Merck wins breakthrough FDA approval for blockbuster cancer contender pembrolizumab

Merck ($MRK) has won the frenzied race to secure the first FDA approval for a new breed of cancer treatment, clearing the way for a U.S. launch and a scramble for dominance in a field expected to peak at nearly $35 billion a year.

The agency has signed off on Merck's pembrolizumab (formerly MK-3475) for melanoma, the first of the company's many planned indications. The drug is designed to galvanize an immune system attack on tumors by blocking a pathway called PD-1, which, left unchecked, allows cancerous cells to pass undetected. The approval, handed down almost two months ahead of schedule, clears the drug for use on patients with advanced skin cancers who have already taken Bristol-Myers Squibb's ($BMY) Yervoy (ipilimumab).

With the victory, Merck becomes the first mover in a blockbuster race to commercialize a PD-1 treatment in the U.S., beating out rivals Bristol-Myers, AstraZeneca ($AZN) and Roche ($RHHBY), among others. Pembrolizumab, which will sell as Keytruda, is the second such therapy to win approval around the world, following last month's Japanese OK for nivolumab from Bristol-Myers and partner Ono Pharmaceutical.

It won't be cheap. The cost for this drug will be $12,500 a month, or $150,000 a year, the low end of the ambitious range expected by Bernstein's Tim Anderson. That puts pembrolizumab on track to earn $3.5 billion a year, according to Anderson, which would make this treatment the first bona fide blockbuster to come out of Merck's pipeline in years. Nivolumab is still tapped by the analyst as the likely overall market winner, with $4.4 billion in expected peak sales. And Roche and AstraZeneca complete the top four group in immuno-oncology, with potential sales of $3.8 billion and $1.4 billion for their rival programs. 

The biggest promise for PD-1 blockers--both clinically and commercially--likely lies in combination therapies, and Merck has launched a fleet of cocktail studies that match pembrolizumab with treatments from Pfizer ($PFE), Amgen ($AMGN), Incyte ($INCY) and others in hopes of bolstering the drug's stirring potential as a monotherapy. Its competitors have followed suit, and the coming years are likely to see a host of PD-1 treatments approved for use in tandem with other therapies in a variety of cancers.

In the near term, Bristol-Myers is closest on Merck's heels in the U.S., planning to submit its PD-1 candidate for FDA scrutiny next quarter. Roche and AstraZeneca are not far behind with their contenders, and each company is banking on the agency following through on its promise of swift reviews for the breakthrough class of therapies.

For Merck, the drug is the star of refocused and revamped pipeline. Under the direction of R&D chief Roger Perlmutter, the once-sluggish pharma giant has ditched programs and slashed jobs in an effort to pare down and invest in high-potential candidates, and pembrolizumab is its first major regulatory victory since Perlmutter took over last year.

"Keytruda embodies Merck's unwavering commitment to pursue breakthrough science to help people who are facing the most challenging diseases," CEO Kenneth Frazier said in a statement.

Pembrolizumab's nod marks the 6th approval for a melanoma treatment since 2011, according to the FDA, reflecting both the explosion of research advances in the field and the series of the disease. Melanoma accounts for about 5% of all new cancers in the U.S., the agency said, killing nearly 10,000 people each year.

- read the FDA's statement
- here's Merck's release