Good morning. My name is Darla, and I will be your conference operator today. At this time, I'd like to welcome everyone to Merck's Q4 full-year 2016 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. Thank you. I would now like to turn the call over to Teri Loxam. Please go ahead. Teri Loxam - Merck & Co., Inc.: Thank you, Darla, and good morning. Welcome to Merck's fourth quarter and full-year 2016 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 Laboratories. Before I turn the call over to Ken, 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 of these in our press release. We have also provided a table in our press release to help you understand the sales in the quarter for the business units and products. I would 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…

Your first question is from David Risinger with Morgan Stanley. David R. Risinger - Morgan Stanley & Co. LLC: Yes, thanks very much. So I guess I'd like to start just by asking a high-level question. Ken, could you just talk about how the meeting with President Trump concluded and the next steps that you expect from the administration? And then, Roger, most physician experts are skeptical that FDA will approve the KEYTRUDA/chemo combo based upon the small Phase 2 data set with the no overall survival benefit. What do you think the naysayers underappreciate about your chemo combo application and the likely FDA assessment? Thank you. Kenneth C. Frazier - Merck & Co., Inc.: Okay, this is Ken Frazier, Dave. Thanks for the question. It's important to recognize that this was a first meeting with President Trump. In this meeting, we got a lot of issues on the table. The President was really clear that his ultimate goal is twofold. One is to create U.S. jobs, and the second one is to ease the cost burden on patients. But he was also quick to say he recognizes the importance of this industry, and he doesn't want to interfere with the incentives in the marketplace for us to continue to take risks and make the kinds of investments that are needed to discover and develop long-term innovation. We also talked, as you know, about reforming taxes, easing regulation, ensuring that we have the right kinds of negotiations around value-based health care. Where we decided to go from there is that we would have regular check-ins after that. We don't have a second meeting today established on his calendar, but we said that we would continue to have regular check-ins to ensure that there was good communication between us and the…

It's from Steve Scala with Cowen. Steve Scala - Cowen & Co. LLC: Thank you very much, two questions, both on KEYTRUDA. On KEYNOTE-189, do you expect PFS to read out before OS? And if yes, how long after the initial PFS will OS assessment be likely? Roche said yesterday on their call that they could get a simultaneous readout from their chemo combo trials. And the second question is, the FDA put a pembrolizumab study sponsored by NCI [National Cancer Institute] in glioblastoma on hold due to an adverse event. Can you provide more color on what signal they saw? Thank you very much. Roger M. Perlmutter - Merck & Co., Inc.: Right, on KEYNOTE-189, we could get a simultaneous readout. It's really a function of the magnitude of the treatment effect. So I can't speculate on what exactly we're going to see for KEYNOTE-189, but again, it's a comparison that looks at the ability of combination with chemotherapy to have a meaningful treatment effect. And if there is an overall survival benefit of substantial magnitude, we'd see it. Again, I think one should keep in mind that crossover does occur in these studies, and more and more, we will be seeing the impact of crossover. We are in the process of evaluating that, because there are some interesting issues with respect to the sequencing of KEYTRUDA therapy and chemotherapy and the impact that has on results, so there's a lot of information we're going to get out of KEYNOTE-189. With respect to the study on hold that you mentioned, that study actually is not on hold. That's a misstatement in ClinicalTrials.gov, and I believe they're busy correcting it, but it's not on hold. What was seen in the study is, we believe, of course, what you would expect to see in grievously ill patients who have intercranial malignancies. And there's really nothing represented in that study, so nothing to pay attention to really, I think. Teri Loxam - Merck & Co., Inc.: Thanks, Roger. Darla, we'll move on to the next question, please.

