Good morning. My name is Darla and I will be your conference operator today. At this time I'd like to welcome everyone to the Q3 2015 sales and earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Teri Loxam. Please go ahead.

Thank you, Darla, and good morning to everyone. Welcome to Merck's Third Quarter 2015 Conference Call. Today I'm joined by Ken Frazier, our Chairman and Chief Executive Officer; Rob Davis, our Chief Financial Officer; Adam Schechter, President of Global Human Health; and Dr. Roger Perlmutter, President of Merck Research Labs. Before I turn the call over to Ken, I want to point out a couple of items. First, you will see that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items. You should note that we've excluded these items from our non-GAAP results and provided a reconciliation of these items in Table 2 of our press release. We've also provided a table to help you understand the sales results in the quarter for the business units and products, which can be found in Table 3 of our press release. During the call we may refer 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 may be considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are made based on the current belief of Merck's management and are subject to significant risk and uncertainty. If our underlying assumptions prove inaccurate 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 2014 10-K, identify certain risk factors and cautionary statements that cause – 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 undertakes no obligation to publicly update any forward-looking…

Thanks, Roger. Darla, we're ready to move on to the Q&A portion of the call.

Your first question comes from the line of Chris Schott with JPMorgan.

Great. Thanks very much for the questions. The first one is can you just elaborate a little bit more on your view of JANUVIA and the broader oral diabetes landscape following the recent SGLT2 outcomes data? I guess, do you see incremental pressure to this franchise as that data is reflected on competitor labels? And then maybe as a follow-up to that, can you just update the timelines of your SGLT2 and when you'll have outcomes data? And my second question was on KEYTRUDA in lung and the commercial dynamics based on the recent approval and now the KEYNOTE-010 study. I guess how do you see the dynamics playing out here relative to Bristol, given the label differences between the products and just given the various moving piece of these two products? I'd just like to understand a little bit how you're thinking about the coming quarters on that one. Thanks so much. Adam H. Schechter - Executive VP & President-Global Human Health: Yeah, so this is Adam, Chris. I'll start off by reviewing JANUVIA and I'll give some color on lung. But I'll also ask Roger to jump in on your SGLT2 question. If you look at JANUVIA, we continue to be pleased with the underlying demand in the U.S. where we're seeing about 4% TRx volume growth. And that's been consistent since before EMPA-REG and after EMPA-REG. And if you look at the most recent current week, it's just over 3% still. So we're seeing the underlying volume continue to be strong. If you look at what's occurring in the marketplace and you look at NBRx data, which is like real early data to try to understand the dynamics early in the marketplace, we see switching that's occurring within the SGLT2 class, but we do not see switching…

Darla, if you can move on to the next question, please.

It's from Tim Anderson with Bernstein. Timothy M. Anderson - Sanford C. Bernstein & Co. LLC: Hi. Going back to KEYTRUDA, do you anticipate that in the U.S. you'll get reimbursed either by Medicare or by private payers in PD-L1 negative patients? The NCCN Compendium came out just in the last couple of days, and it recommends your drug in PD-L1 positive patients. It doesn't specify any cutoff for that positivity. So it's a fair chunk of patients. But I'm wondering from here if you can actually – if you think you can negotiate with payers such that you'll actually get broad coverage, which would go above and beyond what NCCN recommends or what your label actually recommends. And then another question on hep C. Just talking about commercially how the doublet might kind of play into existing therapies that are out there, can you make any directional comments at all on pricing, for example? My guess is that as a later entrant in the category, you might have to come in at a discount. Ken, I think on certain settings you've implied that that may not happen and that you may not play the price card. But can you talk about how you view the competitive dynamics in that category with your doublets, specifically as you go into 2016? Adam H. Schechter - Executive VP & President-Global Human Health: Hi, Tim. This is Adam. So I'll start with, obviously, the NCCN Guidelines were just updated. We received the information last Friday evening, and it's done by an outside agency with no input from us. And we did see that they recommended KEYTRUDA side-by-side with nivo as a preferred option in treatment of algorithm for second-line non-small lung. The updates are very recent. We expect that payers will take some…

Next question, please, Darla.

It's from Mark Schoenebaum with Evercore ISI.

