Ireland to the fore in delivering powerhouse cancer drug

Can a medicine be too successful? It’s a question put to MSD boss Rob Davis regularly these days.

MSD, known as Merck in North America, is the company behind blockbuster cancer drug Keytruda. Originally approved as a treatment for a form of melanoma in 2014, the medicine is now sanctioned as a treatment for 19 different types of cancer tumour and is subject to a host of clinical trials to see if it can work with others.

Last year, outside the Covid vaccines, Keytruda was the second highest-selling drug worldwide with reported sales of $17.2 billion (€16.7 billion). Company sales overall are growing and MSD recently raised its guidance for the current year. What’s not to like?

It’s picky maybe but there’s an underlying nervousness among analysts that the drug accounts for a third of the company’s total sales. Alongside its blockbuster vaccine Gardasil, the figure moves closer to half. That’s a big contribution from just two medicines – both of which come off patent later this decade.

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MSD has long acknowledged that it is on the hunt for takeover targets that could boost its pipeline and help the company diversify from its reliance on a small number of key drugs. But Davis and his team are determined not to overpay for what will necessarily be risky assets. A mooted approach over the summer to a company called Seagan, which specialises in cancer therapies and would have been the company’s biggest deal in a decade, appears to have foundered on price.

Davis, who took over from high-profile chief executive Kenneth Frazier in July last year, is aware of the pressure to grow MSD’s pipeline.

“Our focus, our urgency on business development has not changed,” he said in an analyst call after announcing strong quarterly results that featured 20 per cent-plus growth in Keytruda and Gardasil in October. “We do see a list of potential places to play. Obviously, we’ve got to bring them through to fruition which we’re working to do.

When we meet days later on a typically grey and wet autumn day in Dublin, it’s the first subject on the agenda but not one that he frets over.

“It’s obviously a focus,” he says. “I wouldn’t say it’s a concern. And the only reason I say that is, if you look through history, we have been able to successfully navigate patent losses before.”

He refers to the diabetes drug, Januvia, the company’s star performer back when he joined the business in 2014. The talk in and outside MSD at that time was about a looming “patent cliff” in 2023.

“Well, we’re going to grow through that period. Back then, no one would have thought you’d have a Keytruda. Now I don’t necessarily believe we’re going to find another Keytruda but I do think we’re going to find multiple other products that are going to be very important.”

Keytruda is why Davis is in Dublin.

He is opening the company’s new biologics plant in Swords – MSD Biotech – the culmination of a €1 billion investment in the State which has created 350 jobs to date with one goal – to increase global supply of the cancer drug.

[ Pharma giant MSD opens new manufacturing facility in Dublin ]

“Because of the speed of which we launched Keytruda, we largely had to externalise manufacturing from the start,” Davis says. “We always wanted to produce it ourselves because we felt next-generation production capabilities would allow us to drive higher volumes.”

The Swords site is special – MSD’s first “fully dedicated Keytruda facility” and the largest financial commitment the US group has made from a manufacturing perspective for in-house production.

But it is not just looking to sort today’s supply issues.

“It is set up to be our next-generation production facility. Why that’s so important is that it’s going to increase fourfold our ability to produce volume. Once that facility is up and fully running, we will be able to service 500,000 patients a year from that site.

“If you look at where we are today in Keytruda, Keytruda launched in 2014, we hit our millionth patient in 2022, we’re going to hit our two millionth patient in 2024. That’s how fast this is continuing to expand.”

Keytruda changed the focus for MSD/Merck which, up to then, had not been considered a major player in the cancer sector; now it is and it is working hard to build on the position Keytruda has given it.

“It’s extremely important obviously if you look at the key growth pillars of the company over the next several years. Frankly, we believe oncology will be a growth pillar for us well into the next decade. Keytruda is a foundational element of that.”

But that’s not the company’s sole focus. It is also looking at the potential in its cardiovascular pipeline with Davis noting recently that “by the 2024-28 time frame we could have as many as eight new approvals driving revenue that could be in excess of $10 billion by the mid-2030s”.

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MSD in common with most other big pharma companies has not joined the exodus from Russia in the wake of the invasion of Ukraine but neither is it business as usual.

Back in March, the company said that, for humanitarian reasons, it would continue supplying essential medicines and vaccines in Russia, though it said it would not invest further in the country. And it committed to channelling any profits from Russian sales to humanitarian causes.

The fact that the US giant had no research or manufacturing facilities in Russia no doubt made life a little less complicated for Davis and his executive team.

More broadly, MSD stands apart from others in its sector in still operating an animal health division. Many peers have spun off such businesses but Davis remains committed, arguing that as well as being a “key growth driver” for MSD – it accounts for close to 10 per cent of sales – “it brings a lot of synergies in both directions”.

“As of now we continue to see it as a strategic asset. So, no plans to look at spinning it,” he says.

However, that doesn’t mean the group is averse to offloading noncore businesses.

Just before Davis took over as chief executive, it spun off Organon, a business featuring MSD’s women’s health, biosimilar and legacy drugs, which had accounted for an ever-declining portion of the group’s sales in the years ahead of the move.

In Ireland the new Keytruda plant reflects this evolution within MSD. Swords was originally the site of MSD’s women’s health business in Ireland. As that wound down, the Irish plant closed and the site was earmarked for sale. Fortuitously for Swords the vacant site was just what the company needed when it decided to invest in in-house production of Keytruda.

Our own belief is that mRNA is an important [vaccine] technology but it’s not the only technology

But Keytruda is not the sole focus of MSD in Ireland. The US group employs around 3,000 people across six sites in the State, having invested close to €4 billion her down the years. That includes a state-of-the-art vaccines operation – the group’s first outside the United States – in Carlow which is now a core part of MSD’s Gardasil vaccine production.

