Dear ladies and gentlemen, welcome to the Merck R&D update call. As a reminder, all participants will be in a listen-only mode. May I now hand you over to Constantin Fest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Thank you very much, Heidi. Dear ladies and gentlemen, a very warm welcome to this Merck's 2022 Healthcare R&D update call. My name is Constantin Fest. I am Head of Investor Relations here at Merck. I am delighted to be joined today by the following presenters. We have Danny Bar-Zohar, Global Head of Research and Development and Chief Medical Officer. Klaus Urban, Global Head of Discovery and Development Technologies. Victoria Zazulina, Global Head of Development Unit Oncology. Jan Klatt, Global Head of Development Unit Neurology and Immunology. Please note, also joining for the Q&A part of this call is Andrew Patterson, Chief Marketing Officer. In the next 50 to 60 minutes, we would like to run you through the key slides of this presentation, which will then be followed by a Q&A. With this, I would like to now hand over to Danny to kick it off. Thank you so much, Constantin. Good afternoon, good morning to all of you on the call today. Warm welcome from my side as well as from my colleagues here. Really like to thank you for your interest and very happy to share more about our progress, our plans, and our overall direction. Can we switch to the next slide? Yeah. Healthcare R&D is I would say really proud to operate as a part of the bigger picture context, obviously. Healthcare has been a strong and resilient part of Merck's business. Just as an example, 36% of Merck's sales, as well as 33% of the EBITDA period, come from healthcare. for this strength and the trust that the Merck group has on healthcare, you all know that the new healthcare products are actually part of the big three, the growth drivers of Merck, as 80% of sales overall should come from these. Now, drilling down more mid-term, around three-quarters of healthcare's growth would come from the new launches. From this perspective, we are building on a, I would say, very strong momentum with avelumab growing 51% in Q3. MAVENCLAD growing more than 10% in Q3 as well. But while we are tremendously excited about the second wave of launches being Xevinapant and evobrutinib, we are looking mid and long-term, and the focus of the next slides will be on our resilience and sustainability of the R&D engine. So slide number seven. During the past year, we looked at our past few years' productivity under a very critical lens. I also think that, particularly given the pandemic and the ever-changing geopolitical situations, pricing pressures, inflation, you name it, we agree that it is time to consciously reinvent ourselves. Reinventing means two fronts, how we do things, i.e., the engine, and where we source innovation from or actually the fuel. As I said in the fireside chat session at the Capital Markets Day with BAVENCIO, MAVENCLAD, TEPMETKO as our recent launches, we really have all reasons to believe that our R&D engine is capable of bringing strong value for patients, for the healthcare system and for Merck. We can, and we should do more, though. Now, for the level of R&D investment that we have committed to, there is no intent to change it, we put ourselves the ambition to bring more medicines to more patients faster and in numbers to actually double Merck's historic productivity. Looking at it from a different angle, bring at least one launch of a new molecular entity or a major indication on a rolling average every year and a half. Just to be crystal clear here and not hide behind the slide, launches we know that can have different sizes. As we are talking about value and not just about the number of compounds, I refer to a launch with a potential size of, let's say, a MAVENCLAD every year and a half or any combination of smaller ones that will bring us to this number. Let's move to slide eight and look at how the path forward gonna look like. Relatively simple ingredients for this recipe. First and foremost, focused leadership. You have heard us talking about it quite a lot. When it comes to R&D, it means three things. The therapy areas that we play in, such as head and neck cancer or multiple sclerosis. The biology that we target, and you will hear from Victoria about hitting the tumor at its DNA core. The technology or modality, which also builds up in a focused manner. I'll try not to steal Klaus's thunder here. We are expanding on and actually building in a very methodical way on our expertise. We need to continue doing that at least until we have created our own "escape velocity" with the two additional wave two launches. Which brings me to the second pillar here. We strongly believe in our internal discovery capabilities, full stop. Without it, there would no be no avelumab, no Evobrutinib, no empagliflozin, no TEPMETKO, and no other very successful out- licensing deals. Announced lately, where we home- brewed them. What we did manage to figure out in our analysis is that relying solely on our organic discovery engine to bring us to, I would say, really suboptimal productivity levels, or if we choose to rely on it exclusively, the internal discovery engine will need to be prohibitively large. We must provide a continuous boost of fuel to the engine from the outside. That said, more than 50% of our future launches are expected to come from externally sourced assets. Again, in or expanding from our core areas of expertise, so focused leadership applies here as well. The last part is mostly the how we operate. Our agility in decision-making, simplicity in asking relevant questions in our experiments, and much more of resource discipline and consciously directing resources from lower value-adding activities to the pipeline. It may sound a little bit trivial, but focusing on what really matters most will be the key. We looked at our structure, our size, and our innovation clusters, even within our leading disease areas, and have taken clear decisions on where to focus, what to stop doing organically, and where to double down. We have laid the foundations for an organization with simpler structure, end-to-end accountability, and portfolio governance with enhanced discipline on go, no-go criteria. We pretty much looked at everything. Switching to slide number nine. When it comes to focused leadership, my colleagues here will share with you insights on how we are expanding on DNA biology when it comes to DDR and apoptosis. Our clear-cut commitment to disease areas such as neuroinflammation, with a lot of MS, but not just MS, head and neck cancer, and colorectal cancer, and how we took our leadership in small and large molecules and translated it to the next generation of antibody-drug conjugates. Not sure if Klaus will have enough time to tell you how excited we are also with protein degraders, but we may take these as questions in the Q&A session. What's important to understand here is that we are really aiming at big themes that we have expertise in, that are largely de-correlated in terms of the biology and the compound risks, and expand from there. Now, this brings me to a different dimension, which is the overall approach to risk or risk spread across the portfolio. I don't wanna send a risk-averse message, but definitely a risk-conscious. Not putting all eggs in one basket or high investments on a single compound, particularly if it is still in the pre-proof of concept phase. Yes, acknowledging that apart from Evobrutinib and Xevinapant, the majority of our pipeline is still early stage. In slide number 10, a few words on the second pillar, the focus on external innovation. In actually less than 24 months, we have brought Xevinapant with a very strong proof of concept that seems to get even stronger with the five years data. A very de-risked option deal for PARP1 selective compound from Nerviano that fits very nicely into our DDR program. Rights to develop Cladribine in myasthenia gravis. For Cladribine, we checked both a lot of knowledge about the compound itself and neuroinflammation. Also two deals that I believe will give us a leapfrog in targeted protein degradation with Amphista and Proxygen. Obviously, the nature of future deals is something which is hard to give a lot of details on, but what I can say is that we will intensify these deals and you will definitely see that. The goal, as I mentioned, is to really have more than half of our future launches coming from the outside. That's the mix that we believe is the right one for us to meet the ambition of one launch every year and a half, as I mentioned before. Finally, turning to slide 11, that sheds, I would say, some more light on how we look at agility. You know, let's zoom out a little bit on drug development and have more perspective. Trials have become more complex. Usage of digital endpoints, deep multi-omics phenotyping, precision medicine. You have also heard about FDA's Project Optimus that requires sponsors in oncology to do by far more work in terms of those findings, particularly the early phases of development. This is our reality. It has nothing to do specifically with Merck. It's the environment that we live in. We have intensified at Merck our rigor in protocol writing with a clear aim to de-complexify these protocols wherever we can. We will still use all of these 21st-century novelties, but looking deeper at the key questions to be answered, reducing the number of activities, lightening the burden on patients and on the investigators, being closer to the sites and able to respond to, I would say, small as well as big issues. We showed that with the Ibrutinib team's response to the situation in Ukraine. We are also looking at ways to use advanced analytics to better select sites. This is particularly true when the standard of care is not very uniform, as we saw with the design of the X-Ray Vision study in cis-ineligible head and neck patients with Xevinapant. Look, a clinical site which is selected and does not recruit costs a lot of money. Now we are advancing our capabilities to predict which sites will be active. Now, another aspect is that in an era where one needs to be very agile in terms of selecting the right patient population and indication or indication sequencing, we also need to have our trials being able to cross-stock in an adaptive manner to take real-time decisions. You will hear more from Jan on that. All in all, the engine is being adapted to the needs of today. Less complexity, lower cost studies, more speed, getting answers to questions faster, doing more, and again, doing that with our current financial frame and supporting profitable growth for Merck. Now, I hope that this gives you a glimpse of how we think about healthcare R&D moving forward, and not just the ambition, but also how we are thinking of getting there. I think that this is a perfect timing to hand it over to Klaus to walk you through our excitement on discovery technologies, particularly ADCs. Klaus, over to you. Thank you very much, Danny. Hello, everyone. My name is Klaus Urban. I joined the pharmaceutical industry nearly 30 years ago as a medicinal chemist, and, looking back, it has been really truly exciting to witness and be part of the expansion of the industry's toolbox, so to speak. Pharma industry today has an increasing number of modalities and technologies at its disposal that allows targeting critical pathways to develop new medicines. Merck is a medium-sized company, so we focus on areas where we can build leadership positions that allow us to generate great medicines that will make a difference for patients. Merck has a strong heritage, both in small molecules and biologics, and we have been building technology leadership positions in a number of areas, for instance, in antibodies and protein kinase inhibitors. On those foundations, we are adding additional technology leadership now in selected areas with high potential to generate high-value medicines. Today, I will talk to you about our ADC technology, which we expect to be a rich source of INDs in the coming years. Targeted protein degradation is another area where we seek to build a leadership position in order to