Merck & Co. at Morgan Stanley Conference: Diversification and Growth Prospects

On Monday, 08 September 2025, Merck & Co. (NYSE:MRK) presented at the Morgan Stanley 23rd Annual Global Healthcare Conference. The company highlighted its strategic shift from reliance on KEYTRUDA to a diversified portfolio with promising growth prospects. Despite challenges like pricing policies and tariffs, Merck remains optimistic about its future, projecting over $50 billion in commercial opportunities by the mid-2030s.

Key Takeaways

• Merck is transitioning from a KEYTRUDA-focused company to a diversified launch company.
• Over $50 billion in commercial opportunities is anticipated by the mid-2030s.
• The company has invested over $50 billion in business development since Robert Davis became CEO.
• Strong focus on oncology, HIV, ophthalmology, and animal health segments.
• Positive clinical updates on Winrevair and potential of cetabircept in heart failure.

Financial Results

• Merck projects more than $50 billion in commercial opportunities by the mid-2030s, excluding recent acquisitions.
• The animal health business is expected to more than double by the mid-2030s.
• Significant investments have been made in business development, with over $50 billion spent since Robert Davis assumed the CEO role.

Operational Updates

• Merck is shifting its manufacturing footprint to enhance U.S. production and mitigate tariff impacts.
• The Winrevair launch is strong, with increasing physician prescriptions and patient uptake.
• Approvals for Winrevair in Europe are progressing, with reimbursement expected by late 2025, and Japan has already launched the product.
• The company is conducting 80 Phase 3 clinical studies, with 60 focused on oncology and over 20 new molecular entities in the pipeline.

Future Outlook

• Merck is adjusting its pricing strategy to address imbalances between the U.S. and other markets, particularly in Europe.
• The sBLA PDUFA date for the Zenith label expansion is set for October 25, with Hyperion study data to be presented at ERS meetings.
• The oncology pipeline is projected to generate over $25 billion, with a focus on antibody-drug conjugates like TROP2.
• New opportunities in the HIV pipeline could exceed $5 billion, and the iBio acquisition has accelerated ophthalmology programs by two years.

Q&A Highlights

• Merck is prepared for tariffs through inventory management and manufacturing shifts and is open to working with the administration on MFN principles.
• The company is considering direct-to-consumer strategies for existing and future products, focusing on Part D drugs.
• Business development strategy emphasizes science-driven deals with first-in-class or best-in-class mechanisms, preferring deals in the $1 billion to $15 billion range.
• While pursuing global opportunities, the U.S. remains a key focus, with no strategic pivot towards China.

Merck & Co.’s conference call underscored a commitment to innovation and addressing unmet medical needs. For a deeper understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Everybody, we’re going to get started here, but I’m Terence Flynn, Morgan Stanley’s U.S. biopharma analyst, and I’m very pleased to be hosting Merck & Co., Inc. this afternoon. From the company, we have Robert M. Davis, the company’s Chairman and CEO, and Dr. Eliav Barr, who is the company’s Head of Global Clinical Development and also CMO. Thank you both so much for joining us today this afternoon. Looking forward to chatting. Just quickly, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, I’m going to turn over to Rob for some opening remarks, and then we’ll dive into it.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Great, great. Terence, thank you. Thank you for having us, and thank you for everyone participating. Maybe just a few thoughts to kind of set the stage before we jump in. If you look at where we are as Merck & Co., Inc. right now, I would say we’re really in a transformation. We’re moving from being historically the KEYTRUDA company to increasingly really on a precipice of a wave of launches you’re going to see coming to becoming a launch company and a much more diversified company, which are things we’ve been very focused on. If you look, we’ve communicated over $50 billion of commercial opportunity by the mid-2030s, and that doesn’t even include some of the more recent deals we’ve done, like the recent deal we did for Verona Pharma or the deal for iBio, which each of those are a multi-billion dollar opportunity.

As we sit here today, we feel good about the pipeline we’re building, the commercial potential we have. We have to realize it. We have to add to it. We’re going to continue to invest in, augment, and accelerate our internal pipeline, and we’re going to continue to look to do business development. We’re not slowing down across any of those fronts. Importantly, with the fact that we now have 20 plus real new molecular entities that we’re going to be bringing to market, almost all of which have blockbuster potential, our focus is about how do we launch all of these opportunities successfully? How do we do them in a way that delivers for the patient? Ultimately, as you know, the way we think in Merck & Co., Inc., if we take care of the patient, ultimately we will take care of all of you, the shareholders.

