Merck's 2020 Financial Report: China Leads Global Growth, Keytruda Nears $15 Billion in Sales

On February 4, 2021, global pharmaceutical giants Merck & Co., Inc. (MSD), Roche, Bristol Myers Squibb, and Gilead Sciences simultaneously announced their fourth-quarter financial results. This article will first present MSD’s key product sales data, as well as its research and development and regulatory progress.

Naturally, the discussion should begin with the PD-(L)1 monoclonal antibody market. In 2020, the global market for PD-(L)1 monoclonal antibodies was projected to exceed $26 billion. Since 2014, seven years of development have seen cancer immunotherapy, represented by PD-(L)1 monoclonal antibodies, transform the standard of care for numerous diseases and become a cornerstone therapy for many conditions. It is evident that the competitive landscape for various advanced-stage tumors has largely crystallized. Currently, multiple PD-(L)1 monoclonal antibodies are continuously exploring opportunities in early-stage tumors. Among the growing cohort of PD-(L)1 monoclonal antibodies, Opdivo was the first to show signs of decline, with sales reaching $6.992 billion in 2020, representing a slight year-on-year decrease of 2.94%.

Note: Converted to USD using the annual average exchange rate; Sales of durvalumab in Q4 2020 are forecasted figures.

I. MSD Has Become an Enterprise That Reveres Only “K”

On February 4, 2021, Merck & Co., Inc. announced its 2020 financial results, reporting full-year revenue of $48 billion, a 2% year-over-year increase. Pharmaceutical sales amounted to $43 billion, while animal health revenue reached $4.703 billion. Within the pharmaceutical segment, Keytruda emerged as Merck’s flagship product, generating $14.4 billion in sales in 2020, a 30% year-over-year increase. In its seventh year on the market, Keytruda has become a super-blockbuster drug with annual sales approaching $15 billion, contributing 33% of the pharmaceutical division’s revenue. In the vaccine business, Gardasil/Gardasil 9 (HPV vaccine) achieved sales of $3.938 billion, up 5% year-over-year. Given that Keytruda alone accounts for one-third of total sales, Merck has evolved into a company heavily reliant on this single “K” product. Notably, Merck’s R&D expenditure surged by 37% in 2020, rising sharply from $9.872 billion to $13.558 billion.

Four Key Businesses Driving Performance Growth: Oncology, Vaccines, Hospital, and Animal Health

MSD

https://s21.q4cdn.com/488056881/files/doc_financials/2020/q4/MRK-4Q20-Earnings-Deck.pdf

MSD’s Global Performance: China Continues to Lead Global Growth

Merck Sharp & Dohme

https://s21.q4cdn.com/488056881/files/doc_financials/2020/q4/MRK-4Q20-Earnings-Deck.pdf

MSD’s 2020 financial report highlights the following key points for attention:

1. The PD-1/PD-L1 axis has fully ushered in the era of cancer immunotherapy. Among these therapies, Keytruda stands out as the most prominent super-blockbuster drug, joining the exclusive group of medications with annual sales exceeding $10 billion. Keytruda has achieved comprehensive success in the treatment of advanced-stage cancers, particularly non-small cell lung cancer (NSCLC), and has made highly significant contributions to clinical benefits across various types of cancer immunotherapies.

2. In the oncology business, the combined sales revenue from the co-promotion of olaparib and lenvatinib amounted to approximately US$1.6 billion, representing a year-over-year increase of over 50%. Meanwhile, combination regimens involving olaparib, lenvatinib, and pembrolizumab continue to be explored.

3. In the vaccine business, Gardasil/Gardasil 9 cervical cancer vaccines are the most significant products, but the most noteworthy remains the next-generation pneumococcal conjugate vaccine V114. Once it can secure a dominant position in the bacterial pneumonia prevention vaccine market, this will become its new growth point in the future;

4. Regarding the novel coronavirus, there has been no significant progress in preventive vaccines, as evidenced by the termination of the V590/V591 development programs; in terms of therapeutic development, MSD continues to advance CD24Fc and Molnupiravir.