overcome limitations of protein kinase inhibitors and allow us to pursue targets considered undruggable, in quotation marks, with available small molecules and biologics. Unfortunately, I won't have time to discuss our exciting preclinical TPD pipeline with you today. I also understand you are probably more interested in our later stage pipeline, but I'm looking forward to tell you more about targeted protein degradation next time. Let's dive into our ADC technology. We are not the first company to talk to you about ADCs, and I'm sure that this audience doesn't need education about the basics of an ADC construct and its three components. No doubt, you're also very aware of many of the limitations of first-generation ADC technologies, which have resulted in lower than expected therapeutic windows of many candidates. Today, I'd like you to focus on the pharmacological mechanism of an ADC to help you appreciate why we have high conviction that we are building an industry-leading ADC technology. Mechanistically, you should think of ADCs consisting of two parts. Part one consists of the antibody and the linker. Together, they represent the delivery mechanism. Their purpose is to specifically deliver, sorry, the payload to the tumor and not anywhere else. With our antibody expertise, we can design antibodies against many targets, but we chose to pursue only those that are preferentially expressed on the tumor cell and not in healthy tissue. If such tumor selectivity is not possible to achieve targeting a single antigen, we would use a bispecific design. The same principle pursuing tumor specificity applies to the linker and its activation mechanism. The linker needs to release the payload specifically to the tumor rather than into the circulation. Tumor-specific delivery is of paramount importance to reduce off-target toxicity. Now, part two of the ADC is the payload. To maximize efficacy, we need to pick the right one. Right payload means we need to ensure that tumor is sensitive to our chosen payload, and we need to reduce the risk of resistance. Focusing on these two aspects, tumor-specific delivery on the one hand and tumor killing with the right payload on the other, we pursue many opportunities to enhance the targeted delivery of chemotherapy to tumor cells. At presently, we have two clinical and nine preclinical assets. Can we move on to chart number 15? Thank you. Let's have a closer look at payloads and linker technologies. The first commercially significant ADCs were armed with so-called tubulin binder payloads, maytansines in many cases, such as DM1 and DM4 or auristatins, the so-called vedotins. deruxtecan as well as exatecan, which is the payload we are using in M9140, are Topoisomerase 1 inhibitors or Top1 inhibitors. Top1 inhibitors have broader applicability than tubulin binders across a whole variety of tumor types. Exatecan is more potent than deruxtecan and also has very high bystander activity. Looking now at the evolution of linker technology at the upper part of the picture. First- generation ADCs used acidic or reductive cleavage to activate the payload. This works beautifully in preclinical models, but also results in some payload release in circulation. Enzymatic cleavage was then coming later and quite a significant advancement, increasing tumor targeting. Proteolytic cleavage by cathepsin results in more specific activation in tumor cells compared to acidic or reductive activation, which could happen anywhere in the body. Our linker technology is based on β-glucuronides, which is cleaved by the lysosomal enzyme glucuronidase that is overexpressed in many cancers compared to healthy tissue. Hence, we believe that our linker results in high tumor selectivity. Let me now introduce on the next chart, please, M9140, our anti-CEACAM5 ADC, which has just entered first-in-human studies in the third quarter. The CEACAM5 antigen is highly expressed in tumor cells, with very low expression in healthy tissue, which makes it an excellent target. Our CEACAM5 antibody has great MPK, a long half-life, and robust in vitro stability. Already mentioned that glucuronidase is overexpressed in tumors, which should result in tumor-specific activation of the payload. In addition, with high polarity, thanks to the sugar molecules in the linker, the ADC has high stability and low level of aggregation. You might be aware that aggregation actually can be a major contributor to off-target toxicity. Our topoisomerase I-based payload allows us to address tubulin inhibitor-resistant tumors, including gastrointestinal tumors such as colorectal and gastric cancer, which are not sensitive to tubulin binders, for instance. exatecan also has high bystander activity, as I will show you in a second. Last but not least, exatecan or M9140 offers an excellent combination opportunity with our DDR inhibitors. I'm sure you appreciate that even small changes to any component can result in substantial changes to the pharmacokinetic and dynamic profile of the ADCs. That is why we at Merck, we have built a strong predictive modeling capability that enables us to do rational design of all components to generate ADCs with optimal pharmacokinetics and dynamics. On the next chart, 17, I would like to show you some of the preclinical data that give us high confidence in the potential of M9140. The left panel shows you the high bystander effect that this molecule has in our in vitro models. It shows really superior killing potential of M9140 compared to another ADC. The middle panel shows the sensitivity of a colorectal cancer tumor model to M9140, in contrast to another CEACAM5 ADC armed with a DM4 payload. On the right- hand, we show you the absence of interstitial lung disease in non-human primates at clinically relevant doses. Although not shown here, I can also tell you that there is no evidence for this molecule of ocular toxicity at clinically relevant doses of M9140 in non-human primates. With that set of data, I'd like to hand over to Victoria now, who will also cover clinical aspects of M9140 as part of her presentation. Thank you so much, Klaus. Before we go on to talk about our pipeline and our oncology strategy, I wanted to take one step back and talk a little bit about the cancer biology, because that creates a nice scene and explains what we do and why we do. As we all know, cancer is the disease of genome. It is caused by the damage or changes in the DNA that control how cells grow and divide. With this understanding, no wonder that genomic instability and mutations are among the core and the key hallmarks of cancer, and this is what the wheel in the background in the middle of the slide represents. In addition to the DNA damage, another important contributor to genomic instability are various defects in the DNA repair mechanisms. could be, for example, missing activity of certain proteins or simply lack of time to fix the DNA damage because the cells constantly progress through the cell cycle and experience the DNA damage and replication stress in rapidly dividing cells. While under normal conditions, cells with such defective DNA should be typically eliminated through the programmed cell death mechanisms, which is also called apoptosis. Cancer cells tend to acquire specific ability and features that allow them to evade apoptosis or, in other words, resist cell death. These are the three hallmarks of cancer that we're going to be talking again and again today during our presentation. While we see certain advantages that these features could bring to the cancer cells, they could also help us design specific approaches that could target them also as Achilles heels of the cancer cells or their vulnerabilities. Through our pipeline approaches, what we aim to do is to kill cancer cells through inducing more DNA damage, through preventing DNA repair, and through restoring sensitivity to apoptosis or cell death signaling. On the next slide, we are going to take a little bit of a deep dive into the three mechanisms to show how collectively they can, on the one hand, stand as individual therapeutic approaches, but also can synergize and deliver much stronger impact on the tumor. Let's take, spend a couple of minutes on each of these boxes. The first one talks about damaging, inducing DNA damage, and damaging cancer cells. This is nothing new. This is probably arguably the oldest way of treating cancer with chemo and radiotherapy that we have learned from the World War I. However, we knew also that by disrupting DNA through toxic chemotherapy, we are also driving certain toxicity to the normal tissues. This is why the antibody-drug conjugates that you have just heard of from Klaus are becoming a very interesting approach, which is much more targeted and much more selective towards the tumor. Because we are targeting here with the antibody, the antigens that could be uniquely expressed on the cancer cells, then these molecules will get internalized and will be releasing the payloads, in this case, could be DNA-damaging payloads already inside the cell. This is almost like a Trojan horse approach. Not only this kills the cell that received the portion of the ADC, but also through the bystander effect, the payload will permeate into tumor microenvironment and kill the surrounding cells as well. In response to this disruption to the DNA, and we are now moving to the next box on the slide, this will trigger DNA repair mechanisms. This is a very complex signaling network that detects the DNA damage, can pause the cell cycle in order so that this damage can be fixed and repaired, so that the cell maintains genome integrity. Importantly, most cancers have actually lost their ability or already have some of the weaknesses in their repair pathways, which led to creation of cancer and formation of cancer in the first place. We can put further pressure on the repair systems by applying the biology of DNA damage response inhibitors. Here again, we have a pipeline to address this vulnerability. This allows us to switch off even more essential proteins. Ultimately, those cells, if their DNA remains unrepaired and its levels are accumulating, they will reach some lethal prohibitive levels, and the cells should die. Talking about the cancer cell death, we are moving to the third box, which is covering approaches, how we can increase the cell sensitivity towards those death signals. In this case, we're using as an example, the mode of action of Xevinapant, which is an IAP inhibitor. IAP stands for Inhibitor of Apoptosis Proteins. The role of these inhibitors is to block the caspases inside the cells, which are the enzymes releasing the activity and degradation of cell components. That is one of the first steps in triggering the apoptosis. IAP can also get deregulated and upregulated in response to chemotherapy, to radiotherapy treatment as one of the major resistance mechanisms. This is why when we remove their effect with the help of Xevinapant, in our case, we will be releasing the activity of caspases, which will be responsible to trigger natural cell death mechanisms. All these three approaches, as I said before, are converging at the main points of applying our pipeline, and this is killing cancer cells. The way we wanna do it also shows on the next slide, with the use of the compounds we have in our active portfolio today, is depicted in the diagram. What you can see in the circle inside the layer, the inside layer talks about the three approaches that we have just discussed. Inducing cell death, preventing DNA repair, and enhancing cell death. Let's start and go through each of them to introduce the compounds that are in focus for our development. The first part, the pink part, which is talking about the induction of cancer cell death, talks about the ADCs. In our active portfolio today, we have two clinical compounds, which is M9140. You've heard about it already from Klaus. It's an anti-CEACAM5 ADC. We also have M1231 and nine compounds in preclinical space. To watch this development as we go through the normal development cycle. The second part, the blue part, talks about how we prevent the DNA repair. Here we have portfolio of DNA damage response inhibitors, ATR