Merck Wins Keytruda China Approval; Analyst Applauds ‘First-Mover Advantage’

China has approved Merck’s (MRK) anti-PD-1 therapy, Keytruda, as monotherapy for the treatment of locally advanced or metastatic esophageal squamous cell carcinoma (ESCC) in patients whose tumors express PD-L1 (Combined Positive Score [CPS] ≥10) following failure of one prior line of systemic therapy.

Mizuho Securities analyst Mara Goldstein referred to the approval as an “incremental step, in our view, to a competitive profile in the territory.” As ESCC is the fourth leading cause of cancer-related death in China, she believes this first-mover advantage is a step in helping to entrench Keytruda in a territory that is otherwise price sensitive.

This new indication was granted full approval based on the overall survival (OS) findings from the global Phase 3 KEYNOTE-181 trial, including data from an extension of the study in Chinese patients-which was consistent, if not better than, prior findings.

“In China, more than 90% of esophageal cancers are squamous cell carcinomas, and patients with advanced types of this disease face a poor prognosis and have few treatment options,” said Dr. Shen Lin, vice president of Clinical Oncology at Beijing Cancer Hospital.

Keytruda is now approved for five indications across three types of cancer in China, including as a first-line treatment for patients with advanced non-small cell lung cancer and as a second-line treatment for advanced melanoma.

At the same time, Merck also announced positive V114 (pneuomococcal vaccine) safety and immunogenicity results in the Phase III PNEU-WAY and PNEU-FLU studies, which Goldstein believes will support ongoing regulatory filings worldwide.

Results from the PNEU-WAY (V114-018) study in adults 18 years of age or older living with Human Immunodeficiency Virus (HIV) showed that V114 elicited an immune response to all 15 serotypes included in the vaccine, including serotypes 22F and 33F.

Meanwhile results from the PNEU-FLU (V114-021) study in healthy adults 50 years of age or older showed that V114 can be given alongside the quadrivalent influenza vaccine.

“Looking forward, we anticipate primary completion of MRK’s V116 pneumococcal vaccine in August 2020, which could further expand the reactivity to additional serotypes” says the Mizuho analyst.

She adds that the ultimate commercial potential of this vaccine is likely to rest with the quality immune responses to serotypes meaningful to the pneumococcal disease, which MRK has indicated has been achieved.

On June 22 Goldstein reiterated her buy rating and $100 price target (28% upside potential). Shares are currently trading down 15% year-to-date but analysts have a bullish Strong Buy consensus on the stock. That’s with an average analyst price target of $92 (18% upside potential). (See Merck stock analysis on TipRanks)

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