Merck's Keytruda lung cancer sales may face new pressure, but investors shouldn't sweat it: analyst

Merck & Co.’s PD-1 superstar Keytruda has been growing exponentially thanks mainly to its lead in newly diagnosed non-small cell lung cancer. However, recent successes for immuno-oncology competitors could put some pressure on its near-term growth, one analyst says.

But worry not, SVB Leerink analyst Daina Graybosch wrote in a Wednesday note to clients: The drug still has other indications to lean on.

The way she sees it, Merck can compensate for Keytruda's deceleration with uptake in even earlier stages of the disease, such as before or directly after surgery. In those settings, known as neoadjuvant and adjuvant, respectively, “a potentially long duration of treatment and larger addressable population provide the largest untapped market for checkpoint inhibitors.”

Keytruda arguably has an unshakeable lead in first-line NSCLC with seemingly unparalleled clinical data, but each new entry, however less meaningful, will eat away some market share. That argument led to Graybosch to project a higher probability of receding share for the Merck drug in the indication.

She now projects Keytruda’s U.S. quarterly sales in NSCLC will start to decline in early 2020 from a peak of around $1.4 billion. Hurt by that slide, its overall U.S. sales will plateau next year at around $8.2 billion before ticking upward again in 2023, she estimates.

RELATED: Merck's quarterly Keytruda sales soar past $3B, but analysts fret over future growth

Bristol-Myers Squibb’s archrival Opdivo recently posted two wins in treatment-naïve NSCLC. First, in the Checkmate-227 study, Bristol showed the Opdivo-Yervoy combo could help new patients live longer than chemotherapy alone. Patients on the I-O drugs lived a median 17.1 months, versus 14.9 months for chemo patients. Then last month, the company said the pair plus chemo also prolonged patients’ lives in the closely watched Checkmate-9LA trial.

While Bristol argues the PD-1-CTLA4 combo offers a new chemo-free option with a durable response, industry watchers noted that its 21% reduction in death risk didn’t measure up to the 50% Keytruda’s chemo-combo had posted. But Graybosch suggests the Opdivo+Yervoy+chemo pairing looks to be one of the most significant threats to Keytruda in frontline NSCLC.

The combo could enjoy widespread adoption as long as it meets median overall survival of 26 months or a one-year survival rate of 77%, physicians surveyed by Graybosch suggested, according to an October memo.

RELATED: BMS nets another Opdivo lung cancer win—but it still has to beat Merck's high bar

Another potential major threat could come from AstraZeneca’s anti-PD-L1 drug Imfinzi, Graybosch said. A triplet of Imfinzi, investigational CTLA4 tremelimumab and chemo outperformed solo chemo at keeping patients’ cancer from progressing in the Poseidon trial, the British drugmaker unveiled in October. But given tremelimumab’s string of failures, Graybosch at the time said a fast approval is not likely.

Then, there’s Roche’s Tecentriq, which at the European Society for Medical Oncology annual meeting in September showed it alone could extend patients’ lives by 7.1 months compared with chemo in patients with high levels of PD-L1. That use might not dent Keytruda sales, but “a single-agent approval eases the regulatory path for combinations on top of Tecentriq,” Graybosch said in a September report.

RELATED: Bristol-Myers, Roche will top burgeoning I-O market worth $29B: analyst

In the neoadjuvant and adjuvant settings, though, Keytruda has plenty of other sales opportunities on the horizon. At this year’s ESMO, the drug became the first to show it, when used in tandem with chemo, could beat out chemo monotherapy in terms of triggering pathologic complete responses in pre-surgery metastatic triple-negative breast cancer patients. That Keynote-522 trial is also examining Keytruda in the post-surgery setting, where an interim analysis found it had cut the risk of recurrence by 37% compared with chemo.

That's not to say it's not facing competition in those other indications, though. Tecentriq is so far the only I-O drug approved in TNBC, and there’s no doubt Roche can leverage its long-lasting relationships with physicians in breast cancer to aid its launch. Keytruda in May also posted a rare trial flop in previously treated patients, leaving an opening for rivals. And Tecentriq’s own neoadjuvant trial, Impassion031, is poised to read out next year after a delay.

Overall, Graybosch said she expects “Keytruda competition in frontline NSCLC and possible drug pricing legislation to remain as areas of concern for Merck,” but believes its growth opportunities in other tumor types are underappreciated.