Good morning. My name is Darla and I will be your conference operator today. At this time, I would like to welcome everyone to Merck's First Quarter 2018 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 first quarter 2018 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 maybe 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…

Your first question is from David Risinger with Morgan Stanley. David R. Risinger - Morgan Stanley & Co. LLC: Thanks very much. Congrats on the performance. I wanted to ask two questions. First, could you just update us on the potential approval timing for KEYNOTE-189, ex-U.S., in major markets? And then, second, with respect to the company's operating leverage potential, it appears that some of the negative pressures on key franchises will subside after 2018 and there should be operating leverage in coming years. But I just wanted to ask you to characterize how you're thinking about the opportunity to drive potentially faster operating profit growth and revenue growth in coming years. Thank you. Roger M. Perlmutter - Merck & Co., Inc.: David, it's Roger. With regard to the approval timing for KEYNOTE-189, ex-U.S., the files are moving forward in a variety of jurisdictions. We expect them to move in the usual sort of way. There are no special accelerations that we see in Europe or in other jurisdictions, but the files will move forward and, as we learn more, we'll update you on their progress. Robert M. Davis - Merck & Co., Inc.: Thanks, David. This is Rob. I'll address your question on operating leverage. The answer is we do expect – as we've been signaling for quite some time, that we do expect long-term operating margin expansion and improvement due to the fact – really several things. One, obviously, as we continue to see growth in our sales line and the shift in our mix of our products, that should drive operating margin improvement. And as we have been talking about over the last several quarters, we've been in a period of heavy investment, particularly into the clinical studies behind KEYTRUDA and just the vast oncology portfolio we have in total moving through the clinic. So, that obviously has been putting some pressure on our ability to drive leverage in the near-term and will continue to make leverage more challenging over the near-term. But long-term, we are focused on driving operating margin improvement. So, you should see them. Teri Loxam - Merck & Co., Inc.: Great. Next question, please, Darla.

It's from the line of Gregg Gilbert with Deutsche Bank.

Thank you. Good morning. Ken and Rob, I know you like the Animal Health business for the reasons you've articulated many times. So, don't need you to repeat those, but how do you balance those attributes with the fact that the business could be much more highly valued outside of the company? And my second question is on the Eisai collaboration. Roger, what are the important points of differentiation you see for Lenvima versus other TKIs? Thanks. Kenneth C. Frazier - Merck & Co., Inc.: Well, so, thanks, Gregg, for the question. Let me start by saying what we've stated in the past, which is that we think this is a key growth driver for the company with healthy margins and a strong market outlook. Our goal over the longer term is to drive long-term growth and we think Animal Health, a business that generates really good cash flows, that actually helps fund the Human Health R&D we intend to do, is a way of generating long-term shareholder value within Merck. In addition, I guess, ironically, I might add that from time to time, we're told that a concern is the concentration risk around KEYTRUDA and this provides diversification from KEYTRUDA as well as the rest of our Human Health portfolio. So, I guess, I would say we view this business as an important future pillar of growth for Merck. Roger M. Perlmutter - Merck & Co., Inc.: Right. And, Gregg, the Lenvima is, just as you point out, is one of a large number of tyrosine kinase inhibitors that are active across a broad range of malignancies. It's pretty difficult to compare them, because the different protein tyrosine kinase inhibitors have related, but not identical spectra of activity with respect to the VEGF receptor family, PDGF receptor and others. As a result, one just has to look at the clinical data. I'd say that Lenvima data, first of all, as a monotherapy in renal cell carcinoma and in differentiated thyroid are strong and the hepatocellular data are really very good that provided approval in Japan. Our knowledge of this led us to begin the initial combination studies. We found we were able to combine Lenvima with KEYTRUDA effectively and the results which we presented in part for the combination of the two in renal cell carcinoma are really very, very encouraging. Additional data on the combination of Lenvima plus KEYTRUDA will be presented at ASCO and they're really quite interesting results. That Phase III program, of course, is still ongoing and won't be available until next year, but it is a formidable combination. Teri Loxam - Merck & Co., Inc.: Great. We'll take the next question, please, Darla?

It's from the line of Chris Schott with JPMorgan.

