默克藥廠 (MRK) 2014 Q4 法說會逐字稿

Good day, everyone, and welcome to Merck's fourth-quarter and full-year 2014 earnings call.

Today's call is being recorded.

At this time, I would like to turn the call over to Joseph Romanelli, Vice President of Investor Relations.

Please go ahead sir.

Thank you, Christie, and good morning, everyone.

We'd also like to say good afternoon and good evening to everyone listening outside the United States.

Welcome to Merck's fourth-quarter 2014 conference call.

Before I turn the call over to Ken, I just want to point out a couple of items.

First, you will see that we have items in our GAAP results such as the acquisition related charges, restructuring costs and certain other items.

You should note that we have excluded those items from our non-GAAP results.

There are reconciliation tables available in our press release so you can get a better understanding of the underlying performance.

We have also provided tables to help you understand the sales results in the quarter for the business units as well as for the products.

This can be found in Table 3 of our press release and the reconciliation table I mentioned earlier is in Table 2 of the release.

During the call, we will be referring to Table 2 for the P&L and Table 3 as it relates to revenue.

Second, I would like to remind you that some of the statements we make during today's call might be considered forward-looking statements within the meaning of the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995.

Such statements are made based on the current beliefs of Merck's management and are subject to significant risks and uncertainties.

If our underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Our SEC filings, including Item 1A in the 2013 10-K, identify certain risk factors and cautionary statements that could cause the Company's actual results to differ materially from those projected in any of our forward-looking statements made this morning.

Merck underscores no obligation to publicly update any forward-looking statements and you can see our SEC filings as well as today's earnings release on Merck.com.

So with that, this morning I am joined by Ken Frazier, our Chairman and Chief Executive Officer; Adam Schechter, President of Global Human Health; Rob Davis, our Chief Financial Officer; and Dr. Roger Perlmutter, President of Merck Research Labs.

So with that, I will turn the call over to Ken.

Thank you, Joe.

Good morning, everyone, and thank you all for joining the call today.

Our performance this quarter is the result of the proactive steps we are taking to further sharpen our commercial and R&D focus, redesign our operating model and reduce our cost base.

We are evolving Merck's operating model in recognition of the evolution underway in healthcare markets across the world.

And we will continue to focus our resources on those internal and external opportunities that can generate the most value for patients, customers and shareholders.

While we made real progress in 2014, you should all know that we are by no means content.

Over the past year, our greater focus has led to better execution a point underscored by the effort that led to Keytruda being the first PD-1 inhibitor approved in the United States.

Another example of focused execution is restoring Januvia's growth.

It is our intention to continue this focused disciplined execution especially in areas where we have the greatest opportunities to grow and to lead.

While we are transforming the way Merck operates and executes, our fundamental strategy has remained consistent.

Our success and our future will continue to be predicated upon what has long defined Merck, innovating at the intersection of scientific opportunity and global unmet medical need.

In short, there is no substitution for innovation which we believe remains the best path to intrinsic long-term value creation.

We intend to stay at the forefront of biopharmaceutical science and innovation.

Now turning to our results.

I am pleased that both on an annual and a quarterly basis excluding exchange we reported sales growth in Diabetes, Hospital Acute Care and Vaccines as well as in our Animal Health business.

We also delivered on both our quarterly and full-year non-GAAP EPS commitments.

Our core underlying portfolio continues to perform well and our commercial organization remains focused on those areas where Merck medicines and vaccines can make their greatest contributions.

We've also said that an important part of our strategy is actively pursuing the best external opportunities to augment our portfolio while divesting products and businesses that we believe can be better maximized outside of Merck.

The divestiture of our Consumer Care business as well as the acquisition of Cubist are examples of how we are executing this strategy.

As we move into 2015, we will continue to look for the best opportunities to collaborate with academia and pharmaceutical and biotechnology firms to bring forward the next generation of medical breakthroughs that can deliver value to patients, physicians and payers and fuel our future.

Our increased commercial focus, acquisition of key assets, and an unprecedented number of regulatory approvals in 2014 will enable us to launch several new innovative products in 2015, each with the potential to serve a critical unmet medical need.

We are poised to capitalize on each of these opportunities.

I am pleased that last year we not only achieved six new product approvals in the US but also made steady progress in advancing our late stage pipeline.

We now have over 10 Phase 3 programs targeting many of the world's largest public health needs.

Roger will talk more about the exciting programs in our pipeline shortly but let me reiterate, our industry is built on a foundation of innovation.

Effectively pursuing the most promising scientific discoveries both internally and externally ultimately will be the key differentiator in determining companies' ability to create long-term value for their shareholders and society.

Reducing our operating costs has allowed us to respond more rapidly to changes in the healthcare environment, drive greater profitability and invest in our late stage portfolio.

A little over a year ago we pledged to reduce R&D and SG&A costs by $2.5 billion by the end of 2015 and I am pleased to say that we are on track to meet this goal.

Finally, we have not lost focus on the importance of returning cash to our shareholders.

The past year allowed us to return approximately $13 billion to shareholders through our dividend and share repurchases.

In 2015, our framework for deploying capital will remain consistent.

We will balance investing in our business with funding compelling business development opportunities and we remain firmly committed to returning cash to our shareholders.

Today, Merck has the opportunity to reduce the burden of disease in five of the most significant global health battles, cancer, hepatitis C, cardiometabolic disease, resistant microbial infection, and Alzheimer's disease.

This is only possible because of our unwavering commitment to the discovery and development of transformational medicines and our willingness to challenge how we operate.

These are both important forms of innovation and both will enhance our ability to thrive in the changing healthcare environment and produce long-term value for patients, customers, society and shareholders.

In closing, we are continuing the strong momentum we achieved in 2014.

We have made significant strides in our strategic initiative and accomplished groundbreaking milestones in our R&D labs.

Moving forward, we expect to continue making major progress in advancing our late stage pipeline, gaining first-in-class approvals and launching new innovative products.

And now I'd like to turn the call over to Adam Schechter.

Thank you, Ken.

Good morning, everyone.

This morning I will provide you with an overview of the Global Human Health fourth-quarter results.

I'll also provide you with some context on the 2015 outlook.

My comments will be on a constant currency basis.

We finished 2014 with solid performance.

Sales reached $9.4 billion in the fourth quarter and it reflected growth in our four core areas of Diabetes, Hospital Acute Care, Vaccines and Oncology, and those are partially offset by hepatitis C market dynamics and product divestitures.

If you exclude the divestitures, sales grew 3%.

