Merck: Good Long-Term Despite Major Setback

Summary

• The FDA has placed Keytruda multiple myeloma combination studies on a clinical hold.
• Keytruda had been selling remarkably well to date.
• Keytruda has been outperforming some of its rivals.

On Wednesday, Merck (NYSE:MRK) was notified by the FDA that it was hit with a clinical hold on three multiple myeloma studies that were treating patients with Keytruda. The reason for the hold was that there were more patients deaths reported in the studies. These trials are treating patients with multiple myeloma using a combination of Keytruda and other compounds.

Combo Treatment Problem

About a month ago Merck had stopped enrollment in two phase 3 multiple myeloma studies. Those studies were testing Keytruda in combination with Celgene (CELG) drugs. The decision to pause enrollment in the studies came from a safety monitoring board. The board determined that there were more patient deaths in the combination studies with Keytruda, than in the control groups. Enrollment being paused was a huge blow to Merck, but not as bad as the clinical hold itself. The FDA placed a clinical hold on three multiple myeloma trails due to patient deaths. The bad news is that all the patients in these multiple myeloma trials that were taking the combo treatment will no longer receive Keytruda. This is a setback for Merck, but there is a bright side to this story. The good news is that none of the other clinical trials dealing with Keytruda have been affected. Keytruda is currently being tested in hundreds of other clinical trials in combination with other cancer drugs. There is no guarantee, but one can conclude that this treatment combination might be the culprit in the patient deaths. Anyways, that is what the FDA will try to parse through to determine the cause of the patient deaths.

Keytruda Targets

Keytruda has already been successful by obtaining FDA approval for multiple cancer indications. Such indications include: Lung cancer, kidney cancer, melanoma, and one form of blood cancer Hodgkin's Lymphoma. If the clinical hold is eventually removed and Keytruda makes it past phase 3 testing in the multiple myeloma indication it would be the second approval for a blood cancer product for the company. Merck has been doing well with Keytruda on the market. When it reported its 1st quarter results in May it stated that Keytruda sales hit $584 million during the quarter. Why is that impressive? Well, that's because sales more than doubled up by 134%. Even analysts are upbeat about the sales that Merck should be producing. Analysts were expecting more from the company. Analysts were expecting sales to increase to $615 million for the quarter. Still, seeing an increase in sales by over 100% or more during the quarter is quite substantial.

Keytruda Against Competitors

Thus far Merck is in the lead in the immuno-oncology space. Of course, that could all change depending upon upcoming data. Positions changed when Merck announced that Keytruda achieved better results in advanced lung cancer compared to Bristol Myers (BMY) Opdivo. Merck announced that Keytruda was able to reduce the risk of disease progression or death in lung cancer patients by 50%. It was even able to reduce the risk of death by 40%. These results were from the Keynote-024 trial. The median-progression in the trial for patients taking Keytruda was 10.3 months compared to only 6 months on placebo. The only downside is that patients must be tested to determine if they have a PD-L1 version of lung cancer to be placed on Keytruda. Only then can they take the treatment with greater success. That is where Bristol-Myers had an advantage. Because patients with Opdivo didn't have to be tested for PD-L1 in lung cancer. The problem is that Opdivo failed to beat placebo in a first-line therapy trial in patients with lung cancer. Both Keytruda and Opdivo were second-line therapy treatments for lung cancer. The failure of Opdivo in first-line lung cancer patients put Keytruda on the forefront.

Conclusion

The clinical hold on the three myeloma trials is not a good thing, but it won't have a major impact on Keytruda sales. Sales of Keytruda have already more than doubled year-to-date. Merck has already received a couple of FDA approvals this year for Keytruda in other indications to help it expand to other markets. Keytruda has shown to be superior in lung cancer patients compared to Opdivo which is a major competitor to its immuno oncology product. That makes Merck a good long-term investment despite the setback with the FDA clinical hold on the multiple myeloma trials.

Analyst’s 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.