Roche (RHHBY) is now a “real competitor” with a potential first treatment in advanced lung cancer, an analyst said Monday after the drugmaker’s immuno-oncology regimen hit its goals in a Phase 3 trial.

XAutoplay: On | OffIn early trading on the stock market today, Roche jumped 5.9% to close at 30.82, running up to its highest point since mid-October. Meanwhile, shares of Dow component Merck (MRK), which has a rival combination, dropped 2% to finish at 54.10.

Top-line data show Roche’s Tecentriq combined with cancer drug Avastin and chemotherapy provided a statistically significant and clinically meaningful reduction in the risk of disease worsening or death compared with a regimen of Avastin plus chemo.

Further details will be provided during an upcoming medical conference in December, Roche said. Overall survival data aren’t mature yet, but are encouraging and expected in the first half of 2018, the firm said.

The results are a mixed bag for Merck. Merck received accelerated approval in May to use its immuno-oncology drug Keytruda with chemo to treat advanced lung cancer.

Keytruda and Tecentriq are both immuno-oncology drugs, respectively, a PD-1 inhibitor and a PD-L1 inhibitor. Evidence has suggested these drugs could work better in a population of patients whose bodies make more of a protein called PD-L1.

In October, Merck pulled its application for its regimen in Europe and delayed a key study of the combination. This move led analysts to question whether there’s an ongoing issue with the regimen. Merck stock dipped to a 17-month low on the worries.

IBD’S TAKE: Big biotech players struggled during the third quarter, but smaller caps enjoyed major sales beats led by Exelixis (EXEL) and Neurocrine Biosciences (NBIX), which topped views by $48.5 million and nearly $36 million, respectively. Read the Industry Snapshot for a deeper dive on the third quarter.

But Roche’s trial helps to confirm the theory that an immuno-oncology plus chemo regimen can succeed in a broad population of patients with advanced lung cancer, regardless how much of that protein their bodies make, Leerink analyst Seamus Fernandez said.

It’s not clear whether Avastin has any real benefit on the combination, Fernandez wrote in a note to clients. Avastin is approved as a first treatment in a form of advanced lung cancer, but isn’t widely used and isn’t well tolerated, he said.

Avastin-based regimens are used as first treatments in an estimated 10%-20% of lung cancer patients vs. Eli Lilly‘s (LLY) drug Alimta, which is used in 50%-60%, he said. Merck discontinued pursuit of an Avastin-based regimen on safety concerns and, instead, gained approval with Lilly’s drug.

“To us, this result is more a validation of the benefits of immuno-oncology plus chemo combinations and is most positive for Roche given Tecentriq’s position in our model as the third or perhaps even fourth player in the PD-1/PD-L1 market by sales,” he said.

Evercore analyst Umer Raffat agreed, noting the news solidifies Roche’s regimen as a “real competitor” in treating advanced lung cancer.


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