Hey, guys. Actually, I just had some IMAX questions for Teri. Is she there? I've been having trouble getting tickets to the latest Avengers movie and -anyway. Thank you very much for calling on me, and welcome Teri. It's great to have you there. A lot of my questions have been asked. So what I'll do is try to re-ask some to see if I can get better answers and ask some different ones. First, on hep C pricing, Adam. Obviously, you're not – it's not in shareholders' interests or your interests to tip your hat on this, but the reason people are asking is that AbbVie, weeks before their negotiations with Express Scripts was saying – Rick Gonzalez was saying things like, we don't think we're going to really be using pricing, Mark. And then they cut price 50%. So I guess when – I guess I'm just asking you, can you reassure the market that when you think about the hep C pricing, your internal hep C pricing scenarios, that something like a 50% cut, it isn't what you're thinking. It's more incremental. And you don't have to give us that number. Even that I think would relieve a lot of the, perhaps, pressure. And then a question biosimilar REMICADE. I may have missed this. I had to hop off the call for a few minutes. But can you update us on market shares, Pan-European market shares for biosimilar REMICADE and what the average price discount is to branded REMICADE in tender and non-tender markets, or perhaps even both combined? And the last one is for Ken and just big balance sheet, M&A, a lot of targets out there. You guys have been quite inactive since Cubist. I'd like to know if you, now that prices have come…

Thanks. Darla, we'll go on to the next one.

It's from Jami Rubin with Goldman Sachs. Jami Rubin - Goldman Sachs & Co.: Thank you. Ken, question for you. Just given the increasing pricing debate in the market, I'm just wondering if you can – I'm interested in your perspective on what you think happens to drug list price versus realized price. I mean clearly we have seen price increases increase over time. But we've also seen the phenomenon of increased rebates and discounts. So just given the increased focus on pricing, given the campaign rhetoric, which doesn't appear to be dying down any time soon, how do you expect the industry to respond to this growing debate? And I'm also surprised that the industry has been so silent given all the headline news. And I know that you have a leadership position within the industry and what your plans are to defend industry practices. And, Roger, for you, just on the anacetrapib interim later this year, I guess, did you say later this year or early next, the interim on futility, are we going to – if the decision is to continue with the trial, are you going to let us know? Or I mean is no news good news in this case? How should we think about it? Thanks very much. Kenneth C. Frazier - Chairman & Chief Executive Officer: Okay.

Why don't we start with pricing? Kenneth C. Frazier - Chairman & Chief Executive Officer: So let me start with pricing. Good morning, Jami. Jami Rubin - Goldman Sachs & Co.: Good morning. Kenneth C. Frazier - Chairman & Chief Executive Officer: Let me first remind everybody what I think is the most important thing, which is that we are, at Merck, entering a period of unprecedented advances in human biology, and we have immense opportunities to advance patient care as well as public health. Unfortunately, I think the current discussion around pricing fails to account for the fact this industry is hardly homogeneous. There are a lot of companies, as you know, that purchase drugs, many of them older drugs. They raise the prices to whatever they feel the market will bear while significantly reducing or eliminating investment in R&D. Merck has not been that kind of company. Obviously, we invest in R&D to bring forward important products like KEYTRUDA. But we've also tried to approach pricing from the perspective of value. And I recently had the opportunity to actually meet with the President of the United States in his office and we had this conversation. And I think there's a lot of rhetoric around the industry. As a leader of pharma, I try very hard to distinguish between the innovation-based companies that do take a value approach to pricing, and a few companies that I think are unrepresentative of the entire industry. If you don't see it in the newspapers, recognize that there's a little bit of a filter between what we say and what actually gets reported in the newspapers, but we're going to continue to make that point. And I have to say that I believe that while there's a lot of noise out there, my experience in Washington is that people do recognize that this industry is important, that these innovations are critical to society, that we, for example, need a disease-modifying agent for Alzheimer's. People see what these immuno-oncology drugs are doing and they know that, that's just the beginning of what we can do as an industry. So I think you have to separate a little bit of the rhetoric and the newspaper reports from the fact that I think there's a lot of rationality in public policy. And people recognize that this is an industry that contributes greatly to global society as one of the strongest industries in the U.S. economy.

Thanks, Ken. Roger, do you want to comment on anacetrapib? Roger M. Perlmutter, M.D., Ph.D. - EVP & President-Merck Research Laboratories: Yeah, Jami, in light of the evacetrapib futility results, there will be a futility analysis incorporated into the interim analysis of anacetrapib, which will be conducted before the end of this year. And if – obviously, if we were to decide that – if our Steering Committee came back and said that it is futile, obviously, we will announce that. If they don't, then we will announce in the appropriate forum that the study is continuing. I wouldn't overinterpret that, though. I wouldn't look at that and say, oh, well, that means it must be working. What it means is it's not futile. It could work. And so it will be one or the other result. I think it is important to include – and I've made the point in talking with the Steering Committee members that it is important to include this kind of analysis, because we wouldn't want to be exposing people to the drug if there's no hope of showing a benefit.