II. Keytruda has been on the market for only seven years, with sales approaching $15 billion

In 2020, Keytruda continued to see notable regulatory and program developments in the United States, including: 1. Approval for advanced, unresectable triple-negative breast cancer with a Combined Positive Score (CPS) ≥10; 2. Enhanced clinical positioning in classical Hodgkin lymphoma due to outstanding data from the KEYNOTE-204 trial; 3. Submission of a marketing application for first-line treatment of advanced unresectable metastatic gastric cancer and gastroesophageal junction adenocarcinoma, with a PDUFA date of April 18, 2021; 4. Program progress demonstrating clinical benefit of Keytruda combined with chemotherapy in patients with early-stage triple-negative breast cancer.

Other regulatory milestones and key Phase 3 clinical trial developments for Keytruda in 2020 will not be discussed here. Keytruda has demonstrated efficacy in up to 25 tumor types, with approvals (as monotherapy or in combination) currently secured in 17 of these indications, spanning both first-line and non-first-line settings. Among these, Keytruda’s strong positioning in lung cancer, particularly non-small cell lung cancer (NSCLC), has laid a solid foundation for the drug’s robust growth.

Merck Sharp & Dohme

https://s21.q4cdn.com/488056881/files/doc_events/2019/Investor_Day/0621/Investor-Day-Presentation.pdf

Covering 17 types of cancer and more than 20 indications, adjuvant/neoadjuvant therapy will be the main direction for Keytruda’s indication expansion in the coming years. The 2019 financial report disclosed expectations for Keytruda’s regulatory progress in the next few years; however, to date, only data from KEYNOTE-054 and KEYNOTE-522 have been released. Notably, the approval of the adjuvant therapy regimen for triple-negative breast cancer was delayed by two years compared to initial projections. Other early-stage indications for adjuvant/neoadjuvant therapies are significantly lagging behind expectations!

III. Under the immense halo of “K,” the vaccine business (especially Gardasil 9) continues to shine brightly

Vaccines remain one of Merck’s traditional core businesses, with Gardasil/Gardasil 9 continuing to steadily generate cash flow for the company. In 2020, sales reached $3.938 billion, representing a 5% year-over-year increase.

MSD’s future vaccine pipeline is heavily focused on bacterial pneumonia prevention vaccines. As its marketed product, Pneumovax 23, does not cover children under two years of age, it is at a competitive disadvantage against Prevnar 13. MSD is developing V114, a next-generation upgraded vaccine that includes all serotypes contained in Prevnar 13 plus the new serotypes 22F and 33F. Multiple studies have already demonstrated its protective efficacy in adults aged 18 years and older. Its protective efficacy in young children warrants long-term attention. Currently, the marketing application for V114 has been accepted!

IV. Three Major Acquisitions by MSD in 2020, Including COVID-19 and Oncology Projects

MSD

https://s21.q4cdn.com/488056881/files/doc_financials/2020/q4/MRK-4Q20-Earnings-Deck.pdf

Keytruda has undoubtedly become MSD’s most critical development priority, commanding a significant share of the company’s resources. MSD’s R&D investment has also been growing rapidly, amounting to $10.3 billion, $9.8 billion, $9.9 billion, and $13.6 billion in 2017, 2018, 2019, and 2020, respectively. Key acquisitions in 2020 included: 1. The acquisition of OncoImmune, which added a novel coronavirus therapeutic project, CD24Fc, to the pipeline; 2. The acquisition of VelosBio, which brought in a ROR1 antibody-drug conjugate, further strengthening the oncology portfolio; 3. The acquisition of Themis Bioscience, which provided several vaccine candidates, including a preventive vaccine for novel coronavirus, although its development has since been discontinued.

What’s Worth Watching in 2021, in Brief:

1. Pembrolizumab–lenvatinib–olaparib achieved breakthroughs in broader indications; more importantly, data on pembrolizumab in the adjuvant/neoadjuvant treatment of early-stage cancer were disclosed, such as KEYNOTE-091, which was expected to be disclosed in 2021;

2. V114, a next-generation bacterial pneumonia vaccine, has submitted a marketing application and deserves close attention. Meanwhile, its efficacy data for pediatric protection will be crucial in the future. The PDUFA date is July 18, 2021.

MSD Sales of Products Exceeding $400 Million (in millions of USD)