Caroline Litchfield
Chief Financial Officer at Merck & Co., Inc.
Thank you, Rob. Good morning. As Rob noted, we delivered another excellent quarter with growth driven by robust global demand across our innovative portfolio. These results are enabled by the excellent execution of our teams and reinforce the conviction we have in our science-led strategy. We remain confident in our ability to continue to deliver strong results in the near term and are committed to making disciplined investments in compelling science to drive long-term value for patients, customers, and shareholders.
Now turning to our second-quarter results. Total Company revenues were $16.1 billion, an increase of 7% or 11% excluding the impact of foreign exchange. The following revenue comments will be on an ex-exchange basis. Our Human Health business sustained its momentum with double-digit growth of 11%, primarily driven by oncology. Our Animal Health business also delivered a solid performance with sales increasing 6%, driven by growth in livestock products.
Turning to the performance of our key brands. In oncology, sales of KEYTRUDA grew 21% to $7.3 billion, driven by increased uptake from earlier-stage cancers and continued strong global demand for metastatic indications. In the US, KEYTRUDA grew across a broad range of tumors. In the earlier-stage setting, the increase was largely attributable to uptake from KN-671 and KN-091 in non-small cell lung cancer. KEYTRUDA has now achieved market leadership in the neoadjuvant and adjuvant settings, building on its existing leadership position as adjuvant therapy.
In metastatic disease, we saw continued strong uptake in first-line advanced urothelial cancer following the recent launch of KN-A39. KEYTRUDA plus Padcev has now surpassed platinum chemotherapy-based regimens in new patient starts. Outside the US, KEYTRUDA growth was driven by increased use in certain earlier-stage cancers, including high-risk early-stage triple-negative breast cancer and intermediate high or high-risk renal cell carcinoma as well as continued strong demand from patients with metastatic disease.
Inflation-related price increases consistent with market practice in Argentina also contributed to growth. Alliance revenue from Lynparza and Lenvima each grew 4%. Welireg sales more than doubled to $126 million, driven by increased uptake in certain patients with previously treated advanced renal cell carcinoma. Our vaccine portfolio delivered solid growth. GARDASIL sales increased 4% to $2.5 billion. In the US, sales benefited from price as well as demand and favorable CDC purchasing patterns. Outside the US, higher demand across many international markets was partially offset by the timing of shipments to China.
In pneumococcal, Vaxneuvance sales increased 16% to $189 million. Growth was driven by ongoing launches in international markets. As Rob noted, we are very excited by the opportunity to positively impact the lives of adult patients with pulmonary arterial hypertension following the recent U.S. launch of WINREVAIR. Recall, we received FDA approval on March 26 with the first patients receiving therapy about one month later. Initial patient and physician feedback has been favorable and we recorded $70 million of sales in the quarter. We estimate that approximately 40% of sales were attributable to doses administered to patients, with the remainder due to distributors building inventory in support of increasing demand.
The launch is off to a strong start. As of the end of June, more than 2,000 patients received a prescription for WINREVAIR. Our experience to date with those prescriptions would suggest that approximately 75% to 80% will receive commercial product. Of those, more than 1,000 patients started treatment in the quarter, largely reflecting prescriptions written in April and May as it currently takes approximately one month to complete the steps necessary to commence therapy. More than 500 physicians have written at least one prescription with many looking to gain experience with the product as they prioritize treating the most advanced patients who are in greatest need of additional therapy. Most prescribers are from either large academic centers or larger private practices.
We are pleased that payers are recognizing the value of WINREVAIR and are already providing access to patients. Many payers have established coverage policies consistent with the label or STELLAR study criteria, while others are in the process of developing their policies. In summary, we are pleased with the strong start and look forward to continued progress in enabling access for appropriate patients over the coming months.
Our Animal Health business delivered another solid quarter with sales increasing 6%. Livestock sales grew 11%, driven by higher demand for poultry and ruminant products as well as price. Companion animal sales grew 1%, reflecting price, partially offset by a reduction in distributor inventory. We are also excited to have launched a long-acting BRAVECTO injectable in a number of international markets during June.
I will now walk you through the remainder of our P&L and my comments will be on a non-GAAP basis. Gross margin was 80.9%, an increase of 4.3 percentage points, driven by reduced royalty rates for KEYTRUDA and GARDASIL as well as a favorable product mix. Operating expenses decreased to $6.2 billion. There were no significant business development expenses in the quarter compared with a $10.2 billion charge a year ago. Excluding this charge, operating expenses grew 8%, reflecting strategic investments to realize the promise of our robust early and late-phase pipeline and support the promotion of our key growth drivers. Other expense was $108 million. Our tax rate was 14.1%. Taken together, earnings per share were $2.28.