Thanks, Roger. Darla, let's move on to the next one, please.

It's from Marc Goodman with UBS.

Good morning. First, you mentioned the diabetes franchise was a little weak in Japan. Can you talk about what's going on there and is that because you have this new product, the once-weekly, that just got approved? Was that having any impact? And how you think that plays out over there? And then second, can you talk about the gross margin a little bit, just the underlying gross margin, what's being impacted by currency, what's going on there and how you're thinking about that? And no one has really asked about expenses. Maybe you can talk about just the underlying numbers. I mean is this a good run rate to be thinking about for how Merck is spending? What are some of the push pulls on spending over the next 12 months? Thanks. Adam H. Schechter - Executive VP & President-Global Human Health: Sure, Marc. I'll cover the question on diabetes in Japan. Japan remains a very important market. In fact, if you look at DPP-4 inhibitors, it's one of the few markets in the world where DPP-4 inhibitors actually have more patient days of therapy than metformin does or (47:51). So it's always been a fast uptake market for DPP-4 use. And for JANUVIA we have a very high share. So the issue there is it's harder to grow because you can't take share away from (48:03) as much because you already have the leading product in the marketplace. We are launching our once-weekly and we think that could be a very important product. It's under two-week prescription limit right now, but that, over time, will be removed. And we think that, that will help us potentially expand the DPP-4 class even into earlier lines of treatment. Overall, it was down about 2% versus prior year in Japan, so…

Thanks, Rob. Darla, let's move on to the next one.

It's from Alex Arfaei with BMO Capital Markets.

Good quarter on the KEYTRUDA progress. Just following up on KEYTRUDA, do you anticipate that most of the PD-L1 testing in lung cancer will be done with the diagnostic test that was approved with KEYTRUDA? Or will it depend on which test the lab chooses? Because your label is obviously not restricted. And a follow-up for Roger if I – apologies if I missed it. But when can we expect data for your next generation immuno-oncology product? Thank you. Adam H. Schechter - Executive VP & President-Global Human Health: Yeah, so I'll start off with the question on the testing. I think – right now, I think a lot of the PD-L1 testing, particularly outside of the large hospitals, institutions, will be done through the approved PD-L1 tests that are available. I do think even today some of the large institutions are doing their own PD-L1 testing. So I think, over time, it's very common for multiple tests to be available in the marketplace for various things like HER2 and so forth and I think that there'll be multiple different tests and the hospital and physicians will choose which ones they use in the future. Roger M. Perlmutter, M.D., Ph.D. - EVP & President-Merck Research Laboratories: Yeah, and, Alex, it's Roger. I assume you want clinical data for next generation immuno-oncology products and we have several. But, for example, we have an anti-GITR antibody, which is an agonist antibody immune manipulator. We also have the CEACAM antibody that we acquired. And both of those are in Phase 1 clinical studies, the GITR antibody also in combination with KEYTRUDA. So we'll have the opportunity to see those data in 2016.

Thanks, Roger. Darla, let's move on to the next one.

It's from Seamus Fernandez with Leerink.

Oh, thanks very much for taking the question. So just a few here. First off, could you guys update us on why the Incyte agreement didn't include lung? Should we assume that lung is excluded from this? Or is that something that may require some additional negotiation going forward? Or is that, should we think of that as still a potential shot on goal for Merck? Second, can you talk a little bit more about the SGLT-2 programs? When might we see data from those? And should we expect a filing in 2016? And if you could, just let us know if that would include the single pill combination or if that would be filed separately, that would be great. And then the last question really is on other indications for KEYTRUDA. You guys have an awful lot of patients in clinical trials and ongoing. Roger, you mentioned the opportunity to potentially see gastric cancer approval of KEYTRUDA in Japan sooner than I think many of us expect. So what other areas should we be thinking about in terms of additional KEYTRUDA filings? Or at least additional data or tumor types where you think Merck has a lead or a potential advantage? Roger M. Perlmutter, M.D., Ph.D. - EVP & President-Merck Research Laboratories: Right. So, Seamus, first of all, with respect to the insight agreement, we have the bulk of data from the combination of KEYTRUDA with their IDO1 inhibitor in melanoma. And based on those data, you'll have a chance to see some of those data at the Society for Immunotherapy and Cancer meeting, as I mentioned in November. Based on those data, we, together, wanted very much to proceed into a late development. And that's what we're going to do. The agreement that we announced is about that.…

Thanks, Roger. And Darla, I know we're starting to run out of time. We're going to try to squeeze in two more questions if we can keep them short. And then if we have time, we'll try to squeeze in another one. But let's move on to the next one.

