Merck & Co., Inc. Adam H. Schechter Executive Vice President and President Global Human Health. Jefferies Global Healthcare Conference

Transcription

1 Adam H. Schechter Executive Vice President and President Global Human Health Merck & Co., Inc. Jefferies Global Healthcare Conference November 20, 2014

2 Forward-Looking Statement This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of Forward looking statements include statements regarding the timing and closing of the tender offer and the merger transactions, the ability of Merck to complete the transactions considering the various closing conditions, and any assumptions underlying any of the foregoing. These statements are based upon the current beliefs and expectations of Merck s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck s patents and other protections for innovative products; the exposure to litigation, including patent litigation, and/or regulatory actions. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck s 2013 Annual Report on Form 10-K and the company s other filings with the SEC available at the SEC s Internet site (

3 Merck is Delivering Focused Results in 2014 Strategic Actions for Growth Focused On Driving Portfolio Growth Advancing the Innovative Pipeline Returning Cash to Shareholders Being the Premier Research-Driven Biopharmaceutical Company

4 Merck Has the Right Strategy to Drive Growth and Productivity New, Focused Model Suite of Opportunities Harnessing Immuno-Oncology

5 Merck Has the Right Strategy to Drive Growth and Productivity New, Focused Model Investing Behind the Best Sources of Growth Divesting Non-Core Assets $2.5B Annual Cost Savings by end of 2015 Suite of Opportunities Harnessing Immuno-Oncology

6 Merck Is Sharpening Its Strategic Focus Top 10 Markets & Core Commercial Therapeutic Areas Breakthrough R&D Including I-O and HCV Non-Focus Areas Investments weighted to priority areas of focus.

7 Key Strategic Accomplishments Portfolio prioritization led to divestiture of $3 billion in revenue Completed sale of $2B Consumer Care business to Bayer Completed divestiture of $1B non-core human health products and business areas Acquired Idenix for key Hepatitis C assets Determined to augment and grow Animal Health YTD Animal Health grew +9% 1 Significant progress redesigning operating model / reducing cost base Remain on track to achieve target of $2.5 billion net reduction in annual operating expenses by the end of YTD sales growth through September 30; excludes impact from foreign exchange and Zilmax.

8 Merck Is Steadily Improving Cost Efficiencies Continuing efforts to Reduce Costs by $2.5B 52% SG&A + R&D 1 50% 48% 46% 44% 42% 40% 38% M Merck Peer Average 3 1 Non-GAAP SG&A + Non-GAAP R&D as a % of sales Operating expense ratio represents Merck standalone; 2009 represents 12 months of Merck + 2 months of Schering-Plough. 3 Peer group results based on Non-GAAP results reported by peers in Q3 earnings reports group made up of 8 large pharmaceutical companies.

9 Merck Made Clear Choices to Deliver on Our Mission and Win We are focusing even more explicitly on: Therapeutic areas where payers will pay for innovation Markets with the greatest opportunities Top global and local customers Obtaining and maintaining prices Preparing for launches

10 Focus: These Areas Give Us a Strong Platform for Growth DIABETES VACCINES Total deaths from diabetes are projected to increase by 50% in the next 10 years ACUTE CARE HOSPITAL Cervical cancer is the second most common cancer in women worldwide ONCOLOGY Antibiotic-resistant bacteria infects over 2 million Americans annually, resulting in 23,000 deaths Every year, 8 million people die from cancer worldwide Sources: CDC, WHO

11 Diabetes: We Are a Leader in the DPP-4 Market 2014 YTD Sales Growth 1 JANUVIA TRx Trend 2 $4.8 $4.4 +4% JANUVIA Franchise 12-Wk Rolling TRx YoY Change % $4.0 $3.6 $3.2 $ Focusing resources on this important brand with ~$6 billion annual sales Macro trends support a growing Diabetes market 1 YTD sales growth through September 30; excludes impacts from foreign exchange. 2 Source: IMS (Nov 15, 2013 through Nov 7, 2014).