inhibitor, ATM, and DNA-PK. You have heard from Danny about how we recently announced the collaboration and option deal relating to a PARP1 selective inhibitor that will nicely complement our efforts in the DDR space. The third part of the diagram at the bottom is dedicated to the mechanisms that are enhancing cancer cell death, which is exemplified by Xevinapant and follow on IAP inhibitor, which is currently in preclinical space, and both are chemo and radiosensitizers that will bring even further synergies with standards of care in certain diseases, but also internally with our pipeline. Having three groups of agents under one umbrella in our pipeline offers us several opportunities and advantages. On the one hand, we are working with validated approaches such as ADCs, such as DNA damage response inhibitors. They have already proven their effect in the clinic. However, there's still plenty more that can be done in terms of innovation. For example, we can use different targets, different payloads, linkers in the delivery of the ADCs. These mechanisms are relevant for most tumors. As you have heard, genomic instability is a major vulnerability. We have a broad playground to play. This can help us drive various standards of care or synergize with the existing standards of care in either all comer populations or also go down the route of the biomarker-selected populations. Can combine with the standard of care as of today, for example, like we do with Xevinapant. We can also drive our own pipeline synergies in the future. We can also guide our strategic choices. You have heard about external opportunities that we will be actively assessing that will provide us a very nice strategic lens how to look into bolstering our pipeline. To showcase today how we are developing in all three segments, I wanted to use three examples corresponding to the segments and talk about three particular compounds. We start with Xevinapant. On the next slide, you will see that when we talk about Xevinapant, we automatically switch to the area of our expertise, head and neck cancer. Head and neck cancer is one of those diseases where patients, the majority of them, get diagnosed in the locally advanced stage, more than 60%. With that, they're becoming candidates for still curative treatment, so we are aiming to eradicate cancer in these patients. The slide here outlines the typical treatment algorithm, highlighting the numbers of patients under each of these parts, reflecting Europe and United States. As you can see, approximately half of the patients will be receiving surgery, and that will allow them to get their cancer removed. Depending on the features of this cancer, how far it spread, and how successful was the surgery, these patients could be simply left to observation or receive radiotherapy, or in high-risk cases for recurrence, it will be chemoradiotherapy combination. Another half of the patients will receive definitive chemoradiotherapy. By definitive, we mean that we again are aiming to cure and eradicate cancer, and for that, we are giving high doses of radiotherapy and high doses of chemotherapy. For both groups, as you can see, radiotherapy is really the main backbone, and then, depending on the fitness of the patient and eligibility to receive high doses of cisplatin in certain cases, we are talking about the patients being either eligible or ineligible to receive cisplatin. That would dictate the further standard of treatment that they would receive. Unfortunately, we know that approximately half of those patients who receive radiotherapy in locally advanced setting will recur within the next two years, and recurrence might be local or might present with a distant metastasis. There's clearly so much more that can be done for these patients, especially because in the last couple of decades, we haven't seen major breakthrough for this population. In fact, cisplatin itself, when introduced in early 2000s through a randomized phase III trial in high doses, has delivered that major achievement which we are still using today. Even the trials of immunotherapy haven't been successful in this setting. That's exactly what we are aiming to change with the introduction of Xevinapant, investigating it across different patient segments, as you can see on the slide. One of our studies, TrilynX, is investigating it in the unresected patients who are Cis eligible. Another study, X-Ray Vision, is looking at the rejected patients who are not eligible to receive cisplatin after the surgery. In between, you can see the third box that is talking about other areas of diverse standard of care, where we are very closely working with cooperative groups in Europe and in the U.S. to generate more evidence that is going to complement and inform further treatment decisions. Watch this space, please. The next slide, we just wanted to remind you why we're excited and remain really firm that in our belief that Xevinapant is poised to change the standard of care in locally advanced head and neck cancer. We have earlier presented the outcome of the phase II randomized trial that has generated a strong proof of concept for Xevinapant when it was added to the standard chemoradiotherapy. On this slide, we are showing the five-year overall survival update that further enhances and reiterates the message that we are demonstrating clear advantages with the addition of Xevinapant to the combination chemoradiotherapy by reducing the risk of death by half, with a hazard ratio of 0.47. In the landmark analysis at five years exactly, this is the time when in oncology we typically talk about cure, we see that 53% of patients, if receive Xevinapant, and 28% of patients, if they haven't received Xevinapant, are still alive at five-year mark. That's really talking again towards the fact that the addition of Xevinapant nearly doubles the cure rate in this population. On the next slide, let me just briefly remind you about other data presented from this phase II proof of concept study. We have earlier reported those endpoints, and all of them in this double-blind, placebo-controlled study are pointing exactly in the same direction. You see the collection, just a selection of the key endpoints, such as progression-free survival, locoregional control at 18 months, overall survival, duration of response, all going in the same direction, speaking towards the robustness of our effect. At the same time, it's important to look at the tolerability aspect of the combination because the amount of chemoradiotherapy that we are able to deliver also dictates the success of treatment. Here you'll be pleased to see that both tolerability as well as the delivery of backbone chemoradiotherapy are equal between both groups, meaning that we are able to deliver better efficacy and successful outcome without compromising on delivery of backbone treatment due to toxicity. What is next for Xevinapant? That's on the next slide. Two global phase III trials are underway. The first one, TrilynX, is approaching the end of recruitment, and that's going to be the next milestone when we are closing the trial to accrue with 700 patients early next year. We are also preparing for the interim analysis. The analysis is event-driven, and we are probably going to hit this mark towards the end of next year. Again, we'll need to watch this space how the data are maturing. Both studies, TrilynX and Xevinapant, have recently started in the complementary population with rejected patients with cis-ineligible situation. Both studies are actually recruiting globally, it's not only European Union and U.S., as we have shown on the numbers in the previous slide, but also Japan and China will be large contributors to the study and will be reflected in our intended label population. With that, I wanted to move to the next slide and start talking and transition through our DDR portfolio, the one that was in the blue part of the diagram on the earlier slide. Depending on the DNA damage and when the DNA damage happens during the cell cycle, there are different proteins that could play a more prominent role in the repair mechanisms, and they are PARP, ATR, ATM, and DNA-PK. There are several ways how these DDR inhibitors contribute to cancer cell death, and this corresponds to the three hypotheses that we are aiming to explore in the clinic. The first one talks about the synthetic lethality concept. This is arguably the one that we've learned most about through the development of PARP inhibitors in BRCA-positive tumors or in BRCA mutant tumors. However, beyond BRCA positivity and PARP success, there hasn't been much more in a way to show and to utilize this class of agents. This is something where we have got a good start with a diverse portfolio of DDR inhibitors and also understanding that the future is about the combinations. It's either the combination of biomarkers, or it's a combination of different inhibitors that could drive a much stronger efficacy. Here we have ATR inhibitor, ATM inhibitor, DNA-PK, and potentially PARP1 selective inhibitor through our option deal to play with and broaden the playground. The second hypothesis is quite intuitive after what we've described about the DNA damage and then prevention of DNA repair. When we damage with chemo-radiotherapy or with ADCs in this case, then we are preventing repair. Unfortunately, even though it's intuitive and logical, we haven't done much as a community in this space because unfortunately, the toxicity of combinations actually driving us to stop this exploration, so it's becoming just too toxic for patients to continue. Hematology, hematological toxicity is driving the major concern here. It's important to have compounds that could overcome this and become very strong combination partners also from the safety point of view. The third hypothesis is talking about our emerging interest to combine DDR inhibitors with checkpoint inhibitors. Another based on the understanding that in case of DNA repair inhibition, it may lead to the accumulation of under-replicated cytosolic DNA, which in itself becomes a key trigger for immune response, which we are aiming to amplify with a checkpoint combination. Across the three hypotheses, as you can see, we are talking about the combinations, DDR-DDR, DDR-ADC, or DDR immune oncology compounds. That's exactly what we are aiming to explore in our clinical program. First, let's look at the next slide to see what is driving those synergies and which classes of compounds we are prioritizing for this exploration for combinability. The combination partners are coming from this in vitro screen, which is shown at the top of the slide. It highlights the M1774, our ATR inhibitor, nicely synergizes in the anti-proliferative activity with several DNA-damaging drugs, and inhibitors of the DNA damage response. Here the usual suspects are platinum. We have Top1 inhibitor, Topoisomerase I inhibitor. We have gemcitabine, we have DNA damage response inhibitors, ATM, ATR, excuse me, PARP inhibitors. When we transfer these observations from the in vitro screen into the in vivo, and that is shown at the bottom of the slide, we see those synergies in the xenograft models. For example, lung cancer or with platinum or pancreatic cancer in combination with gemcitabine, and also with ATM and PARP inhibitors, which together either create or exploit pre-existing defects in the DNA repair pathway, such as BRCA mutations. On the next slide, let's look at the properties of the M1774 as we are shaping and pharmacologically defining this compound through the clinical data. To this end, we have spent actually sufficient time in the early phase I exploration, looking at the dosing regimens continuous and intermittent in order to find the optimal administration that would balance both pharmacological properties, which ultimately would define the effect and the efficacy of the compound in the human, but also balance it with a safety profile. Because as I said before, it's quite important to be able to combine. With the schedule that we are taking forward, 180 mg, two weeks on and one week off, we're able to actually balance both properties and achieve high exposures, well