GLOBAL INNOVATION FINAL
50 SMARTEST COMPANIES 2017
MAYANK JAYESH SHAH
M.S. IN MANAGEMENT OF
NEW YORK UNIVERSITY
This pharmaceutical giant proves that age is just a number
by being one of the smartest companies of 2017 by combining innovation and
business savviness. It has one of the most successful immunotherapies in the market.
With growing number of lung cancer patients being tested to see if they would
benefit from the treatment, sales are predicted to propel upwards. In this paper,
we will discuss how Keytruda promises to keep Merck ahead of all its rivals and
prove that medicine is one of the most impactful invention. It also discusses
the current stock market trend and its potential to be the key player in cancer
Co., Inc. (NYSE: MRK), is an American pharmaceutical company
established in 1891 and the world’s seventh largest pharmaceutical company by revenue.
Its headquarters is located in Kenilworth, New Jersey. For more than a century, Merck, a leading global biopharmaceutical
company has been inventing for life, bringing forward medicines and vaccines
for many of the world’s most challenging diseases.
True to its vision it has been in the
forefront of innovation in the healthcare space. It is known for breakthrough
innovation like the first trivalent vaccine MMR(Mumps, Measles and Rubella),
first Statin class of drug-lovastatin to prevent cardiovascular disease,
antibacterial like streptomycin. Their recent innovative products include
Januvia which is the second largest diabetes selling drug. The U.S. Food and
Drug Administration has approved the breakthrough drug Keytruda to treat
advanced non-small cell lung cancer, signaling a paradigm shift in the way the
deadliest of all cancers is treated. Its success will be the next addition the Merck’s
legacy of innovative products.
CURRENT TRNDS OF INNOVATION IN
The idea of harnessing
the immune system to fight cancer is the latest trend in pharmaceuticals with
capability to make billions of dollars. Oncology drugs are seen as the next
frontier of life sciences with immuno-oncology (IO) drugs at the forefront. The
excitement over IO drugs revolve around their superior efficacy and safety over
existing chemotherapies, many developed as early as the 1960s. Survival rates
of IOs have been seen to nearly
double over chemo and side effects are often
less severe than that of chemotherapy. Immunotherapy can be achieved in many
ways in which the most popular way is immune checkpoint blockade. Checkpoint
therapy can block inhibitory checkpoints, restoring immune system function.
There are 4 types of blockade based on the protein receptors like CTLA-4(Ipilimumab), PD-1
inhibitors (Nivolumab, Pembrolizumab), PD-L1(Atezolizumab) inhibitor and other
intrinsic checkpoint blockade like CISH.
MECHANISM OF ACTION: IMMUNE CHECKPOINT BLOCKADE
Our immune system works by scanning the
healthy cells and destroying the harmful ones. But in case of cancer cells it
has a protective shield of PDL1 ligand which binds to PD-1 and B7-1 of T- cells
(type of lymphocytes which is a subset of white blood cells) thus preventing
its detection. So, the drugs block this interaction and allows T-cells to
detect the tumor cells and hence initiates an immune response to destroy them.
It has been approved for 10 indications and trials are going on for 500
clinical trials and 300 combinational trials.
ADVANTAGE OVER RIVALS
(Pembrolizumab) Keytruda is Merck’s newest approval sets it
apart from rivals like Bristol- Myers Squibb’s Opdivo (Nivolumab), another
so-called “checkpoint inhibitor” immunotherapy drug. That treatment failed to
meet its goals in recent lung cancer trials, paving the way for Keytruda to
potentially dominate the field and sending Bristol-Myers shares tumbling. It
certainly has thrown the gauntlet leaving likes of Pfizer, AstraZeneca behind
in this race.
Keytruda is approved
for around 10 indications and aiming for many more as a drug in Melanoma, Lung
Cancer, recurrent or metastatic head and neck squamous cell carcinoma,
Urothelial Carcinoma and as combination drug in non-squamous non-small cell
According to Merck’s presentation at the American Society of
Clinical Oncology (ASCO) conference in June 2017, it is currently under
evaluation in more than 500 clinical trials, including more than 300
combination trials. The data shows that 40 percent of the patients who have
been taking the drug are still alive three years later. About 15 percent of
these patients have what’s called a complete remission, meaning there is no
trace of their tumors. That compares to about 5 percent of patients given the
standard therapy, interleukin.
