Good morning. My name is Lara, and I will be your conference operator today. At this time, I would like to welcome everyone to the Merck & Co. Q4 Sales and Earnings Conference 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. [Operator Instructions]. I would now like to turn the call over to Peter Dannenbaum, Vice President, Investor Relations. Sir, please go ahead.

Thank you, Lara, and good morning. Welcome to Merck's fourth quarter 2020 conference call. Today I'm joined by Ken Frazier, our Chairman and Chief Executive Officer; Rob Davis, our Chief Financial Officer; Dr. Dean Li, President of Merck Research Labs; Frank Clyburn, our Chief Commercial Officer; and Mike Nally, our Chief Marketing Officer. Before we get started, I'd like to point out a few items. 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 have excluded these from our non-GAAP results and provide a reconciliation in our press release. We've also provided a table in our press release to help you understand the sales in the quarter for the business units and products. And the supplemental financials posted to our website include recapped 2020 quarters based on the reporting change we are announcing today. I would also like to remind you that some of the statements that 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 beliefs of Merck's management and are subject to significant risks and uncertainties. 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 2019 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 undertakes no obligation to publicly update any forward-looking statements. Our SEC filings, today's earnings release and an investor presentation with highlights of our results are all posted on merck.com. With that, I'd like to turn the call over to Ken.

Thank you, Peter. Good morning and thank you all for joining today's call. Before turning to our financial results and our future perspective, I'd like to make a few comments about this morning's other announcement. It has been a distinct honor and privilege to serve this great company as its CEO over the past decade. I thank all of my Merck colleagues for their extraordinary support throughout this period. We are making this leadership change to cure in the knowledge that Merck has the elements in place for a strong future of scientific innovation and profitable growth. Rob Davis is well prepared and well suited to help Merck capitalize on the many exciting opportunities before it as well as to take on the challenges that lie ahead. He and the Merck senior team will provide outstanding leadership for our company in the coming years. Given Merck's current position of strength, the Merck Board and I believe it is a good time to begin transitioning the company's day-to-day decision-making as well as a strategic direction to Rob, who will assume the title of President in April, at which point our operating divisions, Human Health, Animal Health, Manufacturing and Research, will begin reporting to him. I will retire as CEO at the end of June but remain for some period of time as Executive Chairman to assist Rob, Dean, and the rest of the senior team. I am extremely confident in the capabilities and commitment of Merck's people and Rob's ability to guide the company to an even brighter future. Moving on to our results. Despite challenges from the pandemic, Merck achieved solid growth in revenues and earnings in 2020, made meaningful advancements in our pipeline and added important assets through business development. Despite the particular impact to our portfolio, the underlying…

Thanks, Ken, and good morning, everyone. I'm honored and humbled to be named as Merck's next Chief Executive Officer. I look forward to continuing the important work we do to bring our medicines and vaccines to the people who need them. Under my leadership, Merck will remain focused on scientific innovation as the source of sustained long-term value for both patients and shareholders. Ken's unrelenting commitment to excellence and scientific innovation with patients at the center of everything we do permeates the culture of the company and its employees. Under Ken's leadership, Merck has achieved improved growth, clinical success, most notably with KEYTRUDA, and a revitalized pipeline and discovery research capability that will benefit both the company and the patients we serve for many years to come. Ken has put us in a position of financial and operational strength, from which we will be able to pursue our important mission to save and sustain lives through ongoing scientific innovation. The company has benefited from Ken's leadership. I personally and professionally benefited from his mentorship and guidance and want to thank him for that. His shoes won't be easy to fill in so many ways, both within Merck but also including his many principled and valuable contributions to important issues facing society today. The talent and commitment of Merck's employees worldwide, however, make me extremely confident that we will achieve continued success through this transition and long into the future as we build on Ken's legacy. Now turning to the business. Our resilience in a year that brought us countless challenges amidst the global pandemic is a true testament to the talent, hard work, and dedication of Merck employees worldwide. Our performance in this environment reinforces the confidence we have in our science-led strategy and in our potential for strong growth…

