Is there life beyond Keytruda? Merck makes its case in first investor event in 5 years

Merck CEO Ken Frazier kicked off Thursdays Investor Day presentation by acknowledging that the companys most recently lauded blockbuster, immunooncology drug Keytruda, is also its biggest challenge. “Everywhere I go, the key question I hear from people is ‘What do you have beyond Keytruda?’” Frazier said in his introduction to the investor presentation—the company’s first such event in five years. “But I think what we’re going to be able to show you today is that we do have tremendous growth opportunities beyond Keytruda.” It’s no wonder Frazier finds himself constantly facing the Keytruda question, considering how dominant that one product has been in Merck’s financial reports over the last few years. Even as recently as the first quarter of this year, when Keytruda’s sales leaped 60% to $2.3 billion, the company touted the recent successes that Frazier and his colleagues vowed would drive growth even more, including its new FDA approval for the first-line treatment of non-small cell lung cancer patients who have low levels of the biomarker PD-L1. During Investor Day, Merck’s chief commercial officer, Frank Clyburn, pointed out that Keytruda is just now starting to forge another new market—renal cell carcinoma. He reported that at the recent conference of the American Society of Clinical Oncology (ASCO), clinicians told him the data in kidney cancer would be “practice changing.” Oncologists were also excited about the potential of the drug in adjuvant melanoma, both in the U.S. and overseas, he said. CFO Rob Davis said he is confident that as Merck moves away from selling drugs mostly to a primary-care audience toward more hospital-administered products, the company’s profit margins will expand. Operating expenses will grow at a rate “meaningfully below sales,” he said. And the resulting margin expansion “will translate to accelerated earnings-per-share growth,” he vowed.