First I will review performance of several key products and then I'll provide an update by region and I'll begin with Januvia.

The Januvia franchise reached approximately $1.7 billion in sales and grew 6% in the quarter and 4% for the full year.

In the fourth quarter, sales in the United States grew 5%.

Our increased focus in investments enabled us to defend our 75% market share and to grow the DPP-4 class.

In our international markets, sales grew 6%.

Europe and emerging markets continue to grow on strong demand.

In Japan, sales declined as a result of DPP-4 class repricing and the competitive environment.

We committed to grow Januvia in 2014 and our team worked hard to deliver on that commitment.

We are entering 2015 with momentum to deliver another year of growth.

Next in hospital and specialty care, sales of Isentress were approximately $420 million in the fourth quarter, a decline of 1%.

Internationally, we drove growth in Europe on continued volume increases.

Emerging markets sales grew as a result of demand and of tenders.

In the United States, sales declined due to a tough year-over-year comparison and competitive dynamics.

On a full-year basis, Isentress grew 3%.

We expect continued competitive pressure in 2015 but we believe that based on its efficacy and tolerability that Isentress will remain a compelling treatment option for physicians.

Sales of our immunology products reached approximately $750 million in the fourth quarter growing 5%.

Simponi remains the fastest growing anti-TNF in the markets where we promote the brand.

Remicade sales declined 3% reflecting biosimilar competition in smaller EU markets partially offset by growth in core markets.

For the full year, our immunology business grew 10%.

However, we will lose patent protection for Remicade this month across the remainder of our European markets.

We expect competition for biosimilars to begin upon patent expiry.

While we believe we will retain many current patients being treated with Remicade, we will face increased competition for new patients and there will be mandatory price reductions in certain markets.

In Hospital Acute Care, sales were approximately $650 million and grew by 12% this quarter.

We saw continued uptake of Bridion in Europe and emerging markets as well as solid performances from our antibiotic and antifungal treatments.

Our Hospital Acute Care business grew 11% for the full year.

In 2015, we expect continued growth driven by the strength of our legacy brands and the acquisition of Cubist.

As a global leader in Hospital Acute Care, we look forward to this business being a significant contributor to growth for Merck.

Now turning to our Vaccine business.

In the fourth quarter, Vaccine sales grew 18% to $1.6 billion.

Growth was driven by pediatric vaccines, Pneumovax and Zostavax and they were partially offset by Gardasil.

Sales of Zostavax were $285 million in the quarter, the highest quarter of sales of the brand.

In the United States, sales grew 7% in part as a result of our new DTC campaign.

Internationally, sales grew 15%.

We are now launching in more than 25 markets globally.

Gardasil sales declined 6% due to timing of customer purchases as well as fewer catch-up cohort vaccinations in certain emerging markets.

We look forward to the launch of Gardasil 9 in the US in the coming months.

The ACIP is expected to discuss Gardasil 9 at its meeting in late February.

We see Gardasil 9 as the best-in-class HPV vaccine that will offer greater protection against cervical cancer and build upon our legacy in this important market.

On a full-year basis, our Vaccine business grew 4% to sales of $5.7 billion.

Vaccines remains an important core focus area in 2015.

Now turning to some geographic commentary for the fourth quarter.

Sales increased 1% in the US but decreased 4% in Europe.

In both regions, we drove growth in Januvia and in Hospital Acute Care.

But sales were impacted by continued declines in hepatitis C portfolio and from product divestitures.

Sales in Japan grew 1%.

Despite increases in Pneumovax sales, the biannual price decreases and ophthalmology product divestitures impacted growth this quarter.

Additionally in Japan, we launched Belsomra in November and we are encouraged by the early results of our launch efforts and from feedback by physicians.

Sales in emerging markets grew 7% driven by strong performance in China which grew 14%.

Mexico and Turkey also contributed meaningfully to emerging market growth this quarter.

Now I'll spend a few moments speaking about the Keytruda launch.

We have made significant progress in bringing Keytruda to patients in the United States and through our expanded access program in several markets around the world.

Sales of Keytruda were $50 million in the fourth quarter.

Important to the early success of our launch is the strong market access we secured for Keytruda.

Virtually all claims for the labeled indication are reimbursed without restriction within two months.

In December, through broad acceptance of academic centers and community treaters, we estimate roughly 2000 patients were receiving treatment with Keytruda.

These figures indicate rapid uptake in patients fighting refractory metastatic melanoma.

Furthermore, we continue to fortify our Oncology business unit as we prepare for potential launches in other tumors such as non-small lung cancer.

We are investing to be a global leader in Oncology.

Now I'll briefly discuss 2015.

2015 will be an exciting year for Merck with current and new product launches.

We will be launching Gardasil 9 and as we speak, the launch meetings for Zerbaxa and Belsomra are occurring in the United States.

We also look forward to a potential launch of Bridion in the United States later this year.

And of course, we will continue to maximize the potential for Keytruda.

In summary, Global Human Health executed on our strategy in 2014.

We focused investments in priority commercial areas and priority markets.

We drove growth in Januvia, in Hospital Acute Care, and in Vaccines.

We acquired key assets from Cubist with near-term revenue and good long-term growth prospects to solidify our leadership position in Hospital Acute Care.

We divested several non-core products and franchises to increase our focus while reducing our costs and at the same time, we executed on a robust launch of Keytruda.

I believe that the strength of our underlying business, our commercial strategy and our new launch opportunities position us well for future growth.

Now I'll turn the call over to my colleague, Rob Davis.

Thanks, Adam.

Good morning, everyone.

As Ken and Adam shared with you, 2014 was a year of strong execution and solid performance for Merck.

From a financial perspective, we are leading a transformation of the business and are on track to achieve our strategic goals by sharpening our focus.

From a deal perspective, we executed a significant number of business development deals in 2014.

From our divestiture of the Consumer Care business to the acquisitions of Idenix, Cubist and OncoEthix, our deal strategy shows we are focusing our business on our core areas which we believe will help drive future growth.

We also making steady progress to change the business model and achieve our cost reduction goals.

Consistent with our guidance for 2014, we were successful in lowering our M&A and R&D expenses below 2013 levels.

This drove a leveraged P&L and is an example of how we've changed the way we are operating.

For shareholders, 2014 was a significant year from a capital allocation perspective.

We returned approximately $13 billion to shareholders through the dividend and share repurchases.

This was a record year for Merck in terms of returning cash to shareholders and shows our commitment to being operationally focused and shareholder minded.

Lastly, we met our guidance targets in 2014.

We achieved the top end of our EPS guidance range by delivering $3.49 of earnings.