above what was predicted to be efficacious from the preclinical data and translational modeling. You will see in the middle of the slide on the table that we are many-fold in terms of our concentrations above what's needed to drive the pharmacodynamic effect. In this case, we are looking into the inhibition of Chk1 phosphorylation. In particular, at our recommended dose that we are taking forward, we are 24-fold above the anticipated inhibitory levels that we wanted to achieve to drive effect. Meaning that on the one hand, we can comfortably play with the dose, if the combination partner requires, we could dose reduce without compromising on efficacy. On the other hand, considering that we are going to broader populations for our proof of concept exploration, we'll be seeing different individuals with variability of PK, and that again should not be a major issue and consideration and worry about the dose that we are delivering. At the same time, with the proposed schedule, we appear to be mitigating hematological toxicity. On the right-hand side, you see the safety table, which highlights and focuses on the hematological effects, which are known to be an issue for ATR inhibitors. Here, one week off in our treatment administration appears to be mitigating for severe neutropenia, severe thrombocytopenia, and has a low rate of grade three anemia in the context in comparison to other ATR inhibitors under development. On the next slide is just a brief summary of where are we taking with this data and combinability profile, where are we taking our M1774 ATR inhibitor. As you can see, there are waves of studies. The dose 1A, as dose escalation is completed. Now we're expanding as a monotherapy in the pre-specified biomarkers, patients with pre-specified biomarkers, and are also combining with niraparib in the dose-finding exercise. Earlier this year, we have opened another trial. We're looking at the combination with ATM inhibitor, in-house compound, and avelumab. What we are discussing for next year is the combination with ADCs and broader IO platforms, and that is something that I invite you to watch this space. Talking about the ADCs, I wanted to proudly introduce and build on what Klaus has said on the next slide, showing to you the new program that we have recently taken to the clinic. You have heard about the CEACAM5 expression cells. You have heard about the CEACAM5 being a perfect antigen that is much more abundant in the tumors versus normal tissue. That's what, Klaus's presentation has covered, and that's what makes it an ideal target, especially for the diseases of interest, such as colorectal cancer, gastric cancer, pancreatic with high expression of this target. The strength of our concept is also based on the payload, exatecan, which has perfectly matched the sensitivity of these tumors towards the chemotherapy that we know work in these indications. The difference in the payload also explains what you see in the middle graph, where you're comparing anti CEACAM5 ADCs, which are dependent on the payload that they deliver, could have an effect, like the one with the green line, with the exatecan payload, or not have an effect like a DM4 payload with the orange line. That's where the differentiation comes, as well as the combination within the portfolio and the ability to combine with DDR will drive further differentiation in the clinic. We started our phase I exploration. We go straight into colorectal cancer population already in the dose escalation. We've cleared a couple of doses and basically the journey continues. So far, so good. We are aiming to come to the recommended dose towards the end of next year and from there expand in the indications of interest. With that, let me summarize and recap where we stand in oncology and how we plan to deliver our scientific leadership and build on the unique synergies of our pipeline. We're aiming to do that through addressing the major vulnerability of cancer, that is genomic instability and defective DNA of cancer cells. We aim to do that through proven and active therapeutic approaches and modalities. There's still a lot of room for innovation and precision, that also allow us to diversify development risk. We are also setting clear priorities for assessment of future organic opportunities to bolster our pipeline through the lens of our strategy. The success across these three fields will allow us, on the one hand, to pursue focused leadership in the existing indications of interest. You've heard about colorectal, you've heard about head and neck, also pivot to new disease areas as see fit and dictated by the pipeline successes. Most importantly, it will allow us to bring sustainable components to our R&D engine. I'd like to thank you for your attention and hand over to Jan to talk about our advances in neurology and immunology. Thank you very much, Victoria, and good morning or afternoon to everybody also from my side. In neurology and immunology, we have a clear strategy consisting of three pillars that will help us to gradually expand from a solid foundation. Each of these pillars comes with a respective flagship development asset. The first one is around maximizing MS, an area with long-standing presence and a great example for focused leadership. The key development asset here, of course, is Evobrutinib, and we will come to that in a minute. The second pillar is expanding on our long-standing expertise with MS and taking these learnings forward to other diseases where neuroinflammation is the main underlying biological driver. The main development compound here is oral cladribine, which we plan to develop for generalized myasthenia gravis. The third pillar is building our immunological capabilities on the discovery and research side, and at the clinical stage is looking into broader autoimmune diseases. The main focus here is on Enpatoran, which is currently under development for lupus and myositis, and I will come back to that later. Overall, our goal with these pillars is to expand the contribution of the N&I franchise to the overall healthcare business within Merck and provide highly differentiated medicines for patients with neurological and autoimmune conditions. Let's go to the next slide, and let's start with the remaining unmet need in MS. Together with the MS community, we have developed a much better understanding of the disease over the last few years, in particular with the advent of therapies that are highly effective in suppressing peripheral inflammation. Initially, it was thought that if you look over time, that progression is primarily caused by relapses and the associated disability. However, by now, we are observing progressing disability in many patients despite good control of relapses and focal inflammation. This emerging concept is called silent progression. This is also a key reason why patients, despite apparently good disease control, often are impaired in their daily lives. Many even lose their jobs, for example, due to cognitive impairment or fatigue. Importantly, this silent progression already starts very early in the disease, often even before the first relapses start to occur. Mechanistically, the silent progression is driven primarily by chronic inflammation in the brain, mediated in particular by microglia. This brings us to Evobrutinib and why we are so excited about it. Next slide, please. It has a dual mechanism of action where we know that BTK inhibition modulates B cells and monocytes in the periphery, and at the same time, we know that Evobrutinib gets in the brain and therefore also interacts with cells within the central nervous system, such as microglia, through the same BTK. This actually then allows for a dual angle to efficacy by reducing both the conventional progression associated with relapses and the silent progression. This is very relevant as the silent progression cannot be adequately addressed with the existing therapies. We therefore are convinced that Evobrutinib can differentiate from the existing MS treatment options. The other piece I would like to highlight here is our clinical excellence development approach. The molecule has been specifically designed to achieve high BTK occupancy with BID dosing throughout the day to achieve sustained BTK inhibition. We have conducted the most comprehensive phase II program amongst BTKi in MS, which beyond thorough dose finding, also included exploration of novel endpoints such as neurofilament light and slowly expanding lesions. We have also characterized the PK in the CSF of MS patients, confirming that indeed Evobrutinib is brain penetrant. Now, in this phase II data set, we could actually show that a high degree of BTK occupancy is correlated with maximal clinical efficacy. Hence, we do believe that this gives us best-in-class potential versus any other covalent once-daily dose BTKi. Besides that, let's also talk about safety. We have gathered vast experience with Evobrutinib across several indications in phase II studies. In these studies, we have observed a consistent and encouraging safety profile. We have not seen opportunistic infections, no increased malignancy rates, no safety liabilities from first- generation BTKis. The only finding so far really are the liver enzyme elevations. The pattern we observe has been very consistent from the beginning. They appear early, they are easily detectable, and they are reversible after stopping the drug. Based on those experiences, we have implemented the right liver monitoring schedule in our phase III trials, and we are confident in our monitoring approach here. Of note also, we now have data out to three and half years of continuous treatment and did not observe any new safety concerns. Besides these mechanistic reasons to believe in Evobrutinib, when you look at slide 36, you can start seeing emerging clinical evidence to support a best- in- class or potentially even a best- in- disease from our phase II study and its extension. With all limitations of side-by-side comparisons across trials, we are very encouraged by the very low and stable annualized relapse rates that we see with continuous treatment with Evobrutinib that are in the same ballpark as ARR observed with anti-CD20s. Interestingly, we also in the open-label study, do see that once patients were switched from QD to BID Evobrutinib, that the ARR went down, which further supports our initial observations from the double-blind period that higher BTK occupancy with BID dosing is correlated with higher efficacy. On the right panel, you see some of our long-term data that we presented recently at ACTRIMS, and this is a unique data set amongst the BTK inhibitors, where we could show that patients achieve long-term clinical stability with Evobrutinib treatment out to three and half years. Next slide, please. Beyond those more classical measures, we have also shown promising effects on more novel markers of progression. One promising emerging marker are slowly expanding lesions or cells that can be detected by MRI imaging. Cells are chronically active lesions that are expanding over time due to activated microglia involvement. This gradual expansion can result in irreversible tissue damage and axonal loss, which ultimately then manifests as clinical progression and accumulating long-term disability. This lesion type, as opposed to GAP lesions or T2 lesions, is not highly impacted by the currently available MS therapies. Slide 38 recaps the emerging evidence on two key endpoints related to silent progression. On the left panel, you see the effect of Ibrutinib on neurofilament light chains or NfL, which is a marker of neuronal damage. You see that the effect comes early and is again, dose dependent. We have also recently shown at ACTRIMS that this effect on neurofilament reduction is maintained with long-term treatment in the extension phase. Please note that this is the first and so far only time a BTK inhibitor has shown an effect on NfL. On the right-hand side, you see the effect of Evobrutinib on cells. You can see that Evobrutinib in our phase II study reduced the volume of these lesions in a dose-dependent manner at week 48. Here, to our knowledge, this is unique