I read an announcement in The Wall Street Journal that Merck is going to spend $1 billion to manufacture its cancer blockbuster, Keytruda, in the United States.
This is really part of President Trump’s goal – to bring critical manufacturing back to the United States.
And there are few things more critical than pharmaceuticals.
[Another would be weapons, drones, etc. – things critical to national security have to be brought back.]
So I was excited to see Merck’s announcement they’ll be building a plant.
Keytruda has been a game changer. It’s so big it’s responsible for literally half of Merck’s revenue.
It’s the best-selling drug of all time, and sold $29 billion last year alone.
It will keep that title until Ozempic and weight loss drugs exceed it.
But the real headline here is, we’ve found the company we believe has the potential to take Keytruda’s place.
Keytruda is what we call a “checkpoint inhibitor.”
Inhibitors are like off switches, or door stops. They’re blockers. They block things from happening in the body.
And in the case of Keytruda, it keeps T-cells from attacking other cells in the body. Very important…
They put a door stop. It’s like blocking communication.
It does this by attaching itself to PD-L1, which is a protein on many normal cells and cancer cells.
So it tells those T-cells to leave the other cells alone.
And Keytruda’s been killing it since 2014.
As you can imagine, other companies have been trying to knock Keytruda out.
Remember something – business is war for money. That’s how I’ve always seen it.
Keytruda has this kind of amazing castle it can defend because it’s patented.
But that patent expires in 2028. So they basically have three more years on patent.
Other companies all along have tried to get a piece of Keytruda’s $29-$30 billion a year in sales.
Everyone’s tried to attack that castle.
One has been BeiGene’s Tevimbra.
Tevimbra has an effective checkpoint inhibitor – a PD-1 drug which has done very well for them – about $600 million in sales last year.
But there’s one company we’ve been very focused on –
That we watched for a long time and didn’t recommend until they posted phase three results that were better than both Keytruda and Tevimbra…
The company’s stock is still cheap.
And look, doctors will prescribe the better drug – period.
They want to save lives.
If you have a drug that helps 40% of people, and this one could help 45% of people, you’re going to prescribe this drug – period.
Now, if you are Pfizer, Amgen, Glaxo, Eli Lilly, and you’ve been watching Merck make $29-$30 billion a year on a single drug…
(Especially if you’re Pfizer and haven’t had a hit since the Covid days)…
You’re saying to yourself, gosh, we could muscle our way into Merck’s cancer franchise and get a $10, $15, $20 billion slice…
That makes a company like this a super attractive takeover target for all the Big Pharma companies.
There’s a lot of exciting stuff happening here even as the biotech sector has taken on the chin.
The bear market in biotech has turned the best of these companies into absolute bargains.
And one thing I’ve learned being an investor all these years is that if you don’t buy a stock when it looks absolutely terrible, you’re never going to buy a bargain.
Now, this stock doesn’t look “terrible” – it looks like it wants to go higher!
