EMA, Market

Merck’s bad day: $310M for NotPetya, franchise drugs take a hit and now the EMA pushes back on Keytruda

Merck $MRK took a series of hits on Friday, capped by news after the market closed that its European application for its Keytruda/chemo combo for frontline non-small cell lung cancer was being scrapped in the face of a pushback from the EMA.

In the morning, rolling out its Q3 numbers, Merck was forced to concede that the NotPetya cyber attack had cost the company $135 million in lost sales along with $175 million in related costs while forcing them to borrow $240 million worth of Gardasil from federal stockpiles. That extra $310 million in costs will be repeated in Q4, Merck noted in their quarterly call, as overall damages roll up to the $1 billion mark.

During the call with analysts the company also noted: “We’ll have to wait ultimately to see more about KEYNOTE-021G before we can comment…”

As they noted in their terse release late Friday, the European application was based on KEYNOTE-021G and Merck felt it needed to clarify the situation ahead of the formal pushback notice from European regulators, prompting the late statement.

In a note Friday evening, Evercore ISI’s Umer Raffat says that the Europeans have been reluctant to approve drugs on Phase II data. The FDA, meanwhile, has made that standard operating procedure in oncology.

Ironically, the EMA has been fine with keeping PTC’s Duchenne MD drug ataluren on the market following an accelerated approval, even though it’s failed a series of studies and was just slapped down for the third time by the FDA, which wants to see some real evidence of efficacy before handing out a green light on marketing.

Merck’s surge to the top in NSCLC in the US after a snafu at Bristol-Myers Squibb forced a stumble on that front has helped make Keytruda the star franchise player for the pharma giant. Q3 revenue broke the $1 billion mark, making Keytruda the second largest franchise drug in the portfolio.

Their number one drug Januvia is experiencing some pricing pressure, a feature that will also start to crimp revenue from Zepatier, which is set to see revenue slide in the face of declining patient volume as more people with hep C are cured.

Investors reacted the same way they greeted competitive pressures at Celgene and Gilead this week. Merck’s shares dropped 6% during the day, and another 2.3% in after-market trading as investors shook their heads over the implications.

As I reported yesterday, Merck is also signaling that it wants to do more big deals like the one it did with AstraZeneca on the cancer drug Lynparza. Keytruda as the lone standout isn’t going to cut it with investors.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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