Merck Earnings Call Nuggets: Global Patents, Pricing, and Capital Deployment
New Products and Expiring Global Patents:
Marc Goodman – UBS: About this MK-3222 we haven’t heard much about it, what’s the key to the product and how it will compete with the others? Then SINGULAIR OUS seem to be a little weak. How much of that was currency? Or is there something else going on? Obviously, we know what’s going to happen next year.
Kenneth C. Frazier – Chairman, President and CEO: Great. Thanks, Marc, why don’t we start with the SINGULAIR ex-U.S. number and then we’ll come back to the IL-23.
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Adam H. Schechter – EVP and President, Global Human Health: So, Marc, if you look at SINGULAIR outside U.S., we’ve already started to see some patent expiries, in countries like Mexico, Canada and Poland. So you really are starting to see some impact from the SINGULAIR patent expiries already. In addition to that we had a slightly slower (ARCs) in Japan. In general, in markets such as the emerging markets in Japan, where we don’t have the patent expiries, we believe that we continue to see good growth and we expect to see good growth over time.
Kenneth C. Frazier – Chairman, President and CEO: Also on MK-3222, we expect to begin Phase III trials in psoriasis either late this year or early next year. This is a drug that we have a great deal of excitement about. We think that this is a disease where there continues to be a great deal of unmet medical need going forward. We had a Phase II program that based on the study that we had there, we feel that there is value for moderate to severe chronic psoriasis patients. So we look forward to learning more about this drug as we move forward. The anti-IL-23 psoriasis program, which is the monoclonal antibodies one that we look forward to.
Pricing and Capital Deployment:
Chris Schott – JPMorgan: The first, it seems like this earning season we’ve had kind of mixed data points on U.S. primary care pricing as kind of think out to 2013 from some of your competitors. Can you just talk about how you’re thinking about managed care access and pricing for the JANUVIA franchise as well as the ZETIA, VYTORIN franchises as we look out to 2013, are you seeing any incremental pressure there? Then second, if I just think about where Merck is right now, we’re getting through SINGULAIR. We thought some positive updates on your pipeline. It seems like you only have really one more major expiration with cholesterol out in 2016 or 2017 it seems like a time when Merck could start getting more aggressive with its capital deployment? I guess, how are you thinking about use of cash at this point, particularly business development relative to in fact, further dividend increases?
Peter N. Kellogg – EVP and CFO: Thanks, Chris. Let’s start with your questions about pricing in managed care access and we’ll comeback to capital.
Adam H. Schechter – EVP and President, Global Human Health: Chris, thanks for your question. This is Adam. We continue to do well with our managed care access. For JANUVIA and for that matter for ZETIA and VYTORIN. With JANUVIA we have 85% to 90% unrestricted access and it is important to note that many patients use metformin even prior to JANUVIA or JANUMET, so therefore they are using a tier 1 product before they move to our unrestricted access in tier 2 or tier 3. Of course, there continues to be pressure, but I think with the profile that we have with JANUVIA, with the utilization and where it’s utilized, we expect to continue to have very good formulary acceptance as we move forward into 2013. If you look at VYTORIN and ZETIA, we have 90% of patients that have commercial, Medicare Part D access to at least one of the brands and why we think it’s important, is that they have the ability to use (indiscernible) through either adding ZETIA or utilizing VYTORIN. So, 90% access we believe for either one of the two being in second tier or third tier with no (prior off) is a good place to be. And if you look at 2012 and 2013 we don’t anticipate any significant changes for VYTORIN or ZETIA.
Kenneth C. Frazier – Chairman, President and CEO: Chris, thanks for your question on capital deployment, I think first of all, we do a very strong balance sheet, and we have the ability to do deals when we see them. Our goal is to always look for the best external R&D opportunities that are out there. But we also want to access them at a price at which we can create value for our shareholders and from our standpoint a deal like we just do with AiCuris for late stage antiviral candidate is the kind of thing that we want to continue to do. We will look for opportunities, but we want to temper the aggressiveness with being really smart and how we invest our cash for growth. The other obligation we have obviously is to continue to return cash to investors in a way that is actually appropriate to where we are. So I would say the first objective is to continue to do smart deals whether you can add value to the long-term and the second one is return cash to shareholders.
A Closer Look: Merck Earnings Cheat Sheet>>