Merck's Keytruda fortunes look even better as doctors digest Opdivo's lung cancer failure

Analysts hiked their estimates for Merck & Co.’s ($MRK) Keytruda sales last week after a Bristol-Myers Squibb ($BMY) rival fell short in a key lung cancer study. But if new doctor surveys prove out, they may need to jack up those estimates even more.

Here’s why, says Bernstein analyst Tim Anderson, citing a survey conducted by FirstWord Pharma: 60% of the doctors who responded said they expect new scripts for Keytruda to start rolling in quickly or very quickly as oncologists turn to the PD-1 immunotherapy for previously untreated patients who qualify.

Plus, the doctors who responded to the survey--30 in the U.S. and 49 in the E.U.--said they’re likely to use Keytruda more often in previously treated patients now. A large majority also said they’ll test for the PD-L1 biomarker more often, removing a hurdle for Keytruda; in the second-line setting, the Merck drug requires diagnostic testing, but Bristol-Myers’ Opdivo does not.

That’s bad news for Opdivo, which failed to hit its goals in a first-line lung cancer trial announced a little over a week ago. With Opdivo considered the dominant drug in the new class of immuno-oncology meds, the study results were a shocker, and doctors, analysts and drug execs are all still recalibrating their expectations.

After the top-line data went public, Bernstein raised its peak sales estimates for Keytruda by $2.5 billion and cut Opdivo's by $3 billion; consensus estimates went up by $1.3 billion and down by $2 billion, respectively.

“Some have felt that Bristol-Myers would retain its dominance in second-line, despite losing out in first-line,” Anderson pointed out in a Monday investor note. But this doctor survey lines up with Bernstein’s expectations of a “halo effect” for Keytruda in the second-line setting, where the Merck drug has lagged far behind Opdivo.

“Opdivo has indisputably dominated over Keytruda in the current labeled lung cancer population,” Anderson notes. “This seems set to change potentially.”

An expert polled by Deutsche Bank offered some backup, too. As time goes on, samples taken in first-line patients for PD-L1 testing will be available for second-line diagnostics, lowering the testing obstacle that Keytruda has been facing in that setting.

“Keytruda is ... well positioned to gain market share in second-line” for that reason, assuming data in subgroups of patients with lower PD-L1 expression puts it on an equal footing with Opdivo, Dr. Roy Herbst, chief medical oncology and associate director of translational research at Yale Cancer Center, told Deutsche Bank ($DB). Herbst also sees the Opdivo results reinforcing the importance of first-line diagnostic testing for PD-L1.

And other things being equal, Keytruda’s dosing advantage--once every three weeks versus bi-weekly for Opdivo--could come to bear in its rivalry with Opdivo, Herbst told Deutsche Bank.

More inauspicious commentary for Bristol-Myers. More than 40% of the survey respondents said their perception of Opdivo has changed “significantly” or “very significantly” because of the recent trial failure. And, surprisingly, the doctors said they’ll experiment with Keytruda in patients who aren’t “high expressers” of the PD-L1 biomarker.

Keytruda’s first-line boost could come soon. Data from Keytruda’s first-line lung cancer study will be presented at the European Society of Medical Oncology meeting in October--the lung cancer study where Keytruda topped chemo in patients who are “high expressers” of PD-L1, testing at a level of 50% or more. With that data public, Anderson sees Keytruda joining the official list of options for untreated patients by the end of this year.

Herbst isn’t one of those whose perceptions of Opdivo have changed markedly, Deutsche Bank reports. He believes the first-line trial failure was “likely the result of the choice to use a low cut-off for PD-L1 expression, rather than any inherent issue with Opdivo efficacy,” the firm reports, and Herbst believes "that Opdivo and Keytruda are similar drugs from an efficacy and safety standpoint.”

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