Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Merck & Co Inc (MRK, Financial) achieved strong revenue growth of 7% in Q2 2024, driven by robust global demand across its innovative portfolio.
- The company successfully launched WINREVAIR for pulmonary arterial hypertension and received positive feedback from patients and physicians.
- FDA approval and ACIP recommendation for CAPVAXIVE, a pneumococcal conjugate vaccine for adults, highlight Merck's commitment to vaccine innovation.
- Merck's oncology portfolio, particularly KEYTRUDA, continues to show strong performance with a 21% sales increase, driven by uptake in earlier-stage cancers.
- The acquisition of EyeBio and Elanco's aqua business expands Merck's pipeline and strengthens its position in ophthalmology and animal health.
Negative Points
- Merck & Co Inc (MRK) faced a significant step down in GARDASIL shipments in China, attributed to the country's anti-bribery and anti-corruption drive.
- The company anticipates potential challenges in meeting the full-year 2024 contracted doses for GARDASIL in China, which could impact revenue.
- Operating expenses increased by 8%, reflecting strategic investments and ongoing expenses related to recent acquisitions.
- The tax rate for the full year is expected to be between 15.5% and 16.5%, including an unfavorable impact from the EyeBio acquisition.
- Merck's guidance for 2024 EPS was adjusted downward due to the one-time charge related to the EyeBio acquisition and increased investments.
Q & A Highlights
Q: Can you quantify what percent of your international sales are coming from China, and any additional color on what drove the step down in 2Q? Is the potential for shipments to come below the 2024 contracted dosage now reflected in that guidance?
A: China represents about 60% to 70% of GARDASIL's international sales. The step down in 2Q was surprising and a significant departure from prior trends. We believe it may be due to China's anti-bribery and anti-corruption drive, which has reduced scientific engagement and immunizations. Our guidance assumes a range of scenarios, including less than the contracted 2024 doses shipped to China.
Q: Can you speak to whether there's any future contracting happening and whether your long-term price integrity will stay intact on GARDASIL in China?
A: We do not believe the current dynamics are related to future competition. We expect a flattening of demand in China as the female indication becomes more penetrated, followed by growth with the male indication. We have always contemplated a 9-valent competitor in the market, and our current contracted doses for 2025 are less than for 2024. We remain confident in the long-term opportunity for GARDASIL.
Q: Can you maybe characterize the pace of new starts for WINREVAIR and the timeline from prescription to start?
A: As of the end of June, more than 2,000 patients received a prescription for WINREVAIR, with about 75% to 80% converting to commercial product. The total period from prescription to approval is about two to three weeks, followed by scheduling for nurse training. We expect continued growth in both the breadth and depth of prescribers.
Q: Are there likely to be periods where year-on-year sales of GARDASIL in China contract beyond 2024?
A: We expect a flattening of the curve as the female indication becomes more penetrated, followed by growth with the male indication. The market expansion opportunity in China remains significant, and we continue to believe in the long-term potential for GARDASIL globally.
Q: How does clesrovimab compare on hospitalizations to Beyfortus, and how does it achieve longer durability given its shorter half-life?
A: We are confident in clesrovimab's profile, including its ability to cover the entire RSV season with a single dose. Detailed findings will be presented at an upcoming scientific congress, and we plan to file these data with global regulatory authorities.
Q: Can you confirm that you can file clesrovimab in all major markets this year, and what is the opportunity in China?
A: We plan to file clesrovimab such that it would be available for the next RSV season in the US. We are looking at all global markets, including China, for future filings.
Q: How do you think about sales of WINREVAIR in the third quarter of '24, given some stocking that we saw this quarter?
A: We expect the stock level to increase as more patients are prescribed WINREVAIR. We remain confident in the outlook for WINREVAIR, consistent with our high expectations.
Q: Can you provide the latest views on business development, particularly in the obesity space?
A: We continue to focus on science-driven opportunities that match our portfolio and skill set. We are interested in next-generation plays in the obesity space, such as oral delivery, high tolerability, combinability, and preservation of muscle mass.
Q: Is the conversion of 75% to 80% of WINREVAIR scripts into commercial embedded within fiscal year '24 guidance?
A: Yes, the conversion rate is embedded within our fiscal year '24 guidance.
Q: Can you characterize what we should expect from the Phase 2b trial of MK-8189 in schizophrenia?
A: The Phase 2a trial showed efficacy in schizophrenia and a reduction in body weight. If the Phase 2b results are comparable, we would be eager to see such results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