12 Vaccines: We Are a Leader in the Global Vaccines Market Merck Vaccine Sales 1 +14% CAGR Merck ranked #1 in global sales 2 Broad portfolio GARDASIL market share leader at >90% globally V503, 9-valent HPV vaccine currently under FDA review, increases protection to almost 90% 1 Excludes SPMSD joint venture sales. 2 Merck and Peer revenue as reported, FY 2013 and YTD 2014.

13 Acute Care Hospital: An Area of Significant Unmet Need 2014 YTD Sales Growth 1 $ % Portfolio of products with annual sales >$2 billion Key products include: $1.5 Antibiotics (INVANZ, PRIMAXIN) Antifungals (NOXAFIL, CANCIDAS) $1.0 $ BRIDION Well-positioned longer term with several Phase 3 pipeline opportunities 1 YTD sales growth through September 30; excludes impacts from foreign exchange.

14 Oncology: Launching in Immuno-Oncology First Anti-PD-1 launched in the US ~1,200 eligible patients at launch, with a few hundred additional patients eligible each month 900+ patients treated since approval (Sept. 2014) Most payers are covering cost of current indication without restrictions Reached top ipilimumab prescribers within days of approval

15 Merck Has the Right Strategy to Drive Growth and Productivity New, Focused Model Suite of Opportunities Numerous Launches and Filing Opportunities in 2014 and 2015 Launching into Large Markets with Unmet Needs Opportunities in Immuno-Oncology and HCV Leveraging Global Presence to Accelerate Growth Harnessing Immuno-Oncology

16 Merck is Launching New Molecular Entities into Large Markets Recent Approvals Regulatory Action Upcoming Oncology: KEYTRUDA for advanced melanoma Insomnia: BELSOMRA Cardiovascular: ZONTIVITY Allergy Immunotherapy: GRASTEK RAGWITEK Hepatitis C Virus: VANIHEP, in Japan Vaccines: V503, HPV-related cancers V419, pediatric hexavalent combination vaccine in US Acute Care Hospital: Sugammadex in US Diabetes: Omarigliptin, once-weekly DPP-4 Inhibitor in Japan Cardiovascular: ZETIA / VYTORIN, plan to submit snda with IMPROVE-IT data in mid-2015

17 Merck Also Has Many Attractive Programs in Registrational Trials Actoxumab / Bezlotoxumab (C. Diff. Infection) Grazoprevir / Elbasvir (Hepatitis C) KEYTRUDA NSCLC (KN-010) V212 (Inactivated VZV vaccine) KEYTRUDA Bladder Cancer (KN-045) Letermovir (HCMV prophylaxis) Anacetrapib (Atherosclerosis) Omarigliptin (once weekly DPP-4) Ertugliflozin (SGLT-2 Inhibitor) BACE Inhibitor (Alzheimer s Disease) Earliest study primary completion date per clinicaltrials.gov Latest study primary completion date per clinicaltrials.gov

18 HCV: Fast-growing Market with High Unmet Need The number of patients with cirrhosis will peak in the next 7-10 years Number of Cases 1,200,000 1,000, , , , , Cirrhosis M 50+ M M 0-30 F 50+ F F Year In US, 3.2 million people with chronic HCV 50% diagnosed ~170, ,000 cured >450,000 may get insurance between 2014 and 2020 Without changes to historical diagnosis and treatment paradigm, annual medical costs expected to rise to $85 billion in 5 years There is an unmet medical need for an interferon-free, ribavirin-free, short duration HCV therapy that is highly effective across all patient populations, including patients with cirrhosis. Source. Hepatitis C in the United States, Holmberg, NEJM 2013; Decision Resources (2013), Health care reform and Hepatitis C: a convergence of risk and opportunity - Milliman, 2013; CDC Draft Recommendations May 18, 2002

19 Merck s HCV Doublet will be Filed in 2015 Grazoprevir (MK-5172) Highly Potent HCV Protease Inhibitor Elbasvir (MK-8742) Highly Potent HCV NS5A Inhibitor Grazoprevir/Elbasvir Fixed Dose Combination Tablet High rates of efficacy demonstrated against key genotypes High barrier to resistance and activity against common resistance-associated variants of HCV Single tablet given once-daily, no significant food effect Breakthrough therapy designation from FDA

