Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Fortune favors the (statistically) bold.

Merck on Thursday reported its cancer drug Keytruda had succeeded in a clinical trial for treating newly diagnosed non-small lung cell cancer (NSLC) -- a market with more than a million new patients per year and the holy grail of immuno-oncology (IO) drugs, which use the immune system to fight cancer.  Merck's results were so good the trial was stopped early to switch chemotherapy patients over to Keytruda.

This is great news for patients and for Merck. But trial data from Bristol-Myers Squibb's competing drug Opdivo in treating NSLC is expected later this year, and it may rain on Merck's parade.

This IO race contrasts two competing approaches to drug development: tightly focused trials, which bolster the likelihood of success in a given treatment, versus broader trials that get a drug to as many patients as possible but have a greater risk of failure because they are less picky.

Bristol-Myers has chosen the latter path for Opdivo, focusing trials on a bigger population, including patients whose tumors have less of the protein Opdivo targets. Merck, in contrast, has focused on patients with high levels of the protein, for whom its drug works best. The downside of this safer approach? Keytruda can only be used in a subset of patients, and doctors must send a tumor sample for testing before they can prescribe it. 

Bristol-Myers' approach means its trials have a greater potential to fail because they include less-responsive patients. But it also means Opdivo can be prescribed without tumor testing and can treat bigger populations. That has given Opdivo the edge on Keytruda in treatments already approved by the FDA. Opdivo did $942 million in sales last year to Keytruda's $566 million. Analysts expect the gap between the drugs to grow. 

Given the pitfalls inherent in drug development, it's understandable Merck would choose precision. It means the company is generally likely to produce better trial results sooner. In the case of Keytruda, Merck should get quicker FDA approval in treating newly diagnosed lung-cancer patients -- meaning a two- or three-month head start on Bristol-Myers, according to Bloomberg Intelligence. But Bristol-Myers' broad approach should help its sales catch up, and then some. Merck's shares gained 2.5 percent on Thursday,  while Bristol-Myers was down more than 1 percent. That divergence is likely to be short-lived.

Crossing Pattern
Merck's head start in treating newly diagnosed lung cancer boosted its stock Thursday at the expense of Bristol-Myers Squibb.
Source: Bloomberg

Bristol-Myers' broader approach may put Opdivo at risk of failing early-stage NSLC trials, if too high a percentage of patients don't get much benefit from it. But for patients with high levels of the protein Opdivo targets, it will probably be just as effective as Keytruda. That looks to have been the case so far, anyway.

Doctors seem to think it is pretty much interchangeable with Keytruda. If Bristol-Myers' trial results continue to stay relatively close to Merck's, then Opdivo's competitive advantage should carry over into treating newly diagnosed lung-cancer patients.

Bristol-Myers is also ahead of Merck in combination therapy, using multiple drugs at the same time to treat cancer. Regulators have already approved the combined use of Opdivo and Yervoy, a similar drug also owned by Bristol-Myers, to treat melanoma. The company disclosed promising data on the combination's use in lung cancer earlier in June, which should help it further press its advantage and treat more patients. 

Analysts expect Opdivo to pass $3 billion in sales this year. Consensus estimates have Merck's Keytruda reaching that level only in 2018, from an anticipated $1.3 billion this year.

A Proper Thrashing
Analysts expect that Bristol-Myers Squibb's immuno-oncology drug will continue to beat Merck's in the market.
Source: Bloomberg

Merck has already let one head start slip away: Keytruda was first approved in September 2014, three months ahead of Opdivo. But Opdivo surpassed it almost immediately as it racked up new approvals. By March 2015, Opdivo prescriptions were outpacing Keytruda, according to data from Bloomberg Intelligence, at more than 50,000 to Keytruda's 22,000.

Merck's prudence earned won the day on Thursday. But the game's not over yet.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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