Our performance throughout the year shows that we will manage our business to achieve our financial goals.

Now turning to the fourth quarter.

And as a reminder, my remarks will focus on our non-GAAP financials.

Total Company revenues were $10.5 billion in the quarter, a decrease of 7% year-over-year which includes a negative 3 percentage point impact from foreign exchange.

This decrease reflects $600 million in lost sales due to divestitures including the sale of the Consumer Care business to Bayer and approximately $200 million from the now ended joint venture with AstraZeneca.

Excluding these items as well as the impact from patent expiries and foreign exchange, the underlying business grew 3% in the quarter.

As Adam stated, sales in the pharmaceutical business were driven by growth in our core areas offset by divestitures and competition for our Hep C vaccine franchise.

Animal Health delivered a strong quarter with revenue of $885 million, an increase of 8% year-over-year excluding exchange.

We had strong growth throughout our portfolio across both species and regions.

We continue to see the benefit from the launch of Bravecto, which is now in 30 markets.

The Animal Health business grew 5% ex-exchange for the full year 2014 and we continue to expect mid single-digit growth in 2015.

Now moving to expenses.

Gross margin was 74.6% in the quarter which represents 160 basis point increase year-over-year.

Full-year gross margin of 73.9% was approximately 40 basis points below prior year in line with our guidance.

For operating expenses, we continued to manage our cost base and met our fourth-quarter guidance.

For the full year, we reduced our operating expenses by $1.3 billion year-over-year by disproportionately focusing our resources on key clinical programs, core brands, and new product launches.

We remain on track to deliver $2.5 billion of cost savings versus our 2012 base by the end of 2015.

Our non-GAAP effective tax rate this quarter was 20% and 24.3% for the full year.

The quarterly and full-year rates reflect a benefit from the renewal of the R&D tax credit for 2014.

Taken together, we earned $0.87 per share in the fourth quarter as compared to $0.88 per share in the prior year and delivered full-year EPS at the high end of our guidance range.

Now as we turn to guidance and our outlook for 2015, on the topline, we expect revenue to be $38.3 billion to $39.8 billion in 2015 using mid-January exchange rates.

This range takes into account several key assumptions including the negative impact of generic and biosimilar competition, approximately $1 billion of net lost sales of acquisitions and divestitures, and $500 million from the end of AstraZeneca joint venture.

Additionally, this range reflects $2.6 billion of negative impact of revenue due to the recent strengthening of the US dollar against virtually all other currencies.

This foreign exchange headwind will also impact our EPS in 2015.

At mid-January rates, we expect non-GAAP EPS to be in the range of $3.32 to $3.47 which reflects a $0.27 impact from foreign currency.

If you exclude the impact of exchange, we expect mid single-digit EPS growth in 2015.

We also expect EPS in the first half of the year to be lower than EPS in the second half of the year.

On a GAAP basis, we expect to earn between $1.62 and $1.91 in 2015.

Now I would look to provide some additional color on the other elements we have built into our EPS guidance.

We expect product gross margin to be 75 to 100 basis points higher year-over-year as we see margin expansion from the divestiture of lower margin businesses and products, improving product mix and manufacturing cost improvements.

In 2015, we expect operating expenses overall to be lower year-over-year.

For our marketing and administrative expense, we expect a decline versus 2014 as we continue to focus on our operating model.

For research and development, we plan to invest in our innovative late stage pipeline and therefore expect a modest increase in our R&D line year-over-year.

All together, we remain on track to achieve our target of a $2.5 billion reduction in expenses off of the 2000 base by the end of 2015.

I'm sorry, that was a 2012 base.

Regarding tax, we expect a full-year tax rate to be 22% to 23%.

As in prior years, our guidance does not assume a renewal of the R&D tax credit in 2015.

Finally, we project average diluted shares outstanding will be approximately $2.86 billion for 2015 reflecting a decrease versus the prior year.

In summary, 2014 was a year of focused execution for Merck.

Our commitment to the strategic reshaping of our Company has been evident in the actions we have taken over the past year.

We have been able to execute against our goals while thoughtfully removing expenses from our operating base and continuing to drive productivity in our commercial business and in our labs.

Now I will turn the call over to Roger.

Thanks, Rob.

The fourth quarter saw increased investment in discovery research, clinical development and in regulatory affairs activities at Merck Research Laboratories.

Turning first to product registrations, in December we obtained FDA approval for Gardasil 9, our 9-valent Human Papillomavirus vaccine.

As previously discussed, this vaccine will permit immunization against more than 90% of HPV strains associated with the development of cervical cancer.

Summing over the calendar year in 2014, we received US approval for more new molecular entities, that is new drugs and vaccines, than in any previous year in the history of Merck & Co.

Also during the fourth quarter, we submitted our file supporting the registration of Bridion for which we had previously received a complete response letter.

It is our expectation that the FDA will convene an advisory committee of the Bridion file with an action expected in the second quarter of this year.

On the development side, we continued to make progress on the evaluation of Grazoprevir/Elbasvir together known as our doublet therapy for the treatment of hepatitis C virus infection.

Phase 3 studies for this once daily therapy were fully enrolled during the fourth quarter which assuming that these data recapitulate what we have described previously in our phase 2 program, should permit FDA filing in the first half of 2015.

Results from some of these Phase 3 studies demonstrating the favorable attributes of our doublet therapy will be presented at the European Liver meetings to be held in Vienna in April.

As noted in our press release, last week the US FDA informed us of their intention to rescind our breakthrough designation for Grazoprevir/Elbasvir for the treatment of genotype 1 HCV infection based on the availability of newly registered drugs that address this medical need.

We intend to discuss this matter with the Agency in the coming weeks.

I will remind you the data presented during the AASLD meetings in November demonstrated the potential of our HCV doublet therapy to provide impressive sustained virologic responses in the vast majority of infected patients irrespective of comorbidities.

We also provided data on our polymerase inhibitor now called MK-3682, which we hope to use as part of future triplet therapy for HCV infection.

A robust phase 2 program testing MK-3682 in combination with doublet therapies is already underway and we expect to initiate Phase 3 studies with MK-3682 by the end of the year.

Also in the fourth quarter we provided data at the Society for Melanoma Research on the treatment of patients with advanced metastatic melanoma with Keytruda.

In a randomized trial compared with chemotherapy, the objective response rate was 21% versus 4% for chemotherapy at the labeled Keytruda dose and a hazard ratio for progression free survival was 0.57 favoring Keytruda.

We continue to study Keytruda in earlier lines of therapy for malignant melanoma.