That’s our focus. I feel very good. We’ve talked about the hill versus the cliff of the KEYTRUDA LOE. That continues to be the case. My confidence in our ability to have sustainable growth long term continues to grow, and I’m sure we’ll touch upon all that in our discussion that we go forward from here.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Absolutely. No, thanks so much, Rob, for framing that out. Before we get into all the more exciting stuff, I’m going to ask the question that I don’t think anyone has the answer to, but just to set the stage, latest perspective on tariffs and MFN, kind of where we stand, because I think that is still top of mind for a lot of investors here. A lot of uncertainty, but just, you know, what are you hearing? How are your conversations with the administration going on those two topics?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Maybe start with the tariffs, and then we can move into the MFN. On the tariff front, we’ve done a lot to prepare ourselves, and we are now very well positioned through both the way we’ve managed the inventory across the company, but most importantly, as we’ve started to shift our manufacturing footprints and have in place plans to really do U.S. production for U.S. sales. I would say as well as you can be prepared, we are prepared, depending on how the tariff situation evolves. Still unclear. We still have to see the outcome of the 232 investigation, so that is still out there, and we’ll see how that plays itself out. As it relates to MFN, probably as you’ve heard from others, there are several areas where I would say on principle we agree with the administration and we’re willing to work with the administration.

In fact, we’ve been having ongoing dialogue with them. The question is really how do we think about taking what are principles we agree to, like for instance, we agree we have to find a way to get foreign prices up, and not to enrich the industry, but frankly to allow us to bring prices in the U.S. down. We agree that we have to find a way to make sure that the out-of-pocket cost for patients is lower. Our belief, the best way to do that is to go after the $0.50 of every dollar that sits in the middle. You’ve heard the industry say that in the past. For every dollar of price you see, only half, actually less than half, comes to us as the innovator, the developer, and the manufacturer.

If we could just capture that other $0.50 and bring that to the patient, you could cut costs in half. We continue to believe that’s one of the best things we could do as an industry. Direct to consumers may be a path to do that, and that’s something we’re open to. Beyond that, I think we’re going to have to see how it plays out and where the conversations go over the next coming weeks and months.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Yep. One thing a recent cabinet meeting highlighted was potentially a linkage between tariffs and MFN. Is that something that you’re hearing? As a result, is this going to, the tariff situation going to carry on further because there’s this linkage? Resolution of all this might be maybe longer than we expect versus it being two independent parallel processes.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: I saw the same cabinet discussion. Beyond that, I really can’t speculate because we’ve had no conversations in that regard. I did see the same thing you’re referring to, and we’ll have to see how that plays out in practice. Unclear yet.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: On the DTC side, that’s something a lot of your peer companies have talked about as well. Are there any areas that you see as you think about this forward pipeline for the company? You have probably one of the broadest upcoming launch product sets in the industry. Are there certain areas that you would point to that are more amenable for DTC versus others that maybe aren’t?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: As you look at the direct-to-consumer, the conversations so far have been more with existing products than it is forward-looking products. Today, our portfolio, as you know, is more Part B focused. I think what lends itself best to direct-to-consumer is really the drugs that are in the pharmacy benefit, largely Part D drugs. That said, we’re open to it with some of the products we have. You know, we have some HIV drugs, diabetes drugs, others we could consider. If it would become something on a forward-looking basis, there are opportunities that we would look to do it there as well. We need to see, though, how it defines out before I would say specifically which products we would be looking to do that with.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Yes. Okay. Makes sense. One of your peer companies, Lilly, announced it was raising the price of Mounjaro in the UK. You talked about this price alignment, but there are obviously certain hurdles, challenges across the portfolio. Are there certain areas that are easier to accomplish that in versus others maybe as you think about the forward? I guess the derivative question is, again, new product launches, how does the company think about the strategy for new product launches? Maybe that’s a little bit easier to address than just existing products.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Exactly. If you look at what Lilly did, one, I would say, you know, it’s very product specific. If you look more broadly at the way we’ve been thinking about this in Merck & Co., Inc., and I think you hit upon it, we’re at a point of transition with our pipeline. We are going to be launching multiple new drugs into the market. The best time and place to affect the price imbalance between the U.S. and the rest of the world is with the launch of the new product. It’s much harder to go back for products that already have established presences in the space to do that. As we look forward, I can tell you we already have changed our approach with the way we think about pricing, and are actively considering how we can get prices up outside the U.S.