Thank you, Rob. As I've underscored many times, innovative research is the cornerstone of Merck. This is why we planned carefully for Dr. Roger Perlmutter's retirement and the transition of leadership of the Merck Research Laboratories to Dr. Dean Li, who I'm pleased to welcome to today's call. Dean is a physician scientist who has a keen understanding of Merck's mission, dedication to science and our early and late-stage assets. He has hands-on experience leading key areas of research, including early discovery in translational medicine, while under Roger's leadership at Merck, as well as in his prior role where he exploited new technologies to found company and was a leader in an academic healthcare delivery system. We believe he is uniquely positioned to take on this important role and advance Merck's promising pipeline. I'm confident that under Dean's leadership, Merck's legacy of innovative R&D will continue and we will persist in successfully bringing forward breakthrough medicines and vaccines that make a real difference for patients and shareholders alike. Dean?

Thank you, Ken. I'm delighted to be here for my first earnings call as Head of Merck Research Laboratories. And so for my remarks today, I will provide an update on our COVID research effort, cover key regulatory milestones, clinical updates and recent business developments, first in our oncology pipeline and then the broader pipeline. Regarding our COVID-19 research programs, Merck has made the decision to discontinue development of its vaccine candidate, V590 and V591. This decision was based on clinical finding from Phase 1 study showing that, while the vaccines were well tolerated, immune responses were inferior to those observed with natural infection and those reported for other authorized COVID vaccines. We are grateful to our collaborators and the volunteers who participated in this trial. Our COVID-19 efforts now shift, advancing our two therapeutic candidates, molnupiravir, often known as MK-4482 and MK-7110. Our orally available antiviral candidate molnupiravir, which we are developing in collaboration with Ridgeback Biotherapeutics, continues to progress in our Phase 2/3 trials studying hospitalized and non-hospitalized patients. The primary completion date is in May 2021, but it is possible that we may have interim efficacy data in the first quarter which, of course, we would share publicly, if meaningful. Molnupiravir has the potential to play an important role in the current pandemic as well as other emerging novel coronavirus infections. We have been scaling production capacity and expect to have over 10 million courses of therapy available by the end of 2021. We recently added the second candidate to address COVID-19 through the acquisition of OncoImmune. This agent, MK-7110 is a recombinant fusion protein administered by IV infusion that targets the novel immune checkpoint. Final results are expected in our -- in the clinical trial in the first quarter. Turning to oncology. In the fourth quarter,…

Thank you, Dean. We recognize there could be additional questions today, and we're prepared to extend the call past 9 AM. But in order to get to as many analysts as possible, I ask that you please limit yourselves to one question. Lara, could you start the queue, please?

[Operator Instructions] So your first question will come from the line of Mr. Seamus Fernandez.

So Rob, congratulations on the CEO appointment. Just wanted to get a sense of your thoughts in terms of Merck moving forward. You've talked about the underappreciation of the upside that you see for the company in 2023 plus relative to consensus expectations, but the obvious question that is going to continue is, how are you thinking about the evolution of the company in sort of 2026 to 2030 as KEYTRUDA basically approaches its patent expiration. What do you think the company really needs to do in that regard? And then just as a follow-up to that, just from a strategic perspective, can you just give us your thoughts around the Animal Health business as part of Merck? Could that be part of a future restructuring?

Thanks, Seamus, for the question. As we look forward, from a strategic perspective, obviously, there'll be a lot more time as we move into the months and quarters to come to continue to have the dialogue. But I think at the highest level, the important point is that the strategy we've been under, which is focused on scientific innovation as the core of who we are, driven first by really the revitalization of what we're doing in the drug discovery and from a clinical development perspective, which I think you're seeing the fruits of, and obviously, what we're achieving with KEYTRUDA and with what we see as a growing earlier stage pipeline, which we're excited about. So, as we look at 2025 and beyond, and into the 2030 timeframe, it really is to continue to focus first and foremost on investing behind the best science, whether it comes from inside the company or outside the company, execute on the pipeline we have. We have a lot of great -- near-term, late-stage launches coming. We've got islatravir, we've got our V114, the entire pneumococcal franchise that we're building. We have obviously a whole host of opportunities in oncology which I'm sure Dean and others would be happy to comment on. Looking at both what we can do to extend the breadth of KEYTRUDA's reach to the number of patients it serves as well as its efficacy through combinations as well as broadening into other oncology fields and broader mechanisms, which we have. So, that all will be continued to be where we will focus our efforts. As we look at that, we realize, though, we will need to continue to do business development to augment that, and we are committed to that. We've been pretty consistent in talking about the urgency…

Next question please, Lara.

