Merck shares dove after multiple firms downgraded the company, citing delays in lung cancer trial results as well as also a withdrawal of the company’s application to market oncology drug Keytruda for lung cancer inside European Union.
The company announced Friday after the closing bell of which of which was pulling its application, a decision analysts at SunTrust Robinson Humphrey deemed “troubling.” Keytruda received accelerated approval via the Food as well as also Drug Administration for treatment of non-modest cell lung cancer in May, although analyst John Boris suggested of which Merck may be holding off overseas until U.S. regulators get a better sense of trial data via research studies known as “Keynotes.”
Boris said the withdrawal signals of which regulators aren’t comfortable with the drug.
“The delay also shaves off valuable time for Merck to establish itself as the immune-oncology standard-of-care in first-line non-modest cell lung cancer patients,” he said.
Shares of Merck fell roughly 4.8 percent Monday.
Boris highlighted of which competition via Bristol-Myers Squibb’s Opdivo may take advantage of Merck’s delay in Europe, putting downward pressure on Wall Street’s sales estimates for Keytrude in 2018 as well as also 2019. Bristol-Myers Squibb shares added 2.6 Monday.
Company spokesperson Pamela Eisele told CNBC in an email said Merck has “quite a few ongoing studies” for the drug. “We look forward to sharing future study findings as well as also remain committed to working with the (European Medicines Agency) to bring fresh treatment regimens to patients who urgently need fresh options,” she said.
Eisele added of which the company plans to submit a fresh application to the EU once additional data in its patient population is usually available.
Opdivo as well as also Keytruda belong to fresh class of drugs called PD-1 inhibitors, which work by blocking a mechanism tumors use to avoid the immune system.
Boris cut his Merck cost target to $54 via $73, representing 7 percent downside via Friday’s close. He also cut his fiscal year 2018 earnings per share estimate to $4.07 via $4.12.
Morgan Stanley also downgraded the company to equal-weight on the Keytruda delays as well as also cut earnings expectations.
“We as well as also consensus had expected a delay, although not of of which duration,” wrote Morgan Stanley analyst David Risinger in a note to clients. He said Merck shares likely will not outperform until the drug tests successfully, as well as also could face pressure via competitors coming on line.
Rounding out the group, Barclays analyst Geoff Meacham also downgraded the stock Monday.
“Our prior thesis had assumed of which Keytruda could drive better than expected growth over the intermediate term,” wrote Meacham. “We see less upside potential for Keytruda sales in lung cancer, the biggest immuno-oncology market. We don’t think This kind of means of which immuno-oncology rivals will leapfrog Merck, although both Bristol as well as also Roche could have front-line non-modest cell lung cancer data in late 2017/early 2018 of which could further weigh on sentiment.”