and how we engage in those discussions. More broadly, as an industry, we’ve had a lot of conversations with the UK, with the European Union, and other governments to start to express to them an understanding that we need to see the disparity addressed. We’ll see how it plays out. It is already changing our strategy as we look forward. I think our pipeline positions us in a place, frankly, to be in some ways better positioned than many in that regard.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Yeah. From those initial conversations, do you think that the European Union is amenable to that, or how open are they, or what’s going to be the pushback from them, do you think?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: I would say generally in all the conversations I’ve been involved with, probably more at a country level than at the Europe level, we have had conversations with the EU broadly, but at a country level, no one is challenging the principles upon what we’re talking about. It really comes down to the practical, often budgetary pressures that everyone faces. How do you judge relative value? I think that is going to be the bigger challenge. How do we align on what is value? Once we align on that, how do you translate that into something that they can absorb from a budget perspective? That’s why I think this is going to take time. It’s taken us 50 years to get to where we are, actually longer than that, post-World War II.

It’s going to take some time to transition, but we’re committed to trying to work on that path to bringing equalization, to make sure that we bring full value for the innovation we bring to the marketplace.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Okay. Great. Maybe we’ll just pivot over to strategy. Again, you talked about this a little bit, but just as you think about it, you guys have leaned in on the BD side, doing more of the kind of pre, I’d say, pre-phase three, pre-commercialization type deals. You mentioned, you know, Verona Pharma, iBio as two examples. You also have the TL1A that you brought in, obviously, Winrevair as well. I’ve been pretty active there. As you think about entering this period where you do have a high percentage of LOEs, does the calculus change at all in terms of the types of assets you consider? I think a lot of investors look at AbbVie and how they kind of navigated this period. They ultimately acquired a big company, Allergan. They had two mega blockbuster launches, gave trough EPS guidance, and then came out the other side.

How do you think about that as you get into this period? Is it still just execute the plan that we’ve laid out in terms of these, you know, kind of, you know, $10 billion, $15 billion deals, or has there become a time period where maybe you need to reconsider how to approach that?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: If you look at the, I’d say the common theme, we’ve done some earlier stage stuff, and as you pointed out, we’ve done some late stage stuff, and even with commercialized assets, obviously most recently with Verona. There’s a consistent theme. There’s a science-driven narrative around it. There is a situation where we see, usually a new mechanism of action, either first in class, best in class, or both, and one where we think there continues to be a significant unmet need. Lastly, it’s not just that deal, but then what can it lead to? We like to talk about first, best, next. The next is how can I think about combination therapy? How do I think about next, continuing to evolve in that space once I’m there, once I have a beachhead? That’s been a kind of a consistent theme.

As I sit here today, I feel like we’ve done a good job. We’ve moved with urgency. We’ve invested over $50 billion into business development since I’ve become CEO. I think about the multi-billion dollar opportunities. Think about it. When we talked to you last year, we have two more, Odiver and what we have with iBio that we didn’t have last year, and with pretty much everything we had last year continuing forward. Those two, for instance, aren’t even in the $50 billion plus. I think we need a few more of those. If we can do that, continue to drive our pipeline, we’re well positioned. If we don’t find those, I’m not opposed to doing a commercial deal, but it has to be one that still comes down to the basis of science. I think doing something just to solve a short-term problem is the wrong answer.

