In the span of a month in late 2022, Merck gained a new chairman, announced a $1.35 billion takeover and made waves with Moderna in cancer. Now, Merck stock is trading at its highest point in decades.
The company is navigating upcoming generic competition for its blockbuster cancer drug Keytruda with aplomb, analysts say. Merck is working on a new shot formulation of pembrolizumab, the drug behind Keytruda. Sales of that new shot could help offset Keytruda sales losses to generics.
The acquisition of Acceleron Pharma could pay off with a rare-disease drug and Merck is staring down a $4 billion opportunity in cholesterol treatment. Merck also has hopes for its pneumococcal shot in adults. Pneumococcal infections can range from ear and sinus infections to pneumonia and other infections.
Further, Merck is also collaborating with Brazil's Instituto Butantan on a Dengue fever vaccine.
"What I can say about Merck right now is our pipeline has become increasingly diverse, increasing multifaceted — not only in oncology, but also outside of oncology — with a goal of being able to touch as many diseases that impact public health as possible," Eliav Barr, chief medical officer of Merck Research Laboratories, told Investor's Business Daily.
Merck Stock: Keytruda Remains Key
Some of the Merck stock catalysts surround Keytruda.
Later this month, the Food and Drug Administration will consider approving Keytruda for a subset of hard-to-treat lung cancer patients, Mizuho Securities analyst Mara Goldstein said in a recent note to clients.
Merck also is continuing its focus on Keytruda combinations, including a matchup with Moderna that showed promise. In one study, which hasn't been peer-reviewed, combining Merck's Keytruda and Moderna's personalized cancer vaccine reduced the risk of relapse or death for melanoma patients by 44%. The cancer vaccine helps the body mount an immune response to the tumors' unique mutations.
Merck stock rose almost 2% on the news.
But that's just the beginning, says Merck's Barr. The companies also have early-stage test results that suggest the regimen could help some patients with non-small cell lung cancer. Barr said to expect a number of studies to enroll in 2023.
Merck also is adding Keytruda to its anti-TIGIT drug. TIGIT is a receptor that interferes with the immune system's ability to respond to cancer. By blocking the receptor, these drugs aim to release the immune cells to attack cancer cells hiding nearby.
Gilead Sciences and Arcus Biosciences disappointed with their anti-TIGIT combination. Their results paled in comparison with Roche's drug. RBC Capital Markets analyst Brian Abrahams says the bar could be lower for Merck's anti-TIGIT drug because Keytruda is the standard of care in non-small cell lung cancer.
Merck stock only inched a fraction higher on Gilead and Arcus' results, however.
Replacing Intravenous Keytruda?
Merck stock analysts see a lot of potential for a subcutaneous form of Keytruda. Keytruda currently is administered by infusion, a lengthy process that requires specialists. Subcutaneous shots are given under the skin. Wells Fargo analyst Mohit Bansal estimates half of Keytruda sales could eventually come from the new shot.
"Subcutaneous Keytruda would be more convenient for early-stage cancer patients and push out the loss of exclusivity," he said in a recent note.
Test results appear promising thus far. Merck has shown its subcutaneous Keytruda has the same bioavailability as other injected monoclonal antibodies. Bioavailability is the proportion of the drug that enters the bloodstream and has a pharmaceutical effect. Further, Roche has shown its similar drug, Tecentriq, could work as a shot. Tecentriq is also an infused cancer drug.
Mizuho's Goldstein has a buy rating and 130 price target on Merck stock.
"Merck's efforts to bring forward a subcutaneous formulation of Keytruda could become more visible this year, and the opportunity to cannibalize the current intravenous drug with a subcutaneous formulation with enhanced (intellectual property) protection is, in our view, a significant source of upside," she said.
Barr, the Merck executive, says it's also important to think about the convenience factor for patients and the economic benefit for hospitals and infusion centers. A shot every three to six weeks instead of hours spent at an infusion center is psychologically better for patients, he said.
"You see a whole lot of people who are eager to get pembrolizumab, but also needing to maximize their time with family and time at work, and minimize their time being a cancer patient," he said.
PAH, Cholesterol Drive Merck Stock
Merck stock investors are also watching for news of Merck's sotatercept, a potential treatment for pulmonary arterial hypertension, or PAH.
Sotatercept uses a different mechanism to treat the disease, a form of high blood pressure in the lungs. Rather than open the blood vessels — which other drugs do — sotatercept targets a lung receptor involved in inflammation.
Merck stock began rising in October on sotatercept news. The company added sotatercept to standard treatments, leading to a significant improvement in how far patients could walk for six minutes, a measure of disease severity. The drug also led to improvements for eight out of nine secondary goals.
This year, Mizuho's Goldstein expects Merck to present the full results of that study at a medical meeting. The company is also likely to give guidance for how and when it will ask for FDA approval. She calls sotatercept a "potential blockbuster."
Cardiovascular Pipeline Is Growing
Merck estimates there are currently 40,000 people in the U.S. and 30,000 people in Europe living with PAH. The condition causes a significant strain on the heart. It has a five-year mortality rate. Merck's data in October suggested sotatercept could have a "paradigm-changing potential," Wells Fargo's Bansal said.
Bansal is also watching for more from Merck's cardiovascular pipeline. A new class of injectables block PCSK9, a protein tied to high LDL cholesterol. But these drugs have struggled to gain a following, so Merck is working on an oral version.
"The added convenience of an oral PCSK9 (inhibitor) could improve patient access and compliance," he said. Bansal sees this as a $4 billion opportunity for Merck. Overall, Merck sees its cardiovascular pipeline as a $10 billion annual opportunity by the mid-2030s.
Merck stock has a strong Relative Strength Rating of 96, according to IBD Digital. This puts shares in the top 4% of all stocks in terms of 12-month performance.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
