Pushing Hard On PD-1, Merck Signs Trio Of Combo Development Deals

Merck’s oncology build-up is continuing, even as it tightens focus and squeezes spending in other parts of its business as part of an ongoing “reshaping” that CFO Peter Kellogg said will help to maximize “core in-line assets and key pipeline programs” that are critical for growth.

Merck & Co. Inc. continues to build up its oncology franchise with its Feb. 5 announcement of three collaborations with pharma peers to evaluate combinations of its novel anti-PD-1 immunotherapy and their drugs, most of which also are in development.

The collaborations – with Pfizer Inc., Incyte Corp. and Amgen Inc. – are the latest step in Merck’s ongoing efforts to scale up its efforts in oncology, even as it cuts spending across the board and shifts away from areas it once considered core. In October, it announced a massive R&D overhaul aimed at lowering costs while driving innovation. This included creation of a separate integrated oncology business unit to oversee development and commercialization of its play in the hot area of checkpoint inhibitors, with MK-3475 in the lead, followed by other oncology pipeline candidates (Also see "Merck Bets Big On Oncology In New R&D Strategy" - Pink Sheet, 7 Oct, 2013.).

The deals are distinct because some of the combinations they cover involve testing Merck’s unapproved drug with other unapproved compounds, an approach that in the past has had additional regulatory and scientific risks. FDA has shown greater willingness to consider “novel-novel” combinations in recent years, and scientific understanding of the clinical benefits of combinations has improved, paving the way for greater interest on the part of companies in working together to improve their chances of getting approvals.

MK-3475, a PD-1-specific antibody, is currently in Phase III as a monotherapy for melanoma and being studied in a total of 13 clinical trials involving more than 4,000 patients suffering from a variety of cancers (Also see "Big Pharma Casts Immune Checkpoint Net Wide Across Tumor Types" - Pink Sheet, 10 Jun, 2013.). Under the new agreement with Pfizer, investigators will evaluate its safety and efficacy when combined with Pfizer’s small molecule kinase inhibitor Inlyta (axitinib) in patients with renal cell carcinoma, and also with Pfizer’s investigational immuno-oncology drug PF-05082566 in multiple cancers. Inlyta currently is on the market as a monotherapy for RCC, and ‘2566, which targets the human 4-1BB receptor, is in Phase I, according to Pfizer’s website.

In the second agreement, Merck will cooperate with Incyte on a randomized, double-blinded Phase I/II study of MK-3475 and Incyte’s investigational drug INCB24360, an immunotherapy that inhibits indoleamine 2, 3-dioxygenase (IDO) in patients with previously treated metastatic and recurrent non-small cell lung cancer. Finally, MK-3475 and Amgen’s investigational immunotherapy talimogene laherparepvec will be put to the test in a Phase Ib/II study in patients with previously untreated mid- to late-stage melanoma.

“We believe the scientific justification for each of these partnerships is very strong; moreover the breadth of these partnerships adds to our previously announced collaboration with GlaxoSmithKline and demonstrates our commitment to MK-3475,” said Roger Perlmutter, president of Merck Research Laboratories, on the company’s year-end earnings call, also on Feb. 5. Merck signed a similar deal with GSK in December around combining MK-3475 with GlaxoSmithKline PLC’s Votrient (pazopanib) in advanced RCC.

Amid Reshaping, More Focus On Oncology

Merck timed the announcement of its alliances to coincide with the release of its year-end results. Overall, the company ended 2013 with $44 billion in sales, down from $47 billion in 2012 and earnings of $4.4 billion, compared to $6.2 billion the year before.

Headwinds included faster-than-expected price erosion due to loss of exclusivity for some key drugs, negative foreign exchange impact and divestiture of several non-core assets. But these trends hardly were surprises, and Merck has responded by accelerating a company-wide cost-cutting program and refocusing its efforts on core franchises that it believes will drive future growth, while de-emphasizing non-core assets.

Even as Merck builds up in oncology, a process that has included hiring external commercial and scientific talent, it managed to lower R&D and SG&A spend by about $440 million and $400 million, respectively, in the fourth quarter alone. The former figure includes a payment of about $150 million owed on an unnamed licensing agreement.

Merck currently is reviewing whether to divest its consumer and animal health businesses, a process it has spoken about for months, and CEO Ken Frazier emphasized on the call that decisions will be made this year and could be the same or different for each subsidiary.

