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