FDA Approves Subcutaneous Keytruda

Merck & Co. Inc. (NYSE: MRK) has received approval from the U.S. Food and Drug Administration (FDA) for an injectable, subcutaneous formulation of its blockbuster cancer immunotherapy, Keytruda. The new version, named Keytruda Qlex, is approved for most solid tumor indications currently treated by its intravenous (IV) counterpart and is expected to be available in the U.S. later this month. This approval represents a significant development for Merck, particularly as the company navigates the impending patent expiration of the original IV formulation.

The subcutaneous delivery method offers a notable improvement in patient convenience, reducing administration time from approximately 30 minutes for the IV infusion to a mere one minute. While Merck has indicated that Keytruda Qlex will be priced at parity with the IV version, which costs nearly $11,800 for a three-week course, the enhanced accessibility and efficiency of the new formulation are expected to drive patient adoption.

Strategic Implications for Merck's Patent Cliff

Keytruda stands as Merck's most significant revenue generator, with sales reaching $25 billion in 2023 and $29.5 billion in 2024, solidifying its position as the world's top-selling pharmaceutical product. However, the original intravenous formulation faces a critical patent cliff in 2028, which could expose it to competition from biosimilars and potentially lead to a substantial erosion of revenue, with some estimates suggesting a 30% revenue decline post-2028.

The approval of Keytruda Qlex is a calculated strategic maneuver designed to mitigate the impact of this patent expiry. By introducing a new formulation with its own patent protection, Merck aims to extend its market exclusivity, with some analyses suggesting a delay in biosimilar competition beyond 2028, potentially into 2029. This move is crucial for Merck to defend its market dominance and maintain pricing power, particularly in light of upcoming U.S. price negotiations under the Inflation Reduction Act.

"Merck's approval of Keytruda QLEX is not merely a product update but a calculated move to defend its market dominance. By securing a new patent for the formulation, the company extends its competitive moat against generics and maintains pricing power during the 2029 U.S. price negotiations under the Inflation Reduction Act."

Market Forecasts and Competitive Landscape

The global oncology market, valued at $320.3 billion in 2024, is projected to surge to $866.1 billion by 2034, driven by advancements in immunotherapy and rising cancer incidence. Keytruda Qlex is poised to capitalize on this growth by addressing key barriers such as patient accessibility and treatment adherence. Analysts project a 30-40% conversion rate from the IV to the subcutaneous administration, highlighting the potential for significant market penetration.

Despite the emergence of rivals such as Summit's ivonescimab and offerings from Roche and BMS, Merck is strengthening Keytruda's position through continuous indication expansion in cancers like breast and head & neck, and through mRNA-based combination therapies. Market forecasts for Keytruda revenue vary, with predictions ranging from $26.6 billion by 2030 (at a 2.94% Compound Annual Growth Rate - CAGR) to a more aggressive $65.3 billion by 2034 (at a 9.2% CAGR), especially considering the uptake in emerging markets and combination therapies.

Keytruda's Market Performance and Future Outlook

The sustained demand for Keytruda, driven by its efficacy in metastatic indications and increasing adoption in earlier-stage cancers, underscores its pivotal role in Merck's financial performance. The drug's robust sales growth, contributing significantly to Merck's $64.2 billion in total worldwide sales for 2024 (a 7% increase from 2023), illustrates its enduring market strength.

The introduction of Keytruda Qlex is anticipated to provide a near-term boost to Merck's stock as investors gain clarity on the company's strategy to mitigate patent expiration losses. In the long term, the success of the injectable version in maintaining substantial market share will depend on its uptake and the evolving competitive landscape. Merck's agility in adapting to market demands and its commitment to innovation within the high-growth oncology sector are key factors for investors to monitor in the coming quarters, particularly as the industry awaits further clarity on the financial impact of the patent lifecycle management strategy.