Despite the treacherous business environment and key pipeline failures over the years, Merck has some strengths including the Januvia/Janumet (sitagliptin and sitagliptin/ metformin) franchise in diabetes and other strong performers, such as Isentress (raltegravir) for HIV, and Remicade (infliximab) and Simponi (golimumab) for autoimmune disorders. Janumet franchise sales for 2013 were $5.8 billion, up 2%, including a 3% negative impact from foreign exchange.

Areas of continued heavy R&D investment, in addition to oncology are hepatitis C, diabetes and Alzheimer’s disease.

PD-1 Driving Interest In Merck

Still, the bulk of investor attention devoted to Merck these days revolves around its promising PD-1 inhibitor and related cancer immunotherapy pipeline. The clinical trials underway for MK-3475 are for multiple tumor types, including NSCLC, triple-negative breast cancer, head and neck tumors, and some hematological cancers, Perlmutter said. Response rates in large salvage studies of patients with advanced melanoma previously treated with Bristol Myers Squibb’s Yervoy (ipilimumab) helped to convince the company to start a rolling submission to FDA, which Merck said it expects to complete in the first half of 2014 (Also see "Cancer Checkpoint Race Takes Turn With BMS’ New Lung Trial, Merck’s Rolling Melanoma BLA" - Pink Sheet, 27 Jan, 2014.).

The Incyte compound currently is in Phase II as a monotherapy against ovarian cancer and as a combination therapy with Yervoy for advanced melanoma. Preclinical evidence suggested that the combination therapy could offer enhanced anti-tumor response that is greater than either drug’s effect on its own, Merck and Incyte said.

It targets IDO, an immune regulatory enzyme that dampens immunity and renders cytotoxic T-lymphocytes inactive, but Incyte has not had great luck testing it as a monotherapy in breast cancer, said Barclay’s analyst Ying Huang. “All of a sudden the program has taken a dramatic turn,” he said. “They [Incyte] were testing it as a monotherapy in breast cancer, and the activity was not so great. But they found synergies between it and both PD-1s and another class of immunotherapies, CTLA-4s.”

Yervoy is a CTLA-4 inhibitor. In Merck’s case, there are no human data, but the companies’ combined drugs have shown an affinity in preclinical models.

Amgen’s talimogene laherparepvec is now in Phase III as a monotherapy for metastatic melanoma. In a press release, the company said the combination studies would be open-label and in two parts: a Phase Ib to determine the safety and efficacy of the combination, and a Phase II to evaluate efficacy, as confirmed by the objective response rate and compared to MK-3475 alone in previously untreated patients and also in those treated with MK-3475 alone.

Separately, Merck also said it would start a new Phase I signal-finding study involving about 320 patients to evaluate MK-3475’s safety and efficacy across 20 different PD-L1 positive tumor types that had not previously been identified. The patients are to be selected based on a variety of attributes, including PD-1 expression patterns, which appear to correlate with tumor responses, Perlmutter said on the earnings call. The exec also highlighted a deal that Belgian antibody developer Ablynx NV announced earlier this week, in which the two companies are developing multivalent antibodies to stimulate the immune system to attack cancer cells (Also see "Ablynx And Merck Enter Immune Checkpoint Blocker Nanobody Pact" - Pink Sheet, 3 Feb, 2014.).

On the earnings call, Perlmutter also cautioned about the limits of scientists’ understanding of checkpoint inhibitors and immunotherapy responses in cancer. Studies of the drug in patients with high PD-1 expression levels have drawn a lot of scientific and investor interest, but, in response to questions about the use of PD-1 expression assays as measures of efficacy, he noted, “I think it’s important to stand back from this and recognize that we are testing a hypothesis with respect to PD-1 activity … There are many parts of that that have yet to be tested experimentally, particularly in the human setting (Also see "Two Approaches To PD-1 Blocker Pediatric Studies Could Help Clarify Biomarker’s Role" - Pink Sheet, 11 Nov, 2013.).”

Perlmutter would not disclose terms of the deals, or likely dates for read-outs, except to say that trials with the other companies’ drugs would begin in 2014; Amgen, in a press release, noted that its trial with Merck would start in the fall. The deals are non-exclusive, and either party in all three cases can work with other companies on different combinations.