Dr. Stefan Oschmann, Chairman of the Executive Board and CEO
Dr. Marcus Kuhnert, Member of the Executive Board and CFO
Dr. Belén Garijo, M.D., Member of the Executive Board and
CEO Healthcare
Darmstadt, Germany – February 5, 2019
Merck & GlaxoSmithKline
M7824 - Driving a paradigm shift in the treatment of cancer
2 Merck & GSK Global Alliance | February 5, 2019
Disclaimer
Cautionary Note Regarding Forward-Looking Statements and financial indicatorsThis communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other words of similar meaning in connection with future events or future operating or financial performance are often used to identify forward-looking statements. All statements in this communication, other than those relating to historical information or current conditions, are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond control of Merck KGaA, Darmstadt, Germany, which could cause actual results to differ materially from such statements.
Risks and uncertainties include, but are not limited to: the risks of more restrictive regulatory requirements regarding drug pricing, reimbursement and approval; the risk of stricter regulations for the manufacture, testing and marketing of products; the risk of destabilization of political systems and the establishment of trade barriers; the risk of a changing marketing environment for multiple sclerosis products in the European Union; the risk of greater competitive pressure due to biosimilars; the risks of research and development; the risks of discontinuing development projects and regulatory approval of developed medicines; the risk of a temporary ban on products/production facilities or of non-registration of products due to non-compliance with quality standards; the risk of an import ban on products to the United States due to an FDA warning letter; the risks of dependency on suppliers; risks due to product-related crime and espionage; risks in relation to the use of financial instruments; liquidity risks; counterparty risks; market risks; risks of impairment on balance sheet items; risks from pension obligations; risks from product-related and patent law disputes; risks from antitrust law proceedings; risks from drug pricing by the divested Generics Group; risks in human resources; risks from e-crime and cyber attacks; risks due to failure of business-critical information technology applications or to failure of data center capacity; environmental and safety risks; unanticipated contract or regulatory issues; a potential downgrade in the rating of the indebtedness of Merck KGaA, Darmstadt, Germany; downward pressure on the common stock price of Merck KGaA, Darmstadt, Germany and its impact on goodwill impairment evaluations as well as the impact of future regulatory or legislativeactions.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere, including the Report on Risks and Opportunities Section of the most recent annual report and quarterly report of Merck KGaA, Darmstadt, Germany. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
This presentation contains certain financial indicators such as EBITDA pre exceptionals, net financial debt and earnings per share pre exceptionals, which are not defined by International Financial Reporting Standards (IFRS). These financial indicators should not be taken into account in order to assess the performance of Merck in isolation or used as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with IFRS. The figures presented in this statement have been rounded. This may lead to individual values not adding up to the totals presented.
3
2012-2015 2016-2018 2019-2022
Efficiency
program
Portfolio optimization in LS and PM
Turnaround
in Healthcare
Leadership
in Performance Materials
Sigma
integration
Digital
business modelsNew applications
beyond displays
First pipeline
launches
3 strong pillars
Above-
market growthin Life Science
Fully leverage
pipeline potential
Portfolio management
Maximize our pipelinepotential:
1. Ramp up of Bavencio and Mavencladsales (9M 2018: €106 m)