Data from our KEYNOTE 006 study comparing Keytruda with ipilimumab in first or second line therapy of advanced disease will become available by midyear and we have registration enabling studies ongoing or planned in six other tumor types.

As previously disclosed, we intend to file for approval of Keytruda in the treatment of non-small cell lung cancer in mid-2015.

In December, we also announced the acquisition of OncoEthix which provides us with access to their leading BET domain antagonist for hematologic and other malignancies.

I will have more to say about this molecule during future earnings calls.

The fourth quarter saw important progress in other therapeutic areas.

In November, we presented the results of the IMRPOVE-IT trial demonstrating that Vytorin provides significant benefit versus simvastatin in reducing the risk of major cardiovascular events in patients hospitalized following an acute coronary syndrome.

The fact that two different mechanisms of LDL cholesterol-lowering, HMG CoA reductase inhibitors, that is statin, and cholesterol absorption inhibitors, that is Zetia, both reduce cardiovascular risk suggests that LDL cholesterol is itself the target of action of these drugs and augurs well for our favorable outcome in the REVEAL study of Anacetrapib.

Although an interim analysis of REVEAL will take place in 2015, we expect the trial to continue to an event driven completion.

Also in the metabolic disease area, we have been informed by the executive committee of the TECOS study that they expect to have results available for presentation at the American Diabetes Association meetings in June.

The trial is being administered by the Duke Clinical Research Institute and currently still accruing data.

As Ken mentioned, we are delighted to have the opportunity to form common cause with colleagues in the Cubist research and development organization.

We have just embarked upon a holistic review of Cubist's programs but suffice it to say that this group complements our already strong programs in antiviral agents and vaccines.

Finally, I should note that our 2015 schedule promises to be exceptionally busy with substantial new data becoming available across all of our major programs.

I look forward to sharing this information with you on future calls.

Joe?

Okay, great.

Thank you, Roger and Christie, I think were ready to turn it over to the Q&A portion of the call.

And why don't we go ahead and take our first caller.

(Operator Instructions).

Vamil Divan, Credit Suisse.

Hi, thanks so much for taking the questions.

So just a couple on the Hep C, the breakthrough therapy designation being rescinded.

(inaudible) implications that other companies have received breakthrough therapies -- designations for their products.

So is there any other color you can provide on the back and forth around this decision?

Did you have a sense this was coming or was this a real surprise to you when it came last week?

And then just on the pricing side, a lot of investor focus there as well in Hep C. Are the dynamics in that market playing out in terms of pricing similar to the way you expected?

Is it changing in any way how you view the longevity of this market?

And then maybe if I could just throw in along pricing, are there any comments you could give on the PD-1 in terms of access and in the level of discounting necessary there given that Bristol has a somewhat similar asset as well?

Thanks.

So Vamil, let me just -- this is Roger -- let me just comment with respect to breakthrough designation.

We continue to have the sorts of discussions that we've been having with the Agency with regard to our doublet therapy which we are very excited about.

Breakthrough designation of course doesn't affect our filing strategy and the data are the data.

We have our Phase 3 data and we are moving along with our program.

The Agency has invited us to comment on their intent to withdraw breakthrough designation and we intend to have those discussions with the Agency and we'll see where that goes.

But meanwhile we are moving forward with our program.

And Adam, I think you have some --.

So with regard to hepatitis C first, the first thing I want to say is that it is still a large market.

There's over 3 million patients in the US alone and 100 million patients worldwide.

So we believe that this is a market that will be sustainable for a long period of time.

Whenever there is competitors, there's going to be increased competition in the US on pricing and rebates and although the magnitude may be discussed, I think the fact that there is competition is not a surprise at all.

The good news is as we look at our success in managed care over the years, we've had a lot of success across every therapeutic area that we compete within whether it be diabetes or cholesterol or HIV, even HCV when we had Victrelis in the marketplace.

So we still feel good that we will be able to compete in the competitive environment with our very strong managed care capabilities.

I want to remind you we have the doublet coming which we are excited about but we are also excited about the potential of a triplet in the future as well.

As you look at Keytruda, so we are very pleased with the market access that we have today and the fact that reimbursement is happening very quickly for the approved indication.

We continue to believe that the market is going to reward innovation particularly innovation that's going to lead to improved clinical outcomes over the current therapies.

And if you look at Keytruda, the key is building a wall of data around that product and we've got this very broad clinical program with over 60 studies and we are looking at Keytruda monotherapy as well as in combination therapies.

And we believe as that data comes out it will continue to reinforce the value proposition that we have for Keytruda.

So we are pleased with the initial access and we are going to continue to compete very effectively in that marketplace as well.

Great.

Thanks, Vamil.

And Christie, next caller.

Tim Anderson, Bernstein.

Thank you.

A couple of questions on Keytruda and then on Remicade.

On Keytruda, can you give us an updated timing on KEYNOTE 10 which is Phase 3 and lung cancer survival data?

Clintrial seems to suggest it could report out later this year.

And on that will there be an interim look at any point at those results?

Second Keytruda question, can you comment on how you view the impact of Keytruda from the new Compendia listing that supports the use of both your product and Optivo in first-line melanoma?

It seems like an unexpected win for you guys given the fact that at least to my knowledge you don't have any first-line melanoma data yet.

Yet NCCN just recently gave you this recommendation.

And then on Remicade pricing in Europe, in Norway, the product -- the biosimilar product looks like it's coming in at something like a 60% discount.

I know that's a small market but I'm wondering if you can talk about where you think biosimilar pricing might land in major markets in Europe in 2015?

Tim, with respect to KEYNOTE 10, this trial as with most all of the others is an event driven trial and so the overall survival results will be looked at as a function of the number of events that occur in order to be adequately powered to see a difference which we would hope would anticipate would exist.

So we can't really predict what the timing will be.

The timing that is in clinicaltrials.gov is our best estimate of what we are expecting.

We of course have a data safety monitoring board that's reviewing these data.

There always could be changes in terms of what is seen and they might call us and want us to look at it but that's really the status of the trial as it currently stands.

I would just like to say that with respect to melanoma data, the question that Adam will take on, but we do have a considerable amount of data in all lines of therapy in melanoma which we presented in various different settings so we have a lot of efficacy data that's already available in the first-line setting in ipi-naive patients.

Tim, let me give you some context on Keytruda and then I'll get directly to your question on NCCN.

So we believe there's about 2000 patients who were being treated in December and we believe that virtually all those patients were treated on the current label.

