Keytruda drives another strong Merck quarter, but what’s next?


Merck & Co/MSD’s first quarter followed the predictable pattern of a surge in sales on the back of immuno-oncology blockbuster Keytruda, but analysts are starting to ask how the company plans to diversify.

Keytruda (pembrolizumab) contributed almost $2.3 billion out of Merck’s total sales of $10.8 billion in the quarter, a 55% rise that was driven by use in first-line non-small cell lung cancer (NSCLC) as a monotherapy and alongside chemotherapy.

Keytruda’s growth was actually a little below analyst expectations, but the drug continued to pull away from its nearest rival Opdivo (nivolumab) from Bristol-Myers Squibb and helped the company to an 8% overall revenue increase.

Another solid quarter from cervical cancer vaccine Gardasil – up 27% to $838 million – also helped to inflate Merck’s top-line and prompted a hike in 2019 sales forecasts, but analysts are now starting to worry that Merck is becoming overly reliant on the two products.

“Over time we expect investors to remain focused on what other assets can help diversify the story and drive future growth,” said Credit Suisse’s Vamil Divan in a research note.

As expected, R&D chief Dr Roger Perlmutter focused a lot on Keytruda line extensions, noting that in the last three months the drug has picked up new approvals in kidney cancer and NSCLC as well as for treating melanoma after surgery and now has 1,000 clinical trials posted on the register.

He looked beyond Keytruda as well of course, pointing to approvals coming up including new beta-lactamase inhibitor relebactam in combination with imipenem/cilastatin for the treatment of Gram-negative infections, as well as an Ebola vaccine called V920.

Also in late-stage development is a new 20-valent pneumococcal vaccine candidate (V114) that is looking to take on Pfizer’s blockbuster Prevnar franchise, and Perlmutter also highlighted the recent $300 million acquisition of Immune Design that brought in vaccine adjuvant and a lentivirus vaccine platform for cancer.

Analysts say Merck’s pipeline isn’t overflowing, but with Keytruda firing on all cylinders the company has time to bolster that with bolt-on acquisitions.

China was another high point in Merck’s results, and while Keytruda contributed a chunk of the 58% sales growth in that market thanks to a high number of lung cancer patients there were also gains for Gardasil and other drugs like AstraZeneca-partnered PARP inhibitor Lynparza (olaparib) for ovarian cancer.

There was also news of another round of restructuring at the company however, with a Securities & Exchange Commission (SEC) filing revealing that a shake-up of its manufacturing and supply network is coming that will cost $800 million to $1.2 billion to implement.

The new round “builds on prior restructuring programmes,” it said, but for now there’s no indication of where the cuts will be made.