2. Solid growth of core businessover 29 quarters
3. Diligent development and management of the pipeline(e.g. Evobrutinib, Bavencio RCC 1L,
TGF-ß Trap)
Merck & GSK Global Alliance | February 5, 2019 | Acronyms: RCC = Renal Cell Carcinoma
Healthcare Strategy
Continuing to deliver on our strategic roadmap
4 Merck & GSK Global Alliance | February 5, 2019 | 1: Assessment may change due to regular review
Actively managing portfolio for value maximization
Full pipeline requires regular
prioritization and de-risking decisions
• Merck continuously monitors all pipeline candidates
• Regular assessment of their potential is based on clinical data, strategic fit and financial criteria
• Merck then decides on how to best develop the assets going forward
• Strategic partnerships and external financing are key to de-risk the pipeline and maximize its value
Evaluate
Self
Mavenclad
Tepotinib
DNA Damage Response
Strategic partnerships
Bavencio
TGF-ß TrapEvobrutinib
Externalization
Atacicept
Abituzumab
IL-17
Asset’s fit for Merck’s resources
Asset’s f
it w
ith M
erc
k’s
R&
D s
trate
gy
Merck’s key pipeline compounds1
Healthcare Strategy
Clinical Development
Plans
First-in-class bi-functional fusion protein, targeting both TGF-β and PD-L1
Demonstrated superior anti-tumor activity in pre-clinical study compared to anti-PD-L1 alone, and anti-PD-L1 and TGF-β given in combination as separate agents
Great excitement in IO community about M7824 uniquely addressing TGF-ß biology widely accepted as key resistance factor for anti-PDxtherapies
• Eight high priority immuno-oncology clinical development studies ongoing or expected to commence in 2019, including pivotal registrational studies in non-small cell lung and biliary tract cancers
• Further plans to be communicated at a later stage
Merck & GSK Global Alliance | February 5, 2019 | 1: proposed International Nonproprietary Name (INN) | Acronyms: NSCLC = non-small cell lung cancer 5
M7824 Bintrafusp alfa1
A bifunctional fusion protein with significant potential
• Tested in 14 Phase Ib expansion cohorts across >700 patients in more than 10 tumor types
• Shown clinical anti-tumor activity across multiple hard-to-treat cancers includingadvanced NSCLC, biliary tract cancer, HPV-associated cancers, and gastric cancer
• PhII study M7824 monotherapy versus pembrolizumab 1L, advanced NSCLC high PD-L1-tumor expressers started in October 2018
Clinical Development Achievements
M7824
GlaxoSmithKline1
6 Merck & GSK Global Alliance | February 5, 2019 | 1: Partnering approach complimentary to Merck/Pfizer alliance
Choice of Partner
Joining forces with a strong partner committed to advancing M7824
Selection criteria
Global pharma player with strong capabilities in the development and commercialization of blockbuster drugs
Committed to advancing the development of M7824
Strong commitment to oncology reflected by:• Leading industry talent• Cutting edge portfolio• Recent acquisition of Tesaro
M7824 has potential for synergies with several of GSK's portfolio assets
Aligned on future development plans Fully aligned on current clinical development plan, including decisions made prior to partnership
Impressive global footprint & leadership with deep development and commercial oncology expertise
Provendevelopment
commitment
Complementaryoncology pipelines
Commercial strength
MeRck
7 Merck & GSK Global Alliance | February 5, 2019 | Acronyms: ICOS = Inducible T-cell costimulator, STING = Stimulator of interferon genes, TLR4 = toll-like receptor 4
Choice of Partner
Leveraging collective strengths and an aligned vision
GSK
• M7824: the only TGF-ß / anti-PD-L1 therapeutic, discovered in-house
• DDR portfolio
• Several potential combination assets including ICOS, TLR4, STING and others
• Established Oncology footprint • Global commercial footprint and growing oncology presence
• Proven track record of collaborative R&D, with roughly 50% of the pipeline developed through collaborations
• Strong commitment to oncology• Strong industry talent• Proven track record in collaborative
