Here's What The FDA Approval Of Keytruda Means For Merck, And For Bristol-Myers

This week, the FDA granted approval for Merck & Co., Inc. (NYSE: MRK)’s Keyruda for chemotherapy combination treatment of frontline lung cancer. While the approval was far from a surprise, it may be enough to move the needle for both Merck and rival Bristol-Myers Squibb Co (NYSE: BMY).

BMO Capital raised its price target for Merck following the Keytruda approval from $71 to $74 and says Keytruda’s label is “solid.”

“Based on our oncologist surveys, we expect strong uptake in IL-NSCLC given Keytruda’s broad label and significant market lead,” analyst Alex Arfaei explained. BMO is predicting roughly $4 billion in Keytruda sales in 2017, ahead of Wall Street consensus expectations of $3.5 billion. BMO forecasts sales will hit $10 billion in 2020 compared to consensus expectations of only $7 billion.

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For Bristol-Myers, a rival getting to market is never good news. JPMorgan analyst Chris Schott said Bristol-Myers shares could be under pressure in coming days, but the company has some promising candidates in its pipeline as well.

“We continue to see positive CM-227 data as a key catalyst for shares and see a high probability of success for at least some portions of the pivotal Ph. III CM-227 study given solid phase I data and enhancements made to the design of the trial over time,” Schott explained.

JPMorgan predicts “fairly rapid adoption within the labeled indication” for Keytruda. The firm forecasts 2017 Keytruda sales of $3.6 billion and predicts sales will hit $7.5 billion by 2020.

The firm maintains Overweight ratings on both Bristol-Myers and Merck.