Merck & Co., Inc. (NYSE:MRK) Goldman Sachs 45th Annual Global Healthcare Conference Call June 11, 2024 10:00 AM ET Company Participants Robert Davis - Chairman, President and Chief Executive Officer Dean Li - Executive Vice President and President, Merck Research Laboratories Conference Call Participants Chris Shibutani - Goldman Sachs Chris Shibutani Okay, let's get underway. Good morning, everybody, and welcome to the Second Day of the conference. My name is Chris Shibutani. And on behalf of the entire Go ...

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Group 1: Pfizer - Pfizer's stock has underperformed recently despite its significant contributions to COVID-19 vaccines and treatments [2] - Billionaires such as John Overdeck and Ken Griffin have increased their holdings in Pfizer, with Two Sigma Investments adding 10.5 million shares and Citadel Advisors acquiring nearly 880,000 shares [2] - Pfizer's revenue and net income have declined as the COVID-19 related boost has diminished, but the company is expanding its product pipeline significantly [3] - The company has received seven new product approvals in the past year, indicating a rejuvenated pipeline that is expected to yield more than the previous one or two approvals per year [3] - Pfizer's acquisition of Seagen for $43 billion has enhanced its oncology capabilities, and it has consistently raised its dividends by 61.5% over the past decade, with a forward yield of 5.86% [4] Group 2: Merck - Merck has also attracted billionaire investors, with Citadel Advisors purchasing 1.26 million shares and Millennium Management acquiring 4.02 million shares [5] - Keytruda, Merck's leading cancer therapy, generated $6.9 billion in revenue, accounting for nearly 44% of total sales, which increased by 9% year over year to $15.8 billion [5][6] - Merck is developing a subcutaneous formulation of Keytruda to extend its market presence as the patent exclusivity will expire by 2028 [6] - The company has received a new approval for Winrevair, a treatment for pulmonary arterial hypertension, with peak sales projected to exceed $2 billion [7] - Merck has raised its dividends by 75% over the past decade, with a forward yield of over 2.45%, making it an attractive option for income-seeking investors [7]

Company Performance - Merck (MRK) closed at $129.45, reflecting a +0.57% change from the previous session, which is lower than the S&P 500's daily gain of 1.19% [1] - Over the past month, Merck's shares have decreased by 1.28%, underperforming the Medical sector's gain of 3.54% and the S&P 500's gain of 3.35% [1] - The upcoming earnings report is scheduled for July 30, 2024, with an expected EPS of $2.14, representing a 203.88% increase from the same quarter last year [1] - Revenue is forecasted to be $15.88 billion, indicating a 5.65% growth compared to the same quarter last year [1] Fiscal Year Estimates - For the entire fiscal year, earnings are projected at $8.62 per share and revenue at $64.4 billion, reflecting changes of +470.86% and +7.13% respectively from the previous year [2] - Recent analyst estimate revisions indicate positive sentiment towards Merck's business operations and profit generation capabilities [2] Valuation Metrics - Merck currently has a Forward P/E ratio of 14.93, which is a premium compared to the industry average Forward P/E of 14.4 [3] - The PEG ratio for Merck stands at 1.66, slightly above the industry average PEG ratio of 1.64 [3] Industry Context - The Large Cap Pharmaceuticals industry, part of the Medical sector, has a Zacks Industry Rank of 151, placing it in the bottom 41% of over 250 industries [4] - The Zacks Industry Rank measures the strength of industry groups based on the average Zacks Rank of individual stocks, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [4]

Summary of Merck & Co., Inc. Investor Event at ASCO 2024 Company Overview - **Company**: Merck & Co., Inc. (NYSE: MRK) - **Event**: Investor Event at the American Society of Clinical Oncology Annual Meeting - **Date**: June 3, 2024 Key Industry Insights Oncology Pipeline Progress - Merck has made significant advancements in its oncology pipeline since early 2021, increasing the number of approved indications from 40 to 53, and approvals in earlier-stage cancers from 2 to 10 [9] - The company has expanded late-phase candidates being studied in combination from 2 to 9 [9] - KEYTRUDA is the only PD-1/PD-L1 therapy with 9 U.S. approvals in earlier-stage disease, demonstrating significant overall survival (OS) benefits in four earlier-stage tumor types: non-small cell lung cancer, renal cell carcinoma (RCC), cervical cancer, and triple-negative breast cancer (TNBC) [10] Strategic Pillars - Merck's oncology strategy is built on three pillars: 1. **Immuno-oncology**: Led by KEYTRUDA and V940, with ongoing trials for subcutaneous pembrolizumab [14] 2. **Precision Molecular Targeting**: Includes licensed and investigational medicines like belzutifan (HIF-2 alpha inhibitor) and MK-1084 (KRAS G12C inhibitor) [16] 3. **Tissue-Targeting Medicines**: Focus on antibody-drug conjugates (ADCs) and T-cell engagers, with a robust pipeline [17] Clinical Trials and Approvals - Merck has enrolled approximately 30,000 patients across over 30 Phase III clinical trials in earlier-stage cancers [20] - Recent approvals include KEYTRUDA's use in melanoma, lung cancer, RCC, bladder cancer, and TNBC, with a notable 28% reduction in the risk of death in resectable non-small cell lung cancer [21][22] - The company anticipates significant readouts in earlier-stage cancers over the next few years, which will guide future pipeline development [11] Commercial Landscape - Merck's oncology business has reached 2.6 million patients globally, with 53 approved indications in the U.S. and over 70 in the EU and Japan [42] - Earlier-stage indications are becoming a significant growth driver, with treatment rates for early-stage non-small cell lung cancer increasing from 35% to 65% since the launch of KEYNOTE-091 [43] - The company expects earlier-stage indications to represent 25% of overall KEYTRUDA revenue by the end of 2023 [44] Future Outlook - Merck's oncology pipeline is projected to contribute an incremental $20 billion in sales by the mid-2030s, excluding currently marketed products [48] - The company is confident in its ability to maintain leadership in oncology through ongoing innovation and expansion into additional tumor types [50] Additional Important Points - The acquisition of Harpoon Therapeutics enhances Merck's capabilities in developing T-cell engagers, which are expected to address high unmet needs in small cell lung cancer [37][38] - Merck is focusing on optimizing therapy for high-risk patients while avoiding overtreatment for low-risk patients, utilizing a diverse range of candidate medicines with different mechanisms of action [23] - The company is committed to advancing its ADC portfolio, with promising data from ongoing studies indicating potential for significant clinical impact [30][34] This summary encapsulates the key points discussed during the Merck & Co., Inc. investor event, highlighting the company's strategic focus, pipeline advancements, and future growth potential in the oncology sector.

