In late March, Merck's (MRK 0.10%) Keytruda, used in a chemotherapy pairing, received a positive opinion from the European Medicine Agency's Committee for Medical Products for Human Use (CHMP). The opinion recommended the approval of the duo to treat patients with recurrent or metastatic cervical cancer.
With a final decision expected in the second quarter of this year, regulatory approval for Keytruda could be just weeks away. So, let's dig into the phase 3 clinical results data for the Keytruda-chemotherapy combo and its annual sales potential for the pharma stock.
The treatment combo has impressive efficacy
Cervical cancer is a type of cancer that begins in the cervix, which is the lower part of the uterus. Early-stage cervical cancer often has no symptoms, but advanced-stage cervical cancer can present with symptoms like pelvic pain.
Approximately 44% of patients with cervical cancer are diagnosed at an early stage. These patients have a high, five-year survival rate of 92%. This is a stark contrast to patients who are diagnosed with metastatic cervical cancer (that has spread to organs like the lungs or bones), which has a five-year survival rate of just 18%.
The good news for patients with metastatic cervical cancer or recurrent cervical cancer (cancer that has returned after remission) is that impactful treatments like the Keytruda-chemotherapy regimen will likely soon enter the market. Why am I sold on the treatment combo?
Patients receiving the Keytruda-chemotherapy pairing achieved an overall response rate of 68%, which was significantly higher than the 50% rate from chemotherapy alone. This means that two-thirds of patients on the Keytruda-chemotherapy combo benefited from a decrease in their tumor size or, better yet, experienced a remission of their cancer. And the median duration of response to the treatment was 18 months. This means that Keytruda and chemotherapy together worked much longer than the 10.4 months of chemotherapy by itself.
Image source: Getty Images.
A slight revenue bump
The Keytruda-chemotherapy combo has demonstrated itself to be very effective. What could that mean for its sales potential?
In 2020, 58,000 patients were diagnosed with cervical cancer in the European Union. Since the COVID-19 pandemic had some impact on diagnosis rates and there are many cervical cancer survivors at risk of recurrence, I will assume there are 100,000 patients currently living with cervical cancer. And conservatively, there are 22,000 patients with advanced or recurrent cervical cancer eligible to receive the Keytruda-chemotherapy pairing.
Thanks to the overwhelming potency of the treatment regimen and Merck's global footprint, I will use a 20% patient share rate for Keytruda. This works out to around 4,400 patients.
Keytruda has an annual list price of $182,000 in the United States. However, drugs are about 50% cheaper in the European Union. That's why I will estimate a $90,000 annual list price. Factoring in health insurance adjustments and financial aid programs, I will use a net annual price of $60,000.
That is equivalent to over $250 million in annual sales potential for the indication. This represents a modest 0.5% increase over the $57.4 billion of revenue that analysts are estimating for Merck in 2022.
The stock boasts a deep drug pipeline
Merck derived $17.2 billion or 35.2% of its total revenue in 2021 from Keytruda. But the company also has an exceptionally stacked and diverse pipeline of projects. Merck's pipeline consists of 75 programs in phase 2 clinical trials and 28 programs in phase 3 clinical trials. These are spread across therapy areas like oncology, cardiovascular disease, diabetes, and endocrinology.
Analysts anticipate that Merck's robust existing drug portfolio and equally strong pipeline will translate into 9.4% annual earnings growth over the next five years. Thus, the stock should have little difficulty growing in the foreseeable future, even if the CHMP doesn't approve its Keytruda-chemotherapy pairing.