It has to be sustainable, which is then based in the science and how does it fit within the overall portfolio. The $1 to $15 billion that we’ve been following continues to be our preferred area, but we remain open to others if the parameters of value, science, and all come together in the right way.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Okay. Great. The other area that’s, I think, garnering increased focus is just the opportunity set in China. You guys have announced several deals there, at OilGLP, PD1BGF, LPAA. You’ve obviously been fairly active. As you think about that, is there opportunity for that to expand further into other therapeutic areas? How do you think about making those kind of decisions vis-à-vis maybe some of the U.S. biotech opportunities?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Yeah. We go for the best science wherever it is. I wouldn’t look to the fact that it just happened to be that the opportunities in China presented themselves around the same timeframe. It was not a pivot in our strategy. Since then, you look, we did Verona Pharma. That wasn’t a China-based asset. We did iBio. That’s not a China-based asset. We go to where the best science is. We continue to think the U.S. offers as good a science, if not the best science in the world. We’re not limiting ourselves there. We will go to wherever that is. China is an area where there’s some interesting things. I wouldn’t say it’s also therapeutic area specific. It’s broad-based in what we would look to do there. There and the U.S., as the opportunities present themselves, will be where you’re seeing us focus.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Okay. Great. Maybe we’ll move on to one of your key new product launches, which is just Winrevair. Obviously, it’s off to a strong start. Maybe just talk to us about kind of the dynamics that you’re seeing, kind of U.S., rest of the world, and how to think about the cadence into 2026. The other kind of, you know, question we get more frequently now is just the impact from this upcoming label expansion decision, which could move into a slightly earlier patient.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Maybe I’ll start with kind of where the commercial market is, and I’ll let Eliav speak to the label and how we think that could expand. The high-level answer is we continue to be very pleased with how the launch is going. Everything continues to perform. Access is strong. Number of physicians prescribing continues to grow. Patients on therapy is growing, and our ability to see increasingly patients move from later lines, so from the people really on triple therapy into even some on dual therapy. Everything is moving as you would expect. As you look beyond the U.S., we’re still early, actually, in the approvals. As you know, as you get approvals in Europe, it’s more about getting the reimbursement. As we move into the back half of 2025, you’re going to see more major markets start to have reimbursement in Europe.

We just launched in Japan, which is a very important market, a very big market for this drug. As you get into 2026, really, you’re going to start to see that international piece take off. The early days of what we’ve seen in markets like Germany, where we are in the market, it’s moving very similar to what we’ve seen in the U.S. I think the U.S., as a proxy for you, start with the sickest patients. You test and you learn how to manage the drug, and then as you get comfortable, you start to expand into earlier stage disease and into broader patient populations. That’s what’s happening here, and that’s what we’re seeing globally. Maybe you can speak to Hyperion and Zenith.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Sure. The Zenith trial, as you know, read out earlier in the year, and we submitted for regulatory approval. In the U.S., we have a very, very broad label. The Zenith trial was ready within the label. In Europe, this is very important for reimbursement because Zenith, as you recall, is late stage, patients with very severe functional class III and IV disease. By being able to demonstrate the efficacy of cetabircept against hard endpoints in this population, not only do we expand the label, but we also have the opportunity for a proper reimbursement decision. Nevertheless, Zenith is important in the U.S. because these patients continue to demonstrate over and over again the extraordinary benefit that cetabircept gives to patients across the spectrum. We just announced a little while ago that the Hyperion study is positive, and it will be presented at the ERS meetings later on this month.

Hyperion is very different than Zenith. It’s early patients within a year of diagnosis, mostly on two-drug regimens, not on three-drug regimens, a lot more connective tissue disease, a broader age range. This represents the entry level, the people who are recently diagnosed with PAH. The results of the study were really terrific and completely consistent with what we’ve seen with all of the other studies. I think this will fill a really important gap, right at the time that physicians are thinking, "I’m feeling a lot more comfortable with Winrevair.

Now I really want to try to get to my earlier patients, the patients that are just starting to have symptoms from PAH or on two drugs, and now I want to start them on something that will help them improve outcomes over the long term." This is going to be a really important study as well, and you’ll be able to see the benefit just being consistently seen, whether it’s Stelar, Zenith, Hyperion, and that kind of covers the spectrum of PAH.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: One thing, just you might clarify, since you didn’t mention it specifically, that the mortality benefit from Zenith.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Sure. In the Zenith trial, we have hard endpoints, including mortality benefit. That’s the reason why European agencies, particularly health reimbursement agencies or reimbursement authorities, would be particularly interested in this data set because they have that bar to reimburse. I think we see this time to clinical worsening in Stelar study, hard endpoints, including mortality benefit in Zenith. We see time to clinical worsening better in Hyperion, and you’ll see those data soon. I think that this is a really compelling data set, including a very clear and well-understood safety profile. Very exciting data, and I think it’s going to be very important for the field.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: The sBLA PDUFA date for Zenith is October 25.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: 25th. Correct.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Hyperion, I’m assuming now that you have the other study, will be a separate sBLA filing?