To give you some perspective on compendia, if you look at the approval in 2014, NCCN compendium guidelines added Keytruda for melanoma treatment consistent with our label very quickly.

But as you mentioned in mid-January, NCCN updated the guidelines for melanoma and they've broadened the recommendation to melanoma and I'll give you a sense of what they did.

First, there was consensus among NCCN panel that Keytruda and Opdivo has a higher response rate and less toxicity compared to ipilimumab.

Second, both drugs are included as options for first-line treatment and included on a list of preferred regimens.

So although we promote on label only, it's clearly a positive for the anti-PD-1 class and it's a positive for the future of cancer treatment.

So we'll see how this plays out over the coming months but we believe obviously it is a positive for the class.

As you look at Remicade, I think there's a couple things to think about.

First of all, we had continued growth of Simponi but we had a decline in Remicade of 3% and we are certainly starting to see some impact from the 20% of markets that had availability of biosimilars last year and Norway is one of those.

What we saw in Norway is first of all, it's been available for over a year.

It was launched in October 2013, the biosimilar.

And I don't want to comment on commercial strategy of the competitors, but we have seen this tender at a very sharp discount as you mentioned.

But our expectation remains that customers will continue to take a measured approach in how they use biosimilars and especially for the patients who are well-controlled at least at this early stage as we go into the broader European markets.

So therefore we believe in the broader European markets we will see significant price decreases from the competition but that it will impact primarily the new patients coming in.

Therefore we will try to hang onto the existing patients for as long as we can.

At the same time, there will be certain markets like France and Spain that even if you hold 100% of market share because of reference pricing, we are going to have a lower price there no matter what happens in terms of market share.

So we will be monitoring and discussing that as we get through this year.

And the key for us is continuing to have strong growth of Simponi and as you saw Simponi grew about 40% in the fourth quarter versus prior year fourth quarter.

So we are seeing good growth there.

I will say though that we don't expect the growth of Simponi to offset the decline in Remicade as we are in 2015.

Okay, thank you, Tim.

And Christie, next caller.

Marc Goodman, UBS.

Yes, can you give us a little bit more color on the animal health?

It seems to have gotten much stronger.

Second, can you talk about the FX impact on the expense side for this year?

You mentioned obviously a lot of color on the topline.

And then just update us on when we are going to see the Phase 3 data for the C. diff product.

Thanks.

So, Rob, do want to talk about FX and expense for 2015.

Sure.

So as you look at foreign currency in the prepared comments as we mentioned, given what we've seen really since September of last year is the significant strengthening of the US dollar versus pretty much all currencies.

We are seeing an impact as we said in our prepared comments; we see $0.27 of potential FX impact built into our assumptions.

As we look at how this flows through the P&L, we do get some natural hedge ability through our numbers and we are hedging actively in the marketplace but we can only offset a small percentage of the impact.

And in fact, I would call it more a blunting of the impact than an ability to mitigate it.

As we look at the flow through from sales to EPS, you will see it flow through at a slightly greater rate due to the fact that we do have more expenses in US dollar driven primarily due to our R&D expenses in the United States and our headquarter expenses relative to the percentage of our revenue.

So that's all the dynamic of what's playing through in the numbers you've seen.

But as I mentioned in the prepared comments, if you exclude FX from an earnings perspective, we actually grew.

We will be growing from 2014 to 2015.

So on Animal Health, you can see the fourth quarter showed very strong performance from our Animal Health unit and overall 2014 was a very strong year.

And the good news is that it is driven by strength across all regions and all species and in particular on companion animals, it was really supported as we said by the launch of Bravecto which is underway all over the world and this year we are looking forward to mid single-digit growth in 2015.

We have also said that we will continue to look for opportunities to augment our animal health business in ways that create overall value for our shareholders.

So we are very excited by that business and it is performing very well.

It might be worth adding that recall that we've now lapped the Zilmax impact so part of what you are seeing in the strengthening quarter-on-quarter or fourth quarter this year versus fourth quarter last year is in fact the fact that Zilmax is now out of that compare.

Great.

Okay.

Thank you, Marc, for the questions.

And Christie, next caller.

Seamus Fernandez, Leerink.

Thanks for the question.

First off, wanted to get a little bit of color on the tax rate and the significant drop in the tax rate.

Rob, can you just give us a little color on what the changes are there particularly in the context of no R&D credit actually being incorporated into that number?

And then the second question is for Roger.

Roger, can you help me understand a little bit more the differentiation about -- between the test and the biomarker, the potential availability of a biomarker.

A competitor just received breakthrough designation on the basis of PDL-1 status so I'm just wondering will Merck or would you expect Merck to have their diagnostic available or the Dako diagnostic available within the context of the lung cancer filing?

And then also would it be available at launch?

I think there's a lot of confusion amongst investors as to the realities of the PD-L1 biomarker test.

Thanks.

Good morning.

I will answer the first question around tax.

There are really several things contributing to the decrease in our tax rate year-over-year.

First, the divestiture of the Consumer Care business is expected to benefit our 2015 tax rate given the fact that the majority of the US Consumer Care business was a US-based business and that more than offsets the fact that there is a slight impact and from a negative perspective to the acquisition of Cubist.

So net of acquisitions and divestitures, we actually see a benefit flowing through our tax rate.

And then outside of these factors, we do have favorable product and geographic mix year on year.

We have some one-time items -- I don't want to get into them -- but flowing through.

And then probably most importantly, we have and continue to look for specific strategies to actively manage the tax rate going forward although we don't we give longer-term guidance.

Clearly that is something we are very focused on and we will continue to see as an important contributor.

Just on PD-L1 biomarker, first, with respect to what it's actually good for in non-small cell lung cancer, there is no doubt that there is a correlation between PD-L1 expression and the pretreatment specimens and response rate progression free survival that we measure after treatment.

So we will in fact have the Dako associated PD-L1 antibody test for immunohistochemistry available for filing and available for use with the drug because that is an important aspect of treating patients.

On the other hand, it is important to recognize that PD-L1 is not an absolute predictor of responsiveness.

That is to say that there are PD-L1 negative patients who nevertheless respond to therapy.

So the issue will be how to capture in [layling] language the way in which to use this test.

It's not an absolutely predictive biomarker but it is an important indicator of prognosis with respect to response.

Okay, great.

Thank you, Seamus.

And Christie, next caller.

Mark Schoenebaum, Evercore ISI.

Thanks for taking the question.

I appreciate all the clarity.

Several but very short.

One on Januvia, Adam.

In the US in 2014, would you mind giving us the volume versus price component?

