Should Investors Be Interested in Merck in Fiscal 2016?

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Part 2
Should Investors Be Interested in Merck in Fiscal 2016? PART 2 OF 8

Keytruda Is Still a Strong Growth Driver for Merck

Revenue trends

On September 4, 2014, Keytruda was approved by the FDA as therapy for patients suffering from advanced melanoma. The patients witnessed disease progression despite other therapies. Merck (MRK) also launched Keytruda in around 50 international markets. The drug continues to witness strong uptake all over the world as an effective therapy for metastatic melanoma.

Keytruda Is Still a Strong Growth Driver for Merck

The above chart shows that since 2014, Keytruda continued to witness strong revenue growth. If the drug continues to show a solid growth trend, it might have a positive impact on Merck’s share prices as well as the Health Care Select Sector SPDR Fund (XLV). Merck accounts for ~6.24% of XLV’s total portfolio holdings.

Keytruda’s growth drivers

On October 24, 2016, the FDA approved Merck’s Keytruda as first-line therapy for patients suffering from metastatic NSCLC (non-small cell lung cancer). The target population involves patients whose tumors are diagnosed to be expressing PD-L1 higher than or equal to 50%, as determined by an FDA-approved test. The target population accounts for around 25%–30% of the total NSCLC patient population.

After the approval, Keytruda might become the standard of care for a significant number of patients suffering from NSCLC.

Keytruda was first approved as a lung cancer therapy on October 2, 2015. The FDA approved the drug for previously treated NSCLC patients with tumors that expressed PD-L1 protein at tumor proportion score equal to 50% or more. On October 24, 2016, based on KEYNOTE-010 data, the FDA expanded Keytruda’s second-line NSCLC label. Now, it extends to patients with tumors expressing any level of PD-L1.

Due to these two new indications, patients have been opting for diagnostic tests to determine their PD-L1 levels. As more patients opt for these tests, Keytruda will penetrate more into the lung cancer segment. It will pose strong competition for Bristol-Myers Squibb’s (BMY) Opdivo, Roche Holdings’ (RHHBY) (through subsidiary Genentech) Avastin, and Pfizer’s (PFE) Xalkori.  To learn more about Keytruda, read Keytruda: The New Blockbuster of Merck’s Immuno-Oncology Franchise.

In the next part, we’ll discuss expansion of opportunity for Keytruda across labels and geographies in more detail.

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