So Merck Just Made History. Should You Care As An Investor?

| About: Merck & (MRK)
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Summary

Merck recently got the first-ever drug approval that is tumor agnostic.

While the approval doesn't cast as wide a net as it may seem at first, it could pay dividends.

The impact on clinical oncology could very well be huge.

The immune checkpoint inhibitors have created a fast-running revolution in the world of cancer research. Now, there are 5 agents in the broader class of "PD-1/PD-L1" inhibitors, to accompany the CTLA-4 inhibitors. In 2015 and 2016, Bristol-Myers Squibb (NYSE:BMY) was running roughshod through the field with nivolumab, capturing all kinds of first approvals.

But so far, 2017 belongs to pembrolizumab. Merck (NYSE:MRK) has channeled this agent into a wide variety of treatment settings, most recently bladder cancer. Heck, the prescribing information for pembrolizumab has a list of indications that is getting ridiculously long.

More to point, MRK has captured important segments of oncology. In addition, to being a competitor in second-line lung cancer, bladder cancer, and Hodgkin lymphoma, they have been given approval for first-line treatment of certain lung cancers (those with very high PD-L1 expression) and bladder cases where patients cannot receive chemotherapy.

Merck makes history

But the big wave from the FDA was the announcement that MRK has been given approval for pembrolizumab in patients with a certain biomarker (we'll get to that in a second). This approval is for any patient, so long as they've failed other options, and have evidence of the biomarker. That's pediatric patients. That's adults. That's any tumor.

This is the first time a drug has been approved in cancer without a tumor-specific context. And I'm still personally amazed by that. Today, we're discussing what that means for MRK and the field.

The biomarker

The approval comes for any patients whose tumors are MSI-H or MMRd. MSI-H is "microsatellite instability-high," and this refers to your genome's microsatellites, regions in your genetic code that are prone to mutation naturally, which become even more unstable and result in a large number of mutations, and potentially cancer. MMRd refers to "mismatch repair deficiency," whereby your body's cells, for one of many possible reasons, develop an inability to repair certain kinds of DNA damage.

In essence, both MSI-H and MMRd positivity result in increased mutations in your genetic code, giving rise to higher risk of cancer.

Why immunotherapy, then?

More mutations also make the tumor look more and more different from the body's natural cells. So in theory this can make them more susceptible to assault by the immune system.

If you've been following me for some time, you might remember my article about BMY's clinical trial results in MMRd tumors, published in June 2016. BMY had demonstrated highly promising data for nivolumab in colorectal cancer, but only in cases that were MSI-high.

MRK's approval in MSI-high tumors comes on the basis on clinical studies in a total of 149 patients across 5 KEYNOTE studies. And across this group of patients, the overall response rate from pembrolizumab was a surprising 39.6%. Note that this does not account for things like PD-L1 expression.

Basically, these studies suggest that if you get cancer, and if it is MSI-high, then you have a chance of response approaching 50%, no matter what kind of tumor you're talking about. And nearly 80% of those patients maintained that response past 6 months.

This even includes such "impossible" tumors to treat as pancreatic cancer, GEJ tumors, and biliary cancer. Normally, these are incredibly tough to treat and have a horrific prognosis for patients.

The financial implications

To be fair, MSI status is not currently recognized as a major prevalent biomarker. The hallmark tumor for MSI-high status is colorectal cancer, with as many as 15% of tumors harboring these defects.

But 15% is a lot, considering there are over 130,000 new cases of colorectal cancer diagnosed each year in the United States. Of these, around 13% are detected at the metastatic stage. This gives a very rough estimate of 16,900 new metastatic cases. Currently, a full course of pembro is estimated at the $1 million mark. It's a potential $17 billion market, given those estimates.

And certainly we'll see some differences in penetration and pricing, but this very rough calculation tells us that the potential market just for colorectal cancer is massive. It speaks to the overall massive growth that can possibly be realized by MRK just on the basis of pembrolizumab sales.

The caveat

It's likely that the other big players in the immune checkpoint space are nipping on the heels of MRK. This is an incredibly rapidly-moving field (as readers of my series "3 Things You Should Learn About Biotech Today" will be well-familiar with!), and I fully expect some of the other checkpoint inhibitors to receive approval.

It is unknown what competition is going to do to revenues for these agents, as the explosion of research has only begun to yield a large number of approvals in the last year or so. Needless to say, it seems unlikely that MRK will capture 100% of the eligible patients with MMRd, especially given that it was BMY who was the first to demonstrate publicly the benefit of these agents in MSI-high/MMRd patients.

The implications

I think the greater point is being lost in the discussion of this approval. The FDA's willingness to approve a drug for a biomarker and NOT a tumor, based on studies totaling only a little under 150 patients, signals their aggressiveness, and it seems likely we'll see some kind of dividend payout from it as the years go on.

What I'm saying is this approval could very well be a watershed moment, both for MRK and for oncology on the whole. If a "universal" biomarker can be identified for a given agent, then we now know that the doors open to get approved in any tumor type. It means huge things for molecular testing. It means huge things for finally achieving personalized cancer care.

Essentially, what we're seeing at this stage is that you can get one test for cancer that might determine an effective treatment strategy for you. If that evolves and expands, then we could be witnessing the beginning of a revolution.

And I think everyone should be excited about that, from investors to patients.

Author's note: I appreciate the time you've taken out of your day to read some thoughts on MRK developments and the excitement of immune checkpoint inhibition. If you enjoyed this article, I hope you'll consider becoming a follower of mine on Seeking Alpha, which will allow you to receive real-time email updates when new articles of mine go live, including those from my daily series on recent developments in biotech and pharmaceutical science!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.