20 Merck's HCV Triplet to Start Phase 2 in Q Direct-acting therapies including a nucleotide inhibitor MK-3682 Highly Potent HCV NS5B NI Grazoprevir Highly Potent HCV Protease Inhibitor Elbasvir or MK-8408 Highly Potent HCV NS5A Inhibitors Phase 2 C-CREST program evaluates two different 3-drug regimens Designed to target broad range of genotypes Starts with 8 week regimens in non-cirrhotics, proceeding to harderto-treat patients and shorter durations of therapy

21 Merck Has the Right Strategy to Drive Growth and Productivity New, Focused Model Suite of Opportunities Harnessing Immuno-Oncology KEYTRUDA is first FDA-approved Anti-PD-1 Breakthrough Therapy Designation for NSCLC 1 Growing Utility in Multiple Tumor Types Building Partnerships and Collaborations Expanding Into Combination Therapy 1 KEYTRUDA has Breakthrough Therapy designation for advanced melanoma following ipilimumab and/or BRAF inhibitor failure and EGFR negative and ALK negative NSCLC following platinum based therapy failure.

22 Cancer is a Significant Global Burden Select Cancer Type 2013 Sales ($mm) Breast cancer $11,530 CRC 7,501 NSCLC 6,757 NHL 6,211 Multiple myeloma 6,210 CML 5,952 Prostate cancer 5,384 RCC 3,749 Melanoma 1,388 ALL 1,304 Liver cancer 868 Glioblastoma 846 Stomach cancer 692 Head & neck 659 Pancreatic 541 Source: Globocan (2012) Source: EvaluatePharma

23 KEYTRUDA: Evidence of Response in Seven Tumor Types NON-SMALL- CELL LUNG HEAD & NECK TRIPLE NEGATIVE BREAST CLASSICAL HODGKINS CANCER LYMPHOMA GASTRIC BLADDER OTHERS MELANOMA Initial market entry in metastatic melanoma Second indication in non-small-cell lung cancer Showed data in 7 tumor types in ongoing or planned clinical trials in more than 30 tumor types, with over 8,000 patients estimated to enroll

24 Merck has a Robust Immuno-Oncology Pipeline PRECLINICAL PHASE 1 / 2 REGISTRATION Anti-LAG3 Melanoma & NSCLC (KEYNOTE001) Melanoma IPI naïve (KN006) MONOTHERAPY Other agonists Other antagonists Melanoma brain metastasis (KN027) Head & neck, bladder, triple neg breast & gastric (KN012) Hematologic malignancies (KN013) MSI-high Colerectal and noncolon (KN016) Anti-GITR: Solid tumors Biomarker + 20 multiple solid tumors (KN028) Phase 2 Gastric Melanoma IPI refractory (KN002) 2/3 NSCLC (KN010) NSCLC 1 st line (KN024 & 042) Melanoma adjuvant Head & neck (KN040) Bladder (KN045) Melanoma with IPI/Sylatron (KN029) Melanoma with T-VEC (AMGN) Melanoma BRAF & MEK Inh (GSK) (KN022) NSCLC with abraxane (KN026) COMBINATION NSCLC with chemo, IPI, & TKI (KN021) RCC with pazopanib (GSK) (KN018) MM with lenalidomide & dexamethasone (KN-023) RCC with axitinib (PFE) Solid tumors with 41BB (PFE) HER2+ breast with trastuzumab STUDIES Ongoing Planned NSCLC with IDO1 (INCY) (KN-037) Prostate with Lm-LLO (ADXS) *Phase 1 unless otherwise noted; KN = Keynote.

25 Delivering on Our Commitment to Shareholders Returned over $11 billion to shareholders over the last 12 months Returned ~90% free cash flow in the last 5 years Increased the dividend 3 times in the past 3 years After-tax proceeds from Consumer Care divestiture, net of Idenix acquisition, deployed by year end for share repurchase

26 Merck is Delivering Focused Results in 2014 Strategic Actions for Growth Focused On Driving Portfolio Growth Advancing the Innovative Pipeline Returning Cash to Shareholders Being the Premier Research-Driven Biopharmaceutical Company

27 Focusing on the Future