Merck Wins FDA Keytruda Priority Review For Gastrointestinal Cancer

Merck & Co. announced on Thursday that the US Food and Drug Administration (FDA) has granted priority review for the use of its lead drug Keytruda in combination with chemotherapy as a first-line treatment in patients with advanced esophagus and gastroesophageal cancer (GEJ).

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The FDA’s priority review approval for Merck’s (MRK) new supplemental Biologics License Application (sBLA) for the Keytruda therapy, in combination with platinum and fluoropyrimidine based chemotherapy, was based on data from the pivotal Phase 3 trial which demonstrated “significant” improvements in the primary endpoints – overall survival (OS) and progression-free survival (PFS) – versus chemotherapy in these patients.

These data were presented at the European Society for Medical Oncology (ESMO) Virtual Congress 2020. The FDA has now set a Prescription Drug User Fee Act (PDUFA), or target action date for April 13, 2021.

“Patients with newly diagnosed esophageal and GEJ cancer face an aggressive disease with a poor prognosis, despite the currently available treatment options,” said Vicki Goodman, vice president at Merck Research Laboratories. “We look forward to working with the FDA to bring a new option to patients in the first-line setting.”

In the US alone, it is estimated there will be nearly 18,500 new cases of esophageal cancer diagnosed and more than 16,000 deaths resulting from the disease in 2020, according to Merck.

Keytruda is currently approved in the US, China and Japan as a monotherapy for the second-line treatment of patients with recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus, the company said. The company is continuing to study Keytruda across multiple settings and stages of gastrointestinal cancer, including gastric, hepatobiliary, esophageal, pancreatic, colorectal and anal cancers.

Merck shares have dropped 12% so far this year and the stock scores a Strong Buy analyst consensus based on 6 Buys versus 2 Holds. Meanwhile, the average analyst price target of $96.25 implies 21% upside potential over the coming year.

Mizuho Securities analyst Mara Goldstein recently reiterated a Buy rating on the stock with a price target of $100, following a company call with MRK’s soon-to-be-retired R&D chief Roger Perlmutter, and successor, Dean Li, regarding the transition of leadership.

“Our immediate takeaway is that the call was neutral, essentially signaling, in our view, a continuation of the current strategy of optimizing Keytruda’s opportunity through combinations, advancing earlier-stage compounds in key strategic areas, selective M&A and licensing opportunities, as well as reinvigorating discovery, and thus we do not expect much change near-term,” Goldstein commented in a note to investors.

“We remain comfortable with MRK’s evolving pipeline, particularly on the back of Keytruda-based combinations and other immuno-oncology (IO) candidates, and we posit that concerns surrounding concentration risk in the near-term assume that MRK will not either be able to address this nor ultimately undertake a strategic option, which we believe is premature,” the analyst commented. (See MRK stock analysis on TipRanks).