Whose expectations did 15 months of progression-free survival exceed?

  • The Chinese phase III Lung06 trial enrolled 455 patients with nonsquamous non-small cell lung cancer, no targetable genetic alterations and PD-L1 expression below 1%. First-line sac-TMT plus pembrolizumab produced median progression-free survival of 15 months, versus 5.7 months for pembrolizumab plus chemotherapy in the control group, with a hazard ratio for disease progression or death of 0.49.
  • The 15 months exceeded Goldman Sachs’ prior expectation of 9–12 months. Median follow-up was only 9.7 months, however, and the survival curves had multiple censoring events at 12–13 months, meaning some patients’ subsequent outcomes were no longer included in the observation, which affects the median estimate. The 12-month progression-free survival rate was 51%, versus 23% in the control group.

Why is the advantage most apparent in the duration of efficacy?

  • The objective response rates were similar in the two groups, at 50% versus 47%; the difference was more pronounced in the depth and durability of response. The proportion of patients whose tumors shrank by more than 50% was 29% in the sac-TMT group versus 17% in the control group; median duration of response was 13.6 months versus 6.8 months.
  • Preliminary overall survival data also favored the sac-TMT combination, with a hazard ratio for death of 0.58 and a 95% confidence interval of 0.38–0.88. Goldman Sachs also noted that patients whose disease progresses after sac-TMT treatment may still benefit from subsequent platinum-based therapy, supporting the treatment-sequencing rationale for moving it into the first line.

Beyond efficacy, what supports replacing chemotherapy?

  • With pembrolizumab used in both combinations, the incidence of grade three or higher treatment-emergent adverse events was 48% in the sac-TMT group and 61% in the chemotherapy group; dose reductions and treatment discontinuations were also less frequent in the sac-TMT group. More durable disease control and better tolerability together support the case for replacing chemotherapy.
  • The incidence of grade three or higher stomatitis in the sac-TMT group was 2%, below the 5% seen in Lung05, and no grade three or higher ocular toxicity was observed. The combination did not increase immune-related adverse events such as interstitial lung disease, and hematologic toxicities such as thrombocytopenia were also more manageable. Considering these results alongside Lung05, Goldman Sachs believes sac-TMT has the potential to become an ADC backbone for future first-line treatment.

How does the Chinese trial connect to global development and valuation?

  • The key question for global development is whether sac-TMT plus immunotherapy can outperform pembrolizumab plus chemotherapy in a head-to-head trial. Goldman Sachs expects patients with PD-L1 expression of 1%–49% to derive at least comparable benefit, and therefore sees Lung06 as an important step in reducing risk for Merck’s global phase III program; this inference depends on the applicability of Chinese data to global populations.
  • Goldman Sachs expects Merck to disclose further details of the trial design, particularly whether the immunotherapy component will be upgraded to a PD-1/VEGF regimen. In China, the company has submitted a supplemental biologics license application based on Lung06 and is discussing a first-line indication unrestricted by PD-L1 expression level with regulators.
  • Goldman Sachs maintains its buy rating and 12-month price target of HK$581.20, using a risk-adjusted discounted cash flow method that assumes a discount rate of 11% and a perpetual growth rate of 3%, with success probabilities adjusted for development stage and clinical data. Its valuation remains constrained by factors including development of new indications, ADC competition and limited experience in commercial manufacturing and sales.