amongst the class of BTK inhibitors, and we do see this data as very encouraging in light of the need to target silent progression in the brain as discussed earlier. Based on this data and the clear need to impact progression, we have built a very holistic assessment into our phase III program. Slide 39 summarizes the different outcome measures that we have included to get a holistic understanding of the effects of Evobrutinib on multiple aspects of progression. We have the classical EDSS scale, various composite measures, including disability improvement, functional assessments like the Nine-Hole Peg Test and 25-Foot Walking test, relevant biomarkers like NfL, information processing speed as part of cognitive measures with SDMT, a novel quality of life scale with PROMIS capturing patient-reported symptoms like fatigue and assessment of how well they can perform their daily activities, as well as a battery of imaging measures, including cells. In addition, we have also recently decided to start two additional phase III-B studies in 2023. The first one is an imaging study that will specifically investigate and quantify the interaction with microglia in the brains of MS patients using a unique tracer for the activity with PET methodology. We will also implement a long-term umbrella extension study called Long evo that will follow our patients from ongoing Evobrutinib studies for out to five years, as it is really critical to gather long-term efficacy and safety data. In the next slide, number 40, we switch gears and let's talk about the current status of the program. As you recall, we had to react to the terrible situation in Ukraine earlier this year and have come up with a strong and comprehensive mitigation. First of all, we did convert the protocol to an event-driven design and extended the study period out to three years to allow more event contributions from patients who are in the study for a while. We also reopened sites outside the war zone and recruited additional patients While we were doing that, we were of course, very carefully following the operational status of sites and patients in the Ukraine. Based on this assessment, we have discussed our strategy with external advisors and the FDA, by now have a clear path forward on how to structure our primary analysis. The CDP and relapse events are being closely monitored, we are overall satisfied with how data accumulates so that we have recently closed recruitment again. Overall, with this mitigation strategy, we managed to overcome the Ukraine crisis and keep the program on track to read out in Q4 2023, which is in our line with our earlier projections. Let's now move to Enpatoran, our TLR7/8 inhibitor in slide 41. Just to recap here a bit, the TLR7/8 receptors detect single-stranded RNA and can trigger both the adaptive as well as the innate immune system, and hence contribute to a variety of autoimmune diseases. What is particularly interesting is the fact that apparent activation of TLR7/8 is actually associated directly with several conditions, and just this year, this has been in particular described in Nature for lupus. This publication really gave us an additional confidence boost for testing the TLR7/8 hypothesis in the clinic. What has developed nicely since the last year is that we have increasing clinical experience now with Enpatoran. We have recently completed our 100 mg BID cohort in our phase 1-B study that confirms good safety and tolerability with the treatment duration up to 24 weeks, and now allows us to test a higher dose with 150 mg BID in that study. The biggest advance this year was the start of our phase II WILLOW study that you can see on slide 42. WILLOW has a very innovative design that will allow us to test Enpatoran in two patient populations, cutaneous lupus, CLE, and systemic lupus, SLE. It is designed in a way that allows us to learn throughout the trial with multiple futility and interim analyses, as well as adaptive design elements as the different components of the program are set up in a way to inform each other. For example, we will be able to utilize data from three different doses, with 25, 50, and 100 mg BID in the cohort A, as well as information from the phase 1-B study to inform the dose modification for the SLE cohort B in the second part. We will get efficacy readouts on the standard parameters like BICLA in SLE and CLASI in CLE. I would like to point out, though, that we are also looking at a broad biomarker panel to potentially identify predictive response markers for the phase III program. The study is actively enrolling patients in up to 174 sites in 22 countries. The first decision point will be coming up around summer next year with a futility analysis that also provides a measure of risk mitigation. Taking this design all together, we do believe that this will allow to accelerate the development of Enpatoran in Lupus. Let's move to slide 43. Beyond Lupus, we have recently also decided to expand into inflammatory muscle disorders, more specifically dermatomyositis and polymyositis. These are rare conditions affecting roughly 100,000-120,000 patients in the G7 states with a variety of clinical symptoms, most prominently muscle weakness, fatigue, and rash, they can also affect other organs, leading to substantial patient disability. From a pathophysiological perspective, there is a good degree of similarities with Lupus, including increased TLR7/8 expression, making Enpatoran a potentially interesting treatment option. Speaking of treatment options, the majority of these patients is currently being treated with corticosteroids, conventional immunosuppressants, and IVIG, there are very limited novel and targeted treatment options. To address this, we have designed our NEPTUNIA phase II study. This is a different approach than we took for WILLOW. NEPTUNIA is a very simple proof- of- principle study in 40 patients with our currently highest Enpatoran dose of 100 mg BID compared to placebo over 24 weeks. We are studying classical composite endpoints here, such as the TIF, but also look at potential steroid- sparing effects here, as high steroid use is a problem, like in many other autoimmune diseases. The first sites are being initiated later this year, and we aim to randomize first patients in Q1 next year. To our knowledge, this is the first and only study of a TLR7/8 inhibitor in myositis, and therefore we have first- in- class potential here that could be transformative for myositis patients. Beyond those indications, TLR7/8 inhibition also has potential in several other diseases like lupus nephritis, Sjögren's syndrome, or neurological lupus, just to name a few. We are excited about the broader potential for Enpatoran. At the same time, we also want to manage the risk and continue to explore these other indications in a stage-gated manner, as Danny has alluded to earlier. Which brings us to our third pillar with neuroinflammation and Cladribine. Slide 44, please. As you remember, we have acquired Caraway Therapeutics, and with that, the freedom to operate and develop a novel oral formulation of Cladribine, for example, for MG. MG has seen a lot of progress recently with several biologics being approved, but having said that, what is missing is a highly effective oral therapy. In particular, with the short course treatment that Cladribine can offer, we think this can turn into a highly differentiated product in that indication. Just as a reminder, the reason why we're excited about Cladribine in MG is twofold. One is the mechanism of action targeting both T cells and B cells, both of them involved in pathophysiology of MG. In addition to that, we do have some initial clinical data from an open label study with subcu cladribine in MG that with all limitations of an open label study, has shown comparable treatment effects to recently approved biologics like SOLIRIS. We are currently in discussions with the FDA on the clinical development program, and at the same time are developing a new oral formulation that will be differentiated from MAVENCLAD, which will still take a while until we have it ready for the clinic. More to come on this one, and at the moment, we look to initiate the clinical study in Q1 2024. This concludes the N&I part, and with that, I would like to hand it back to Danny to summarize. Thank you so much, Jan, also Victoria and Klaus. In slide 46, you'll see the key milestones in upcoming two years. Next year is a big one with a final readout of the Evobrutinib phase III program and an event-driven interim analysis from the Xevinapant phase III trial in cis-eligible patients. I'd like to make sure that we're on the same page here. Such interim analysis have very high bar for significance. Although we are super confident in the data for Xevinapant, just still an interim analysis, and the final readout is in 2024. We also have the final readout of Tepotinib in METamp post Agriso, a feasibility/interim analysis with Enpatoran in CLE. Recommended dose for expansion to Victoria's point on M9140, our anti-CEACAM5 exatecan ADC. Next year we will initiate trials with Enpatoran in myositis, further expand M1774, the oral ATR inhibitor in combination with another immune checkpoint inhibitor, and move, I would say, quite aggressively as we can, with M9140 in GI tumors. When it comes to 2024, obviously, apart from the final readout of the TrilynX study, we will start the trial with oral Cladribine in generalized Myasthenia Gravis, further expand M1774's potential as combination partner, potentially with an antibody-drug conjugate. These are the asterisked ones, bring to first in human two, I would say, relatively cool assets, IF, inhibitor follower, and another ADC with a target of GD2. As you know, such early assets are rather volatile. Just to clarify that these are not the only assets that we will bring to first in human, just highlighting them for the sake of focus, just because we spoke about them in previous sections. Turning to the last slide before concluding, we told you about our quantitative aspiration and commitment to double our R&D productivity, staying with the same magnitude of R&D spend, supporting profitable growth. One launch of a quote-unquote MAVENCLAD size every year and a half, we are doing so by looking at our own organization, its structure, size, processes, and ways of execution. The emphasis is the emphasis on externally sourced assets will increase, as I've said. Focused leadership in R&D will continue to be the guiding light in therapy areas, in biology, in modalities. When it comes to modalities, we are nothing short of determined to further enhance our position and leadership in ADCs and targeted protein degradation. When it comes to the pipeline, despite very turbulent environment, our teams have been navigating both phase III assets towards what we expect timely readouts and analysis. Xevinapant, five years OS data with almost doubling cure rates, it breeds our confidence in the potential of this compound for a blockbuster status. Interim analysis late next year, Evobrutinib, dual mechanism of action for dual efficacy with a strong best-in-class potential and best-in-disease potential to address the key unmet need in MS, silent progression. It is on track for a readout in the last quarter of next year. We have reloaded the pipeline with exciting different modalities in different areas with M9140 as truly best-in-class CEACAM5 warhead in GI tumors. M1774 oral ATRI, which seems to have very strong combination potential as a backbone of our DDR program and Pateran, novel mechanism of action that Jan has spoken about the large potential and Cladribine for Myasthenia Gravis. As last year, we have the science, the drive, and most importantly, the vision and the people and the teams to make things happen and bring more medicines to more patients faster. Thank you so much for listening. Thank you. Heidi, if we could have the first question, please. Thank you. We will now begin our question-and-answer session. If you have a question for our speakers, please dial star one and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. Our first question comes from the line of Sachin Jain from Bank of