MSD recently announced a further €450 million investment in a second expansion of the site which already employs 530 people.

Gardasil protects from the human papilloma virus (HPV), responsible for cervical cancer, as well as most cancers of the anus, vagina and vulva and a majority of head and neck cancers.

Take-up of the vaccine – which was being given to girls in their early teenage years – dropped dramatically in Ireland following a campaign of vaccine hesitancy among parents before a series of patient advocates led by the late Laura Brennan turned the tide.

Asked about the impact of a burgeoning anti-vax movement worldwide, Davis is crystal clear. “For society it’s important that science wins in this discussion and the reason is that, if you look at the greatest benefit to humanity over the years, it is vaccines. They have prevented more disease than anything else by far.

“With HPV in particular the data is there; this vaccine has been shown – especially now that we have Gardasil 9 – in countries where they have been able to achieve coverage rates approaching 90 per cent, we can eliminate cervical cancer.”

When Covid struck, the assumption was that MSD as one of the big three global vaccine producers alongside GlaxoSmithKline and Sanofi would be to the fore in developing a vaccine for the virus. In the event, none of the three featured among the developers of the mainstream Covid jabs.

MSD pulled the plug on its programme after disappointing early stage results, turning its focus instead to antiviral solution. Its product Lagevrio is now a core part of the group’s business and delivered sales well ahead of projections in its most recent results.

Davis is sanguine about the experience.

“Our own belief is that mRNA is an important [vaccine] technology but it’s not the only technology and our belief is it’s going to take multiple technologies because different viruses operate differently.

Ireland is very focused and is a great environment for pro-innovation from the manufacturing perspective, pro-IP, the technology, the talent here is some of the best talent in the world

“If you look at mRNA technology, it’s already starting to evolve. We just did a deal in collaboration with a company called Orna, which has what you can think of as circular RNA. The question with mRNA is durability; it’s why we keep having to get boosted so much. Part of the reason, we believe is because it’s a singular strand and it doesn’t hold in your system.

“Circular RNA, the belief is, could potentially have better durability bringing the same benefits of mRNA but a next generation technology.”

MSD has also recently exercised an option for an mRNA-based cancer vaccine that would work alongside Keytruda to increase the efficacy of the blockbuster drug in patients suffering from cancer.

The talk of breakthrough vaccine technology and blockbuster cancer therapies inevitably brings us to the issue of access, a bone of contention for drug companies everywhere, including in Ireland.

“We’re about bringing leading-edge science to help patients with medical needs, so anytime that you can’t get a great discovery to a patient, it’s inconsistent with our mission,” Davis says.

“Ireland is very focused and is a great environment for pro-innovation from the manufacturing perspective, pro-IP, the technology, the talent here is some of the best talent in the world, it’s why you see so much [investment] here on the island. You would like to see access for patients in the local markets match that, so it is something we very much are in favour of and will continue to push for.”

It was a subject that came up when Davis met the Taoiseach ahead of our interview, with the MSD chief executive thanking Micheál Martin for the increased funding for new drugs announced last year while pressing for reform of the State’s health technology assessment regime that determines which drugs will be approved for use – and reimbursement – here.

“We see the complexity in the approval process and the HTA process and, if we can get to a process which delivers on the purpose in a way that takes out some of the complexity, you can have speed and still have the value of what the HTA process is trying to do,” he says.

The other side of the access coin is pricing. It’s a constant concern. Health services have limited budget and new drugs – especially modern biologics like Keytruda – are not cheap by any measure.

What we need is continued predictability of what is there. We’re making investments 10 years out, I’m not looking at what the is world today, I’m trying to guess what the world looks like 10 years down the road

Davis suggest that Government needs to be more open to bespoke approaches on pricing. In the case of Keytruda, for instance, this might involve pricing across the various approved indications rather than separate negotiations on the price for each cancer it can be used to treat.

“Ireland has not been as open to those newer ways of thinking about how you contract, so I think it takes creative contracting and an openness and a willingness to partner on that and it takes thoughtfulness around the HTA process to make sure that we can understand that all these technologies are not one size fits all that we do need some flexibility.”

No discussion about inward investment by a US multinational is complete without talking tax. It has been an element of Ireland’s success in bringing all the top pharma firms to these shores. MSD is among the largest taxpayers in the State and will certainly be affected by proposed new global reforms will see our corporation tax rate jump to 15 per cent.

No corporate chief is going to say they’re happy with higher taxes but Davis does not see it as a game changer.

“I don’t see it as a huge negative. It would be different if Ireland was going to go above the 15 per cent rate but, assuming that what they’re doing is just adjusting to the move to the global rate of 15 per cent, it still will be a highly attractive destination because it’s more than the tax, it is the capabilities that Ireland has.

“I would say, different than the rate moving up, what we need is continued predictability of what is there. We’re making investments 10 years out, so I’m not looking at what the is world today, I’m trying to guess what the world looks like 10 years down the road.”

“All said, I think Ireland will continue to be a destination that you will see pharmaceuticals come to.”

CV

Name: Rob Davis

Age: 55

Position: Chairman and chief executive of US pharmaceutical group MSD, the seventh largest medicines group by sales in the world

Family: Married with 2 college-age children

Outside interests: Given how long a global chief executive will spend on the road, unsurprisingly his priority outside work is spending time with family. He also turns to art in his down time - painting and drawing, and is involved in some charity work.

Something you might expect: He is a board member on a global health and humanitarian aid non-government organisation called Project Hope

Something that might surprise: Among his interests is sculpting