Merck & Co., Inc. Investor Presentation June 2015 - - PowerPoint PPT Presentation

Investor Presentation

June 2015

Merck & Co., Inc.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, NJ, USA

This presentation of Merck & Co., Inc., Kenilworth, NJ, USA (the “Company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include, but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and healthcare legislation in the United States and internationally; global trends toward healthcare cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the Company’s ability to accurately predict future market conditions; manufacturing difficulties

• r delays; financial instability of international economies and sovereign risk; dependence on the

effectiveness of the Company’s s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Company’s 2014 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

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Merck is Positioned for Long-Term Growth through Innovation

Premier Research-Driven Biopharmaceutical Company

New Focused Model Suite of Opportunities

Improving Operating Model Accelerating BD Strategy Four Key Growth Platforms Multiple New Product Launches Programs in Areas with Large Unmet Needs Advancing Innovative Pipeline

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• Investing Behind Products and Programs with the Greatest Returns
• Focus on Candidates with Unambiguous Promotable Advantages
• Resourcing Launch Opportunities
• Prioritization of Investment Leading to Overall Reduction in OpEx

New Focused Model is Driving Growth and Productivity

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Corporate Commercial Operating Expense

On track for $2.5B of cost savings by end of 2015 vs. 2012 base

• Investing Behind the Best Sources of Growth
• Rigorous Portfolio Prioritization: Retaining Animal Health
• Divesting Non-Core Assets, including Consumer Care and Ophthalmics
• Acquiring Complementary Assets, including Idenix and Cubist
• 4 Priority Commercial Areas
• Top 10 Priority Markets
• Integrated Oncology Business Unit

Total deaths from diabetes are projected to increase by 50% in the next 10 years Antibiotic-resistant bacteria infects

• ver 2 million Americans annually,

resulting in 23,000 deaths

HOSPITAL ACUTE CARE DIABETES

Prevention of disease through vaccination is cost effective

VACCINES

Every year, 8 million people die from cancer worldwide

ONCOLOGY

Focused Areas Provide a Platform for Growth

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Sources: CDC, WHO

Growth from Core Commercial Areas and Launches

Diabetes Hospital Acute Care Oncology Vaccines

KEYTRUDA (Melanoma) KEYTRUDA (NSCLC) BELSOMRA GARDASIL9 ZERBAXA

Core Focus Areas Current and Near-term Launches Potential Future Launches Sales

Innovation

MK-5172A (HCV) Odanacatib (Osteoporosis) Omarigliptin (Diabetes) Anacetrapib (Atherosclerosis) Doravirine (HIV) MK-8931 (Alzheimer’s Disease)

Biosimilars

Immunology Oncology Insulin

WAVE 1 WAVE 2

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• $83mm in 1Q 2015 sales
• Vast majority of ipilimumab-

refractory melanoma patients being treated with KEYTRUDA

• Strong access in labeled

indication

• Broad acceptance of

KEYTRUDA in NCCN melanoma treatment guidelines

Launching New Products in Large Markets

• Now launching in U.S. and

Japan

• ~5,500 weekly prescriptions

(mid-June)1

• Achieved positive coverage

decisions for ~50mm commercial lives, half with no step edit

• Launch ongoing in U.S.
• Beginning to see formulary

additions

• Growing issues with Gram-

negative pathogens, including certain resistant species, driving positive discussions and positive formulary uptake

• 1. Source: IMS.

Merck is Advancing its Innovative Pipeline

2015 2016 2017 2018 2019+ 2014

KEYTRUDA – NSCLC (KN-010) Grazoprevir / Elbasvir (Hepatitis C) KEYTRUDA – Bladder Cancer (KN-045) Anacetrapib (Atherosclerosis) Actoxumab / Bezlotoxumab (C. Diff. Infection) Ertugliflozin* (SGLT-2 Inhibitor) Letermovir (HCMV prophylaxis) BACE Inhibitor (Alzheimer’s Disease) Surotomycin (C. Diff. Infection)

Earliest study primary completion date per clinicaltrials.gov Latest study primary completion date per clinicaltrials.gov

KEYTRUDA – Head & Neck Cancer (KN-040) Omarigliptin* (once weekly DPP-4)

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Doravirine (HIV)

* Light green arrow reflects CV outcomes studies for Omarigliptin and Ertugliflozin.

Dates per clinicaltrials.gov as of 5/19/2015

KEYTRUDA: Building a Foundation with Monotherapy

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Over 30 Different Tumor Types Under Investigation

Melanoma NSCLC Mesothelioma SCLC Esophageal Ovarian Renal Colorectal Head and Neck Bladder Gastric TNBC Hodgkin’s Lymphoma

Wave 1 Wave 2 Wave 3

Overall Response Rate in Advanced NSCLC by PD-L1 Proportion Score (KEYNOTE-001)

45.2 43.9 50.0 16.5 15.6 19.2 10.7 9.1 16.7 10 20 30 40 50 60 70 80 90 100 ORR (95% CI), %

PS ≥50% PS 1-49% PS <1%

Total Previously Treated Treatment Naive

Strategy Has Accelerated Melanoma and NSCLC Programs

NSCLC File Accepted by FDA

Priority Review Granted

10 Adapted from presentation by Edward Garon, AACR 2015

Lung Cancer: Largest Global Incidence and Worst Mortality

Source: GLOBOCAN 2012: Estimated cancer incidence, mortality and prevalence worldwide, in 2012. 500,000 1,000,000 1,500,000 2,000,000

