Citi Doesn't See Merck's Lung Cancer Success Lasting Long

Bristol-Myers Squibb Co BMY unexpectedly announced the failure of the CheckMate-026 trial in non-small cell lung cancer [NSCLC]. While this development means that Merck & Co., Inc. MRK would likely dominate the 1st line NSCLC market for patients with PDL1 high expressing tumors in the near term, the success could be short-lived, Citi's Andrew Baum said in a report.

Analyst Andrew Baum maintained a Neutral rating on Merck, with a price target of $65. He added that the new EPS estimates for 2017 and 2018, at $3.81 and $4.39, were now 5 percent higher than the pre-Friday consensus expectations.

Short-Lived Success

Baum commented that Merck's EPS gains would likely be "relatively short lived" due to the expected positive data from AstraZeneca Plc's AZN MYSTIC trial, scheduled for March 2017, and Bristol-Myers Squibb's CHECKMATE 227 trial, expected in August 2017. On account of these, the latest development would have only a modest impact on Merck's long-term EPS.

"The market share for immuneoncology sponsors in 1st line NSCLC was always likely to be determined by the relative benefits to be shown with PDx CTLA4 and PDx chemotherapy combinations in ongoing phase III trials. Nothing has changed in this regard. We continue to strongly favour PDx CTLA4 based combinations," the analyst wrote.

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Short-Lived Success