Your next question will come from the line of Mr. Andrew Baum from Citi.

A question on islatravir please. Roger was quite determined that cabotegravir was not the right dancing partner for fixed-dose combination in the treatment setting. But aside from the capsid inhibitor, there doesn't seem to be a whole lot of other options. With a fresh pair of eyes under Dean's leadership, should we assume that the status quo remains intact or whether another look at cabotegravir as a combination may be interesting? And then secondly, perhaps you could comment on whether, in the PrEP setting, you can bridge -- you can bridge islatravir to explore different delivery formulations, including very long-acting without running separate trials?

Yes. So, thank you for that question. I'll just make some comments that will sort of frame how one might want to think about islatravir. And one way to think about it is, is with the lens that we believe that this can be a foundational medicine, both in PrEP and in treatment. And the favorable attribute to recognize is PK dosing schedule, route of administration, resistant profile, tissue levels, and combinability. And so, the question in relationship to treatment is, I've laid out what we're doing once daily, once weekly, but if this molecule is as foundational as we believe it is, this is something that could combine with many different mechanisms and many different molecules. I can just tell you that integrase inhibitors, which is cabotegravir, that's an important class. It's an important class that's actually very dear to Merck, and so that needs to be looked at carefully. And then lenacapavir, which you allude to, that's a new mechanism, and we believe that islatravir as a foundational medicine should -- we should look at the full array of combinations that can be achieved because we believe it's foundational, and we believe that, that foundation can provide a lot of benefit for many different patients, and we should look at all combinations possible that would allow us to prove that and to show that.

Next question please Lara.

Your next question will come from the line of Mr. Terence Flynn.

Congrats again, Ken, on a remarkable career and best wishes in the future. And congratulations, Rob, as well on the new role and responsibilities and best of luck. I just -- maybe a 2-part question. Rob, I was just wondering if you can provide your perspective on the share repurchase outlook for 2021. Obviously, you have the $8 billion to $9 billion dividend coming in from Organon. Maybe how aggressive are you going to be on that front? And then just a question for Dean on MK-4482, building on Ken's comment regarding an important contribution from this drug in the COVID paradigm, I was wondering if you guys already have some of that initial Phase 2 data in-house?

Maybe I'll go first and then turn it over to Dean. Thanks for the question, Terence, and thank you for the congratulatory comments. As you look at share repurchase, as we've been saying, we continue to prioritize business development as where we want to go. Obviously, first and foremost, it's about funding our internal R&D efforts and funding the capacity expansion efforts we have underway from a capital perspective. But really beyond that, as we've talked, we would like to see business development. And so we have been holding back on share repurchase for that purpose. But what we've also been clear to say is that we're not looking to just grow cash to grow cash, and we're not looking to drive up our credit rating. So over time, if we don't find those opportunities to utilize the cash for business development, eventually, we will return it to shareholders. And that's on an ongoing basis. And then you asked explicitly about the $8 billion to $9 billion -- the potential dividend we're getting coming from -- the dividend from the Organon spin. With that similar answer, our goal would, first and foremost, be business development. But we also will look if we don't have those opportunities to return that to shareholders, and we'll be able to make those determinations as we get closer to late second quarter and into the second half of 2021.

Yes. In terms of the 4482 question, it's a Phase 2/3 trial. It has different interim analysis. The critical component of the Phase 2 different interim analysis is to sort of establish dose. And at this point, we have not fully taken a look at all of the data that is available to us in relationship to that Phase 2.

Thank you Terence. Next question please.

Your next question will come from the line of Mr. Chris Schott from JPMorgan.