Great. Thanks very much for the questions. The first one was on KEYTRUDA and just your thoughts on the role of monotherapy KEYTRUDA relative to combo in light of KEYNOTE-189, the data from KEYNOTE-024 as well as the data from the upcoming KEYNOTE-042 study. When we think about the high expressors as well as that 1 through 49 population, I was trying to understand how you're thinking about how people will be using monotherapy versus combo in those two settings specifically. My second question was a broader question just for Ken. I guess what we're seeing here is just the success you've had with KEYTRUDA and the visibility that provides to the longer-term business, does that change at all how you think about either investing in the portfolio today, your business development priorities or just how you think about core versus non-core assets at all? Thank you very much. Teri Loxam - Merck & Co., Inc.: Roger, you want to start on KEYTRUDA? Roger M. Perlmutter - Merck & Co., Inc.: Yeah. So, Chris, the decision as to whether to use monotherapy versus combination therapy, I think, will be a very personal one that results from the discussions that go on between physician and patient. In a general sort of way, as you can imagine, for patients who have substantial comorbidities and where there is concern about the adverse effect profile of adding chemotherapy, monotherapy is a sensible alternative. For patients who are younger and where comorbidities are not a concern, combination therapy might be the right answer, but it will be a very personalized decision. I guess the important thing to emphasize is that in either case, KEYTRUDA provides the foundation for a therapy either with or without chemotherapy and the data on that becomes stronger and stronger over…

It's from the line of Jami Rubin with Goldman Sachs. Jami Rubin - Goldman Sachs & Co. LLC: Thank you. Just a couple questions, mostly for you, Ken. Congrats again on winning the I-O war with KEYTRUDA which has been phenomenal news for patients, but that has not translated into shareholder value creation as Merck shares have been sort of a chronic underperformer for the past one, three, five years. So, just as you sort of wind down your period as CEO and I also want you to touch upon succession plans, what are your priorities to unlock shareholder value? You just said you're not going to spin out Animal Health. I believe that would be one very easy way to unlock value, but in the absence of doing that, what are the other plans to unlock value? Investors have been frustrated that there has been less aggressive BD activity. Can you talk more about that? And then, Rob, you touched upon margin leverage, but will this be primarily just coming from mix or is there an opportunity for absolute cost cuts? And then, Ken, again, if you could comment on succession plans. Thanks very much. Kenneth C. Frazier - Merck & Co., Inc.: Thank you, Jami, for your questions. So, first of all, of course, we would like to see our stock perform better than it has in recent years, particularly given the fact, as I've said, we have executed, I think, exceptionally well in the I-O space and we also think we've positioned the company for long-term growth and value creation. As I've said in my opening comments, we actually believe that our revenue growth opportunities are somewhat underappreciated, but moving to, I think, the thrust of your question, we continue to look for opportunities to augment our…

It's from Vamil Divan with Credit Suisse. Vamil K. Divan - Credit Suisse Securities (USA) LLC: Hi. Thanks so much for taking my questions. So, one, I know there's been a lot of focus on lung cancer market and, obviously, the data you presented there. Just maybe, I guess, this is for Adam, just some thoughts on the commercial impact you think that might have on the use of KEYTRUDA in other indications and could there be the sort of halo effect that some of us have been talking about in terms of just driving KEYTRUDA to be the sort of preferred PD-1 across a whole range of indications? And then, my second question is more for Roger I guess. With the IDO news that you mentioned, I'm just wondering how that changes, how you think about advancing mechanisms. As you think about combinations, does it make more of an emphasis on finding monotherapy activity from agents before you move them into combinations or just any sort of thoughts, you have so many different combinations that you're working on, how do you think about prioritizing ones that maybe more likely to succeed than others? Thanks so much. Adam H. Schechter - Merck & Co., Inc.: Yeah. Hi, Vamil. This is Adam. Thanks for the question. And I'll start with the U.S. In the U.S., we're already seeing growth across all indications. We're seeing a particularly strong uptake in first-line lung, but we're also encouraged by the recent launches, so there's a strong launch in bladder, we're already number one. Head and neck is continuing to perform very, very well. We see good traction in MSI-high with increased testing. And when you look at the clinical program that Roger talked about, I think we will be a leader in many indications…

