Moderna stock crumbled Monday after updated results for its Merck-partnered cancer vaccine showed a "longish and complex path" toward approval.
The companies tested a combination of Merck's Keytruda and their personalized cancer vaccine in melanoma patients following surgery. After a year, more than 83% of patients hadn't relapsed or died. At 18 months, almost 79% of patients were alive and cancer-free. The results outperformed Keytruda alone.
Still, the pathway for Moderna and Merck likely doesn't include an accelerated approval, SVB Securities analyst Mani Foroohar said in a note to clients. He said accelerated approval is rare for adjuvant treatments — maintenance drugs intended for patients following surgery.
"We do not believe the data presented yesterday are likely to break this precedent, given the small size, low statistical bar and small misbalances in enrollment," Foroohar said. "It was clear that emphasis remains on discussions with regulators to initiate a Phase 3 (study)."
On the stock market today, Moderna stock toppled 8.4%, closing at 143.97. Merck shares fell a fraction to 115.01.
Moderna Stock: 44% Reduction In Cancer Risk
Moderna and Merck ran the study in 157 patients. After a year, 83.4% of patients who received the two-drug regimen came up relapse-free vs. 77.1% of those given Keytruda alone. After 18 months, 78.6% of the combination patients proved alive and cancer free compared with 62.2% of the Keytruda group.
Overall, the regimen reduced the risk of relapse and death by 44%.
But analysts noted researchers completed the study in a small number of patients, just 157. Further, the bar for statistical success was fairly low, Evercore ISI analyst Umer Raffat said in his note to clients.
"So, while the results are strong, don't expect this Phase 2 to be sufficient for approval, even if data continues to shape up well in further releases," he said. The study is "just not powered for that."
Raffat has an outperform rating on Merck shares, but didn't list a rating for Moderna stock.
Phase 3 Study Planned This Summer
Moderna and Merck are now planning to begin a Phase 3 study of the personalized cancer vaccine this summer. It works by prepping the immune system to recognize a patient's own tumor cells. This could give the immune system a fighting chance if and when cancer returns.
The results appear promising, UBS analyst Eliana Merle said in a report. Yet, like SVB's Foroohar, she sees a long path for Moderna and Merck.
"We think these results continue to show early evidence of activity in individualized cancer treatments, though we think longer follow-up and data in larger numbers/additional tumor types beyond melanoma will be key," she said.
Unlike Foroohar, she doesn't rule out the possibility of an accelerated approval. But "it remains too early to determine a regulatory path forward."
Merle has a neutral rating and 221 price target on Moderna stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