Thanks for the questions and congrats as well to both Ken and Rob. I just had a 2-part question on capital deployment in Biz Dev. It's obviously been a big focus and remains a big focus of the organization. Should we think about any pauses or slowdown in activities, specifically as you think about larger transactions given the leadership transitions that are occurring in the organization? And then on BD, I guess all else equal, would your bias be towards a series of smaller transactions versus a larger one that brings multiple assets. So we think about issues of ease of execution, integration, et cetera. I know you're probably looking at everything, but if you had a choice, which direction would the organization lean?

So let me just start by saying that the purpose behind this CEO transition is not to slow Merck down in any respect. The senior team and Rob have the responsibility and the autonomy going forward to evaluate the situation of the company faces and to make the right decisions to position this company for long-term growth. So I wouldn't read into the transition that there would be any hesitation at all about taking steps that we believe are the right steps for this company's long-term success. And with that, I'll turn it over to Rob.

Yes. Appreciate that. And Chris, to your question about our preferred composition of the business development, we continue to prefer to look for smaller opportunities where we can find great science earlier in its life and bring it into Merck Research Labs and then capitalize on that, and we believe bring competitive advantage and differentiation to those assets. So that focal point continues to be where we will look. As we've said many times in the past, it is -- we are agnostic to therapeutic area. We will be driven by science. Science will take us to the areas to look. But likewise, we've been clear to say we're not foreclosed to larger scale deals, always looking at the size, more in terms of its disruption and complexity than in dollar terms. We obviously recognize the need to continue to augment the pipeline, to augment our revenue potential. So we're looking at those as well. But one thing that remains completely consistent as we do not prefer and do not see a transformative deal driven mainly by synergies as a way forward, it will continue to be science led, science-based and driven by where we see an opportunity to bring differential value.

Thank you Chris. Next question please Lara.

Your next question will come from the line of Ms. Louise Chen from Cantor.

So Rob, what about your experience and skill set make you the right fit for where Merck is in its journey right now? And then, Dean, when you look into your pipeline currently, is anything there that you think could take the place of KEYTRUDA?

Yes. Great. Louise, thanks for the question. If you look back at my career and what I've done, I've spent my whole career dedicated to healthcare and to the pharmaceutical industry. And the time I began at Eli Lilly, where I spent nearly 15 years before moving on to Baxter and saw a different view of the business, running the diversified medtech side of that company before coming to Merck. So I have a broad base of experience in the industry and a lens that has really seen it from different views. And I think that is always important to challenge our internal thinking, to make sure we have an external focus and that we are looking externally. But as we look forward, while scientific innovation will continue to be the core of who we are, and I believe, is our best path to succeed in a world where you're going to face increasing margin pressure, we also have to marry with that side-by-side a continuing focus on how do we evolve the business to make it more nimble, to make it simplified and really more focused such that we can drive ever greater efficiency and productivity, not in terms of reducing spend, rather the opposite. We're going to invest in this business to grow, but we have to find a way to make every dollar we invest more productive so that we get a greater than the dollar of output, and that is really where our focus is going to be on how do we leverage new technologies, new capabilities to do that. And then how do we think about broadening our view long-term as you think about not only the drug, but we have to focus increasingly on the outcomes from our medicine, the value we demonstrate and how we ensure affordable access. So those are the cores of what we're looking at. And my experience broadly in the industry and being a part of the leadership team here at Merck has positioned me to, I believe, to do that.