The Food and Drug Administration (FDA)
approved the U.S. drug giant’s superstar cancer immunotherapy Keytruda in May,2017
which treats Lung cancer and is the leading cause of
cancer deaths worldwide; the American Lung Association estimates more than
158,000 people in the U.S. will die from the disease in 2017 alone. Non-small
cell lung cancer accounts for approximately 85 percent of all lung cancers that
is about 222,000 new annual lung cancer cases in America alone. One month
treatment of Keytruda costs about $12,500 which makes Merck’s revenue for the
year from its sales alone to at least 1Billion Dollars!
KEYTRUDA, THE ROAD
Merck’s Box 3 are the drugs in the clinical
trial phase II and Phase III which has the potential for approval by the USFDA
and these will help Merck to dominate the cancer market. Keytruda is been
formulated to use in Ovarian Cancer, Advanced Solid Tumor, Prostate Cancer, head
and neck cancer, breast and gastric cancer. Immunotherapy drugs are still
relatively experimental, only prescribed for patients that are terminally ill
to try to help extend their lives by a matter of weeks or months.
But their potential is enormous. Used in combination with
radiation or other chemotherapy or on their own, they allow patients to have a
better quality of life while they battle cancer, but eventually home delivery
of these medicines will enable them to work to cure specific cancers. Keytruda
is currently shown potential to be used in first line treatment of cancer using
monotherapy or combination therapy.
Merck (MRK) certainly didn’t
light the world on fire with its quarterly numbers this year. But it did not do
that bad as the market expected. It managed to beat market expectation every
quarter this year. Although the stock is down by 5% YTD when US stocks market
has outperformed all expectations there is a great upward trend expected in the
for cardiovascular drugs like Zetia and Vytorin are shrinking because of loss
of exclusiveness. For older drugs like Singulair revenue seems to drop continuously.
Although Januvia, Merck’s number 2 diabetes drug posted YoY sales gain in the
third quarter but combined revenue for the first 3Q of 2017 is below the level
posted in previous years. The company reported high sales growth for Hepatitis
C drug Zeptier but Merck has not denied that increased competition and
declining patient volumes are likely to be a linchpin in sales growth for it.
To add to their woes, major
cause of its stock decline has also been the cyber-attacks which halted the
manufacturing for some. To continue to its bad year the news of failure of
Keytruda as a second in line treatment is sure to add more stress to its stock.
Case for Merck: Merck’s stock performed relatively well for most of
2017 beating market expectations for all the quarters. The drug maker’s
third-quarter results kicked in a selling cycle but it has true potential in
the long term. Commenting on its blockbuster drugs, MRK stock doesn’t
have one huge winner, but it has 9 of them. MRK has 9 drugs that all post
annual sales of $1 billion or more. And of its drugs coming off patent, there
are plenty more coming through the pipeline to make up for the stock loss 6%
YTD and its rock solid 3.4% dividend means the stock is barely underwater for
the year. What’s more, there’s far more upside here than downside, which makes
now a good time to but its stocks.
There is no reason to believe that dark clouds hang over Merck. Keytruda
has enough potential that Merck would continue to increase overall sales and
earnings for years coming ahead. It has true potential and take on likes of
giant pharmaceuticals like Pfizer and BMS in the cancer immunotherapy space. In
my opinion the stock has been down enough to only increase from here on in the
coming years with strong products in the pipeline which Merck has on offering.
Overall, I don’t think the stock is a bad option to place your bet on. In
my opinion, there few stocks among drug companies with better growth prospects,
better valuations, and even better dividends. For example, Pfizer, Merck’s
partner on ertugliflozin, ranks higher than Merck in all three categories. But
Merck will offer stable returns and is a safer option worth considering for
average investor with moderate risk appetite. Merck will surely have better
days to come than days of 2017.
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