Lung Breast Colorectum Prostate Stomach Liver Head & Neck Cervix Esophagus Bladder Non-Hodgkin's lymphoma Leukemia Pancreas Kidney Endometrium Thyroid Brain & CNS Ovary Melanoma Gallbladder Multiple myeloma Hodgkin's lymphoma Incidence Mortality

Number of Cancer Cases Per Year

Incidence of Lung Cancer ~8x Melanoma

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Improving Efficacy with Selective Combination Therapy

Standard Therapies Targeted Therapies Immuno- modulators Novel Vaccines

Combination Strategy

More than 40 Combinations Under Investigation

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REGISTRATION

Broad Pipeline is Advancing Rapidly

EARLY CLINICAL DEVELOPMENT

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KEYTRUDA NME’s Over 30 Different Tumors Over 40 Different Combinations

MK-8628 (BET inhibitor): Solid tumors, hematologic malignancies MK-4166 (Anti-GITR): Solid tumors MK-1966 (anti-IL-10) + SD-101 (Dynavax): Solid and hematological tumors* Melanoma

• 1L (KN006)
• 2L (KN002)
• Adjuvant (KN054)
• T-Vec combination (Amgen)*

NSCLC

• 1L (KN024)
• 1L (KN042)
• 2/3 L (KN010)

Head and Neck

• 1L + chemo/cetuximab (KN048)
• 2L (KN040)
• 3L (KN055)

Bladder

• 1L (KN052)
• 2L (KN045)

Gastric

• 2L (KN061)
• 3L (KN059)

Colorectal

• 3L MSI-high (KN164)*

Triple Negative Breast

• 2L (KN086)

RRcHL

• 3L (KN087)

*Planned

Merck Oncology: Broad Universe of Partnerships

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Potential Launches in Multiple Tumor Types

OTHERS BLADDER MELANOMA HEAD & NECK NON-SMALL- CELL LUNG GASTRIC CLASSICAL HODGKINS LYMPHOMA TRIPLE NEGATIVE BREAST CANCER

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ADVANCED PLEURAL MESOTHELIOMA

• Initial market entry in metastatic melanoma
• Potential second indication in non-small-cell lung cancer
• Possible application in up to 30 different types of tumors

 High rates of efficacy* demonstrated against key genotypes  High barrier to resistance and activity against common resistance- associated variants of HCV  Single tablet given once-daily, no significant food effect  Breakthrough designation from FDA for selected populations  File submitted to FDA (May 28, 2015)

HCV NS3/4A inhibitor

(100 mg once-daily, oral)

All-oral, once-daily, fixed-dose tablet HCV NS5A inhibitor

(50 mg, once-daily, oral)

Grazoprevir/Elbasvir regimen for the treatment of HCV infection

Grazoprevir (MK-5172) Elbasvir (MK-8742)

*Defined as Sustained Virologic Response 12 weeks post-treatment, or SVR12.

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 C-CREST: Phase 2 program evaluates two different 3-drug regimens  Designed to target broad range of genotypes  Starts with 8 week regimens, and based on the results, will proceed to investigate shorter durations

Looking to the future: The Merck triplet regimens

HCV NS5B Nucleoside inhibitor HCV NS3/4A inhibitor HCV NS5A inhibitor Grazoprevir (MK-5172) Elbasvir (MK-8742)

• r

MK-8402 MK-3682

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– ~$30 billion global atherosclerosis market1 – Phase 3 fully enrolled – Oral, once-daily, tablet being tested as additive therapy to statins – Study completion targeted for early 2017 – ~6 million people expected to have Alzheimer’s Disease in U.S. by 20202 – Two Phase 3 studies enrolling mild-to-moderate or prodromal patients – BACE inhibitor prevents the formation of A-Beta peptides – First study completion targeted for early 2017

Anacetrapib: CETP Inhibitor for CV disease BACE Inhibitor for Alzheimer’s Disease Merck has Phase 3 Studies in Large Markets with Unmet Need

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1. Source: IMS. 2. Source: 2014 Alzheimer’s Disease Facts and Figures, Alzheimer’s Association.

Merck’s BD Strategy is Adding Value and Increasing Focus

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 Idenix (HCV)  Cubist (Hospital Care)  OncoEthix (Oncology)  Multiple Oncology collaborations  NewLink (Ebola Vaccine)  Bayer CV collaboration  NGM collaboration1  Moderna collaboration  Consumer Care  Ophthalmology  Saphris  Diversified Brands (Aspen)  Anti-IL-23

Acquiring Divesting

1. Collaboration focused on Diabetes, Metabolic Dysregulation, and Oncology.

Merck Will Invest in the Business While Returning Cash to Shareholders

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• 10

15 5 Cumulative Capital Allocation (2012-2014) R&D1

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1. Non-GAAP R&D, as reported. 2. Change in Accounts Receivable, Inventories, and Trade Accounts Payable as reported on the Cash Flow Statement. 3. Acquisitions as reported on the Cash Flow Statement. 4. Divestitures as reported on the Cash Flow Statement, net of cash tax.

Invest excess cash in BD above hurdle rate; Otherwise return cash to shareholders Fund the Business and Pay the Dividend Capex & Working Capital Change2 Dividend Share Repurchase BD3 Divestitures4

$ billions

Merck is Creating Value and Returning Cash to Shareholders

5 10 15 2014 2013 2012 2011 2010 Dividends Paid Share Repurchase $ billions

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Dividends and share repurchases > 90% of Free Cash Flow

~$3B share repurchases annually (historically) Grow dividend per share annually

2015: Merck Looking Forward to...

• Growth in core areas
• Multiple product launches ongoing
• Near-term regulatory action for key programs
• Targeting business development to drive

long-term value

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