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Merck's Keytruda Q2 Sales Grow 26 Percent; Firm Considers Future Impact of Medicare Price Setting

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NEW YORK – During the second quarter of 2022, Merck continued to focus on driving uptake of its precision oncology drugs Keytruda (pembrolizumab) and Lynparza (olaparib) in earlier-stage disease.

During a call to discuss its Q2 financial results, company executives also reflected on the potential impact of a recently introduced Medicare pricing negotiation bill on its therapeutic products, particularly Keytruda.

Total pharmaceutical sales in Q2 2022 were $12.76 billion, a 28 percent increase compared to $9.98 billion in Q2 2021. The checkpoint inhibitor Keytruda contributed $5.25 billion to revenues during the quarter, a 26 percent increase from $4.18 billion in the year-ago quarter.

In Q2, Keytruda maintained its leadership position in non-small cell lung cancer, where it is approved in the US in combination with chemotherapy for metastatic disease and as a single agent in those with PD-L1 expressing tumors. Merck is optimistic that it may be able to grow its footprint in NSCLC even further by securing an approval for Keytruda in an all-comer adjuvant NSCLC setting.

In June, Merck said that the US Food and Drug Administration had accepted its supplementary biologics license application for Keytruda as an adjuvant treatment of stage II to stage IIIa NSCLC patients after surgery. The company submitted data from the Phase III KEYNOTE-091 trial, in which Keytruda compared to placebo significantly improved disease-free survival in all patients, regardless of PD-L1 expression status, but didn't reach statistical significance in those with PD-L1 expression in at least 50 percent of tumor cells. The company said it will continue the trial and analyze the co-primary disease-free survival endpoint in high PD-L1 expressers and overall survival as a secondary endpoint.

The FDA is slated to issue a decision on this application on Jan. 29, 2023. "However, further data may be provided during the review process that may delay this date," Dean Li, president of Merck Research Laboratories, said during the call. He explained that while the disease-free survival endpoint in the PD-L1-high group wasn't statistically significant in KEYNOTE-091, there was a positive trend toward an improvement among Keytruda-treated patients. As the data mature, Li said regulators may want to see additional data on this endpoint as well as data from other Keytruda trials in early-stage NSCLC.

In Q2 2022, Merck recorded revenues of $275 million for the PARP inhibitor Lynparza, which it sells with AstraZeneca as a treatment for breast, ovarian, pancreatic, and prostate cancer, an 11 percent increase compared to $248 million in Q2 2021.

"Lynparza remains the market leading PARP inhibitor," said Merck CFO Caroline Litchfield, noting that sales were driven in part by uptake in early-stage breast cancer patients with BRCA1/2 mutations at high risk of relapse. In March, the company reported that this subset of patients receiving Lynparza in the Phase III OlympiA trial saw a 32 percent overall survival improvement compared to those on placebo.

The company is also anticipating Lynparza plus Janssen's Zytiga (abiraterone) to be approved as a first-line metastatic castration-resistant prostate cancer treatment regardless of whether patients have homologous recombination repair mutations, based on the results of the Phase III PROpel trial.

Earlier this month, Merck announced a global development and commercialization agreement with Orion Corporation for the investigational agent ODM-208 and other drugs inhibiting CYP11A1, an enzyme involved in steroid production. "Business development and licensing remain a key element of our strategy to build and retain a strong and diverse pipeline," said Li, highlighting the transaction. Merck paid $290 million in the deal in which the company plans to immediately begin collaborating with Orion to advance ODM-208 in prostate cancer.

There is early data in prostate cancer suggesting that patients with activating androgen receptor (AR) mutations may respond particularly well to the drug. In February, Orion presented data from 44 metastatic castration-resistant prostate cancer patients receiving ODM-208 in the Phase I portion of the CYPIDES trial at the American Society of Clinical Oncology's Genitourinary Cancer Symposium. In the trial, patients' ctDNA are centrally tested for mutations in the AR ligand binding domain.

The company reported at the ASCO meeting that although around a third of patients on ODM-028 achieved at least a 50 percent reduction in prostate-specific antigen levels, 17 patients or around two-thirds of those with AR ligand binding domain somatic mutations had similar PSA reductions.

Li noted that ODM-208 complements Merck's existing R&D efforts in prostate cancer exploring the activity of Keytruda with chemo and with anti-androgen therapy, and Lynparza with anti-androgen therapy in the PROpel trial.

During the call, Merck executives weighed in on the potential impact on the company's business if a bill is passed giving the US government the ability to negotiate Medicare drug prices. The legislation introduced earlier this month by Democratic senators would allow the US Department of Health and Human Services to bargain over the prices of up to 10 high-cost drugs, which would go into effect in 2026. The government can negotiate on another 15 drugs, with pricing set to go live in 2028, and for another 20 drugs, for which price reductions would take effect in 2029.

The bill would cap the annual out-of-pocket drug cost for Medicare beneficiaries to $2,000 and advance other measures to make drugs more affordable for low-income seniors. Drugmakers could also be on the hook for providing Medicare beneficiaries rebates if they raise drug prices too fast.

Merck President and CEO Rob Davis said during the call that Merck has significant concerns that elements of the bill allowing the government to negotiate Medicare pricing will have a chilling effect on life sciences innovation. "If you think about an area like oncology … the development of the drug continues long after the first approval," he said, noting that between 2014, when Keytruda was first launched, and 2022, the drug has been approved for more than 30 indications.

The company expects to more than double the number of indications for Keytruda between 2022 and 2028, he estimated. "Our concern is that if you have the threat of mandatory discounts, it could cause companies to question that innovation because you'll have to question whether or not you'll see the return," Davis said. "We see a highly chilling effect of that."

If this bill is passed as proposed, and HHS chooses to negotiate the price of Keytruda, which holds the distinction of being the highest-selling pharmaceutical product in history, Davis noted that those negotiations will be happening around the time the drug is expected to lose patent exclusivity in any case. Keytruda's key patent is set to expire in 2028. The list price for a dose of Keytruda given every three weeks is more than $10,000.

Davis noted that the bill contains other provisions that may allow for exemption from price negotiations if biosimilars are already under development. Even though Merck is against the price setting portions of the bill, Davis said the drugmaker does support provisions in the bill to reduce patients' out-of-pocket drug costs.