Pharma Q3 Results Preview: Merck Vs. Bristol In IO Showdown

With Merck and Bristol-Myers Squibb at the head of the immuno-oncology class – and jockeying for the lead – the two companies are reporting third quarter earnings in back-to-back calls on Oct. 25. Oncology has become dominant for both businesses, and analysts are keen for nuances to help differentiate the growth potential for the two firms.

Has Bristol's Opdivo Slipped Further?

Bristol-Myers Squibb Co. set the pace for the entire checkpoint immunotherapy space with the launch of the CTLA-4 inhibitor Yervoy (ipilimumab) in 2011 and the PD-1 inhibitor Opdivo (nivolumab) in 2014 and ruled the roost for a long time.

But Opdivo’s failure in first-line non-small cell lung cancer (NSCLC) was a huge setback and allowed Merck & Co. Inc.'s competing PD-1 inhibitor Keytruda (pembrolizumab) to gain enormous steam at Bristol's expense. (Also see "Roche, Bristol On The Defensive After Merck's Lung Cancer Wins At ASCO" - Scrip, 6 Jun, 2018.) During its earnings call Oct. 25, Bristol is likely to face questions about a regulatory setback with its multi-arm CheckMate 227 first-line NSCLC study and research into use and validation of tumor mutational burden (TMB), an emerging biomarker for checkpoint immunotherapy. (Also see "TMB Biomarker Is A Winding Path Rather Than Straight Road" - Scrip, 14 Jun, 2018.)

On Oct. 19, Bristol announced a three-month delay for its supplemental BLA with the US FDA for the combination of Opdivo with low-dose Yervoy in first-line NSCLC with high levels of TMB, defined as ≥10 mutations per megabase (mut/Mb), and high PD-L1 expression, based on results from Part 1 of the CheckMate 227 study, which showed a benefit for the IO combo vs. chemo in these groups. European regulators requested additional data, including an overall survival analysis for participants with <10 mut/Mb, and when the same information was provided to the FDA it triggered a three-month extension to the original user fee date to May 20. Analysts will want to know what this means for Bristol’s attempt for approval using the TMB biomarker.

Analysts from Biomedtracker note that although later analysis of the trial showed Opdivo/Yervoy had a 45% one-year PFS rate in the high expressers compared to 18% in the low expressers, “the failure to demonstrate TMB’s utility in predicting the combination’s overall survival benefit in first-line NSCLC will likely increase the already measured skepticism about the biomarker among physicians.” During the earnings call, analysts will push Bristol for when it expects to update OS from the trial, which will be critical for gaining footing in the first-line space.

Sales for Opdivo started to slip behind Keytruda for the first time in the second quarter ($1.67bn vs. $1.63bn) but Opdivo's performance was nevertheless strong and beat expectations. Opdivo is a top earner for Bristol, accounting for 28% of the company's $5.7bn total sales for the second quarter. Bristol's anticoagulant Eliquis (apixaban) is another consistent performer in the company's portfolio, with $1.6bn sales – also about 28% of BMS’ total sales. Investors would be comforted by more diversification from the pharma, and as Opdivo loses the lead in IO, questions will mount about BMS expanding its interests.

“In our view, the onus is on Bristol management to respond to growing investor concerns about Opdivo’s growth post 2019. It has been very disappointing to witness Bristol's once dominant position in IO cede to a potentially distant second,” Goldman Sachs analyst Jami Rubin said in an Oct. 22 note, though she noted most of the disappointment has been priced in to the stock.

Opdivo has proven to be resilient in second-line NSCLC despite facing new competition, and the combination with Yervoy had a very strong launch in first-line renal cell carcinoma following approval in April, quickly capturing a 30% share of new patients. In its second-quarter report, the company stressed its diversified approach as a big strength. (Also see "Merck To Build Case For Doravirine-Based HIV Products On Efficacy, Safety Differences" - Scrip, 31 Aug, 2018.)

The company is likely to face questions about how market share has changed in various indications and of future competitive threats from other immunotherapy combinations in renal cell carcinoma. Merck and Merck KGAA/Pfizer Inc. have developed competing combinations of their PD-1/L1 inhibitors with the tyrosine kinase inhibitor Inlyta (axitinib). Results for Merck KGaA/Pfizer's combination of Bavencio with Inlyta will have been presented at the European Society for Medical Oncology meeting on Oct. 21.

Bristol may be asked to provide an update on the status of Opdivo in small-cell lung cancer (SCLC). The drug won US FDA approval as a monotherapy in third-line SCLC in August based on response rate data. However, Bristol announced in October that the drug failed to improve overall survival in the Phase III CheckMate 331 study of Opdivo vs. chemotherapy in second-line SCLC. (Also see "Bristol’s Checkmate-331 Failure Not Likely To Endanger SCLC Labeling For Opdivo" - Scrip, 12 Oct, 2018.)

