While rivals have hit setbacks, Merck's largely executed on a clinical program for Keytruda that's put the pharma on top in immuno-oncology.
Shares in Merck are up 40% on the year, outpacing gains from pharma peers.
Keytruda's edge looks tough to beat, at least for now. Growing Gardasil sales will also help, but long-term pipeline questions remain.
For the first time since 2011, Merck's best-selling drug this year won't be its aging diabetes blockbuster Januvia.
Instead, the pharma's cancer immunotherapy Keytruda is all but assured to claim the top spot as class-beating clinical results have fueled steady sales growth.
The change, while not a surprise, reflects an ongoing evolution at Merck from the primary care products that drove its business in the early 2010s to a portfolio led by oncology and vaccines.
Keytruda has accelerated that transition and looks set to do so at an increasing rate in coming years. Last year, the cancer drug earned $3.8 billion. In 2022, when Januvia's patents expire in the U.S., consensus Wall Street estimates predict sales to top $13 billion.
Optimism for Keytruda's continued success is rooted in large part by a strengthening clinical profile that's set it ahead of rivals like Bristol-Myers Squibb's Opdivo.
This year, results from three Phase 3 studies showed treatment with Keytruda extended survival versus standard-of-care chemotherapy in previously untreated lung cancer patients. Coupled with Keytruda's existing approvals in first-line lung cancer, the data give Merck an undisputed advantage in one of the largest oncology markets.
"For the next several years, it is tough to see how someone is going to beat them," said Vamil Divan, an equity analyst at Credit Suisse, in an interview with BioPharma Dive.
Investors have responded to Keytruda's performance by bidding up Merck's stock, which to date in 2018 has outperformed that of the company's peers.
Januvia's not the only blockbuster Keytruda's pulled ahead of in 2018.
Measured by sales, Merck's immunotherapy has trailed Opdivo in the immuno-oncology market since the drugs' respective approvals in 2014. But over the last six quarters, Keytruda has rapidly gained ground and, in the second quarter, outpaced its rival by a hair.
Analysts forecast the gap to widen in the coming quarters as Keytruda consolidates its advantage in lung cancer.
The role reversal is often traced back to divergent results the two pharmas reported in key lung cancer studies two years ago for their respective drugs. Merck's success led to a first-line approval for Keytruda while Bristol-Myers, hamstrung by its clinical failure, is still working towards a Food and Drug Administration nod.
As Credit Suisse's Divan explains it, Merck's emphasis on pairing Keytruda with chemotherapy — rather than Bristol-Myers' focus on matching Opdivo with another immunotherapy, Yervoy — has paid off.
That strategy's success was clearest this spring, when a study called Keynote-189 widely impressed oncologists and investors alike. Patients with non-small cell lung cancer given a combination of Keytruda and chemotherapy were 51% less likely to die than those given chemotherapy alone.
Data presented two months later proved a survival benefit to Keytruda monotherapy in patients expressing levels greater than 1% of a biomarker known as PD-L1. While it remains a question among oncologists whether people with low levels of PD-L1 should receive Keytruda monotherapy or Keytruda plus chemo, the two studies are already shifting the standard of care.
Summary of key clinical readouts for Keytruda in 2018
|Keytruda plus pemetrexed/platinum chemo
|1st-line non-squamous NSCLC
|51% reduction in the risk of death versus chemo
|Keytruda plus paclitaxel/platinum chemo
|1st-line squamous NSCLC
|36% reduction in the risk of death versus chemo
|1st-line non-squamous NSCLC
|19% reduction in the risk of death versus chemo
SOURCE: New England Journal of Medicine, company releases
Although Merck has faced criticism for not striking more deals, the pharma has used some of its firepower to expand the combination opportunity for Keytruda. A potentially $5.7 billion deal in March with Eisai for 50% rights to the Japanese pharma's Lenvima mirrored a similar arrangement with AstraZeneca and its PARP inhibitor Lynparza last year.
"We have explored combinations aggressively and where combinations have showed promise — if we don't have them in house — we have structured business development deals to address them," explained Roy Baynes, head of global clinical development at Merck Research Laboratories, in an interview with BioPharma Dive.
For some investors the crucial question is what else besides Keytruda will power Merck in the future.
Merck executives define the company around four core areas: oncology, vaccines, hospital or specialty care and animal health.
Within the four, though, only the papillomavirus vaccine Gardasil 9 currently stands out as a multi-blockbuster product.
In October, the FDA approved Gardasil 9 for use in adults ages 27 through 45, expanding the addressable patient population in the U.S. Greater commercial opportunity could lie further west in China, where sales have ticked up strongly.
For many on Wall Street, though, Merck's story still comes down to Keytruda. In 2018, about all that could go well for Merck in immuno-oncology did, helping the company separate from its peers.
Whether it repeats that feat in coming years will fall to an executive team led by longtime CEO Ken Frazier.
Recently, Merck's board of directors voided a retirement rule allowing the veteran chief to continue leading the company at least through next year. The move was regarded positively, given the transformation from primary care generalist to oncology powerhouse Fraizer has led at Merck.
But some of those long-term questions might be on the boards' mind as well.
"The board, I think, feels like the current team's job isn't done," said Credit Suisse's Divan.