Let me grab the other part of that question. And if you don't mind, I would just sort of make 4 points. The first is immuno-oncology has essentially revolutionized all of cancer biology and medicine. And a quick way to point that out is, if one reads the book Emperor of All Maladies, one looks at it and say, this is outdated because the whole impact of immuno-oncology is not there. And the driver for this revolution has been pembrolizumab. And just so that we're very clear, we continue to want to expand indications by tumor type and by stage of cancer. We want to deepen responses with combinations that span agents with immunomodulatory mechanisms, which the internal pipeline is focused on and agents with direct tumor-killing mechanisms that we have largely done through BD. And we want to extend the value and access of pembrolizumab to patients through route of administration, dosing regimens, combinations, co-formulations and biomarkers. So that's IO, pembro and cancer. So the question that you ask is, do I have anything in my pipeline that has reshaped a whole field right now that I can see? I do not have one in our pipeline. And this is an important point that we should mention. We should remember that we were not in cancer, and IO allowed us the chance to make a huge impact on cancer, transformative cancer -- transformative impact. And one of the reasons why Rob and Ken and Roger for that matter have always talked about therapeutic agnostic, it is because we do not know that we have the foresight to know where that next revolution and where that next transformation occurs. So could that be in my pipeline? Yes. Could it be in the pipeline of others? Yes. But do we have it right now defined, whether it be in neuro, whether it be in cardiovascular, whether it be metabolism? I would say that, in general, the whole field has not seen. The whole pharmaceutical field has not seen something equivalent to KEYTRUDA or pembro at this point in time throughout the industry.

Thanks, Louise. Next question please.

Your next question will come from the line of David Risinger from Morgan Stanley.

Yes. Thanks very much, and I wanted to add my congratulations to Ken and Rob as well. So my question is, could you discuss the opportunity for weekly combination HIV treatment including your internal assets for a combination regimen and how you are assessing and seeing the opportunity to move that forward versus pursue an external partnership opportunity to bring forward a weekly combination treatment regimen?

Yes. I'll take a first shot at that. This is Dean. Fundamentally, we're doing it step wise, right? We're doing it in PrEP, and we're doing it in treatment. And we're trying to demonstrate to ourselves and to others that this is what we think it is, that this is a really important medicine. And so we're stepwise doing Q day, Q week. But I do agree with you. We have to think about what's really going to be important for patients and their access to the medicine. And so less frequent dosing will be important and that less frequent dosing will be important for both treatment and for PrEP. And both of them are places that Merck needs to explore fully to create that full suite of options as we build the story for islatravir. But Mike, did you want to make some comments?

Yes. Thank you for the question, Dave. I think a couple of things just to add to what Dean said. I think first and foremost, islatravir is the best partner across a whole range of different mechanisms of action. And we think it will add a lot of value. And we do think the market will ultimately evolve to a longer-acting format. We see up to a majority of the HIV market ultimately being in a long-acting format. And so weekly would be the starting place, and then we look even further out in the treatment space. In the PrEP space, I think what I would add is that we don't need necessarily a partner with islatravir in the PrEP space. And so we think there through both in an oral route of administration and other forms of administration, we can go to long-acting format, potentially even longer than a week initially in the PrEP space. And so that's how we're looking at the market.

Next question please.

Your next question will come from the line of Ms. Daina Graybosch from SVB Leerink.

Thank you for the question and congratulations from me all around. I wonder talking about BD in oncology and KEYTRUDA. We've had a couple of negative trial readouts to competitors on TGF-beta and oncolytic virus approaches. I wonder if you could update us on your current perspective on the path forward for some of the early IO assets Merck has acquired in recent years, including Tilos, Viralytics and Immune Design?

Yes. Let me take a stab at that. So I sort of separated how one might think about the IO space and related to pembrolizumab and especially related to solid tumors. And so when you look at our internal pipeline, we speak about having over 25 mechanisms in the clinic. And you're aware of 3 immune modulatory mechanisms are advancing into Phase 3 and they have the opportunity to be co-formulated, TIGIT, LAG-3, our CTLA-4, we also showed ILT4. The other sort of thing that I would also emphasize is that the word is sometimes overused, but it's caught orthogonal. But I simply say that KEYTRUDA, when mixed with tumor-killing mechanisms or standard-of-care mechanism like chemo, surgery and potentially radiation, there seems to be enhancement. And because of that, that creates a possibility for us from a business development standpoint. And that business development you saw with Eisai and AZ, but we are excited with Seagen with the LIV-1 ADC, the Velos with the ROR1 ADC because essentially, there -- we're confident that pembro plus chemo works really well, right? We're first-in-class, best-in-class and transformative-in-class in lung. And so Seagen, Velos, those are ADCs where you're essentially developing a chemotherapy that's a little bit more precise. But our interest is past that. I would call your attention to Peloton, which is essentially targeting an oncogenic nodal pathway, and we would hope that, that not only can we advance that Peloton with a potential 2021 filing, but we're also interested in looking at that HIF-2α in relationship to pembrolizumab. But I also want to emphasize that that's focusing on KEYTRUDA as a foundational medicine that can combine with many internal and external assets. I would just end by simply saying, we are in a advantaged situation. And the advantage situation is that if you are developing a drug in cancer and you're a biotech company, you must ask what your molecule will do in relationship to IO. And if you're going to look for a partner, you're going to look for a partner who can give you that quickness, that speed and that rigor to advance that. And so when we say that we have 1,400 trials, including more than 950 combinations and more than 90 registrational trials, I would remind myself that, that most of those combinations are in combinations with other assets from other companies. So it allows us to do BD, not simply by looking at PowerPoint decks, but by actually getting our hands wet with the agents of other companies.

