Merck's Leadership Position In Immuno Oncology Is Improving

Merck & Co., Inc. MRK unexpectedly announced a priority review for Keytruda plus chemo in first-line lung cancer. This, along with the previous announcements related to Keytruda, extends the company’s leadership position in immuno-oncology, Morgan Stanley’s David Risinger said in a report.

Risinger upgraded the rating on Merck from Equal Weight to Overweight, while raising the price target from $65 to $71. The company has previously announced a priority review for Keytruda in microsatellite instability-high biomarker patients. Earlier this month, Merck also announced it was moving Keytruda-IDO combo into Phase 3 in multiple cancers.

Oncology Strategy Delivers Results

“Management's oncology strategy is delivering better results than expected,” Risinger noted, adding that Merck could extend its lead in first-line lung cancer.

Keytruda had already received the first approval as monotherapy for first-line lung cancer in ~20 percent of patients on December 19, 2016.

The analyst expects it to be approved in combination with chemo for first-line non-squamous lung cancer by the May 10, 2017, Prescription Drug User Fee Act. He commented that this would give the compound “at least several months head start vs. competitors in first-line covering almost all patients.”

Risinger said Merck’s growth could accelerate from 2018 onward, following six years of no growth. “Revenue and earnings growth should improve starting in 2018 as Keytruda steps higher and generic pressures on older franchises (e.g. Vytorin/Zetia) moderate.”