It's from Tim Anderson with Bernstein. Timothy Minton Anderson - Sanford C. Bernstein & Co. LLC: Thank you. Going back to KEYNOTE-189, unless something has changed, my understanding is that PFS is the only primary endpoint for that trial, which makes it unique if true, because all the other I-O combo trials by other companies have PFS and OS as co-primaries, so I'm trying to understand the rationale behind this. Is it so you can put more dedicated alfa (32:33) only to this primary endpoint, or does it say you're worried about the crossover hurting OS potentially or what? And then another question on KEYNOTE-042, so another monotherapy trial, but this time I think it's in all-comers, and I believe you're supposed to have that in early 2018. Might you change the cutoff for the primary analysis to widen it beyond KEYNOTE-024, but not maybe go as low as 1%? I would imagine to keep the momentum going, you don't want have a negative trial on your hands. So how might you might address KEYNOTE-042? And then last question, just on CTLA-4 combo, is that still something you might be considering, or with Bristol's increased caution, could that not be something you pursue? Roger M. Perlmutter - Merck & Co., Inc.: Okay, so first of all, with KEYNOTE-189, not much to add to what I've said previously. Again, we are expecting that there will be a meaningful impact of crossover in all future studies, because of the widespread appreciation of the value of KEYTRUDA therapy, and the desire on the part of physicians and patients, to gain access to that when they have progressive disease. The impact of crossover will depend upon its timing and also the sequencing phenomenon that I mentioned. PFS is a sensible endpoint in that context,…

It's from Geoff Meacham with Barclays.

Hey, guys. Good morning. Thanks for the question. Rob or Adam, you mentioned including KEYNOTE-021G in the 2017 outlook. Can you speak more qualitatively about your expectations for the MSI indication or for broader monotherapy use beyond the 50% cut point? And then, Ken, you've talked in the past about biz-dev being a priority I think for over a year now. Is there a tipping point to put it into action via, say, valuation expectations from sellers or tax policy or ACA? Thanks. Adam H. Schechter - Merck & Co., Inc.: Hi, Jeff. This is Adam. So with regard to KEYNOTE-021G, as you know, right now KEYTRUDA is approved first-line use in patients that have PD-L1 greater than or equal to 50%. Assuming that KEYNOTE-021G gets put into the label, we anticipate that that would open up the non-squamous lung market. So we would have patients that are negative on PD-L1 all the way from PD-L1 of 1% up through greater than 50%. So it certainly would open up the rest of the market. The way I would think about it, though, is that from what we can tell, physicians will be much more apt to use the combination in patients that they deem to be relatively healthy. They're going to evaluate it patient by patient and see where they believe that the combination of the two would outweigh potential side effects and so forth. So I think initially, it will be used in patients that are relatively healthy and those where they would be thinking about using ALIMTA anyway. After that, we believe that it will go into patients that are relatively healthy where they're not necessarily thinking about ALIMTA but they might start to use ALIMTA in combination with KEYTRUDA to treat those patients and get better results.…

It's from Mark Schoenebaum with Evercore ISI.

Hi, guys. Teri, I have a question with two parts and one sub-part. I was just wondering, they're very simple. Roger, can you just remind us what your development strategy is in the squamous lung cancer setting for front-line? And then number two, I'd love to hear, Roger, your thoughts on ALIMTA versus ABRAXANE in particular, but just other chemos. Do you think the chemo is ultimately – the choice of chemo is going to matter very much? And then the impact of the solanezumab failure on your thinking about the A-beta hypothesis, you've been very – you made some very interesting statements. You thought a lot about this, the A-beta hypothesis and made some memorable statements. I was just wondering what you think the solanezumab trial date is. And also thanks to Teri and the team for all the help that she gave my team while I was out. Thank you. Teri Loxam - Merck & Co., Inc.: Thanks, Mark. Roger M. Perlmutter - Merck & Co., Inc.: Right, so a number of questions, Mark. Thanks for that. First of all, we do have a squamous front-line study which will be coming out and we expect sometime in 2018, the first part of 2018, KEYNOTE-407. And our expectation is that we'll be able to demonstrate the same kind of effect in first-line with squamous, but time will tell. As far as chemo combinations are concerned, it is early days. If you look at the KEYNOTE-021 program, you can see that there were improvements in response rates in a variety of different settings in combinations with different therapies. And of course, our colleagues at Roche have demonstrated combination results with chemotherapy using their PD-L1 antibody. So I think that over time we're going to find out that there are probably…

It's from Vamil Divan with Credit Suisse.