It's from Tim Anderson with Bernstein. Timothy Minton Anderson - Sanford C. Bernstein & Co. LLC: Thank you. I'd like to press you again on M&A, because I have kind of been confused what the message is. Merck has talked about not doing transformative deals, which I think really speaks to big pharma tie-ups and how that doesn't create value. At AACR, Roger talked about deals not really – deal focus not really being revenue-based, yet today, you mentioned your balance sheet is strong, you kind of suggest you're looking at everything. You claim that asset prices are high. I don't think that's really true when you look at big biopharma names. And so, my question is this, can you really rule out that it's not realistic that Merck is looking at a big biopharma name? It'd be great if you could just kind of narrow down what it is you're willing to consider versus not. I understand nothing transformative, but that still leaves open a very broad bandwidth of target companies potentially. Second question is on KEYNOTE-042. I know results haven't been released. Can you say, at least directionally, whether you saw a meaningful benefit on efficacy in low expressors such as the 1% to 20% segment, I think that was one of your cut offs or could the benefit in the ITT group really have been driven by primarily the high expressors? Kenneth C. Frazier - Merck & Co., Inc.: Okay. Thanks, Tim. Let me just start by saying what I said earlier which is that when we look at the possibilities, we try not to restrict our scope in terms of what we look at. What I've said before and I will say again is that a large, what some people would call, transformational deal is not…

It's from Steve Scala with Cowen. Steve Scala - Cowen & Co. LLC: Thanks. A couple questions. First, Ken, you mentioned with more intensity than in the past that Merck revenue prospects are underappreciated. Consensus looks for a 3% compound revenue growth through 2022. Are you saying that revenue growth will be more like mid-single digit, if not higher, through 2022 and beyond? And if that's the case, then you probably don't need to do M&A. And then, one for Adam on GARDASIL. Can you give us a sense of GARDASIL's potential in China? For instance, can China double the current GARDASIL sales base from $2.5 billion to $5 billion alone? Thank you. Kenneth C. Frazier - Merck & Co., Inc.: Okay. Steve, with respect to your first question, I'm not going to be specific about numbers and I'm not giving long-term guidance. What I can say is that we look at our portfolio, we look at the growth that's possible, for example, in oncology and we are very confident about our ability to grow the company in the near- to long-term based on our key pillars, as I said before, oncology, vaccines, Animal Health and Hospital/Specialty. So, we are very confident in our ability to drive that growth and I can't be more specific in terms of specific guidance. Adam H. Schechter - Merck & Co., Inc.: And then – hi, Steve, this is Adam. GARDASIL continues to perform very well in many markets around the world and we see it as a continuing growth driver for us as we move forward. I mentioned in my script that outside the U.S., we saw significant growth in this quarter and that was partially driven by the performance in China. There's no doubt that China represents a strong opportunity for GARDASIL moving forward. We're just in the initial launches in China. We're off to a very strong start, but we're going to have to really wait to see a period of time to understand if that demand will continue over time. So, I believe that represents a very good opportunity for us, but the magnitude of which we're not going to talk about today, we have to give it more time. Teri Loxam - Merck & Co., Inc.: Thanks. Let's move on the next question, please.

It's from the line of Andrew Baum with Citi.

Morning. Couple of questions, please. First to Ken and Adam. The FDA and the HHS have made clear that they want to see commercial success for biosimilars. I note on the PBM side, many PBMs, including Express today, have voluntarily adopted to adopt pass-through of rebates to patients. The question on the biosimilars' side is do you think shareholders will voluntarily adopt the biosimilars' first strategy before anything gets mandated by CMS through the legislative or regulatory pathway? And then, second, Merck has been a pioneer of tissue-agnostic approvals with KEYTRUDA in MSI. Given the reimbursement of next-generation sequencing on the Medicare as of the beginning of this year, I'm somewhat surprised Merck isn't exploring a trial of KEYTRUDA in patients with germline DNA damage repair, given the stats. Do you have a trial ongoing? Do you have one planned? Given the size of the market, isn't that an obvious area of interest for you? Thank you. Adam H. Schechter - Merck & Co., Inc.: Yeah. So, hi, Andrew. This is Adam. And I'll start with biosimilars and I'll be focused on the U.S. market. I think that there will continue to be a significant potential market for biosimilars in the U.S. and I do think that there's a lot of energy to ensure that cost savings can occur by the appropriate utilization of biosimilars. Whether it's through regulatory environment or payers that – who are volunteering to try to use biosimilars first, I do believe that there will continue to be an increase in their utilization. At the same time, I think that you'll continue to see price pressure and you'll see the free market work the way in which it's supposed to work. So, the parent compounds or the originators might come down in price in order to…

It's from the line of Geoff Meacham with Barclays.