Results from the Phase III CheckMate 451 study of Opdivo with Yervoy as maintenance therapy in extensive-stage SCLC after completion of platinum-based chemotherapy have not reported yet and are expected by the end of the year.

Roche's competing combination of its PD-L1 inhibitor Tecentriq (atezolizumab) with chemotherapy recently demonstrated PFS and OS benefits in the IMpower133 study of first-line SCLC and the combination has been submitted to the FDA. (Also see "Tecentriq's Small-Cell Lung Cancer Success Takes Edge Off Roche's IO Position" - Scrip, 25 Sep, 2018.)

How Much Ground Has Merck Gained?

Merck's Q3 call on Oct. 25 will provide an eagerly awaited update on the extent to which the company's PD-1 inhibitor Keytruda has expanded its dominant position over Bristol's competing Opdivo.

Bristol had been in the lead since the beginning, but sales of Keytruda (pembrolizumab) started to overtake Opdivo in the second quarter, though by a small margin – $1.67bn vs. $1.63bn. (Also see "First-Line Chemo Combo Data Help Merck's Keytruda Power Past Opdivo" - Scrip, 29 Jul, 2018.)

Keytruda gained the lead in part though reports of stellar results in first-line NSCLC, the largest indication for immune checkpoint inhibitors. (Also see "Roche's IMpower150 Gets AACR Applause But Merck's KEYNOTE-189 Big Winner " - Scrip, 17 Apr, 2018.) Merck reported that Keytruda was capturing two-thirds of new first and second-line lung cancer patients in the US in the second quarter. Analysts are looking to the Q3 call for an update on how market share has shifted in various indications.

Bristol stole the lead for immuno-oncology in first-line renal cell carcinoma, following approval and successful launch this year of the combination of Opdivo with its CTLA-4 inhibitor Yervoy. However, Merck recently announced that its combination of Keytruda with Pfizer's tyrosine kinase inhibitor Inlyta hit overall survival (OS) and progression-free survival (PFS) endpoints in the Phase III KEYNOTE-426 study in first-line RCC, so presentation of full results, filing strategy and positioning vs. Pfizer/Merck KGaA's combination of Inlyta with their PD-L1 inhibitor Bavencio (avelumab) for this indication will likely be a topic of discussion during the call. (Also see "Merck & Co.’s Keytruda/Inlyta Combo Invades Kidney Cancer Territory" - Scrip, 18 Oct, 2018.) 

Keytruda was shown to have a survival benefit in head and neck squamous cell carcinoma at the European Society for Medical Oncology (ESMO) meeting, so analysts will have a chance to push the company to translate the data into commercial impact.

And results from the Phase III SOLO-1 study of its PARP inhibitor Lynparza (olaparib) – partnered with AstraZeneca PLC – as a first-line maintenance therapy of BRCA1/2 mutated ovarian cancer exceeded expectations at ESMO. (Also see "Stellar Survival Data For AZ's Lynparza Hailed At ESMO" - Scrip, 22 Oct, 2018.) The call will provide an opportunity for the company to comment on filing strategy in the new first-line indication, which would differentiate its position relative to other drugs in the PARP class.

Oncology has been a big driver for Merck sales. Keytruda accounted for 17% of total sales of $10.5bn in the second quarter and cancer drugs together accounted for 21%, which is likely to grow as Lynparza gains steam. (Also see "Merck Looks To Add Pneumonia To Zerbaxa Label; Market Value Not Clear" - Scrip, 12 Sep, 2018.)

Some analysts have expressed concern about the company's dependence on Keytruda as other areas have not been performing well and Merck usually fields questions about its M&A plans. Goldman’s Rubin noted her key question for Merck is how comfortable it is becoming a one product company, and how it is thinking about diversifying.

Sales of Merck's HIV drug Isentress (raltegravir) have been stagnating lately. Two of Merck's HIV therapies were approved during the third quarter – the novel non-nucleoside reverse transcriptase inhibitor (NNRTI) Pifeltro (doravirine) on its own and as part of the combination pill Delstrigo (doravirine/lamivudine/tenofovir) – but analysts question their competitive proposition. (Also see "Merck To Build Case For Doravirine-Based HIV Products On Efficacy, Safety Differences" - Scrip, 31 Aug, 2018.) 

Also during the third quarter, the company announced positive Phase III data for its antibiotic Zerbaxa (ceftolozane/tazobactam) in hospital-acquired bacterial pneumonia, which could support expansion of labeling beyond its current indication in Gram-negative complicated intra-abdominal infections and complicated urinary tract infections (cUTI), but the commercial value is unclear. (Also see "Merck Looks To Add Pneumonia To Zerbaxa Label; Market Value Not Clear" - Scrip, 12 Sep, 2018.) Merck reported $826m in antibiotics sales in the second quarter; the company did not break out Zerbaxa sales.