Hi, thanks so much for taking my questions. So I just had a couple here. One, you talked a little bit about the BACE and the CHMP data you'll have later this year. Are there any other data readouts that you'd highlight as being important from the pipeline perspective? Maybe people are underappreciating beyond BACE and CTP and I guess beyond KEYNOTE-189, which has also been discussed here. And then my second one, if you could just maybe provide a little bit more of a breakdown in terms of the percentage of KEYTRUDA sales in the fourth quarter that came from each of the different indications, especially in the U.S., as you gain more of the lung impact so far? Thank you. Robert M. Davis - Merck & Co., Inc.: So let me start with the KEYTRUDA numbers. And again, the data is not perfect, but I'll give you a rough estimate. The total sales were $483 million globally. The U.S. was $311 million. Rest of the world was $172 million. A rough estimate for the U.S. is that about 40% of sales were melanoma. About 30% of the sales were in lung cancer, about 15% in head and neck, and then 15% in all other categories. Roger M. Perlmutter - Merck & Co., Inc.: Right. So, Vamil, there's a lot of data coming out over the next year. And of course, there's a very substantial amount of KEYTRUDA data that we'll be seeing, which we've already mentioned, that relates to the enormous breadth of indications. That's the first thing. The second thing, of course, as we talked about already, is we're going to be seeing data from the REVEAL study and from BACE. Beyond that, of course, you're going to be seeing additional data from our ertugliflozin data that is in diabetes, Type 2 diabetes. We have a lot of data in the HIV setting and generally in infectious diseases. So both doravirine Phase 3 data, which should be presented relatively early in 2017. And we're going to be seeing a lot more information coming from as well the letermovir CMV data that you'll have a chance to look at, which could be quite important. And finally, there's data from our acquisition of Afferent in the chronic cough setting. This is our P2X3 antagonist, and that could be quite interesting. And you'll have a chance to see some of those Phase 2b data as well. So a lot of data coming out in 2017. Teri Loxam - Merck & Co., Inc.: Okay, we'll move on to the next question, please.

It's from Jami Rubin with Goldman Sachs. Jami Rubin - Goldman Sachs & Co.: Thank you, just a question maybe for you, Adam, on what you expect for the uptake of chemo combo. Assuming you get approval, which we are, how do you see the uptake of KEYTRUDA/ALIMTA given that this trial was a limited trial, only 60 patients in the KEYTRUDA arm, KEYTRUDA/chemo arm? We don't yet have overall survival. The reason I'm asking the question is that your own KEYNOTE-189 will be reporting out just a few months later. I don't recall how many patients are in the KEYTRUDA/chemo arm. But also the Roche trial with about 1,100 patients or 400 in each arm with PFS and potentially OS will be reporting out, again, a few months later. Do you expect physicians to wait for the larger Phase 3 clinical trials, or is your expectation that there is so much pent-up demand that you would expect a strong uptake? And then secondly, there are still so many questions that the key debates have yet to be resolved. I think market expectations on I-O/I-O have changed, but we really haven't seen data yet. How are you thinking about KEYTRUDA front-line lung and the competitive dynamic in 2018 and 2019, when presumably others will be on the market? Thanks. Adam H. Schechter - Merck & Co., Inc.: Hi, Jami. So, first of all, when you think about KEYNOTE-021G, it certainly opens up the entire market for first-line for non-squamous patients. And once it's in the label, I think physicians will tend to use the product. Our representatives will be able to promote it appropriately. They'll be able to talk about the data and the information. And typically, the physicians will follow the label on something as important as first-line lung…

It's from Tony Butler with Guggenheim.

