[Overseas Stocks Spotlight] Merck Expands Indications for 'Keytruda' with Combination Therapy

[Asia Economy Reporter Eunmo Koo] Global pharmaceutical company Merck & Co (MRK-US) plans to continue growth by expanding the indications of its immuno-oncology drug Keytruda, which is now in its sixth year since launch, beyond monotherapy to combination therapy and perioperative adjuvant therapy for early-stage cancers.

Keytruda has demonstrated tumor reduction effects in over 30 cancer types and has received marketing approval for 16 cancers, including melanoma and non-small cell lung cancer. Based on its overwhelming efficacy, it recorded sales of $11.1 billion last year, a 54.6% increase from the previous year, and is expected to grow at an average annual rate of 12% to exceed $25 billion in sales by 2026.

On the 14th, Hana Financial Investment evaluated that the 2020 American Society of Clinical Oncology (ASCO) meeting held last month provided an opportunity to reassess Keytruda's growth drivers. At this year's ASCO, interim data from phase 3 clinical trials for triple-negative breast cancer (TNBC), colorectal cancer, and Hodgkin lymphoma were presented, along with long-term survival data over two years for previously approved indications such as non-small cell lung cancer and melanoma.

Until now, the market had concerns about whether additional indication expansions would be possible as Keytruda entered its sixth year since launch. Merck is currently conducting about 1,200 clinical trials related to Keytruda, including approximately 90 phase 3 trials aimed at regulatory approval and about 100 adjuvant therapy trials for early-stage cancers. Most of these trials involve combination therapies with other drugs rather than Keytruda monotherapy. Merck has also stated that clinical trials involving Keytruda monotherapy are nearly complete.

First, the ‘KEYNOTE-355’ trial for triple-negative breast cancer compared combination therapy of Keytruda and chemotherapy with chemotherapy alone, releasing progression-free survival data. Minjung Sun, a researcher at Hana Financial Investment, said, “The Keytruda-containing regimen showed a median progression-free survival of 9.7 months, which is 4.1 months longer than the control group (the point at which 50% of all trial participants had disease progression or death). This trial, along with the neoadjuvant therapy for early-stage triple-negative breast cancer presented at last year's European Society for Medical Oncology (ESMO), is expected to be an important foothold for entering the triple-negative breast cancer market in the future.”

The trial for colorectal cancer with the genetic characteristic MSI-high (KEYNOTE-177) compared Keytruda monotherapy with conventional chemotherapy. The median progression-free survival for the Keytruda monotherapy group was 16.5 months, more than double the 8.2 months of the control group. Additionally, the 24-month progression-free survival rate was 48% in the Keytruda group compared to only 19% in the control group.

The trial for patients with relapsed Hodgkin lymphoma (KEYNOTE-204) compared Keytruda monotherapy with Adcetris, an anti-CD30 antibody-drug conjugate from Seattle Genetics. The median progression-free survival for Keytruda was 13.2 months, extending 3.9 months longer than the control group.

Long-term survival data for already approved indications were also disclosed. Researcher Sun said, “These results show that Keytruda's efficacy extends patients' survival over the long term.” She explained, “A notable trial is the KEYNOTE-189, which established Keytruda combined with chemotherapy as the standard treatment for non-small cell lung cancer. In this trial, the two-year survival rate for the Keytruda group was 45.7%, more than double the 27.3% of the control group.” Additionally, the adjuvant therapy trial for melanoma patients at high risk of recurrence (KEYNOTE-054) showed that at the three-year mark, the recurrence rate was only 36.3% in the Keytruda group compared to 55.9% in the control group.

Merck is acquiring substances expected to have excellent efficacy when combined with Keytruda. Notably, in 2017, it licensed the co-development and sales rights of AstraZeneca’s PARP inhibitor Lynparza for a total milestone value of $85 billion. Lynparza has received FDA approval as monotherapy for ovarian, breast, and pancreatic cancers, and is also undergoing clinical trials in combination with Keytruda for ovarian cancer, triple-negative breast cancer, prostate cancer, and non-small cell lung cancer.

In 2018, Merck licensed the VEGFR inhibitor Lenvima from Eisai for $5.8 billion. Lenvima has also been approved as monotherapy for thyroid and liver cancers and is undergoing multiple clinical trials in combination with Keytruda for kidney cancer, liver cancer, endometrial cancer, and non-small cell lung cancer.

The valuation is also considered reasonable. Merck stated in its first-quarter earnings report this year that two-thirds of its product portfolio consists of prescription drugs requiring hospital visits, making it inevitably affected by COVID-19, which has also led to a sluggish stock price. However, researcher Sun analyzed, “Demand for cancer treatments like Keytruda is expected to recover first, so the company's mid- to long-term attractiveness remains unchanged. Merck is currently trading at a price-to-earnings ratio (PER) of about 15 times based on 12-month earnings, which is in line with the average of large-cap peers specialized in oncology, indicating a reasonable valuation.”