Merck & Co. Inc. shares surged 2.4% in premarket trade Thursday after the company's Keytruda was approved in combination with chemotherapy for first-line lung cancer. The approval is key because the approval applies regardless of patient expression of the PD-L1 biomarker, which "opens up the 1st line market meaningfully for Merck," said EvercoreISI analyst Umer Raffat. Raffat described the approval as "a very significant opportunity," and said he expected demand for Keytruda in this wider patient population to grow as new patients are diagnosed. Keytruda and chemotherapy is "a clear positive as it positions the company in a leadership position in this $10bn+ segment of the market," said J.P. Morgan analyst Chris Schott, who rates the company overweight with a $63.94 price target. The company also has "a distinct time-to-market advantage (9-12 months) over peers in 1L lung, raising the bar for competitors to show differentiation relative to Keytruda/Alimta to gain share in this setting." The development was an incremental negative for rival Bristol-Myers Squibb , which has been neck-in-neck with Merck in this area of drug development, Schott said. Bristol-Myers Squibb shares declined a scant 0.5% in premarket trade. Merck shares have declined 0.3% over the last three months, compared with a 3.6% rise in the S&P 500 .
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