Merck & Co.’s Valuation Is Neither High nor Low: So What?
Keytruda, a prescription medicine classified under Merck & Co.’s (MRK) Immuno-Oncology franchise, is used to treat non-small cell lung cancer as well as melanoma, a type of skin cancer. Keytruda was launched by Merck in the fourth quarter of 2014, and global sales reported for 2015 were ~$566 million. The US market contributed ~69.4% of total Keytruda sales during 2015.
Keytruda is used for the treatment of melanoma when the following are true:
The melanoma has spread.
It can’t be removed by surgery (advanced melanoma).
Ipilimumab didn’t work or is no longer working.
The tumor has an abnormal BRAF gene, and the BRAF inhibitor didn’t work.
Keytruda is also used for non-small cell lung cancer when the following are true:
The cancer has spread.
The cancer tests positive for PD-L1.
Chemotherapy containing platinum doesn’t work.
The tumor has an abnormal EGFR or ALK gene but EGFR or ALK inhibitors didn’t work.
In the United States, Keytruda has ~70% of anti-PD-1 patient share in melanoma and is the number-one therapy for melanoma in the United States across all classes of treatment.
Outside US markets, Keytruda is launching in about 40 markets, including the European Union. Keytruda is approved for advanced first-line and second-line melanoma in the European Union.
Overall, Keytruda’s clinical development program is studying more than 30 tumor types in more than 160 clinical trials. They include more than 80 combinations of Keytruda with other cancer treatments.
Some of the EGFR inhibitors used to treat various types of cancer include Iressa from AstraZeneca (AZN), Tarceva from Astellas Pharma (ALPMY), Tykerb from Novartis (NVS), Erbitux from Eli Lilly (LLY), and Vectibix from Amgen (AMGN).
In order to divest the risk, investors can consider ETFs such as the Market Vectors Pharmaceutical ETF (PPH), which holds ~5.1% of its total assets in Merck.
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