Particularly curious about price.

What happened to your net price in 2014?

And then on the CETP, Roger, you mentioned your expectation is that's going to go to final analysis.

I just want to be clear, so you're basically telling us that you just don't expect that to be stopped early and any expansion on that comment would be appreciated.

And then on TECOS if I may, you mentioned ADA that you will have the data but should investors expect the topline release before that?

Yes or no?

Thanks a lot.

Hi, Mark, this is Adam.

With regards to Januvia in the US, there was some positive impact from price but it's mostly from volume and if you look at TRX volume and you look at whether it's the current week or rolling 12 weeks, you are seeing anywhere from a 6% to 7% increase for same week or same rolling 12 week time period in the prior year.

So a little bit from price but mostly volume.

Yes, and Mark, it is Roger.

On CETP, yes, I think it's very unlikely that the study would be stopped early.

It is important in general to the executive committee of the study I think speaking for those groups that are involved, Oxford and TIMI, they are extremely anxious to have a definitive answer with respect to the question of whether HDL elevation of the kind that you achieve with anacetrapib through CETP inhibition actually has a meaningful additive or better effect on cardiovascular outcomes when used in combination with -- when used as a treatment for cardiovascular risk.

Keep in mind again as you know well, Mark, that anacetrapib lowers LDL cholesterol dramatically.

So my comments were meant to say that since we know that LDL-cholesterol lowering is itself associated with a favorable outcome, one expects a favorable outcome, the question that's being asked is can we do still more through CETP inhibition?

I think we will go to the end trying to find that out.

Of course we are all looking very carefully at safety along the way and that could be a reason to stop the study.

But on efficacy I think it's very unlikely to stop at an interim.

I think it will go to completion.

And then with respect to TECOS, we just have to see what the data look like.

The study is being of course run by an independent executive committee, Duke Center is coordinating it.

They are going to pull together the data.

They believe that they are going to be able to pull that together in time for presentation at the ADA meetings.

And depending on what we see, that will decide how that's announced to you and to the public at large.

Thanks Mark.

Appreciate it.

Christie next caller.

John Boris, SunTrust.

Yes, thanks for taking the question.

So the first question has to do with some of the commentary, Adam, you gave on Remicade.

I think you've indicated (technical difficulty) there has been some reference pricing.

Across the major European countries, what is your assumption about the price compression across the major European countries in your plan for that franchise?

And then the second question on your HIV strategy, Roger, Isentress and (inaudible), a combination, secured approval on it.

Can you talk about doravirine product profile, timing for completion of Phase 3 trials and how that fits into a more broader combination strategy with the other assets that you have within the HIV portfolio?

Hi, John.

So first of all with regard to Remicade, it's hard to say because you have never had a product of this magnitude, with biosimilar competition in major European markets.

It's hard to predict based upon what happened in the smaller markets as to exactly what will happen in a large market.

What we are assuming is that we can maintain a large number of the currently treated patients and we will see the most pressure in new patients coming into the markets.

The immediate mandatory price reductions, there's really four or five markets where that occurs specifically France, Spain, Austria and Belgium and those are markets that it's going to depend on what the biosimilars do in other parts of Europe in terms of competition and what they do discount versus how they tried to compete for the business in certain other markets.

So what we have assumed is that we keep the majority of patients.

There will be some pricing pressure.

If you look at the overall franchise, we think that it will decline versus the prior year because the growth in Simponi which will remain strong will not offset the pressure that we'll see on the Remicade and the price erosion.

But it's just too early to know exactly what could happen.

We've seen discounts so far of approximately 30% but then you see what happened in Norway which was more steep than that.

So we will have to see where they go and we will report over time what we see in the marketplace.

John, with respect to HIV strategy without going into an enormous amount of detail and the totality of it, as you know, Isentress is an extremely important platform for therapy and the data that we described last year from the advanced study demonstrate that moving Isentress to a once-daily platform obviously is something that is important to do.

MK-1439, doravirine, is intended ultimately -- if it reaches its objectives to replace Efavirenz, which is another platform and the non-nucleocide transcriptase inhibitor category, what we know is that this is an extremely important aspect of combination therapy and yet there are some real concerns about the ability of patients to adhere to Efavirenz because of adverse experiences.

1439 has very favorable properties.

Doravirine has very favorable properties.

We are expecting to see -- we are in Phase 3 now for that study.

We are expecting to see data in the 2016, late 2016 timeframe.

And based on what those data show us then we will be in a position to put that molecule in combination with the other programs that we have including Isentress.

So that's an aspect.

There are many, many aspects of the combination therapy that gives you a sense of where we think we are -- where we think we are right now.

Okay , great.

Thanks.

Christie, your next caller.

Jami Rubin, Goldman Sachs.

Hi, thanks for taking the question.

This is Jay Olson on behalf of Jami.

A couple questions for Roger.

The first question is about Hep C from our regulatory perspective.

With the recent approvals of oral Hep C regimens, does it change the way you plan to run your Phase 3 program?

And specifically, will you include the new standard of care as an active comparator in your Phase 3 studies?

And then second, can you update us on the development plans for MK-4166?

When should we expect to see clinical data and when should we look for new studies to be posted on clinicaltrials.gov?

Thank you.

First of all, for the Hep C program, our Phase 3 studies, the first wave of Phase 3 studies that support of registration are essentially complete.

So those data are being prepared and our expectation is that we are going to be able to file the Hep C program in the first half of this year.

That's what we've said and so there is really no change to those programs that we can engineer at this point.

The studies are done and of course those studies were studies that we designed following lots of discussions with the FDA.

So that's kind of where we are with respect to those.

We are looking forward to having the opportunity to describe those data to you and the data will be presented in significant part at EASL.

With respect to 4166 which others know as our GITR agonist program which is one of the combination programs in our immuno-oncology program.

It is in Phase 1, has been since the middle of last year.

Data are accruing and we hope to have the opportunity to share those data with you in the not-too-distant future.

Great, thank you, Jay.

And Christie, next caller.

Colin Bristow, Bank of America.

good morning and thanks for taking the questions.

Just a few quick ones.

On odanacatib, can you give us an update on the progress towards regulatory submission?

On the business development front, can you just give us an update on your strategy with respect to therapies of areas of interest and optimal deal size and whether any of this has been impacted at all by the recent high-profile pricing headlines?

And then finally on the Animal Health business, are there any specific internal reviews scheduled with regards to potential divestiture of this unit or is this more of an ongoing fluid process?

Thanks.

