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Merck's lung cancer drug, Keytruda, can potentially grow to $100 billion plus valuation by 2025. Our forecast for Keytruda assumes:Revenue growth of 11% on average over 2020-25Margins of 29% for the drug, same as the company's overall marginsA P/E Multiple of 17x, which is slightly above the current P/E of around 15x. Merck leads the lung cancer drugs market, with Keytruda, which garnered revenues of $11 billion in 2019, followed by Bristol-Myers Squibb's Opdivo. However, Keytruda has been approved for multiple indications, and the $11 billion figure includes its sales from all indications. Lung cancer accounts for roughly 65% of Keytruda's total revenues. Looking at other indications, Roche's Avastin leads in Cervical cancer, but Keytruda is also approved for this indication. In gastric, Eli Lilly's Cympraza is one of the top selling drugs, along with Roche's Herceptin. Novartis leads in renal cancer with its Afinitor and Votrient, followed by Pfizer's Sutent and Inlyta.Roche leads the breast cancer market with its Herceptin, Perjeta, and Kadcyla, followed by Pfizer's Ibrance. With Keytruda approved in multiple indications, it could see sales growth at a faster pace compared to some of the other drugs.
Keytruda Sales Have Grown At A CAGR of 105% From $1.4 Billion In 2016 To $11.0 Billion In 2019, Led By Its Approvals In Multiple Indications.
Keytruda Sales Growh
What Can Drive Future Growth?
Keytruda will likely continue to be the leader in lung cancer.Lung cancer is one of the largest market, in terms of diagnosis each year. For 2020, it is estimated that
228,820 new cases of lung cancer will be diagnosed in the U.S.Apart from lung cancer, Keytruda has already bagged the US FDA approvals in cervical, gastric, melanoma, renal and head & neck cancers among others. Also, it is being tested for breast cancer, which is the largest market, in terms of no. of cases in the U.S.In the below sections we highlight the top drugs for each cancer type.
Cervical Cancer: Roche's Avastin Is The Leader With Sales of Over $7 Billion.
Note that $7 billion figure represent the sales from all indications. Avastin has been approved for multiple indications, including cervical, renal, colorectal, lung, and brain cancer.
Gastric Cancer: Eli Lilly's Cyramza Is Poised To Be A Blockbuster Drug In Gastric Cancer.
While Roche's Herceptin is also approved for Gastric cancer, its primary indication is breast cancer.
We have shown Herceptin sales in the breast cancer section.
Merck's Keytruda's Valuation Will Likely By North of $100 Billion In 2025
We arrive at Keytruda's valuation using a price to earnings multiple of 17x, slightly higher than the current multiple of around 15x, the company's adjusted net income margin of 29%, and sales of around $21 billion.
You can modify these three drivers in the below charts to arrive at your own valuation for Keytruda.
Keytruda Valuation = A x B x C
P/E Multiple (A)
Merck's Adjusted Net Income Margin (B)
See our complete set of analyses for RocheMerckPfizerBristol-Myers Squibb