which you haven't seen the data I have, very excited. And so you are having a positive PFS and OS is the first ADC in a Phase III data set in endometrial, I think, supports that we're on the right path.

Understood. Now last one on just PD-1 and VEGF and then I actually want to go broader. LaNova acid, I think the term Merck adopted was we're Phase III ready at ASCO. I will say -- the one question I think I've certainly thought of, and I've heard this from investors as well, it's like it's unusual for Merck to present unconfirmed responses. I mean you guys are very straight narrow. You give confirmed responses, you give proper durability and at ACR, I think both in the poster and then the abstract, it was kind of the same data cutoff. And so the question I've always had is really how does that data mature over time. Really encouraging 55% response rate but it was unconfirmed. Is there any qualitative color you can give us in terms of as you've given that therapy on -- because that's really what you have internally how that profile has evolved over time?

Yes, I don't like to talk about data that's not public in any kind of form. And so we have confidence in the data that we presented. Otherwise, you wouldn't have seen us for such information like that. And so we wouldn't call an asset Phase III ready unless we thought that what you would see is what you would get.

Understood. That's helpful in itself. Now maybe stepping back and hitting on also CML. And you guys just external BD there. I was happy. I actually I come turn. So it's always great. But there's been -- I think -- to me, it has been kind of frustrating because there's this idea like, oh, I read the deal documents and the response rate change, and this is not the asset we think it is. And I'd love to give you an opportunity to kind of what is your perspective when you saw this MNO1 molecule in terms of a, safety and durability of response. But b, I really want to hit on efficacy, right? I remember talking with Amy at turns, and so us saying we have the opportunity to maybe run a head-to-head study against Scemblix or run a study that where we feel like we could be superior against standard of care, which is something Scemblix never showed -- so specifically on the efficacy front, what is your view of that molecule and what it can deliver. .

And we're really excited about the acquisition of Terns and Terns 701, which I think we've now renamed MK4208. We're calling it 701. And this drug, we really appreciated that we think that they have improved the therapeutic index and that's -- it's the way that they have presented data is very consistent when you look back at the original Scemblix Phase II data sets and Phase I data sets and the other second-generation TKIs, they use the same terminology. So that way was an apples-to-apples and -- so that's where the data set is. We were able and diligence to do -- look at patient level data and look at every single patient, including the ones that weren't presented at ASH last year and looked broader. And so when we made the statements that the efficacy you've got incredibly fast kinetics of time response. We were able to independently verify and look at each patient and verify that. And we say that MMR is around 2x what you would expect to see from more recent assets. We have verified that information and DMR 2 to 3 times similar direct comparisons, again, all the caveats to limitations there. All of that is very accurate information. And so we think this is something that is -- does have the opportunity, as Amy had said, when she was CEO of a company of being able to really improve outcomes, not only in this sort of relapsed/refractory population where it's originally studied. I think a lot about the first-line setting because clinicians still worry. Thankfully, the transformation in acute leukemia has dropped dramatically. And so it's less about 10% right now. It's really come down. But what you want to see is that very fast response. They do get better over time I think there was updated data, presented at ASCO Scemblix that's showing over time, things get better, but you really want that deep, deep response and then you want the durability of it because it opens up the potential for potential for some people to go off therapy. And this is a chronic disease. And after several years of therapy, if you keep someone very suppressed, you might be able to stop their therapy and get them right. This goes into the tolerability as well is that most of the significant toxicities that have been reported with this class have occurred in the first 6 months. And so I think that, that's definitely there are plus effect side effects that you are going to see that all of them are going have but it's the magnitude of the frequency and how you manage it that improves that therapeutic in case I think turns has done a really nice job there. So we're excited. We're continuing on at the proof the progress. We're about a month into the acquisition and the integration -- and we really are excited about the potential opportunity in the future with this asset.

Understood. And maybe just a final point on that. In terms of the design, I know it's early in terms of Phase III, I think you're quite important about the molecular response that could be [indiscernible]. Could you run head-to-head studies? Could you run or a trial where it's more traditional to what Scemblix did, which is in kind of frontline against standard of care -- is there a discussion currently for your team to take the more aggressive approach or will it be more traditional.

So we're still month -- so give us a little time.

Yes, that makes sense. Now maybe stepping back, the ADCs, you don't get asked a lot about are the Dai-ichi ones and that at the time -- And that's incredibly important because, again, one of the largest pharma partnerships ever, I think, probably the largest at the time of the deal. But I think there's been mixed headlines. There's -- it's a really competitive landscape. And there's always this question of, well, which one of these assets is right now most excited about. I'd love to kind of give you a chance to refresh in terms of the data that you have internally because you're running these kind of dynamic Phase II/III trials, larger Phase II studies. So there's a lot of data you have internally that maybe is not public yet. Of the 3 sets which one do you feel like since you've acquired it, you've gotten much more excited about as you've gotten more clinical data?

