Keytruda has a blockbuster market not factored into Merck’s forecasts—China

Merck & Co.’s Keytruda is already the best-selling immuno-oncology drug on the market, but as one group of analysts sees it, the drug still has one key upside opportunity that’s not yet calculated into forecasts: the Chinese market.

Despite lower-priced competition from domestic rivals, Keytruda could reach blockbuster sales in China thanks to its "bolus of efficacy and safety data," Cantor Fitzgerald analysts said in a recent note to clients.

In fact, physicians have already started using Keytruda in lung cancer off label, according to two oncologists Cantor interviewed. Right now, the drug is only approved in China for unresectable or metastatic melanoma patients who have failed one prior line of therapy.

One lung cancer-focused physician based in Guangzhou said his department is currently treating most of its patients with Opdivo, as the Bristol-Myers Squibb PD-1 is approved in China for second-line use. However, if Keytruda is approved in lung, he intends to mainly use Keytruda as either a monotherapy or with chemo—depending on patients' levels of biomarker PD-L1.

"I think Keytruda has a bigger opportunity than Opdivo in first-line lung," he said. "In second-line lung, for patients who do not receive an immunotherapy as first-line, I will choose Opdivo."

Another doctor, a chief physician of oncology at a cancer-specialized hospital in Zhengzhou, said his department is already primarily using Keytruda "because it is used commonly in the U.S., and we have learned about it at many academic conferences."

Keytruda is given to 10 ongoing patients there, of whom only two are melanoma patients. He said patients experienced strong adverse reactions to Opdivo, which he attributed to the lack of experience using the drug as the first immuno-oncology agent approved in the country. Nevertheless, doctors became nervous and turned to Keytruda once it was launched.

Merck is currently conducting Keynote-033, a China-specific registration trial in second-line lung cancer. Opdivo, in its own phase 3 Checkmate-078 trial done predominantly with Chinese people, cut the risk of death by 32% versus chemo in previously treated NSCLC patients.

Lung cancer is the most common cancer type in China. According to a 2018 study done by China’s National Cancer Center, based on national registry data, there were about 782,000 new lung cancer cases in the country in 2014, while melanoma had about 7,000, and lymphoma 81,000. That's more than three times the 234,000 cases the American Cancer Society estimated the U.S. saw in 2018. And Cantor analysts estimate that 2024 sales of Keytruda for the U.S. lung market alone can exceed $5.0 billion.

The competition for Keytruda in China is not just coming from multinational drugmakers, though. Two local companies have also won regulatory approvals for their members of the PD-1/PD-L1 class, and they’re pricing at huge discounts to the foreign drug.

Last December, Chinese regulators conditionally approved Junshi Biosciences’ Tuoyi (toripalimab) for metastatic melanoma—the same indication Keytruda has. The drug went on to become the first domestically made PD-1 on the market after provoking a response among 17.3% of the 128 patients in a single-armed phase 2 study. Not for direct comparison, Keytruda, in Keynote-151, a 103-participant single-armed phase 1b Chinese trial Merck used to win Chinese approval, demonstrated an overall response rate of 16.7%.

Just days after clearing Tuoyi, China’s National Medical Product Administration waved through Innovent’s Lilly-partnered Tyvyt (sintilimab) for relapsed/refractory classical Hodgkin lymphoma (R/R cHL). In a study featured on the cover of The Lancet Haematology, investigators reported a response rate of 80.4% among 92 patients after a median follow-up of 10.5 months. Keytruda, in its Keynote-087 trial, delivered an overall response rate of 69% with a median follow-up of 9.4 months in 210 patients. But again, the studies were not head-to-head and therefore not meant for direct comparison.

More local competitors could be coming. BeiGene has already filed its Celgene-partnered tislelizumab in R/R cHL as well, and Jiangsu Hengrui Medicine is expecting a regulatory decision this year on its camrelizumab (SHR-1210). But both drugs have raised some concerns. When BMS announced its $74 billion deal to buy Celgene, BeiGene’s stock tanked, as investors worried the Opdivo owner would ditch the tislelizumab partnership. Hengrui’s candidate was previously part of a collaboration with Incyte, but the American firm returned the rights in favor of Macrogenics’ MGA012.

In terms of pricing, under usage guidelines, Opdivo and Keytruda cost around 30,000 to 35,000 Chinese yuan (about $5,200) per month, with Opdivo coming out cheaper. Even though those are about half the drugs’ prices in the U.S., Junshi and Innovent have priced their versions at an additional 50% discount.

All four approved PD-1s have their own patient assistance programs that could further cut their costs. But because Keytruda is only approved in melanoma, lung cancer patients are not currently eligible for these programs and are paying the full price entirely out of pocket, given that no PD-1 is covered by insurance.

But if that's the case, why are patients and physicians still favoring Keytruda over cheaper Chinese products?

"For Keytruda and Opdivo, even if we do not have a specific approved indication, we have clinical data available from the Keynote and Checkmate trials," the Guangzhou-based physician told Cantor. "For Junshi’s product, we do not have lung cancer data and therefore have no confidence in that drug."

Indeed, Keytruda boasts U.S. first-line approvals in non-small cell lung cancer both on its own and in combo with chemo. In the phase 3 trial dubbed Keynote-189, Keytruda, in tandem with Eli Lilly’s Alimta and platinum chemo, cut the risk of death by half in nonsquamous NSCLC patients. And in squamous NSCLC, a Keytruda-chemo combo reduced the risk of death by 36% compared with chemo alone in the phase 3 Keynote-407 trial. Data showing a drug can prolong patients' lives is considered the gold standard in cancer research, and Tuoyi and Tyvyt don’t yet have any.

A regulatory consultant who’s an executive director at one of the largest Chinese pharma companies also acknowledged that "it is also a question of how comfortable physicians will be recommending the local brands [over] a more expensive drug that has more convincing data."

"Since this is a matter of ‘gambling with lives,’ I think this is […] where patients will be willing to pay for more expensive treatments," the consultant told Cantor.

And then there's Merck’s status as a large multinational company with established sales and marketing power, compared with Junshi and Innovent, which are marketing their first commercial products in Tuoyi and Tyvyt, respectively.

One way Keytruda could reach more patients is by getting itself onto the government’s insurance coverage. Cantor now expects currently approved PD-1 players will begin negotiations to snag a place on the National Reimbursement Drug List this year. Based on the recent rounds of talks, Cantor assumes a price cut on the scale of 50% to 60%. But because manufacturers usually end their patient assistance programs following coverage, the analysts predict that getting on the list will have a modest impact on actual price.

Industry watchers should find out in a few months. According to the draft timeline China’s State Medical Insurance Administration unveiled Wednesday, this year’s negotiations will begin around June to July, and new entries will be announced in August.

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