Thank you, Daina. Next question please, Lara.

Your next question will come from the line of Mr. Umer Raffat from Evercore ISI.

My congratulations to Rob as well. I wanted to focus on the COVID and MRL. And my question is, is it fair to assume that the first upcoming trial is the hospitalized trial? And the time from symptoms to study enrollment is a little more loose in the hospitalized trial versus non-hospitalized. So should we assume that hospitalized setting is more difficult? And could you also update us on your progress for attempting to characterize in vitro activity against the new variants?

Yes. So let me take both of those questions. The first thing is we're advancing it in both. And we think it's important to do it in both. And so there's no distinction between hospitalized or non-hospitalized patients. We think we need to advance it for both because we believe that this will affect the viral application and viral load. In terms of the other question, let me just make sure, the other question was, the variants. We need to do those experiments, but the mechanism by which molnupiravir works would make it very -- we would predict that it would work for all the variants. I would remind everyone that molnupiravir doesn't just work for coronaviruses. It works for many RNA viruses and many respiratory RNA viruses. So the variant difference within a SARS-COV-2 is, there's variation, but that variation is much smaller than the variation that you see with whole different classes of RNA viruses. But to answer your question specifically, we need to test that to prove that, but every expectation is that the variants would be taken care of by molnupiravir based on mechanism of action.

Thank you Umer. Next question please.

Your next question will come from the line of Steve Scala from Cowen.

And let me add my congratulations to Rob, and thanks to Ken for your many contributions. Ken, I think 2 of your more significant contributions to Merck were guiding it through the Vioxx litigation and buying Schering-Plough. The industry once again finds itself dealing with CV risk of oral arthritis drugs and you don't prefer big deals. On the former, what observations would you make on Vioxx 15 years later, particularly since I believe it's back on the market? And why do you not prefer big deals when it was perhaps your biggest contribution?

So thank you for giving me the opportunity for retrospective here. Let me start by saying, I think if there's one lesson that I learned from Vioxx, it is that for a company like Merck, you have to stand strong on your heritage. And people see this as a litigation defense. But I think for every one of us inside the company, it was really about articulating to an audience, particularly in that case, jurors, what this company really stood for. And I thought we won repeatedly because we were able to remind people of the importance of what we do for the world and the integrity by which we do it. I won't go into any more details about the decision to withdraw the drug, but it was also based largely on this company's sense of what was in the best interest for patients based on what we knew at that time. On the issue around Schering-Plough, this company was in a very different situation at that time relative to its pipeline, relative to its growth prospects. And that deal was done at a time where, frankly, we saw an opportunity in the market based on where the valuations of companies were. We saw that as an opportunity that was appropriate for Merck back in 2009. And the reality of the world is, none of us were really smart enough to know that among the assets we were acquiring was pembrolizumab. So I would like to take a bow, but that's a classic example of the narrative fallacy when people say, "Well, look at a great deal you did." I think the one thing that we learned from that deal is that when we bought that company, we actually had our eye on Organon and the work that was being done in the basic research labs at Organon. And so we knew that we were buying a company that not only gave us an opportunity for cost synergies, but gave us an opportunity for growth based on the quality of the science. And so at the end of the day, the problem with large transactions, and I think if you look at the history of this industry, is that they are really difficult for our research organizations to respond to and recover from. And so that's the main reason I opposed for those mergers. It's because I think they're highly disruptive. And then at the end of the day, when you get through your cost synergies, you still either have a pipeline or you don't. And what we're focusing on right now is developing that pipeline. So thanks for the question.

