Merck & Co. Inc. shares surged 5.8% in extremely heavy trade Tuesday after the company announced that its key cancer drug Keytruda had positive results in a late-stage clinical trial for advanced lung cancer.
Keytruda has already been approved for this indication, last year. But the latest results should support the Food and Drug Administration’s decision and pose a setback for competitors Roche RHHBY, +0.59% and Bristol-Myers Squibb Co.BMY, +0.73%
They also support the company’s MRK, +0.25% move to change the design of the phase 3 trial last fall, despite pushback from Wall Street, cancer research expert Brad Loncar said.
Merck’s recent results are “actually about as big as it gets,” Loncar, who manages the Loncar Cancer Immunotherapy exchange-traded fund CNCR, +1.90% said, describing it as a “happy ending” for the company as well as patients.
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In the phase 3 trial, patients on Keytruda plus chemotherapy performed better on two measures of a cancer therapy’s success, progression-free survival and overall survival, than the chemotherapies did alone.
Those are especially important results because the trial was initially only supposed to look at progression-free survival, which measures how long it takes before a patient’s cancer worsens.
But last fall, Merck added overall survival, which measures how much longer patients on a therapy live, as another primary endpoint.
Wall Street saw it then as a suggestion that Merck wasn’t confident in its product, as well as a timeline for results that was at least a year longer, Loncar said.
Merck shares fell 6% two days in a row in late October alongside a third-quarter sales miss and news of a major cyberattack.
Merck plans to release more detailed results from the phase 3 trial at a coming medical meeting, and will submit them to regulators as well. (Keytruda has not been approved in this indication in Europe; Merck withdrew its application there in late October.)
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Keytruda has grown to become a top product by revenue for Merck in recent years, going from a mere $55 million in sales in 2014 to $1.4 billion by 2016.
Sales are expected to grow to a projected $9 billion globally by 2026, according to an estimate by pharmaceutical and biomedical industry analyst firm Informa Pharma Intelligence.
Related: Merck earnings buoyed by cancer-drug sales
The latest results could prove an important foundation for that growth. Smoking, which causes many lung cancer cases, has made advanced lung cancer a big market for pharmaceutical companies.
The competition has also been fierce.
Shares of Roche, which recently presented data in this area, dropped nearly 4% and shares of Bristol-Myers Squibb, which has the next big trial readout, dropped nearly 5% on Tuesday after Merck’s results.
“It doesn’t look like Roche will be very competitive,” Loncar told MarketWatch, adding, “the next company that has a fighting chance is going to be Bristol, but it’s going to be a tall order after today, for sure.”
Merck shares have declined 2.3% over the last three months, compared with a 9.4% rise in the S&P 500 SPX, +0.44% and a 12.8% rise in the Dow Jones Industrial AverageDJIA, +0.21%