Merck & Co., Inc. (NYSE:MRK) Investor Event at ASCO 2024 June 3, 2024 7:00 PM ET Company Participants Peter Dannenbaum - Senior Vice President, Investor Relations Dean Li - President of Merck Research Labs Eliav Barr - Chief Medical Officer & Head of Global Clinical Development Marjorie Green - Senior VP & Head of Late-Stage Oncology, Global Clinical Development Chirfi Guindo - Senior VP & Chief Marketing Officer of Human Health Joanne Monahan - Senior Vice President, US Oncology Conference Call Participant ...

Merck (MRK) announced a definitive agreement to acquire London-based private biotech Eyebiotech Limited (“EyeBio”), which makes therapies for retinal diseases. The buyout will expand Merck’s presence in the growing ophthalmology market. The acquisition will add EyeBio’s lead pipeline candidate, Restoret, a novel Wnt agonist antibody being developed for treating retinal diseases like diabetic macular edema (DME) and neovascular age-related macular degeneration in a phase Ib/IIa study called AMARONE. In Febru ...

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Core Viewpoint - Merck (MRK) remains a compelling buy despite a price increase, with a current P/E ratio of approximately 14.6x, which is still reasonable when considering its growth potential and Graham P/E of about 23.7x, indicating a significant margin of safety [3][4][11] Valuation and Growth Potential - The stock is currently undervalued with a PEG ratio of only 0.78, suggesting that growth from pipeline drugs, particularly Molnupiravir, is not fully reflected in the stock price [1] - Analysts project a compound annual growth rate (CAGR) of 7.6% for EPS from fiscal years 2024 to 2028, with EPS expected to grow from $8.64 in FY2024 to nearly $12.5 by FY2028 [6][7] - The forward P/E ratio is anticipated to decline to about 10x by the end of FY2028, further supporting the investment thesis [7] Key Profit Drivers - Merck's diversified business model mitigates risks by generating revenue from both established therapies and vaccines in developing markets, unlike many peers reliant on blockbuster drugs [8] - The Keytruda franchise has shown strong sales growth, with a 21% increase in Q4 2023 sales to $6.61 billion, and is expected to maintain momentum due to its patent protection until 2028 [9] Financial Strength - Merck has demonstrated strong financial health, with an A+ rating and a low financial debt-to-equity ratio of 0.108, indicating a solid balance sheet [12] - The company has a relatively low payout ratio of about 35% on FY1 EPS, allowing for sustainable dividend growth despite a lower-than-average dividend yield of 2.38% [10][12]

Core Insights - Merck has over six blockbuster drugs, with Keytruda being a major contributor, accounting for more than 45% of pharmaceutical sales and driving steady revenue growth [1] - The company reported better-than-expected first-quarter results, with Keytruda sales rising 24% and Gardasil sales increasing by 17% [1][2] - Merck raised its 2024 earnings per share guidance to between $8.53 and $8.65 and increased its revenue guidance range to $63.1 to $64.3 billion [2] Financial Performance - Merck's stock has increased by 20.3% this year, outperforming the industry average increase of 15.3% [2] - The strong first-quarter performance and guidance increase have contributed to the stock's rise [2] Product Pipeline and Acquisitions - Merck made significant regulatory and clinical progress in oncology, vaccines, and infectious diseases, including the acquisition of Harpoon Therapeutics, which added HPN328 to its pipeline [4] - Keytruda continues to expand into new indications and markets, with ongoing growth expected [4] - Merck is developing innovative immuno-oncology combinations and personalized mRNA therapeutic cancer vaccines in collaboration with Moderna [5] Future Prospects - Merck anticipates eight potential new product approvals between 2025 and 2030, with V116 and Winrevair expected to generate significant long-term revenues [7] - Winrevair was approved for pulmonary arterial hypertension in March 2024, and V116 is under priority review with an FDA decision expected on June 17, 2024 [7] Challenges - Merck faces challenges such as generic competition and rising pressure in its diabetes franchise, raising concerns about growth in its non-oncology business ahead of Keytruda's loss of exclusivity [6]