America. Please go ahead. Your line is open. Hi there, Sachin Jain, Bank of America. Thanks for taking my questions. Two, if I may. Firstly, big picture for Danny. You kicked off by referencing an increase in external innovation. Wondering if you could just preface the size of deals that you're potentially considering. Should we be thinking sizes of inipant type deals, or is something bigger possible just given the corporate firepower of $15 billion stated? The second question on Evobrutinib. KOL feedback we get focuses on progression as a potential differentiator. I wonder if you can just detail to a greater extent what your target progression profile, perhaps on CDP or EDSS, is in phase III, and whether you think you can beat CD20s. Obviously that is a large growing market. Whether you think you'll be differentiated enough versus the existing rules on progression, in what will be a largely generic market. Thank you. Sachin, thank you so much. I'll take the first question, and for the second one, I'll hand it over to both Jan and Andrew to address. Maybe Jan. Look, I think that we have communicated that and I will just reiterate, we will definitely increase the number of deals in terms of external innovation sourcing. Look, Xevinapant, you mentioned that was a very nice deal. You know, fits very nicely into our pipeline, our focused leadership, and also define, you know, very de-risked in terms of the proof of concept, very strong one. Also the financials for us were very, I would say, favorable. Of course, we would like to have more like this in terms of de-risked assets, you know, to the point that I made, that we acknowledge the fact that currently our peri-proof of concept pipeline is not full enough to my taste. So we will work deliberately on that. We will complement our pipeline across the entire value chain, you know, from discovery, from target identification to hit discovery to phase I assets that, you know, sequentially will complement the pipeline and bring us to this one launch every year and a half on a rolling average. In terms of the size of the deals, I think that Peter mentioned that several times. We are not necessarily talking about huge deals, about huge M&As, and we can definitely walk or move forward without huge ones and get into more into bolt-on ones, Xevinapant-like, yes. This is what you should expect, Jan. Yes. Thank you, Danny. Thanks for the question. Yeah. On progression on EDSS versus anti-CD20, let's first keep in mind that the EDSS is a scale that has basically been used for the last 40 years. It's an accepted relator-regulatory endpoint, but it doesn't tell the entire full story around progression, as it really is geared primarily towards mobility. It doesn't capture the concept of progression holistically. That's why of course, we have it as a key secondary endpoint in our program. We'll be looking towards that. And we do expect that we land in a similar range than anti-CD20s. Beyond that, however, let's also keep in mind that anti-CD20s do not get in the brain, and this is where we think that evo can basically bring additional aspects to the table and to the treatment of MS physicians that anti-CD20s, with all of their potency that they have on relapses, on controlling inflammatory activity, can do here. These are some of the novel concepts I talked about, neurofilament light, slowly expanding lesions, cognitive measures, potentially, the quality of life scales. Those are potential differentiators that basically go beyond the traditional EDSS scale, which is heavily geared towards mobility. The same would also hold true for some of the other oral molecules. Andrew, do you have anything to add? Yeah, maybe just to expand on beyond the concept of progression. I mean, I think the other thing when we talk to neurologists, and we talked to a lot of neurologists at ECTRIMS two or three weeks ago, the other things that they tell us that is very appealing about this profile, oral versus subcu stroke IV is appealing. The fact that belzutifan is non-depleting, therefore doesn't cause lymphopenia, doesn't have an impact on increasing infections, interesting for them as well. Reversibility of belzutifan, I think is another key differentiator in this field. You want to be able to sequence treatments easily in this field if at all possible. Obviously there is a significant hurdle to doing so with CD20, with some of the S1Ps that exists today that we don't expect to exist with belzutifan. If you can bring all of these benefits plus CD20-like activity on relapse with the promise, if you like, of potentially addressing silent progression, that's a really highly appealing product profile across the board. Highly differentiating against S1Ps and highly differentiating against CD20s. Yeah. Just to complement on two and a half sentences, Sachin Jain, on the EDSS, to Jan's points, fully agree. The EDSS is a bad measure to capture progression. The base case assumption, particularly when we are powering the phase III studies, is the powering for similar effect of the anti-CD20s. Do we have reasons to believe that it will do more than that? Yes. It gets into the brain and so on and so forth, and we have the effects on sNfL and NfLs. Will this belief be able to be translated to a disproportionately higher effect on EDSS progression? We don't know because the EDSS as a scale is a very bad scale, and this is the reason why we took the other measures that Jan mentioned. Very clear. Thank you. Thanks. Thank you. We would take our next question. Our next question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open. Thank you. Two questions, please. The first one's for Danny, and it's a general one. You said in your introduction that you were gonna be a low-risk organization or averse to significant risk-taking. I think the phrase you used was you don't want all your eggs in one basket. Arguably, the U.S. Inflation Reduction Act encourages you to go all in with R&D investment, because now, particularly for small molecules, you have a shorter life potentially before government starts to discount. I'd love to understand how you square that circle, that you're gonna cautiously move through the phases, cautiously use phase IV to broaden the label, but that may mean that you really miss out on the commercial potential of some of the molecules in your pipeline. The second question following from Sachin's on ibrutinib, you mentioned all the additional endpoints that you believe are going to show differentiation of the BTK class versus existing therapies. I would love to understand how many of those new endpoints are regulatory acknowledged by EMA and FDA that you believe you could get onto the label to really give you commercial differentiation of these molecules. Thank you so much, Matthew. You know, for both questions, I'll take the first one. I'll ask Andrew if you want to chime in, and then Jan on the belzutifan question. Look, you know, I would open and say that we, needless to say, strongly believe that the IRA is simply, what I call it, the wrong approach for patients still waiting for new therapies, right? It undermines the private sector investments and really negatively impacts the ability to deliver these new novel therapies. The, you know, over the next few years, the agencies will need to start implementing that. I think that generally speaking, we are right now digesting it as the rest of the pharma industry, and trying to understand the impact. I'm quite sure, I would say, that it will not be exactly as it looks right now. There is more to come to that end. Now, when it comes to the risk, the concept of not putting all eggs in one basket or making mega investments in compounds with, without, you know, a clear proof of concept or something which is near to clear proof of concept is something that will continue with or without the IRA. Yeah. Here we will just need, I'll say just, you know, it's easy to say we'll need to be smarter in terms of, as I said before, when we design our clinical development programs to do things smart and have studies cross-talk, to have follower compounds to existing mechanism of actions. For example, like the follower to Xevinapant, same mechanism of action opens different sets of opportunity. We also have other follower compounds that we are right now at this stage not disclosing. That's key to understand. Now, it's tough. Yeah. I will not, I will not hide that. You know, we wanna go all in. We'll need to think differently on how we go into the first indication and then expand forward. With the use of these of these approaches, with follower compounds and with, I would say, innovative designs of trials and CDPs, I believe that we have a way forward. I wanna double-click also on other modalities. You know, their modality like ADC, like antibody-drug conjugates, apart from the fact that these are, you can, and I'm sure that we will do that, submit them as biologics, which opens a different door. These compounds per definition and these approaches bear a lower risk in the pipeline, okay? The target is clear, the chemo is clear. The overall probability of success of such compounds is higher, generally speaking. It impacts the overall risk profile of the pipeline when I look at that, you know, from from my seat and as head of R&D. This allows, if we do the right thing, and this is why we are deliberately and intentionally doubling down on ADCs, this allows us to maybe to have a different sets of risk-taking in other parts of the portfolio. I hope it gives you a little bit more context to that. Maybe just to build on a couple of comments. First of all, echo everything that Danny said. I think when it comes to the near-term launches, Evobrutinib and Xevinapant, I think we are optimistic that we will achieve a strong pricing level in line with the value that we believe both of those products can bring. Obviously, Victoria talked very eloquently about bringing a new standard of care in locally advanced head neck cancer with Xevinapant. We should be able to support a good pricing point for that particular innovation. If we're able to bring a best-in-disease profile for Evobrutinib that Jan talked about and that Danny talked about, once again, within the MS class, we believe we can bring a strong price point to that as well. Thanks, Andrew. Jan, do you wanna comment on the Evobrutinib? Yeah, sure. I mean, first of all, the endpoint discussions and what will eventually appear on the label will, first of all, depend a little bit, of course, on the treatment effect and the effect sizes that we see. Obviously, we will seek that dialogue with the respective agencies as part of the submission dossiers. I mean, we generally know that the EU is a little bit more open towards new and novel endpoints in the neuro field. We've seen that in the MS space, for example, with brain atrophy, also with neurofilament lights. Yeah, we'll obviously seek that dialogue. On the specific ones, I mean, there are some of the endpoints that are, of course, fully accepted. CDP, CDI, for example. NfL, we see, gets increasing usage and depiction by the FDA. The PROMIS scale I mentioned, it's a PRO scale that actually has seen a lot of additional work going in there and just validating the scale. All of the build-up that needs to be done for any PRO, and this will be submitted as part of the dossier. I mean, we are seeing the agency being more and more open overall to patient-reported outcomes and patient-centric measures. We are fairly confident on that from a methodological perspective. For some of the things like cells on an imaging perspective, it's really TBD because nobody has ever tried that. We'll, of course, make the argument as part of the submission, but this is a bit speculative at the moment. Overall, of course, it's easier to have those data if they are positive, or on the label, because we can use them in a commercial setting, then. On the other hand, we know that in particular, the MS community also has very active scientific dialogue going on. We have seen that a lot in the past, yeah, with concepts like brain atrophy, like NEDA, for example, that were to a large degree, never part of a particular labels, and