So with respect to refining the overall portfolio, not with respect to Animal Health specifically, we continue to evaluate our strategy and our opportunities to create greater value for shareholders and for customers.

I have said very clearly that we see Animal Health as a great business.

We are very interested in that business.

We are looking to augment that business.

From a business development standpoint, first of all, we do remain committed to business development as a way of augmenting our pipeline with programs that as Roger says provide unambiguous promotable advantage.

And while we had a significant number of deals last year including Cubist, Idenix and OncoEthix, in 2015, we will also pursue the right kind of deals which for us are bolt-on opportunities that will either drive our pipeline which of course is the most important thing to our future growth or we might pursue additional commercial assets if we believe that we have the ability in our portfolio to maximize with our reach, our expertise and our fit what those molecules can't do.

So I would say we'll continue to look for value-added bolt on opportunities and I will remind that we believe we have the right balance sheet to continue to do this.

Colin, with respect to odanacatib, as we've said, as we showed at last year's meetings, odanacatib has very impressive effects in terms of reducing the risk of vertebral non-vertebral and hip fracture and has a particularly strong effect on reducing the risk of clinical vertebral fractures in women with postmenopausal osteoporosis.

The problem in our data set was there were some inconsistencies with respect to MACE events and we decided after looking at that and after discussions with the FDA that we would readjudicate all of those events.

So we are in the process of doing that, the readjudication is going forward, FDA has participated in the design of that process and we are working through it.

As soon as those data are complete, we will pull it all together and we will have the opportunity to file it which we expect to do by the end of the year.

Great, thank you, Colin.

And Colin, congratulations on the arrival of your first baby, your daughter a few weeks ago.

Christie, next question.

Steve Scala, Cowen.

Thank you.

First a follow-up on pembrolizumab in lung and the filing around midyear.

It would seem that the data available in the PD-1 negative population is too limited to support a filing in that population.

I'm wondering if you disagree?

Secondly, to clarify on your comments on the REVEAL trial, are you saying that it won't stop because the DSMB wants a definitive answer and not because there won't be a reduction in the event rate at the interim?

So there could be a reduction in the event rate at the interim but it won't stop because a definitive answer is sought?

That's the second question.

And then lastly, Glaxo recently released some very strong topline results from their zoster vaccine.

Two questions, if the results hold up when the full data is released, what will be your commercial response?

It would seem logical to me that Mark would do a study of Zostavax given in a two dose regimen.

Are you contemplating that study?

Thank you.

Steve, with respect to PD-L1 in lung, we actually have a very large data set.

We've described through our presentations and also clinicaltrials.gov more than nearly 600 patients with non-small cell lung cancer.

Included in that are a lot of individuals who have low PD-L1 expression.

But let me point out that it is a continuum of PD-L1 expression.

So the issue really is when you are looking at it with our immunohistochemistry test, what is the cut point that you use.

There are patients who are absolutely completely negative, we can't find a single cell seemingly that's PD-L1 expressing.

Of course that's based on a very small biopsy sample.

You don't know what would happen if you looked at another sample.

There could be populations of cells that are expressing there.

And then there are others in which seemingly every cell is expressing, and then the vast bulk of individuals who are somewhere in the middle.

So the question is what is a PD-L1 positive patient?

We obviously have an approach to that that we've developed through a series of statistical analyses, but that's something that clearly will have to be reviewed with the agency as we go forward.

With respect to REVEAL, I am very confident for the reasons that I mentioned that there will be a favorable effect of anacetrapib in terms of cardiovascular risk.

It has very impressive effects on LDL-cholesterol and that should be associated with the lowering of risk, but that isn't the question really that's addressed in the trial.

The trial is trying to address the question of whether HDL elevation known for decades as associated with improved cardiovascular outcomes has a meaningful effect.

And for this reason, the trial is structured in such a way that as is typical for such trials that it's unlikely that a DSMB is going to call this study unless there's just an extraordinary, extraordinary favorable result.

So that's my expectation.

Steve, with regard to Zostavax, so first when you think about the GSK product there's still a lot more we need to learn beyond the limited phase 3 efficacy data that was available in the press release.

So we are looking forward to the data being published and available so we can learn a lot more about that vaccine.

But if you look at Zostavax specifically, there a lot of attributes that customers really value.

First of all, it's a single-dose vaccine.

It has an established track record of safety and efficacy in both clinical trials but also in real-world evidence settings.

We've already distributed over 20 million doses across 25 markets.

There's still a lot of unvaccinated patients in the US alone that can benefit from it.

And as you can see in the marketplace, we've increased our direct-to-consumer advertising.

We are doing a lot to try to treat as many patients as possible in the short term.

To be blunt, we are trying to get patients to originate to get a single-dose vaccine, and we think that that is something we can continue to do.

Getting people to originate twice to get a double shot, it's probably a little bit more challenging.

Great, thanks, Steve.

Christie, next caller.

Tony Butler, Guggenheim Security.

Yes, good morning.

Thanks very much.

I'll be brief and it's really around OpEx.

Adam, you made some comments around the reduction in SG&A and some modest increase in R&D but with Sivextro launching in Europe, Zerbaxa in the US and some others, the question is are you really providing sufficient support to those new launches?

Second, likewise from an R&D perspective with TECOS rolling off, the question is I might have thought much like 2014, R&D expenses would be flat to down yet they are up.

Is that more related to increased dollars spent for Keytruda or what?

And then third, again on CTP, anacetrapib, Roger, forgive me if you've actually stated this, but is it your intention to put out a press release or will it be at the end of a quarter or part of a quarter call when you will state the trial has continued, the DSMB, etc.

etc.?

Thank you.

Tony, I'll start with regard to operational excellence.

It first starts off with focus and what you've seen is we've really put our resources behind the four focus areas that I've talked about before and although total SG&A had come down last year, what you saw is we increased our spend in diabetes and we built an oncology business unit to launch Keytruda and we fully allocated resources to there.

We look at every launch as a very important opportunity and we intend to fund those launches to be successful.

And we will cut in other areas but we are not going to cut in areas that are key priority growth areas for us in particular when you think about Diabetes, Hospital Acute Care, Vaccines and Oncology.

But also other launches that are even outside of those areas, we are going to fund those and we are going to resource those for success.

So it really does come down to where else will we reduce expenses and it's going to be outside of those key growth areas.

Broadly speaking for R&D, recognize the magnitude of the clinical trial costs associated with moving forward with the totality of the Keytruda program and all of the other programs that we are pursuing.

That said, I believe firmly that you have to live within your means and we will do everything we can to prioritize those investments.