R&D• Rapid growth including Tesaro
acquisition
8 Merck & GSK Global Alliance | February 5, 2019 | 1: all studies shown to be commenced in 2019 | 2: randomized controlled trials | Acronyms: CT = chemotherapy, CRT = chemoradiotherapy, NSCLC = non-small cell lung cancer, BTC = biliary tract cancer, TNBC = Triple-Negative Breast Cancer
Alliance Development Plan
Exploring M7824‘s potential in difficult-to-treat cancers
Explorative Registrational
1L NSCLC in PD-L1 high vs pembrolizumab (mono)2
Started / ongoing
2L Biliary Tract Cancer (mono)
Stage III unresectable NSCLC 2(CRT combo)2
1L NSCLC all-comers (CT combo)
NSCLC
BTC
Not yet started1 Registrational intent
Additional studies and settings(incl. Gastric, 1L BTC, TNBC and
HPV related cancers) to becommunicated at a later date
Others
9 Merck & GSK Global Alliance | February 5, 2019
Deal Structure
Attractive payment terms rewarding developmental success
Upfront & Milestone Payment
Structure
Profit & Costsharing
• Profits & Costs: Shared equally on a global basis• Sales: Merck to recognize sales in the United States, GSK to recognize sales ex-US
Total deal volume: €3.7 bn
Upfrontpayment:
€300 m
Milestone payments: €3.4 bn
Development(up to €500 m)
Approval Commercial
Development milestones: Up to €500 m triggered by data from the M7824 lung cancer program
Upfront payment 300 m Around €100 m anticipated to be recognized as other operating income
in 2019 and remaining portion expected to be recognized until~mid-2021
Development milestone
Up to 500 m• Majority deferred and recognized as part of other operating income over
the remaining development term starting from the day on which the milestone is achieved
Approval milestones
Up to 2.9 bn• Recognized as part of other operating income as soon as the relevant
success criteria are metCommercial milestones
Sales n/a• Merck to recognize sales in the US• GSK to recognize sales ex-US
Costs n/a • Reconciled to ensure 50/50 share
Profits n/a • Reconciled to ensure 50/50 share
10 Merck & GSK Global Alliance | February 5, 2019 | 1: Accounting treatment subject to confirmation by the Group Auditors
Deal StructureUpfront – and milestone payments recognized asOther Operating Income
Payment type Amount (in €) Accounting treatment1
Effective date Approx. second half of March following anti-trust clearance
11 Merck & GSK Global Alliance | February 5, 2019
Merck and GSK
Driving a paradigm shift in the treatment of cancer
Innovative first-in-class bi-functional
molecule (TGF-β plus PD-L1) leading the
TGF-β immuno-oncology field
Strong partner truly committed to
co-developing M7824 and
exploring synergies with
their oncology portfolio
Attractive deal terms rewarding
developmental, regulatory
and commercial success
Eight high priority immuno-oncology
clinical development studies ongoing or expected
to commence in 2019
Constantin Fest
Head of Investor Relations+49 6151 72-5271
Eva Sterzel
Retail Investors / AGM /
CMDs / IR Media +49 6151 72-5355
Annett Weber
Institutional Investors /
Analysts +49 6151 72-63723
Institutional Investors / Analysts +49 6151 [email protected]
PATRICK BAYER
Assistant Investor Relations+49 6151 72-3744 [email protected]
SVENJA BUNDSCHUH ALESSANDRA HEINZ
Assistant Investor Relations+49 6151 72-3321 [email protected]
EMAIL: [email protected]
WEB: www.investors.merck.de
FAX: +49 6151 72-913321Institutional Investors / Analysts +49 6151 [email protected]
AMELIE SCHRADER
Appendix
Merck & GSK Global Alliance | February 5, 201914
M7824 is a first in class TGF-β targeting bifunctional fusion protein
TGF-β targeting overcomes poorly addressable tumor biology
anti PD-L1
1
2
3
TGF-β Trap
Appendix
Merck & GSK Global Alliance | February 5, 2019 | Lan et al, Sci Transl Med, Jan 201815
Co-localization of two highly synergistic pathways
M7824 is superior to co-administration of TGF-β trap and anti-PD-L1
MC38 Colorectal Cancer
Appendix
Merck & GSK Global Alliance | February 5, 201916
Ongoing phase I signal-finding studies treated >670 patients with M7824
