An independent Bayer is no blueprint for German Merck

As Bayer yesterday moved to end years of dogged resistance to a business split, at an analyst meeting its German counterpart Merck KGaA focused on keeping the union and bolstering its individual parts, which include pharma, OTCs and chemicals.

Of course, Merck is a far smaller business that can hardly boast Bayer’s robust return to health, and lacks the luxury of acting from a similar position of strength. The group’s plan to license out a key immuno-oncology asset thus shows grim acceptance of the fact that Merck is destined to remain a mid-tier player.

Already, its pharma business has taken a battering, with the recent failure of the cancer vaccine tecemotide, termination of a multiple sclerosis alliance with Ono, and lacklustre performance of its hypoxia-targeted agent TH-302. Given the speed of progress in immuno-oncology, a fifth-to-market project like Merck’s anti-PD-L1 MAb MSB0010718C will at best struggle to make an impression.

So it makes sense to seek a partner for it, even if Merck has come to this decision rather late in the day (For oncology deals, don’t forget the other Merck, June 19, 2014). The company said yesterday that talks were already underway with “several oncology players”.

This morning Morgan Stanley opined that '0718C could be of interest to big pharmas like Novartis or Pfizer, who have a strong oncology presence but have not kept up with the immuno-oncology leaders. This is all very well in theory, but the concept faces practical stumbling blocks.

Two anti-PD-1s are already on the market: Merck & Co’s Keytruda and Bristol-Myers Squibb’s Opdivo. It is anyone’s guess what this space will look like once '0718C reaches it – potentially behind Roche’s MPDL3280A and AstraZeneca’s MEDI4736, not to mention Keytruda and Opdivo.

Moreover, the competitive environment must cloud the practicalities of running clinical trials; how robust can a study be when patients will likely get multiple lines of PD-1/PD-L1 therapy? What is the relevant agent to use as a comparator? Perhaps for this reason Merck KGaA started a phase II trial in Merkel cell carcinoma, where the competitors do not seem to be present.

Underwhelming

But data at Asco hardly set the world on fire. A phase I study showed that '0718C caused just one partial response in 28 patients. Subsequently, results from expansion cohorts have shown overall response rates of 13% in 127 second-line NSCLC patients, and 17% in 23 subjects with heavily pre-treated ovarian cancer.

This study has been aggressively expanded, and now comprises almost 600 patients; the German firm seems to be following in the footsteps of its US namesake, whose Keynote-001 phase I pembrolizumab trial now numbers a staggering 1,137 patients across multiple tumour types.

And, since combinations are fast becoming the rage, Merck KGaA confirmed that it had preclinically combined '0718C with an anti-CTLA-4 agent – this is the antigen that Bristol’s Yervoy targets.

Elsewhere in the pipeline Merck KGaA has the Threshold Pharmaceuticals-partnered TH-302, its most advanced project, whose phase III pancreatic study readout in 2016 represents a key catalyst. Analysts have also pinpointed the phase II c-Met kinase inhibitor EMD 1214063, and the company has worked hard to stress differences between this and Roche’s failed MetMAb.

The group is also targeting acquisitions to bolster all of its divisions, but, both yesterday and at Asco, spoke of excessively high biopharma valuations in the market, necessitating a high degree of discipline. It cannot help that, as a mid-sized, family-owned business, Merck KGaA has far less financial firepower than its peers – a predicament that a putative business split would arguably make worse.

The group desperately needs its labs to come up with R&D successes. And, at least as far as the PD-L1 asset goes, the big concern is that it has already missed the boat.

Trials of MSB0010718C 
Status Enrolment Trial ID
Phase II 84 Merkel cell carcinoma pts NCT02155647
Phase I  590 pts, various tumours NCT01772004
Phase I  38 Japanese pts NCT01943461

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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