Thank you, Steve. I realize it's 9 o'clock. We're prepared to continue on with some additional questions. So next question, please?

Your next question will come from the line of Mr. Navin Jacob from UBS.

I'll add my congrats to the course as well to both Ken and Rob. Rob, if I may ask about Organon, please. In the past, Merck had suggested that there are some pipeline assets that could furnish the Organon spin-off. Wondering if there's any more color to add as to what those assets may be, just to help us with trying to model out what revenues could look like for the next few years?

Yes. Thanks for the question, Navin. So as you look at Organon and the assets that will make up that spin, the key growth drivers that sit within that business is, first and foremost, the women's health business, anchored by NEXPLANON, which we continue to believe is going to be a blockbuster drug. It has patent protection for several years. It is growing globally. And as you look at the need for contraception, it continues to fill in a very important niche. So that is a core area of growth. And then obviously, surrounding that is the broader women's health business, including our fertility drugs and other drugs. So that business is the core growth driver. And if you could dissect within Merck and look at that business, excluding the impact of the loss of exclusivity of some key franchises, that has been growing and will continue to grow. So really, what is accelerating the growth will be further focused on investment in that. And then you layer upon that the biosimilars business, which is really a burgeoning business, very small now, but will grow very fast and will contribute meaningfully to the growth. So between those 2 pieces of Organon, they will comprise, I think as we get out over the next 4 or 5 years, they're going to be 30%, 40-plus percent of the total revenue of the company. Why the business has been declining over the last couple of years is really twofold. One, it is mainly loss of exclusivity. Most recently, we're experiencing the loss of [NuvaRing]. Before that, we had Zetia/Vytorin. So we've been hit by those LOEs. As we look forward, they really don't have those. Those should start to sunset as we get through 2021. So it is really going to allow those businesses, which have been good businesses to start to shine, and then they will accelerate that growth through focus and investment and more of a core formulation strategy and a business development strategy to augment those assets long-term. So I do think they will continue to look at the assets and ask how can they extend them, how can they broaden them, but that's really the focal point. There are no real key R&D programs being transferred over. It's more of how they will focus on those strategies moving forward across those growth businesses with the LOEs out of the base.

Thank you, Navin. Next question please.

Your next question will come from the line of Mr. Gregg Gilbert from Truist.

Congrats, gentlemen. Maybe 2-parter for the newer guys in the newer roles. Dean, what are some modalities you'd like to enhance or add to MRL? And Rob, I realize this decision has been made on Animal Health, at least for now, your comments are obviously in line with what Ken has been saying for a few years. And I certainly get that Merck is investing in that business and then it's performing well. But how do you bridge the gap between how helpful it is to Merck versus how valuable it would be if it stood alone and traded at 35 times earnings or more? I realize that's one moment in time, but it's not like these peers or just all of a sudden trading at a high multiple and are likely to change? So again, understand why it's helpful to Merck, but how do you bridge the gap to why it's not better served and better valued elsewhere?

I'll take that first question. I'll say 2 or 3 things. The first thing is, modalities are important. They're platform. It's critical that we focus on products. But if you don't have the right platforms, it makes it more difficult for you to move quickly. In terms of platforms that we are building currently, clearly, we're a company that's really well-known for our chemistry. And over the last few years, we've become increasingly a more biologics company with KEYTRUDA. And so our continued evolution to use that from antibodies to bispecific immune engagers to TriNKETs to protein engineering, those fields are going to be very important. And as we build biologics, it will also help us in relationship to the space between chemistry and biologics, especially with target therapy. So that's a very important play. What I would also say is that I kind of group them in the nucleic acids, whether you talk about mRNA or sRNA or gene delivery systems. Those -- that group, we have to take a look at. But one can't willy nilly decide "I want this platform because I'm really interested in the platform, that it's neat and cool." One has to say, "What am I going to do with that platform? What is the product? How am I going to drive it from discovery to development to registration?" So we look at modalities and we look at what is moving throughout the whole landscape, but we don't get enamored specifically on a platform by itself.

