Dive Brief:
- Merck & Co.'s star cancer immunotherapy Keytruda buoyed the U.S. drugmaker's revenues in the fourth quarter of 2017, beating market expectations as it continues to command a competitive edge in the important lung cancer market.
- Overall revenues totaled $10.4 billion during the three month period, 3% higher than the same stretch a year ago but slightly below consensus forecasts.
- Merck expects sales of between $41.2 billion and $42.7 billion this year, which would represent growth of between 2% and 6% over 2017's total of $40.1 billion. While the company said it would benefit from the recent cut to U.S. corporate taxes, it expects to pay 19% to 20% in 2018 — roughly equal to last year.
Dive Insight:
Jefferies analyst Jeffrey Holford perhaps summed up Merck's current position most succinctly in his title for a Feb. 2 note on the company: "Holding pattern continues as we wait for competitive fog to clear."
That fog clouds assessments of how well Keytruda (pembrolizumab) can hold on to its lead in non-small cell lung cancer (NSCLC) moving forward.
Sales of Keytruda continued their steady — and impressive — rise on the back of the immunotherapy's competitive edge in the lucrative first-line setting. As Merck feels the effect of patent expirations for other brands and biosimilar competition to Remicade (infliximab) in Europe, Keytruda has become an essential growth driver.

Yet several competitors expect key trial read outs for their respective checkpoint inhibitors in the first half of the year, which could shake up the immuno-oncology market yet again and threaten Keytruda.
Roche AG says overall survival results from its IMPower150 study of Tecentriq (atezolizumab) together with Avastin (bevacizumab) and chemotherapy in first-line NSCLC should come shortly. Data released in December showed the combination regimen cut the risk of disease progression or death by two-fifths compared to Avastin and chemo alone. The Swiss pharma already plans to file for approval in this indication, but securing strong overall survival results would greatly boost Tecentriq's competitiveness.
"We have every chance to play there well with the competition," said Roche CEO Severin Schwan on a Feb. 1 earnings call, referring to the first-line non-squamous lung cancer setting.
Bristol-Myers Squibb & Co. and AstraZeneca plc are also set to report data from studies of Opdivo (nivolumab) and Imfinzi (durvalumab), respectively.
"Although Merck & Co has consolidated leadership in a fiercely contested and uncertain immuno-oncology market, competitor combination readouts, including PD-1/CTLA-4 combos, may temper Keytruda’s upside," wrote Ali Al-Bazergan, an analyst with PharmaVitae at Informa Pharma Intelligence, in an emailed comment.
Elsewhere in oncology, Merck noted that AstraZeneca's PARP inhibitor Lynparza (olaparib) regained its market leadership in the newly competitive class after winning a broader label in ovarian cancer. Merck paid $1.6 billion upfront last year to partner with AstraZeneca on the drug in a deal worth a total of $8.5 billion.
Merck didn't drop many hints about potential business development, yet the company could find pressure to buy rising in the current market environment.
"Despite rising Keytruda sales, modest overall earnings growth and the Januvia patent expiration in 2022 provide an impetus for acquisitions," said Michael Levesque, a senior vice president at Moody's, in an emailed statement. "Following U.S. tax reform, Merck has more tax-efficient access to its cash, which totals over $20 billion of dry powder for potential acquisitions."
Some of that cash will go to capital investment. The pharma said it would invest $12 billion over the next five years in new capital projects, with $8 billion of that spending coming in the U.S.