Shares of Merck & Co Inc (MRK.N) rose as much as 6.5 percent Monday after it filed the first part of an application to market its experimental drug, MK-3475, for advanced melanoma, putting the treatment on track to become the first in a new class of promising cancer drugs to reach the market.
The application was filed earlier than investors had expected and ups the ante in a race between Merck and Bristol-Myers Squibb Co(BMY.N) for dominance of a class of drugs known as anti-PD-1 inhibitors that are expected to generate billions of dollars in peak sales.
Merck's drug is designed to treat patients with advanced melanoma who have previously been treated with Bristol-Myers' melanoma drug Yervoy. The company is also testing the drug in other cancers, including lung and renal cancer.
Bristol is testing its own PD-1 drug nivolumab in a variety of cancers, with lung cancer likely to be one of the first to move forward.
"This is probably one of the most important classes of new drug," said Damien Conover, an analyst at Morningstar, who forecasts peak sales for Merck's drug, including multiple cancer indications, of $3 billion. He forecasts peak sales for Bristol's drug of $6 billion.
The drugs are designed to restore the natural ability of the immune system to recognize and target cancer cells.
While Bristol has more clinical trials and data to show for nivolumab, Merck's move in filing for MK-3475 early "is a way to fight Bristol by getting out ahead of them," Conover said.
Merck said it expects to complete its application in the first half of this year. Under a rolling application, completed portions of the package may be submitted and reviewed by the Food and Drug Administration on an ongoing basis.
Jeffrey Holford, an analyst at Jefferies, said in a research note that the future of PD-1 development could focus on combination regimens. He said it is too early to decide on a winner in the PD-1 space, though he said Merck's drug "does appear to have the best overall profile as a monotherapy."
Merck also benefited from other news on Monday.
The company said it is pursuing strategic options for its animal health and consumer businesses and expects to complete any action it takes this year. It previously said it was looking at options for separating the businesses but the company's statement reinforces the likelihood something will in fact occur.
Separately, a preliminary review of Merck's experimental blood clot-preventing drug vorapaxar by the U.S. Food and Drug Administration found clinical trial data to be "robustly positive" and recommended the drug be approved in patients who have previously suffered a heart attack.
Merck's shares rose 5.7 percent to $52.72 in afternoon trading on the New York Stock Exchange. Earlier in the day, they rose as high as $53.10.
(Reporting by Toni Clarke in Washington; Editing by Bernadette Baum)