nevertheless, contributed to respective program differentiation. We will try to maximize the labels, and we think we have good grounds on them for most of these parameters. Even if that's not successful for one or the other parameters, we still think that the MS community is basically ready to embrace these things, and we'll find the appropriate channels for that. Thanks, Jan. Thank you. We will take our next question. Our next question comes from the line of Richard Vosser from JP Morgan. Please go ahead. Your line is open. Hi. Thanks for taking my questions. Maybe going on to the antibody drug conjugates. Just thinking about the exatecan payload. You're saying it's more potent than the deruxtecan, or the Trop-2 payload. Just, you know, what do you think about ILD toxicity that you might see with this? Given the higher potency and maybe more substantial bystander effect, wouldn't this be a concern? Would be interested in your thoughts there. Second question also in that area. Just thinking about the path of development. Can you get a fast-track approval in third, fourth line colorectal cancer just on the basis of phase 1-B data? Thoughts on that. Also then thinking about earlier lines and pivotal trials there, at what point could you start those? Would you look to do those sort of trials on top of Avastin or what's the regimen, what's the plans? Thanks so much. Thank you so much, Richard. I'll hand the first question to Klaus and the second one to Victoria. Yeah, Richard, this is a very good question because obviously Xigac is more potent and one could be worried indeed that this would result in interstitial lung disease. So far we have our non-human primate data that actually give no indication at all at the clearly clinically relevant dose equivalents For this kind of effect. Whilst it's well known that the deruxtecan payloads seem to have that feature both preclinically and clinically, we haven't observed that in exatecan. So that's why we are pretty comfortable with that at the moment. If it comes to bystander effects, yes, exatecan has a stronger bystander effect than, for instance, maytansines or other molecules. Therefore, we believe that this actually will contribute to the increased activity that we also observe preclinically. If it comes to your question around fast-track approval and earlier lines, I would like to hand over to Victoria, please. Thank you so much, Klaus. Of course, you know, oncology is one of those areas where in the face of very high unmet need, and let me remind you that colorectal cancer, third, fourth line is exactly the area of high unmet need. There is a potential mechanism how we can accelerate development of the drugs and deliver it to the patients. That's exactly what FDA and other agencies are open to should the data support. It probably would be too premature to say whether we can embark on this path. We are definitely investigating in this area, but we also understand that we need to do dose optimization, and the bar is raising. You have seen the recent communication with FDA, and the orders constantly highlight the necessity to do confirmatory trials, to also do dose optimization, et cetera. Having said that, we know we are equipped, and we will be looking for a signal. Should that hold, obviously we would aim to pursue and enter into this discussion with the regulators to get the accelerated label. Thanks, Victoria. Thanks, Klaus. Thank you. We will take our next question. Our next question comes from the line of Peter Verdult from Citi. Please go ahead. Your line is open. Thank you. Peter Verdult, Citi. Two sets of questions. Danny, just on cladribine, just the latest on the USPTO appeal in MS? More importantly, just what is the IP situation for the, for cladribine in MG and neuromyelitis? I think you mentioned that trials would start in 2024 in MG. I'm just wondering why, given that the core deal was struck last year, why it's taking so long to start phase II? Secondly, just apologies for being blunt, but we get asked this quite frequently when discussing CEACAM5 with investors, especially in light of the pentraxin experience at Merck. The question is this, look, if CEACAM5 is such a great target, why is it that Sanofi and Merck are in the lead here? Why are we not seeing the usual oncology heavyweights playing in this space? I suppose that sort of segues into your remarks about the differentiation you have in ADC technologies. I'd like to push you there in terms of what is it? Is it the linker that you feel that you're most differentiated on or the payload or a mix of all three? Thank you. No. Thank you so much for these questions. I'll start with the second one and hand over then to Andrew to talk about the IP for cladribine. With CEACAM5, I think that we need to understand that this target is so abundantly expressed in GI tumors, particularly colorectal cancer. You saw on the left panel, one of the slides that Victoria showed me, 90% expressed this target. It's more than intuitive to go there and do that. The warhead exatecan, hospitalized one, colorectal cancers are super sensitive to exatecan. The uniqueness about our technology, as Klaus alluded to, is in the linker payload. It enables release of the payload at the tumor site. The cleavage of the linker is done at the tumor site because of the specific glucuronide, and we know that. It's very, very intuitive to go there. The Sanofi CEACAM5 has a different warhead, and I think that, you know, getting the rationale, I'm sure that they would be much better placed to explain why they're going with this warhead into those indications. I would be less amenable to comment on that. Colorectal cancer is a huge market, and there are a lot of opportunities. We are aware of other advances in the field. You know, recently, if I'm not mistaken, AstraZeneca has announced a bispecific ADC to get into this space. We strongly believe that CEACAM5 is the simplest and the most abundant target to go for the context of colorectal cancer. Strongly believe in our technology, this is why we are moving forward with that. Klaus, anything to add on that? We're good? Okay. Andrew. On the patent side, as it pertains to MAVENCLAD, and maybe that wasn't the exact question, but let me handle that first. No new updates further to the conversations that we had at Capital Markets Day. Regarding cladribine in the setting of myasthenia gravis and other indications that the team have talked about, this would be new IP subject to new dates. I think that's kind of where we are. We're looking at- IP reaching out to the mid-2030s and beyond in MG and in NMOSD. Now to your question regarding the time, because we struck the deal already several months ago. As Jan said, we are working on two fronts. The heaviest front actually is formulation, and we're working on a totally differentiated formulation that is suitable for the patients with myasthenia gravis. It sounds a little bit easy, but you know, myasthenia gravis have problems with swallowing, for example, so you need to tailor the size of the capsule appropriately. The dose and the dosing regimen in general will be totally different than in multiple sclerosis because it's a different disease, and we are modeling and simulating data from the small clinical study that was published. In parallel, we are in discussions with FDA on the clinical development plan in order to bring this as fast as possible to a pivotal trial. Thank you. Thanks. Thank you. We will take our next question. Our next question comes from the line of Gary Steventon from BNP Paribas Exane. Please go ahead. Your line is open. Great. Thanks for taking the question. Just to follow up on the one launch every one and a half year phase. I'm just wondering really how important a metric this is for you to hit, just given the focus of the pipeline on the higher risk oncology category. I guess in the event that some of the later- stage assets didn't meet the desired clinical profile, how important would using the group's balance sheet be to make sure you're still delivering on those launch metrics, maybe by accelerating BD timelines or a greater need to go to later- stage opportunities? Secondly, just a quick clarification please on Danny, on your comment for the expectation for the same magnitude of R&D spend moving forward. Just wondering whether those comments are relative or absolute in terms of R&D spend and how or if the 2026 LOE for US MAVENCLAD impacts that trend at all. Thank you. No, thank you. Thank you for both questions. Look, you know, of course, you know, with Ibrutinib and Xevinapant with, I would say, very high probability of success assets currently in phase III, the potential success of both of them can contribute very nicely to the one launch every year and a half. You know, we are running trials. We're getting the results and our BD teams are working regardless in order to fish for opportunities. If we need opportunity at the commercial stage and so on and so forth, we are looking at these as well. We are looking from, you know, at the entire life cycle, as I said, you know, from discovery to phase III-B and beyond. Rest assured that we are very, very aware of the potential developments. However, as data continues to accumulate with for Ibrutinib and Xevinapant, our confidence, I would say, is just increasing. You will see more regardless of the internal discovery engine, you will see more, and regardless of the results of Xevinapant and Ibrutinib in terms of external innovation at all stages. Now, regarding the magnitude of R&D spend, a couple of weeks ago, the Capital Markets Day, I think that Belén alluded to R&D percentage of sales is the low 20s. This is what I was aiming to, you know, give or take the normal fluctuations in R&D. That's for sure. We intend to grow together, you know, in terms of the R&D spend. It intends to grow together as a proportion of sales, of course, building on Xevinapant and Ibrutinib at the second wave and maintaining profitable growth. We'll be very, very disciplined in that. Thank you. We will take our next question. Our next question comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open. Thank you very much for taking the question. A big picture question for Danny and then a couple of smaller product ones. Danny, when AstraZeneca did a similar internal examination of its R&D function and told the world about the findings, one of the things where they changed significantly was the amount of focus on target validation. I was just wondering how important that is in the evolution of Merck's R&D, particularly given that you've indicated that you were doing much more external sourcing of projects. A couple of product questions. Firstly, on Ibrutinib. As you say, this is a twice-daily formulation. I can find no evidence that you've looked at reformulating that as a once-daily. Is that because you've tried and haven't succeeded, or is that something way down the line once the product is commercialized? Finally on the ADC, with your glucuronide, linker, do you have any data on the immunogenicity and liver tolerability of that linker? Thanks so much. Thank you. Thank you so much for these questions. I'll start with the first one. I'll hand it over to Jan to talk about the Ibrutinib formulation and to Klaus on the ADCs. I did mention that in, you know, sort of hinted towards that in my presentation in terms of Discipline in decision making and go, no-go criteria. This entails a very, very strong emphasis on target validation. This is of utmost importance to us, and we will definitely strengthen that. We have started, and we'll continue doing that, leveraging also, advanced technologies for target validation. We are working with partners on that. One thing that I'm very keen about is not necessarily to develop everything also in terms of the validation in-house, but also to work with partners and with advanced analytics and genetic validations and so on. Moving forward from one stage of discovery to another, we'll need to have a very clear emphasis on that. Jan, do you wanna mention, to talk about the formulation? ned also in the presentation, I mean, our starting point really was to get to maximal BTK