Merck Still a Leader in Immuno-Oncology
We don't expect any major changes to our view after the wide-moat firm withdrew a drug application in Europe.
We expect Merck will need data from the Keynote189 study (expected in February 2019) to file Keytruda in the wider NSCLC population in Europe, although it is already approved in patients with PDL1 expression above 50% (close to 25% of patients). The launch in the wider NSCLC will not carry the importance of the first-mover advantage that Merck gained in the U.S. in May. However, we believe the European regulators are more conservative than the FDA in cancer approvals, as we have seen several U.S. cancer approvals before European approvals. Further, the expanded indication was supported by a midsize phase 2 study that likely just barely exceeded the bar for approval by the FDA, but more data is likely needed for European regulators. We still expect Keytruda will gain the expanded label in Europe, but not likely until late 2019. As a result, we expect both Roche and Bristol to gain approvals in the wider NSCLC European market ahead of Merck by close to a year. The loss of the critical first-mover advantage in Europe will limit Merck’s gains in this important market, but we expect Merck will still leverage its first-mover advantage in the U.S. across all nonsquamous NSCLC patients and in Europe for patients with PDL1 expression above 50% to position the firm as the leader in the immuno-oncology market.
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