This is always hard because it's asking what your favorite child is or so what is it that you like to do -- the IR team will have because if I get asked a question, I always like to mention a specific drug as my favorite drug because they're also different and special. They each have fantastic potential. And that's what I think is -- we saw that initially when we did the diligence, and we started our initial discussions. And as we're seeing data come out, if you look at IDXT, we've got a PDUFA date in October for small cell lung cancer or tremendous that means about 4% survival at 5 years with this horrible malignancy and very compelling efficacy from the Phase II data set [indiscernible] study and potential for combinations also with MK670, which is our DLL3. We have ongoing Phase III studies looking at IDXT and esophageal cancer as well as in prostate cancer, which they're all excited to me. And I think the continued data that we're seeing keeps me excited about this asset and the potential. We have other Phase II studies ongoing, which are not publicly disclosed. If I move to RDXD, another one where it's again, exciting and compelling data. It is -- you see very marked responses in [indiscernible] ovarian cancer. So we have Phase III studies ongoing in the platinum-resistant setting. We have large Phase II data sets and more Phase III to follow in this indication. We are also looking at RDXT and other tumor types. And so we're waiting for emerging data to inform where else this drug can potentially go. And then with PDXT, we started a Phase III in breast cancer. And so HER3 is really important in breast cancer in a way that I think is not always appreciated. And so we've started one in hormone receptor -- breast cancer, including a combination with KEYTRUDA, where normally you don't give KEYTRUDA and it is partly what you mentioned earlier about the ADC combination can it improve the likelihood of benefit to a checkpoint inhibitor because of increased antigen exposure. Is there something there that makes that happen. And with this, we also in HER2 is allowed on a controller because it does have very, very below for 2 levels in there, and we know that there is expression response with ADCs generally across the board. We also are doing Phase II studies, and this is public information, looking at HER2 positive because HER3 is particularly important in HER2-positive disease. And HER2 has done an amazing job. I am former breast oncologist and now I'm a drug developer. And for me, it's a breast oncologists and HER2 has been transformative in HER2-positive disease, but there's still a ton of unmet need and people diagnosed with de novo breast cancer, so opportunities for multiple different kind of combinations to innovate there.

And a quick one on that de nova. I mean, this question, I think Lilly presented some data with her Nectin-4. And there's -- to me, this is like -- this is a huge problem. You have all these -- PDCs, they're all going frontline. You're going to have this issue in ovarian. And I think there is early signs that if you retreated with topo, you're not getting a response at all regardless of even changing the target. So when you talk about HER3 for breast, is that what's your confidence that you can retreat with the tobotoxin and get a response or is it more -- we're trying to go to populations where HER2 really hasn't gone.

I think it's to be determined. And so there are multiple different data sets that it's -- well, if I take a step back and just talk about chemotherapy. And so I'll go back to my history as a breast oncologists. We would never treat someone with it paclitaxel to go to docetaxel. We would never treat someone with [indiscernible] to got to [indiscernible]. You don't do them sequentially like that. And so there have been data sets presented that have shown that if you do ADCA with the topo, the ADCB with the topo, you don't see a lot of activity that doesn't surprise me. The big question is at what treatment-free interval do you get sensitivity back and does that happen because you can retreat with from breast cancer if you have a period of time between them and get quite robust activity. Same thing is true ampacyclines. You can retreat with Doxil if you've had adriamycin and get quite robust activity so I think it's to be determined. If the mechanisms of resistance are different with the topos -- you can get to topisomarase-1 mutation and you also can get change [indiscernible]. And probably, it's maybe the specific topopayload that could make a difference on whether or not there's a response to. So a lot for us to learn and think about moving forward.

Understood. I have a little break on my next meeting. So I'm selfishly going to ask one more question she's giving me a scale but it's fine. On the Maderna I&T partnership, and I say this is, I'm probably -- I was more skeptical than anyone else. I was like, oh, there's all these LAG-3 studies in adjuvant and they've all failed actually. And you continue to present really interesting data regardless of PD-1 expression of a durable response, which I think is quite interesting. I want you to talk about the signal you've seen in melanoma and how it might apply to long. Have you -- has your confidence in that program increase? And what are you learning about the biology of these personalized cancer vaccines that maybe we don't appreciate.

So for those who are not study looking in Stage II, III melanoma pembrolizumab versus pembrolizumab combined with INT, 5-year follow-up information saw that there is almost a 50% reduction with distant metastasis as well as relapse-free survival. So I'm rounding up one number rounding down another number. So really compelling activity that's prolonged. They also have exploratory data showing T-cell -- expansion that was maintained even though the INT was stopped and it wasn't continued on to boosters were given. So the question that you're asking is how do we take that and apply it to non-small cell lung cancer. The reason why we started Phase III, we just opened up one in stage 1 lung cancer and non-small cell lung cancer [indiscernible] relates to the TMB levels and the neoantigens, the similarities that you see between non-small cell lung cancer and melanoma, the underlying biology of what makes something immunosensitive. It's the most similar between these 2 diseases, which is why we started our Phase III programs. We have multiple Phase II studies looking more broadly. For example, renal cell, which is IO-sensitive has less neoantigens. And so will some of them like INT will be effective there. And then other studies which are [indiscernible] sensitive like bladder cancer Phase II studies ongoing to really understand that as well. So more to follow...

More to follow indeed. Thank you so much.