Okay. Rob?

Okay, great. And to the question on Animal Health. So we obviously -- I would start by saying, we look at this objectively. So you should not assume that there is some form of philosophical opposition to thinking about Animal Health differently. It comes from an objective analysis of what we think creates the greatest long-term value for the Merck shareholder. And that's our focus, is long-term value creation. As I look at the Animal Health business and if you really decompose what's happened and why we feel like we're the rightful owner for this asset, you have to start to challenge where is the growth coming from in that business and what would happen outside of Merck. I would start with the fact that we do see meaningful synergies coming from the collaboration with Merck Research Labs. As I mentioned, a big portion of the growth we're going to see in Animal Health long-term is coming from new products. And those new products are, in many instances, coming on the companion animal space through products that they've discovered, working with MRL and looking at the Human Health catalog. And there are also new products coming in vaccines. And obviously, we are the leader in vaccines on the human health side. We're a leader in vaccines on the animal health side. So across the pillars of our excellence, there's a nice alignment from a synergy, and that is driving their growth. It's not by accident that they're one of the fastest-growing businesses in the animal health space. It's because of our ability to focus on innovation and leverage those synergies. And then beyond that, I think you have to look at each company and the facts and take them one at a time. So if just maybe one example, if…

Thank you Gregg. We have time for one more question.

Your next question will come from the line of Ms. Mara Goldstein from Mizuho.

So Rob, I just have a question for you, and that is with the benefit of having occupying the CFO seat, what are you looking for from that position once you have transitioned to your new role as CEO? And if I could also just ask, with the incremental bump in the operating margin guidance post spin out, does that change the upper end of the aspirational dividend payout ratio as well?

Yes. So on the first question, with regard to the next CFO of the company, what I would expect from that person and what I think is an important role that the CFO can play is to, obviously, first and foremost, you have to be a strong fiduciary for the company. You have to focus and make sure that the controls are in place, the compliance is met and that the company is meeting its reporting responsibility. That's kind of table stakes and expected. What differentiates a CFO, in my perspective, is the ability to partner with the business to find solutions on how to grow strategically. And as I mentioned in the earlier comments, we're going to be investing for growth. But we know that there's going to be pressure. There's -- on margins, the world is transforming around us. We're going to have to find ways to drive productivity to get every dollar we invest more from that dollar. And I think that's an important area where a CFO can help. The one thing that being CFO allowed me to do, I sat at the crossroads between each of the divisions, and it allowed me to see the whole company and to start to look at Merck as an integrated whole and to start to look to how can we challenge and drive optimization at the scenes that sit between the divisions because, frankly, those are always where, if you will, the corporate tax is paid. And the more you can eliminate those inefficiencies, the more productive and efficient you can go, and I believe that's what a CFO should do. On your question around the margin expansion, it does not change our view of the dividend payout ratio. We're still shooting for that 47% to 50% range. And obviously, we're looking at that both now, but even more importantly as we think post spin. And then we'll continue to reassess that as we go. But right now, that is -- continues to be our long-term goal that we would shoot for.

Thank you, Mara. Ken, do you have some closing remarks?

Thanks, Peter. As you've heard, we are executing on our clinical and commercial priorities while making the necessary changes in our business model, and importantly, investing in opportunities for future growth for the short, intermediate and longer term. I'm confident that if we continue to follow this strategy and with new leadership, charged with taking a fresh look at how we operate our business and our strategic opportunity and charge also with taking the right actions for Merck going forward, that the company will be positioned to continue to deliver important value to patients and shareholders in the future. It's been a privilege working in this job for 10 years. I'm pleased to be handing it over to Rob and the senior team at this time. And I want to thank you for joining us and for your continuing interest and support. I hope you have a healthy and Happy New Year.

Thank you, all.

Thank you, sir. Thank you so much, presenters. And again, thank you, everyone, for participating. This concludes today's conference. You may now disconnect. Stay safe and have a lovely day.