Yes, thanks very much, two questions. One for you, Rob, on the operating expenses of some modest increase, or expectations for some modest increase in 2017. I'm struck by the notion that, even in the midst of VYTORIN and ZETIA's LOEs, where that, I would argue, free up some capital, you are still going to grow op expenses. But moreover, is that simply dependent upon what might occur with KEYNOTE-021G midyear? Is it dependent upon that approval or not? And second, Roger, back to the notion of types of chemo that one might utilize with pembrolizumab, I was struck in ClinicalTrials.gov of your own CDK inhibitor. I think it's MK-7965 in conjunction with pembro, I guess in malignancies in the KEYNOTE-155 trial, but it may have utility in others, and just your thoughts around different mechanisms, more specific mechanisms, than simply something like ALIMTA or paclitaxel. Thanks for your time. Robert M. Davis - Merck & Co., Inc.: Tony, this is Rob. Thanks for the question. As we look at this, I think this really goes back to something we started talking about even back in the third quarter, as we started giving some indications of what we saw coming into 2017. Clearly, we recognize the need to pivot and try to manage expense in the year of patent expiries. However, we also recognize, and frankly feel good about, the fact that we have such a strong opportunity with KEYTRUDA that to try to pull back on some of those important clinical studies – as you know, we have over 420 studies underway for a product that clearly is starting to show it can be a leader in the space, only to manage for the short term, we felt, was not the right decision. So we made a decision to…

The next question is from Alex Arfaei with BMO Capital Markets.

Good morning, folks, and congratulations on a strong 2016 and all the progress with KEYTRUDA, a couple for Roger on the BACE inhibitor and the EPOCH study in Alzheimer's. Does the design and the statistical plan account for some of the potential limitations, such as not screening patients for beta amyloid and also including moderate patients? Also, to what extent – can you give us an approximate breakdown of what we should expect in terms of mild and moderate patients in that study? And will you be looking at activity in those patients in a prospective manner as an endpoint as opposed to the ad hoc analyses that we often see? Thank you. Roger M. Perlmutter - Merck & Co., Inc.: Right, Alex. So with respect to the first study, you're right. There was no imaging done for amyloid in the first study, in part because at the time of the start of the study that was not so easy to do. We did, however, try and pay attention to the representation of APOE subsets by stratification, which will improve the representation of individuals who likely have amyloid-enhanced Alzheimer's by the traditional definition. In terms of the study itself, measuring the progression of cognitive improvement, it's a fairly traditional set of measures. And roughly speaking, the representation of mild versus moderate is about 50:50. So we're eager to see the results. We will do a lot of subset analyses no matter what. And we are in a position, I think, because of the size of the study and the care with which the study was conducted, to get a lot of information. Fingers crossed, we're hopeful that we'll actually see a positive result. Teri Loxam - Merck & Co., Inc.: Next question, please.

It's from Gregg Gilbert with Deutsche Bank.

Thanks. First for Ken, you and your colleagues seemed quite constructive post the meeting with the President. I just want to make sure you're confident post the meeting, that there's not a proposal in the works to create some sort of bidding or direct negotiation process. I just want to make sure there's not a false sense of security building here. I'm not sure to what degree that came up, but perhaps you could go beyond just what you learned at the meeting on that front. And secondly for Rob on gross margin, is KEYTRUDA gross margin still well above the corporate average even after that new royalty burden? And is there anything else you'd like us to understand about product-specific gross margin as we think about the evolution of your gross margin this year and longer term as we model revenues for the different products? Thanks. Kenneth C. Frazier - Merck & Co., Inc.: I'll start with the question you asked. So obviously, we can't say what people in the Trump administration are thinking beyond what we heard in that meeting. And what we heard in that meeting I think gives us a lot of confidence that the Trump administration does understand the challenges associated with research-based pharmaceutical industry growth going forward. What I heard from Mr. Trump was a concern less around the cost of drugs in the aggregate but more around how patients need to be able to afford their co-pays and things of that nature. So since that was the discussion in the meeting, we were thinking about okay, we know that under the Part D benefit it's coming way under what was forecast. We know that substantial discounts are being negotiated by large players in the system. The question becomes how do we get some…

This concludes Merck's Q4 and full-year 2016 sales and earnings conference call. You may now disconnect.