Good morning, guys. Thanks for the question. Adam or Roger, on first-line lung in the U.S., you touched on this, but I want to get a better sense from you as to who the incremental prescriber is or what overall share you think could now be in play based on the full KEYNOTE-189 dataset. I'm assuming that low expressors could be the biggest opportunity. And then on – Ken, another strategic question for you, you mentioned Animal Health diversifying the model and concentration risk. Investors have long been worried about the LOE from diabetes and how much of a strategic priority is filling this gap over the long-term? Thank you. Adam H. Schechter - Merck & Co., Inc.: Yes. Hi, Geoff. This is Adam. And as I mentioned before, the key opinion leader and even the community-based, there's an excitement on the KEYNOTE-189 data is very strong. As I mentioned in the past, I think we did a very good job with penetrating the greater-than-50% PD-L1 marketplace previously and a lot of that was the monotherapy use. Where we weren't as successful, it was in the patients with 1 to 49 or the patients below 1. And what we're hearing is now that we've shown the overall survival data in all of those segments that there will be increased utilization of the combination therapy for those segments and I think that there's a lot of runway to go into those two segments. Robert M. Davis - Merck & Co., Inc.: And, Geoff, this is Rob. I'll answer the question about filling the gap related to JANUVIA, JANUMET. As Ken mentioned in his prepared comments, we are feeling very confident in the growth potential we have. And if you look at some of the recent deals we've done, we are focused…

It's from Jason Gerberry, Bank of America Merrill Lynch.

Hi. Good morning and thanks for taking my questions. Just first question, just wanted clarification. I thought I heard you say KEYNOTE-407 would be presented at ASCO, but we didn't see it in the titles or the study hasn't been top-lined. So, Roger, could you just provide some clarification there? And then on your 15 valent vaccine that you initiated Phase 3 studies on, just wondering if you guys can comment a little bit on how you see the products competitively positioned relative to Prevnar. Is it basically roughly about 15% (54:43) coverage with no additional negative trade-offs? Is that sort of the ultimate value proposition if that study is successful? Thanks. Roger M. Perlmutter - Merck & Co., Inc.: Yeah. Jason, it's Roger. KEYNOTE-407, it was actually – the title was in the abstract publication and it will be presented at ASCO. So, those data will – people will have a chance to see them. It wasn't specifically named, but the title was there with respect to squamous and lung cancer. And regarding V114, the serology data, which we had a chance to present in Melbourne just recently, are really very, very strong for the V114 vaccine. And it provides the opportunity to both strengthen the response to serotypes covered by other pneumococcal conjugate vaccines, but also to add additional stereotypes which will be important in terms of preventing invasive pneumococcal disease. So, we see opportunities there in both areas and we anticipate that assuming that we can get those same kinds of results in the Phase 3 studies, then we'll have a very attractive profile. Teri Loxam - Merck & Co., Inc.: Great. Thanks. We're going to try to squeeze one more question in here.

It's from Alex Arfaei with BMO.

Okay. Good morning, folks. Thanks for taking the questions. A few quick ones, if I may. Rob, on your tax rate, we're seeing notably lower tax rate from some of your peers. I'm just wondering if there's a further opportunity for lowering your rate as well. Roger, you're obviously showing a very strong execution, R&D execution with KEYTRUDA, but there seems to be a notable difference in your R&D productivity with KEYTRUDA and the rest of the pipeline. I'm just wondering if you have a comment on that please and if there's any additional steps being taken to close that apparent gap. And then, finally, Adam, not sure if I missed it, but could you please provide estimated KEYTRUDA sales by different indications? Thank you. Robert M. Davis - Merck & Co., Inc.: Good morning. This is Rob. I'll answer your question about the tax rate. So, if you look at where we are, we are guiding for 19% to 20% for this year. As we indicated on our fourth quarter call, we do expect – as we move into 2019, there is the opportunity for us to see a further reduction in our tax rate of up to 1 percentage point. So, you will see our tax rate improve as we move forward from 2018 into 2019. Roger M. Perlmutter - Merck & Co., Inc.: And, Alex, I guess you and I might have to agree to disagree on the issue of the rest of the pipeline. I thought you were going to say the pipeline execution outside KEYTRUDA is even stronger. If you look at things like the registration for PREVYMIS, which is an extraordinary drug in CMV, it is already being adopted as the standard in hematologic transplant and the solid organ transplant work is going along.…

This concludes Merck's first quarter 2018 sales and earnings conference call. You may now disconnect.