Now turning to our 2024 non-GAAP guidance. The continued operational strength of our business has enabled us to raise and narrow our full-year revenue guidance. We now expect revenue to be between $63.4 billion and $64.4 billion, an increase of approximately $200 million at the midpoint. Our increased guidance range represents strong year-over-year revenue growth of 5% to 7%, including an approximate 3 percentage point negative impact from foreign exchange using mid-July rates. Our gross margin assumption remains approximately 81%. We now expect operating expenses to be between $26.8 billion and $27.6 billion. This range reflects an incremental $1.5 billion of charges related to the one-time cost to acquire EyeBio and ongoing expenses to advance the assets as well as investments to progress our innovative pipeline.
As a reminder, our guidance does not assume additional significant potential business development transactions. Other expense is expected to be approximately $350 million, which now includes financing costs for the acquisitions of EyeBio and Elanco's aqua business. Our full-year tax rate is now expected to be between 15.5% and 16.5%, which includes an unfavorable impact related to the EyeBio acquisition that is not tax-deductible. We assume approximately 2.54 billion shares outstanding. Taken together, we expect EPS of $7.94 to $8.04. This range includes a negative impact from foreign exchange of more than $0.30 using mid-July rates. Recall, our prior guidance range was $8.53 to $8.65, including the one-time charge of $1.3 billion or $0.51 per share related to the acquisition of EyeBio and an estimated $0.09 to advance the assets as well as finance the EyeBio and Elanco's aqua business transactions, our prior guidance range would have been $7.93 to $8.05 with a midpoint of $7.99.
Our current guidance midpoint remains the same as our higher revenue estimate is being offset by increased investments to support our business. As you consider your models, there are a few items to keep in mind. We look forward to the opportunity to help protect certain adults from invasive pneumococcal disease and pneumococcal pneumonia following the recent FDA approval and ACIP recommendation of CAPVAXIVE. We are now working toward the achievement of certain milestones that will enable commercial uptake. These milestones include publication in the Morbidity and Mortality Weekly Report, which typically lags an ACIP recommendation by a few months, as well as obtaining payer coverage and contracting with customers.
For GARDASIL, over the past few years, we've benefited from extremely strong demand in China, including from the expanded indication for GARDASIL 9 to the 9 to 45-year age cohort in late 2022. In the second quarter, however, there was a significant step-down in shipments from our distributor and commercialization partner Zhifei, into the points of vaccination compared with prior quarters, resulting in above-normal inventory levels at Zhifei. We are working closely with them to more fully understand the dynamics that caused this change. As we learn more, we will assess future shipments to our partner and work to bring their inventory back to more normal levels. If shipments from Zhifei into the points of vaccination do not increase, it is likely that we will ship less than our full-year 2024 contracted doses by the end of this year.
We believe the opportunity in China remains very attractive as there are more than 120 million females in the addressable population living in Tier 1 to Tier 5 cities who have not yet received the protection of an HPV vaccine. As we said before, it will take increasing efforts to educate and activate the next wave of patients. Together with Zhifei, we are focused on and committed to investing in additional resources and patient education on the value of GARDASIL given the important benefit it provides. We also look forward to the potential approval for males, which we believe represents a meaningful opportunity.
More broadly, we remain confident in the opportunity for GARDASIL globally based on the protection it provides against HPV-related cancers and low immunization levels overall, and continue to believe we will achieve sales of over $11 billion by 2030. Our initial launch of WINREVAIR is having a positive impact for patients. We are very pleased with its performance and look forward to supporting more patients in the U.S. and across the globe.
Outside the U.S., we are pleased with the positive CHMP opinion and potential near-term launch in Europe. Following EU approval, we will need to obtain reimbursement which should occur in 2025 in most major markets, but expect that Germany will receive reimbursement and launch this year. We remain confident in the successful launch of WINREVAIR consistent with our high expectations and look forward to providing further updates on our progress. Now turning to capital allocation, where our strategy remains unchanged.
We will prioritize investments in our business to drive near- and long-term growth. We will continue to invest in our expansive pipeline of novel candidates, each of which have significant potential to address important unmet medical needs. We remain committed to our dividend and plan to increase it over time. Business development remains a priority, and we are well positioned to pursue additional science-driven value-enhancing transactions. We will continue to execute a modest level of share repurchases.
To conclude, as we enter the second half of the year, there is continued strength in our business driven by global demand and commercial execution. We remain confident in our outlook driven by our unwavering commitment to leverage leading-edge science to save and improve the lives of patients with investment in innovation and our ongoing focus on execution we are well-positioned to deliver value to patients, customers, and shareholders now and well into the future.
With that, I'd now like to turn the call over to Dean.
