3. Merck & Co.

Merck
(Merck)

R&D budget: $9.75 billion
Change from 2017: -6%
Total 2018 revenue: $42.3 billion
R&D budget as percentage of revenue: 23%

With more than 1,000 trials of its blockbuster checkpoint inhibitor Keytruda going through the mill, it’s no surprise that Merck has been adding billions of dollars to its R&D spend over the past few years, making it the third biggest R&D spender overall.

That drug is the standout therapy in what has become a crowded PD-1 and PD-L1 field, and while Merck has seen setbacks for its drug in some trials, they haven't been as large as those of its rivals, which have all seen some major flops in recent years.

It seems combinations are the New Way, and everyone is looking to add their marketed and/or experimental drug to Keytruda in a "throw it and see what sticks" approach. While this is great for Merck, it’s in danger of becoming a one-drug company, an AbbVie/Humira type if you will, and that makes some analysts nervous for the future.

Buying Immune Design this year is one way Merck is trying to add to its pipeline, but last year, one of its other cancer drug hopefuls failed to fully shine at ESMO.

Amid high expectations, the first clinical data with Merck’s so-called STING agonist MK-1454 at the European cancer congress proved a disappointment, at least as a monotherapy. It did better when wedded to Keytruda, but this still left a bitter taste.

STING (stimulator of interferon genes) has emerged as a hot new target in oncology, with companies like Merck and fellow big R&D spender J&J rushing to develop drugs that activate the protein and—it is hoped—kick-start an innate immune response against cancer cells in the tumor microenvironment.

As Merck is one of the front-runners among companies developing STING agonists, the lackluster data were a bit of a cold shower for the emerging category, which also features candidates from Novartis/Aduro, Bristol-Myers Squibb/IFM Therapeutics, and Mavupharma, among others.

In addition to Keytruda, the U.S. Big Pharma is also investing heavily in vaccines, with four vaccines in the later stages of testing, including its Ebola vaccine, a heat-treated varicella-zoster virus vaccine, and a pneumococcal conjugate vaccine, which will rival Pfizer’s blockbuster Prevnar.

Check out Merck’s pipeline.

3. Merck & Co.

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