It's from David Risinger with Morgan Stanley. David R. Risinger - Morgan Stanley & Co. LLC: Great. I will cut my eight-part question to six. Just kidding. So very quickly, so could you just rephrase what the proposed anacetrapib study change was that – I think, Roger, you said was rejected by the FDA or something like that? Second, with respect to the base interim look, when is that interim look and does it include a futility analysis? And then third, could you just update us on the timing of GARDASIL safety updates in Japan and the U.K.?

Roger, you want to start with the question? Roger M. Perlmutter, M.D., Ph.D. - EVP & President-Merck Research Laboratories: Yeah, so, David, with respect to anacetrapib, the critical issue was to change the primary endpoint of the REVEAL study to include ischemic stroke as a component of the composite endpoint rather than revascularization, because ischemic stroke is both a more explicit endpoint to test, and in addition, is something that we know from the IMPROVE-IT study was associated with cholesterol reduction. Regulatory agencies were not comfortable with the idea of changing the primary end point, perhaps not surprisingly. While it is at the sponsors' discretion to do those kinds of things, I think the feeling after the discussions on the part of the steering committee was that, that wouldn't be the way to go forward and we would stick with the primary endpoint as originally constituted. So that program moves forward. And with respect to the base program, we have completed enrollment in the mild to moderate study. I should – I would expect that study to proceed to completion. So you can anticipate that, that study will proceed to completion. We would hope to have data available in the 2017 timeframe. Adam H. Schechter - Executive VP & President-Global Human Health: And, David, with regard to GARDASIL, we continue to work with our customers and the government in Japan. We are confident in the efficacy and the safety of the product. And we continue to have active discussions with them and provide them whatever data they would like to have.

And I think we are almost out of time, but let's try to squeeze in one more really quickly. And then I want to be sensitive to the time given all the other calls going on today.

And your final question comes from John Boris with SunTrust.

Thanks for taking the questions, and congratulations on the results today. One thing that appeared to be really robust in the quarter were obviously JANUVIA, JANUMET sales relative to how we projected them. It just has to do with realized sales and your contracting strategy in the U.S. Have you recently implemented anything on that in the way you're accounting for discounts and rebates? And are you an able to realize a higher level of net sales as a result of anything that you're doing on the accounting on JANUVIA and JANUMET? And then secondly, on ertugliflozin, can you maybe just outline what you view, aside from developing combo pills, as the key points of differentiation relative to the other competitors? And just any thoughts on how you're designing your outcome study that would be required for that product? Thanks. Adam H. Schechter - Executive VP & President-Global Human Health: So, John, this is Adam. And I want to make sure I'm really clear about JANUVIA. What I look at first is TRx volume growth. And in the United States, we saw 4% TRx volume growth. But we also saw timing of customer buying patterns that caused about $100 million of increased sales in this quarter, and those will come out in the fourth quarter or subsequent quarters. We had increased price last year in the third quarter. And we saw customers draw down their inventories. This year, in the third quarter, we did not increase price. So we saw inventory levels remain at higher levels. And JANUVIA is just a very big product. And a few days of inventory in one direction or another can impact reported sales significantly. So that's why you saw that difference of $100 million from – versus the prior year. And then with regard to – and by the way, there's no change in terms of accounting or the rebates or discounts. Those are all consistent. What you're seeing is this timing of when we took price last year versus this year. That's all. It's just, that's why I say to monitor the volume, and we're very pleased with the volume. We feel good about the volume going into fourth quarter and the volume going into 2016.

Roger, you want to comment really quickly on... Roger M. Perlmutter, M.D., Ph.D. - EVP & President-Merck Research Laboratories: Yeah, John, with respect to ertugliflozin, what I've said from the very beginning is when we partnered with Pfizer on the drug, this is a drug that has extremely good pharmaceutical properties, and hence, it can be paired easily. It plays nicely with others. And so the most important attribute of the drug is our ability to formulate it together with JANUVIA and develop it in that context. With respect to the outcome studies, the data that are available from EMPA-REG obviously influence the way we think about those outcome studies. And so we're looking at that carefully to ask the question, what do we need to do to ensure the outcome study provides a satisfactory test of whether ertugliflozin also reduces cardiovascular mortality in the way that was seen in EMPA-REG. Kenneth C. Frazier - Chairman & Chief Executive Officer: So just in closing, this quarter saw very strong performance from key drugs like JANUVIA and KEYTRUDA. We are looking forward to launching in the hepatitis C space and the lung space, and we feel there's good momentum for the business. Take care. Thank you.