Merck's Keytruda Plays Catch-Up to Bristol-Myers' Opdivo

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Merck & Co (NYSE: MRK) and Bristol-Myers Squibb (NYSE: BMY) are engaged in a battle of sorts. The two won FDA approval for new non-small cell lung cancer therapies in 2015 that work similarly, and ever since, they've been elbowing at one another for market share. So far, Bristol-Myers Squibb's drug, Opdivo, generates the most in sales, but in the second quarter, sales of Merck's Keytruda closed the gap.

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Keytruda takes aim at Opdivo

Non-small lung cancer is common, and unfortunately, despite improving survival statistics, it's still a major cause of death.

There are 222,500 new cases of lung and bronchus cancer diagnosed in the U.S. annually, according to the National Cancer Instititute, and it claims the lives of 155,870 every year.

Non-small lung cancer is the most common of this type of cancer, accounting for between 80% to 85% of cases. Current treatment options result in a significantly higher survival rate for early-stage NSCLC diagnosis; however, they fall short in stage III and stage IV lung cancer, with survival rates dipping into the single-digit percentages.

Hopefully, those numbers are going to get a bit better over the coming years thanks to a new class of drugs called PD-1 inhibitors. This class of drugs, which includes Merck's Keytruda and Bristol-Myers Squibb's Opdivo, keep cancer in check by preventing cancer cells from using PD-1 proteins to escape the immune system's detection.

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Opdivo won its first FDA approval in lung cancer in March 2015. At the time, the approval was for its use in metastatic squamous NSCLC that has progressed following platinum-based chemotherapy. In trials, the objective response rate to it was 15%, of whom 59% had responses that lasted more than six months. Later that year, the FDA expanded Opdivo's use to include non-squamous lung cancer patients after it boosted overall survival rates in trials.

Opdivo may have been the first to secure a FDA OK, but its head-start was small. In October, 2015, Keytruda won approval for use in advanced NSCLC patients whose disease has progressed, if a companion diagnostic shows the tumor over-expresses PD-1. A slightly more restrictive label, plus Opdivo's first-mover advantage, allowed Opdivo's sales to outpace Keytruda's early on, but that lead is shrinking. 

Keytruda won approval last fall as a first-line metastatic NSCLC treatment in high-expressing PD-1 patients, and that approval allows its use instead of chemotherapy. Importantly, this approval means Keytruda is getting used earlier in patient treatment than Opdivo, an advantage that was secured when a trial evaluating Opdivo in the first-line setting came up short last summer.

In May, 2017, Keytruda made even greater inroads against Opdivo when the FDA approved its use alongside chemotherapy in the first-line setting, regardless of PD-1 expression.

Since winning these approvals, Keytruda's sales have rocketed higher. In Q1, Keytruda's sales were $584 million, up 134% year over year, and in Q2, they were $881 million, up 180% year over year. Meanwhile, over at Bristol-Myers Squibb, Opdivo's Q1 sales were $1.1 billion, up 60%, and Q2 sales were $1.2 billion, up 42% year over year. Clearly, Keytruda's catching up.

Where do we go from here

The PD-1 drug market opportunity is massive, but admittedly, it's a fast-moving market that's getting increasingly competitive and hard to handicap. In the past year, new PD-1 drugs from Roche, Pfizer, and AstraZeneca have won approval. Across all of these companies, there's a flurry of R&D activity going on that could give any one of these PD-1 inhibitors an advantage over the others.

For instance, Bristol-Myers Squibb is evaluating if pairing Opdivo with Yervoy, another one of its drugs, can improve outcomes in first-line NSCLC. Bristol-Myers Squibb, Merck & Co., and others are also evaluating if combining Opdivo and Keytruda with other cancer-fighting drug classes works across various cancers. All of this activity makes picking which drug will dominate the market a guessing game. Ultimately, it might not matter which one of these drugs is the winner. After all, these two drugs already sell at a combined annualized pace of over $2 billion, and sales aren't showing signs of slowing down, so there appears to be plenty of market opportunity to share. 

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Todd Campbell owns shares of Pfizer. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.