This is something that Adam and I do together in thinking about how to develop our portfolios and we are quite disciplined about that and we do expect that because of the profound opportunities with Keytruda, there will be an increase in expenses.

But we are going to manage that pretty carefully.

With respect to anacetrapib, we are -- the trial will continue.

There will not be a reason to announce that the trial is continuing.

If something happens of course we will let you know about it but in general I think you should expect that you will hear about the trial when we obtain the results.

And Tony, this is Rob.

I just might add that I do think and agree with Adam, we are adequately investing where we need to invest for new products.

I think the fact that we are growing the R&D spend is more a statement of the success of our programs and our excitement around our pipeline because to Roger's point, we are very disciplined and I think that shows in the fact that overall we are still expecting to lower OpEx in 2015 versus 2014 versus focus.

So it is I think a good story of focus and discipline.

Great , thank you, Tony.

And Christie, I think we have time for two more callers.

Gregg Gilbert, Deutsche Bank.

Thanks.

First, Roger, on anacetrapib, can you tell us how specifically the study leaders and yourselves would attribute benefit to LDL lowering versus HCl raising at the end of study?

Secondly, for Adam, do you have any recent marketshare data on how Keytruda is faring versus Optivo in the labeled indication and perhaps how you are trying to differentiate your molecule and how you might try to differentiate in lung?

And lastly post IMRPOVE-IT, are there any updated plans for the Liptruzet product and are you thinking OTC on Zetia at all?

Thanks.

Okay, on Anacetrapib, Gregg, there is no way to assign benefit to any particular mechanism except to say that there is an awfully good nomogram that correlates LDL cholesterol-lowering with the degree of reduction in major cardiovascular events.

That nomogram is supported by a whole set of studies with different agents now particularly in light of IMPROVE-IT.

So you have a general feel for the magnitude that you are expecting.

The question is do you see something that is above and beyond that?

I think that what's critical in the study of Anacetrapib is to get a very, very hard number and to be really comfortable with the magnitude of the treatment effect and we will see that when the study completes.

Gregg, with regard to picture it up.

There's really no market share data at this point time.

It's still very early but a couple things to think about.

First of all, we noted that in December we have about 2000 patients and most of those are, the vast majority of those are the approved indications.

So you know the math, you know how many patients are out there.

We think we've done a very good job in terms of the labeled identification getting a lot of patients already on Keytruda.

But I think the key thing is that this marketplace has room for multiple competitors and it's going to play out over years.

It's not going to play out over days or weeks or months and as I think about it, I think about this marketplace almost like the anti-TNFs where you multiple players, some are strong in one indication and then another could be stronger in a different indication.

We're going to have to see how a combination plays out over the years.

But what we are doing is we are building our oncology business unit to really maximize the potential of Keytruda over the long-term.

And Roger in the past has talked about the numerous studies that we have underway as monotherapy, the number of cancer types that we are studying and we believe that the totality of the data will allow us to really be able to be successful for Keytruda over time.

With regard to Liptruzet, I'll broaden it to how do we think about Vytorin and Zetia and the overall Zetia franchise.

We have to wait for the information to be in a label in the US before our representatives can begin to promote the product and that hasn't occurred yet but once it does occur, we'll actively promote the data into label.

We are hearing very good comments from cardiologists and physicians about the trial but we are going to wait before we can promote it to a label in the US.

The good news is outside the US, the patent in Europe goes past 2016 and in Japan, it goes into 2019.

So in other markets around the world, we have a longer time in order for us to actually be successful introducing the IMRPOVE-IT data to physicians in those countries.

Great , thanks, Gregg.

Christie, our last caller.

Chris Schott, JPMorgan.

Great, thanks very much.

Just a couple quick ones here.

First, coming back to HCV, I guess just elaborating a little bit more.

Do you see access as a challenge in 2016 given some of the exclusive contracts that are currently being signed by some of your competitors?

Should we think about another step down in price for the category as you enter the market?

Second one was on Keytruda.

Beyond the lung filing, what's the next tumor type we should be watching in terms of a potential filing?

And then finally as we think about the broader IL portfolio at Merck, when could we see additional Merck developed IO agents enter the clinic and what mechanisms are you most excited about as you think about your preclinical portfolio?

Thanks so much.

So Chris, first with regard to HCV, first of all, we don't know the exact language in the contracts that our competitors have signed so I'll put that aside not knowing their exact wording in the contracts.

But in general, we have had their very, very good success with managed care access across multiple different therapeutic areas, multiple different specialty classes where there's entrenched competitors and we believe that we will be able to get good access once we launch the product.

I don't want to discuss our contracting or pricing strategy but we are going to make sure that we are competitive in the marketplace in order to get access.

Chris, with regard to Keytruda filings, as we have discussed before, beyond melanoma and non-small cell lung cancer, last year we had the opportunity to present data from five additional tumor types in which response rates really suggested registration enabling studies to proceed and we are pursuing all of those.

So that includes of course head and neck cancer, it includes gastric cancer, it includes bladder cancer, Triple-negative breast cancer and Hodgkin's lymphoma data.

We have quite strong quite provocative data in all these areas that we've had a chance to share with you.

We've initiated studies in many of those cases and depending on what those results look like, that would provide the basis potentially for filings going forward.

We will have a lot more to say about that but those are the areas which are most advanced right now.

And a look at clinicaltrials.gov will reveal that in particular for the head and neck cancer and (inaudible) cancers.

And then with respect to other immuno-oncology assets, of course, we have the GITR asset we've already talked about.

We've discussed LAG-3, which will be coming forward.

We are very interested in the set of cell surface molecules that are both stimulatory and antagonistic with respect to immune regulation and we have developed internally derived antibodies against a whole cluster of those and you are going to have a chance to see a number of them coming forward in this calendar year.

Great.

Thanks, Roger.

Ken?

Okay, let me just summarize.

I think we had a solid 2014 with growth in all of our core areas, EPS at the high-end of the range.

Importantly six new product approvals in the United States and that innovation momentum continues into 2015.

We will be filing for lung in mid-2015.

Our HCV filing is in the first half of 2015.

We are making steady progress in a number of areas within MRL and we're going to continue through business development to develop the best external collaborations we can.

As it relates to 2015 underlying business, our core business again will be growing and again I stress that ex ForEx, we are growing EPS mid-single digits in 2015.

So the underlying portfolio is performing well and the Merck research labs are performing well.

So thank you very much for hanging in there with us for a little bit more of an extended call.

We look forward to talking to you soon.

Thank you.

This does conclude today's conference call.

You may now disconnect.