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Correct. Yeah.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Yeah, that would work. Okay. All right.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: These data are pretty, very clear.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Is there an opportunity to do, I think maybe the company has talked about this before, but like a combined analysis of mortality across these studies almost, like on a postdoc basis?

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Sure. We’re going to be doing a lot of those analyses. That’s going to be very important. Mortality is an important endpoint. We’re going to look at also transplants and other really severe outcomes for the patients. Those data are going to be coming in over the next few months.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Yeah. The other thing that, you know, there were some initial questions, always on safety, just given what this drug has done. I think it’s important with STELARA and then using the STELARA data plus what we have from these studies and then our ongoing follow-up study we have, Ceteria. I think you’re also going to see us focus on bringing real-world evidence to give confidence to the fact that the safety profile of this drug is quite, quite good. Our confidence of that is quite high. We want to make sure that we have the data to back it up. That’s also another area where we’re focusing a lot of our data aggregation to be able to give people the same confidence we have.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Is that something that you think that maybe the community, the community docs who treat PAH are still focused on, or do you think that’s more of a Wall Street issue, the safety question?

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: I think patients are, I mean, doctors, physicians are always interested in balancing benefit-risk. I think that the safety profile of cetabircept is well known. It’s really quite good. We haven’t seen any new safety signals, and I think that all the clinical trials have been really good at defining how you reduce doses for high hemoglobin and some of the bleeding elements and so on. What’s really important with the Ceteria study, which is now really quite a large study with patients on drug for five, seven years now, is long-term outcomes. People want to know, what happens? Do things get worse over time? Do things get better over time? Is the efficacy the same? What we’re seeing is the efficacy patients are, the efficacy findings continue to be really good. The safety profile, again, quite manageable. There’s no accumulation of problems. There’s no worsening.

These data, I think, are very important because now we have patients who are in the real world and will be on this drug for quite a substantial period of time. They’re feeling better. They’re doing better. We just don’t have to be able to share what the data are. We will have every 6 to 12-month updates so that docs are comfortable with that.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Great. Maybe just the last one on cetabircept is there’s obviously phase two data from the Cadence study that you guys are expecting later this year. The first part of the question is just to frame for us kind of what you guys are looking for to move that into a phase three study. The one that we frequently get is how to size the number of people that would be eligible for this therapy vis-à-vis the current PAH population because I see a lot of different estimates out there. How is the company thinking about eligibility in the patients that you enrolled in this study? Maybe I’ll let you start and I can add anything.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Sure. Just to start with the end first, these patients are patients with heart failure with preserved ejection fraction that have high blood pressure in both the pulmonary veins and arteries. It’s a particular subset of what’s called HFpEF. The TAM, the total addressable market, is roughly the size of PAH, we believe. The difference versus PAH is that because there’s never been anything for these patients, they’re somewhat less diagnosed. What we did with the cadence study is a phase two trial that looked at two doses of cetabircept against placebo on a background of standard medicines in these patients, and we’ll have the results. The primary endpoint is blood pressure in the pulmonary vasculature, so-called pulmonary vascular resistance. You have secondary endpoints, including the classic, the standard six-minute walking distance. We’ll see what those results are.

It’s our expectation that those data would be available later on this year. Should the data look robust, then we would move into a phase three program. I think that looking at enrollment rates in the study, at the beginning, they were pretty slow. As people began to understand what cetabircept can do, and they recognize that there’s potentially some hope with these patients, our enrollment rate went really quickly up. I think that there’s going to be a lot of enthusiasm should the data turn out to be supportive of the use of cetabircept.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Can you remind us what you think a clinically meaningful result would be on PVR? I mean, I remember a lot of the PVR data from PAH, but in this setting, is it similar? Is it different?