occupancy, which led us to the twice daily formulation that we currently have. And we think this is really the key feature because we know that in MS, efficacy really counts. So we really wanted to start with a formulation that really gives us the best shot at clinically meaningful efficacy. This is what we have on our trial. This is what we launch. At the same time, of course, yes, we understand that QD is more comfortable than BID. So we are indeed looking at this at the moment internally. It is quite challenging to design a QD formulation that would really give us the same pharmacological features, which is really a sustained BTK occupancy over the years. We are exploring different technologies at the moment to see if we can eventually mimic this. Let me repeat, however, that at the moment we are very satisfied with the formulation that we have, and we think this is really the best formulation to take to market. We'll take it from there and see how this goes by and if we might introduce this as an LCM option or not, that remains to be seen. Yeah. I think the key point from the market's perspective is that we shouldn't compromise on efficacy. That's what when we have the conversations with neurologists in the market, that's what they tell us. You know, in order to overcome the remaining unmet need to compete in what is a very, very competitive marketplace, you need to bring best in disease type efficacy, and that's what we see with the BID formulation. Yep. Klaus. With regards to your question, Simon, around immunogenicity and liver safety, in particular that pertains to the linker fragment of a glucuronide. I think it's fair to say, we would say that we wouldn't expect that, first of all, because glucose or glucuronides are very polar and would actually therefore, rather avoid aggregation phenomena, for instance, among the various ADC molecules. Those have often been one reason for side effects and off-target effects. In fact, if it comes to immunogenicity, we haven't seen in our preclinical studies any evidence for anti-drug antibodies so far, anything. That was actually quite reassuring for us and let us move forward into the clinics. In terms of liver safety, it's fair to say we have that we have not seen any evidence for that. It's actually not among the target organs that we have seen in the preclinical studies at all. Taken together, we are actually quite confident that this glucuronidase linker is actually a very good selection. Thank you, Klaus. Excellent. Thank you. Thank you. We will take our next question. Our next question comes from the line of Oliver Metzger from Oddo BHF. Please go ahead. Your line is open. Good afternoon. Thanks for taking my questions. The first one is on your target to double historic productivity. It means technically that you double the output compared to the input. You mentioned a more targeted approach and also more analytics. Is this really enough to double the productivity or is your statement already linked to a progress in pipeline you've indicated and also your related expectations? Number two, regarding your external growth support to reach the 1.5 years new launch. Do you see any changes in the environment as higher risk premiums make it harder for smaller companies, potentially with novel therapies or approaches, to be refinanced, which could mean more opportunities for you? to which extent, have your underlying assumptions, regarding external opportunities changed over the past nine months? Thank you. Thank you so much. To your first question, when I refer to doubling the output, it is not necessarily doubling the output as compared to the input. It's comparing doubling the output as compared to historical output in the last several years. We are not talking about necessarily an increase in our probability of success in general or decrease of the attrition rate. I think that we're building on the same attrition rates as in the industry in the respective therapy areas. What we are talking about is actually having more launches at at the end of the funnel. So this will increase, this will need to have, you know, with, you know, when we are staying in the same financial envelope, as I said before, to do things differently. To look at our processes, to look at our structure, to look at our size, and to look at how we take decisions. That's from the engine perspective. The fuel perspective is the one that I referred to in terms of bringing more assets, bringing more compounds from from the external environment, from biotechs, as you said, or other in-licensing deals or acquisitions. This is across the entire value chain. We will bring more, yes, in order to do more, in order to launch more. That's the key concept here. Doubling is as compared to the previous performance, which we are, I would say, pleased with, but not satisfied. To your second question about smaller companies. As you can imagine, we are looking very, very carefully into these companies and you know very well the market dynamics and the valuations, and I'm sure that there are opportunities. We know that there are opportunities. I'm sure that there will be more. However, the potential deals will be still under the frame of focused leadership, which means in the areas or expanding slightly from the areas, not going to totally different areas. This is super important. The focused leadership approach is a guiding principle here. This relates to the disease areas, to the biology and to the modalities. The likelihood that in the foreseeable short-term future, we will do a, I don't know, cell therapy deal is, I would say, lower as compared to others. We are in our, I would say, disease areas, biologies and modalities where we operate, and there are many opportunities to expand there. Okay, great. Thank you very much. Thank you. Thank you. We will take our next question. Our next question comes from the line of James Quigley from Morgan Stanley. Please go ahead. Your line is open. Hello. Thank you for taking our question. I've got a couple of product-related questions. You mentioned you had ADC, nine ADCs in sort of the preclinical stage. At what pace could we see these coming through into the clinic, you know, assuming all goes well? What proportion of those assets have the same linker and payload technology as your current ADC approaches? IE, do you have many in there that use other novel linkers, other novel warheads? For empagliflozin, you mentioned you're moving forward in stages, opportunity to move forward in stages. what's the timeframe and what do you need to see, and when could we see some data for Sjögren's and lupus nephritis as well? Thank you. Okay. I'll ask Klaus to take the first one and Jan to take the second one. James, this is a very, very important question. Obviously, we want to have a sustainable pipeline of ADCs and the pace is relevant, as you mentioned. It is fair to say that I think Danny has already briefly alluded to a next molecule, which could be a GG two molecule, which would basically carry the same linker payload technology that you've seen for M9140. We have more. Imagine the possibilities. There is not only cytotoxic payloads that you could utilize, you could also look into immunological payloads. For instance, both actually immune dampening and immune activating payloads. As you are aware, we are well-versed in the oncology field. We have a product there. We are quite interested, actually, to supplement that with corresponding compounds. All in all, I would say the first generation of molecules will be probably three or so, which will actually have the same linker payload, which will be coming in the next two or three years into the clinics. Then we will have a next generation payloads, which will actually expand the space of biology that we are utilizing. I hope that helps. Just to add one sentence to Klaus. ADC technology is very exciting and can be applicable not only Jan, empagliflozin. Yes, thank you for the question. For empagliflozin, indeed, as you mentioned, we are moving in steps. Basically what will happen next year is that we will have the various futility and interim analysis. That will mainly help us with refining the studies that we have in the lupus area. The studies with both the lupus study as well as the myositis study, should give us initial proof of concept data in the second half of 2024. Now, at the same time, we will certainly do our homework, explore the additional indications, as you have mentioned, for example, lupus nephritis, Sjögren's, or others. We'll basically, be ready with concepts and then decide in a data-driven manner, depending on the outcomes, from the WILLOW studies, if we will pursue additional indications to those, or not. Yes, just to add to that, I'm sure that you that you heard the recent, maybe not that recent, interview with Peter Guenter, who alluded to the fact, you know, the huge potential that this compound has. Of course, you know, the potential is high, and there could be a window of opportunity for several indications. We will be open to potentially partnering them and do it like that in order to de-risk it moving forward. Right. Thank you very much. Thank you. We will take our last question. Our last question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open. Matthew Weston, your line is open. Please ask your question. Forgive me, I didn't realize I was on mute. You'd have thought after two years, I'd have figured that one out. Danny, it's another big picture question, and it's about spending. There's been a lot of focus in the Q&A about you continuing to spend the same amount of R&D. That's the P&L charge. You've also said you're gonna meaningfully increase the number of assets you're gonna in-license. How should we think about the balance or how do you think about capital spending on R&D? Do you charge that internally yourself, or you're simply saying that there's a certain amount of trials you can prosecute and you don't have enough molecules to spend that money, so you need to go and buy more? I'm just trying to understand about the total spend, both including, ongoing R&D through the P&L, but that acquisition spend as well. Is Merck's R&D really getting more productive or is it actually that you're having to buy assets in cause you can't find them yourself? Great question, Matthew. It's actually a perfect combination of both. We will work on the organization and on the engine, and not just around, I would say, soft things like, there is nothing soft in being very disciplined in target validation and in go to go, no-go criteria and governance and so on and so forth. We will enhance that. We are also looking at the organization from the structure and from the size perspective. As you can see in one of the slides, I alluded to a leaner organization. What we're planning is actually redirecting, consciously redirecting resources from, I would say, low-lower value-adding activities into the pipeline. I truly believe that this could give us enough firepower in the frame of or the current frame of the R&D budget in order to fund additional external innovation activities. Each external innovation or in-licensing deal, of course, you know, we've presented, it's a part of our GL discussions, and the Merck board will present the deal. Of course, the R&D spend is on our P&L. As I've said before, with these changes that we are looking at process-wise and structure-wise, we believe that we'll be able to stay within this frame. Obviously, when once, you know, the wave two launches in the form of Xevinapant and Evobrutinib kick in, with a lot of enthusiasm, the relative parts, these low 20s that Belen and We are still committed to that for sure. In terms of the absolute number will increase, which will enable us to have more firepower. We want to bring it from a... I don't wanna say a vicious circle, but definitely to a virtuous circle. Thank you. I think these were all the questions of the day. With this, I'd like to thank you very much for tuning in, for following the Merck journey, and for all of your questions today. This now concludes this year's R&D update call. Thank you and goodbye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.