Phase I, open-label, multiple-ascending dose trial
Study design (NCT02517398)
Study design 001
Subjects with metastatic or locally advanced solid tumors and expansion to selected indications
Indications: Locations:
Sites in America, Asia, Europe and Oceania
1
Pancreatic >2L
TNBC >2L
HCC 2LExpansion
CRC >2L
Melanoma PDx Failure
NSCLC 2L
Adeno Esophageal >2L
Cervical >2L
HCC 2LNSCLC PDx
Failure
SCCHN
GBM >2L
Phase I, open-label, multiple-ascending dose trial
Study design (NCT02699515)
2
Study design 008
Subjects with metastatic or locally advanced solid tumors with expansion to selected indications in Asian subjects
Locations:
Sites in Asia
Sq. Esophageal Biliary tract 2L Gastric 3L
Appendix
17
* TPS ≥50% with 22C3 comparable to ≥80% with EMD 001 assessments
1200 mg (data cut off 23 July 2018)
Keynote 001
80
60
40
20
0
ORR (
%)
Keynote 010
19% 18%
27%29%
44%
25%(10/40)
37%(10/27)
85.7%(6/7)
M7824
All PD-L1+* PD-L1high*
All PD-L1+* PD-L1high*
Efficacy According to Independent Read, RECIST 1.1
Appendix
Merck & GSK Global Alliance | February 5, 2019
Non-small cell lung cancer (NSCLC 2L)
Impressive durable responses seen across all PD-L1 expression levels
18
Biliary tract cancer (BTC) - Update on Clinical Results
ORR of 20% with long durability in allcomer population - IRC readBiliary Tract Cancer (Asian patients, 2nd line after platinum based 1st line)
N=30 N INV % IRC (%)
Objective responses 7 23.3 6 (20.0)
CR 1 3.3 1 (3.3)
PR 6 20.0 5 (16.7)
DCR (conf CR/PR/SD) 11 36.7 12 (40.0)
DoR Median not reached, 6/6 ongoing for 8.3+ to 13.9+ months
PFS Median 2.6 monthsPFS12 23.6%
1.3-5.69.7-40.8
OS Median 12.7 monthsOS12 52%
6.7-not reached32.8-68.2
RECIST 1.1, Independent Central Read
Best change in target lesions from baseline
Change in target lesions from baseline
SOC Efficacy BTC 2L (ASAN Medical Center, Lamarca2014)
ORR 7.5% (Lamarca 2014)
Pembrolizumab BTC cohort in PD-L1 ≥1%*
ORR 5.8%
data cut off date: 23 July 2018
Appendix
Merck & GSK Global Alliance | February 5, 2019 | * Keynote 158, n=104 pts, 6.6% ORR in PD-L1 pos, 2.9% ORR in PD-L1 neg
19
HPV-associated cancers – A potential pan-tumor therapy
M7824 produced strong responses in these cancers, especially those HPV+
• Data shown is from dose escalation portion of the Phase 1
• HPV is associated with almost all anal and cervical cancer, and some SCCHN1-3
• Anti–PD-1 monotherapies have shown clinical activity but response rates remain in the range of 17–26%4-7
• Analyses of HPV+ cervical and SCCHN tumor samples from TCGA and Oncominedemonstrate frequent dysregulation of TGF-βR1 signaling, suggesting this pathway plays a role in HPV-mediated carcinogenesis
1. De Vuyst et al. Int J Cancer. 2009;124:1626–36;2. Ihloff et al. Oral Oncol. 2010;46:705–11; 3. Mehanna et al. Head Neck. 2013;35:747–55; 4. Bauml et al. J Clin Oncol. 2015;33(suppl; abstr TPS3094); 5. Ferris et al. N Engl J Med. 2016;375(19):1856; 6. Frenel et al. J Clin Oncol. 2017;35(36):4035; 7. Ott et al. Ann Oncol. 2017;28(5):1036;8. Levovitz et al. Cancer Res. 2014;74(23):6833
BOR, n (%) N=17(all HPV associated tumors)
N=12(all HPV-positive)
CRPRSDPD
2 (11.8)4 (23.5) a
4 (23.5)7 (41.2)
1 (8.3)4 (33.3) a
1 (8.3)6 (50.0)
ORR 6 (35.3) 5 (41.7)
DCR 10(58.8) 7 (50.0)
a1 patient had an unconfirmed PD per RECIST prior to durable PR (assumed
pseudoprogression)
Appendix
Merck & GSK Global Alliance | February 5, 2019
Merck & GSK Global Alliance | February 5, 201920
Gastric Cancer (Asian patients, 3L+) – A promising monotherapy in allcomers
Long durability and response rates nearly twice as PDx
N=31 n INV % IRC (%)
ORR (confirmed CR+PR) 7 22.6 5 (16.1)
CR 2 6.5 1 (3.2)
PR 5 16.1 4 (12.9)
SD 5 16.1 2 (6.5)
PD 17 54.8 21 (67.7)
NE 2 6.5 2 (6.5)
DCR (CR+PR+SD) 12 38.7 7 (22.6)
RECIST 1.1, investigator read
Nivolumab Pembrolizumab
Trial ONO-4538 KEYNOTE-059
Phase III vs. Plc II
Line of Therapy 3L+ 3L+ mono
Patient (n) 493 143
ORR 11.2% 13% (PD-L1 pos)
All comer population has been enrolled in this trial
Efficacy According to Investigator-Assessed RECISTv1.1: Tumor Regression from Baseline
Appendix