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: It’s going to be something similar to that. I think this patient population in general is similar to Hyperion in terms of age and comorbidities and so on. That gives me some confidence in the sense that Hyperion was such a great result. I hope that we’ll replicate it. It’s a different disease. I don’t have any data, but we’re hoping to get the data later on this year.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Okay. Great. Is that a press release opportunity? I mean, this might be a question for Peter. Is that a medical conference presentation? What’s it, what’s kind of for a phase two, remind us like Merck’s standard disclosure for these kind of things? Yeah. We’ll have to wait and see what the date is, but our expectation is we see the data near the end of this year. Likely it would be for a conference, probably sometime early next year. Obviously, a lot of it depends on what the date is.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Okay. Great. I just want to kind of drill down to the pipeline a little bit further here. I think you guys have talked about this a lot, most recently on earnings. You reaffirmed this over $50 billion opportunity. You mentioned it again here. I think oncology is one area where maybe if I look at consensus versus how you guys are thinking about it, you say over $25 billion. I would guess there’s not that much in street models, nearly that much. When you look at your opportunity fit in oncology beyond KEYTRUDA, what do you think the biggest disconnects are that people are missing that you’re excited about?

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Maybe I would just start and say one of the things I think in general when we speak to what we think is underappreciated, and I’ll speak to oncology, is the overall breadth of our pipeline. You know, we have now 80 phase 3 clinical studies underway, 60 in oncology, all of which could be registration enabling. That’s a massive phase 3 pipeline. As we said, that’s driving 20 plus assets that are unique assets that we think almost all of which have blockbuster potential. I just lay that out there. Within oncology specifically, if you take the $25 billion, we talked about that there’s over $25 billion from our oncology assets. What is that made up of?

It’s made up of our antibody-drug conjugate portfolio, it’s made up of our small molecule portfolio, mainly precision molecular targeting agents, our individualized neoantigen therapy with what we’re doing with Moderna, and our recently acquired T-cell engager that we have as well. That kind of is what’s in that. It excludes the subcutaneous KEYTRUDA, excludes other assets. If you look at the $25 billion, almost, I guess, a little over half of that $25 billion would be just the ADCs. Within that, I would point to probably the one that we think is underappreciated, which is TROP2. TROP2 currently has 14 phase 3 studies underway, nine of which we think will be basically first-in-class indication. The other five could be potentially best-in-class. We think that in and of itself is a highly differentiated asset, TROP2, that we’re going to continue to pursue.

Obviously, we invested behind the 14 phase 3s based on our understanding of the oncology space and our confidence in what that could be. Not to mention in the precision molecular space, what we have with our KRAS G12C would be one. Maybe you can hit on those.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Our PIF-11A1 inhibitor and our medicine bone and stem cell for various myeloproliferative diseases like essential thrombocytopenia. Very large pipeline, very diverse pipeline, new entry into the hematology space. SACTMT, I think, is a real workhorse medicine that will help both in maintenance settings, in GYN and women’s cancers, certain kinds of lung cancer. A lot of these assets are biomarker defined, so that we have deep and defined responses in specific patient populations. Overall, KEYTRUDA has helped us a lot. We are focused on the areas where KEYTRUDA is foundational, but we’re not limited to that as hematology points out. I think oncology is a huge opportunity. I think it is undervalued by investors simply because we will show you the data in due course. I think that the result, the ADCs are terrific, as are the targeted agents and combinations of those agents as well.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Maybe just allow me because we have so much. Going beyond oncology, I guess that’s one follow-up question.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Yeah, please go ahead.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Just on TROP2, because I think there’s kind of two follow-up questions. Number one is I think investors have maybe become a little less optimistic because of some of the data on the lung cancer side. Maybe you guys could just speak to what gives you confidence, because again, if I’m assuming half of this $25 billion is for a big chunk of that, it’s probably lung cancer. What gives you the confidence in the lung setting here with the TROP2? The related question is that biomarker question, which Elliot alluded to. How critical is a biomarker in unlocking this big opportunity for TROP2? I think that’s the other thing investors kind of wax and wane on, like do you need a biomarker, do you not? Maybe just elaborate.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: We are very committed to the biomarker approach, but maybe Dr. Eliav Barr can address the.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Sure. I’ll start with TROP2 and then I’ll start with lung cancer. They’re like this overlapping, but not completely. With TROP2, I think that the difference, if you look at the different TROP2 agents, each has some issue that I don’t think we have with TROP2. ILD on the one side, and on the other side, really significant diarrhea and problems with potency. It hasn’t. Our program, our drug, first of all, from an AE profile, is much more of the traditional chemotherapy kind of AE, neutropenia, and so on, but not to such an extent that it causes a lot of discontinuation. First of all, well-tolerated drug with strong efficacy. That’s step one. Step two is where we’re going. Merck & Co., Inc. has traditionally, with KEYTRUDA, been heavily focused in GYN and triple-negative breast cancer, and we also have, of course, HER2-positive breast cancer studies going on.

