Power Alley Saturday: We Have Said For Quite A While That Wall Street Has Under-Estimated Keytruda®'s Patent Life [Extenders]...

Much of the current analysts' writing -- at Wall and Broad -- operates from the assumption that when Merck's first patent on pembrolizumab (branded as Keytruda^®) expires, a generic / biosimilar "gold rush" will take place. The bulk of them put that as a 2027 event (and harm Merck's present, and future cash flow juggernaut).

As I've said for over four years, here -- that misunderstands the way the patent law in the US favors. . . extensions, and new formulations. To be sure, at over $25 billion a year in revenue, there will be many competitors hoping to enter, with bio-similar versions. . . but Merck is presently conducting several Phase 2 and Phase 3 studies showing that a much more convenient "shot version" (subcutaneous) -- as opposed to an hours long IV drip version, as presently patented -- will do the job just as well.

Candidly, that effort (based on already-well-known, "generally recognized as safe" processes) is nearly certain to deliver, in demonstrating comparable efficacy -- i.e., succeed, and thus support an entirely new FDA approval (and new US issued patents, to boot!) -- for this far more convenient formulation.

By my lights, this would extend the highest margin markets' patent protection to the mid-2040s. And there may well be other reformulations, or combos-, that make the old IV patented version. . . less attractive in the high-end oncology suites.

Sure, the generic manufacturers will come with various bio-similars, but those -- relegated to the IV formulation -- will be seen mostly in China and Russia, and India . . . and eventually parts of Sub-Saharan Africa, and South America. But that will be, net-net, only about five to ten percent of the overall revenue -- and less than one to two percent of the profits, that Keytruda will be racking up, as a subcutaneous injection. . . in the EU, UK, Australia and Japan -- and of course, the vast US and Canadian markets.

That is my candid assessment. So, in general -- this is in no manner akin to the situation in 2008-09 that legacy Schering-Plough faced when one franchise was over 65 percent of the company profits, and over 40 percent of the company revenue. . . and was then determined to be an expensive placebo. Do trade with this in mind, as you look at Merck around $123 a share on the NYSE.

It has quite a bit of blue sky ahead, in a series of wildly profitable, and vitally life saving markets, around the globe. Smile.

नमस्ते