In any event, in GYN cancers, a strong opportunity for SACTMT. We also see that in specific segments of lung cancer where people are, the biggest differentiator between our program and others’ program is that we’re not going up against the big gun chemotherapies because those drugs are well entrenched. They are quite effective. What these drugs can’t do, like a platinum doublet, can’t do is allow for long-term anti-cancer effect. You get through it, you’re done, and then you hope. Whereas SACTMT has a long, long, long, long, long tail, which enables us to have maintenance therapies. Instead of going up against the first line, you have a lot of maintenance studies. As a concept, that’s not been exploited too much. When it has been, the effects have been really quite good in terms of overall survival. That’s that.

Biomarkers are really important because all of these ADCs do have some enrichment, but not for every cancer. We have invested quite a bit in a lot of biomarker work, digital pathology, AI, all the kind of whiz-bang sort of stuff. We’ve come up with the kind of markers that I think will make it, will make the right drug go to the right person at the right time. That’s why we have such a big suite of ADCs. We have SACTMT. We’ve got three Daiichi compounds. We’ve got a heme ADC, and we’ve got others in the pipeline. They’re not going to cannibalize each other. They’re each for that patient, then that patient, then that patient. You’ll see that in lung cancer, we have some studies with TROP2.

We’ve got our B7H3 in small cell, and in other cancers, in GYN cancers, we’ve got TROP2, but we also have our ovarian RDXD with Daiichi. Overall, we cover a huge number of cancers. We have really groundbreaking efficacy, specific biomarker-defined populations. KEYTRUDA data help us get there. I think it’s going to be, these drugs are going to be quite transformational in healthcare.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Rob, I know you want to talk broadly on this.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Yeah, the problem is we have so many things. We’re going to not have enough time to cover them all. If you look at a few other areas, I think underappreciated, HIV. You know, we recently had an investor event where we went into a deep dive. If you look, we have interesting opportunities with azelastomabine and duraviren in daily treatment. We have weekly treatment in combination with lenacapivir. We have our own weekly treatment coming in a combination of azelastomabine with ulo, which we’re excited about. We think it’s a very interesting next-generation agent. Probably the thing we’re most excited about, MK8527, which is our once-monthly PrEP. We have a whole suite of opportunities. We now see with over $5 billion of opportunity there and more coming in that space.

I think that’s one that it’s going to take time for people to get comfortable with, but I think as they do, they will come to appreciate the power we’re going to have in that space. The other one is ophthalmology. We have, through the acquisition of iBio, accelerated that program two years. We’re coming two years faster to the market than what was originally anticipated. We have two F’s, that’s not just one. Importantly, we have MK3000, which is currently in phase three. We’re looking starting first in DME, but looking then to move into AMD. We also have another asset called Tyspectus, which we think is as meaningful as what MK3000 is. That also is a multi-billion dollar opportunity. We feel very excited about those. The last one is animal health.

Our animal health business, we’re going to more than double it by the time we get out to the mid-2030s. It’s on a story that’s very similar to the human health business. It’s driven by new product innovation in both the companion animal and the production animal space. In the companion animal space, we have a next-generation JAK inhibitor for atopic dermatitis, Nuvelvy, that is launching outside the U.S. It’ll hopefully launch here in the U.S., get approval later this year, maybe early next year. We just launched our annual once-per-year injectable Bravecto, long-acting Bravecto, in the United States. We have that outside. We have a whole suite of next-generation vaccines for animals, and then we have a technology business. That business is going to grow faster than the market, and I think we’ll surprise people with the strength of the growth it will bring.

We’re very excited about what we have. Next time we’re together, we’ll go through some others. If you wanted to know, that’s a few areas I’d say if you haven’t looked, open your book and look a little bit because I think you’ll see there’s more there than you probably originally expected.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Great. Thank you so much, Rob, Eliav. Really appreciate the time today.

Robert M. Davis, Chairman and CEO, Merck & Co., Inc.: Thank you.

Eliav Barr, Head of Global Clinical Development and CMO, Merck & Co., Inc.: Thank you. Thanks so much.

Terence Flynn, U.S. biopharma analyst, Morgan Stanley: Thanks for having us.

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