Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

Zimbabwe Health care / Thematic (Sector/Industry)

<div class="content-highlight"><h2>The potential for Merck and Roche looks underappreciated.</h2></div><hr><p>Innovation in immuno-oncology drugs has supported the moats for <a href="https://www.smartkarma.com/entities/merck-co-inc" target="_blank" data-smartkarma-citation="entities:1130:1">Merck &amp; Co Inc. (MRK US)</a>, <a href="https://www.smartkarma.com/entities/roche-holding-ltd" target="_blank" data-smartkarma-citation="entities:976:1">Roche Holding Ltd (ROG VX)</a>, <a href="https://www.smartkarma.com/entities/bristol-myers-squibb-co" target="_blank" data-smartkarma-citation="entities:1133:1">Bristol Myers Squibb Co (BMY US)</a>, and <a href="https://www.smartkarma.com/entities/astrazeneca-plc" target="_blank" data-smartkarma-citation="entities:21824:1">AstraZeneca PLC (AZN LN)</a>, and we expect expansion into the adjuvant/neoadjuvant settings to strengthen these moats. We project the lung adjuvant/neoadjuvant market to expand the potential by close to $10 billion in annual sales (not probability-weighted) by 2027, adding to almost $40 billion projected in the latestage metastatic settings. We estimate an 85% probability of success in this early-treatment setting based on early clinical data and the strength of the drugs in the late-stage setting. We view Merck and Roche as best positioned in the adjuvant setting due to a first-mover advantage with upcoming clinical data in 2020-21. While Bristol and Astra have earlier data in 2020 in the neoadjuvant setting, we are skeptical that these neoadjuvant studies without combination adjuvant chemotherapy will show strong enough efficacy to be competitive. Overall, including both early- and late-stage settings, we believe the potential of immuno-oncology drug sales is most underappreciated for Merck and Roche, and we see both of these companies as undervalued.</p><hr><h2>Key Points</h2><ul>
<li>Merck's and Roche's potential in immuno-oncology looks underappreciated versus consensus expectations, and the addition of the adjuvant lung potential strengthens the firms' positioning.</li>
<li>We estimate the lung neoadjuvant/adjuvant market share for Merck (35%), Roche (35%), AstraZeneca (15%), and Bristol-Myers (15%) based on timing and design of clinical studies, early-stage study results, and data in the metastatic disease setting.</li>
<li>Successful studies in neoadjuvant lung, nonresectable stage III lung (early but not as early as neoadjuvant and adjuvant), and adjuvant melanoma support an 85% probability of adding neoadjuvant and adjuvant lung cancer indications to the leading PD-1/PD-L1 drugs.</li>
<li>Data at ASCO 2019 strengthens the outlook for neoadjuvant/adjuvant treatment with a PD-1/PD-L1 drug, with Bristol's combination of Yervoy and Opdivo showing a stronger major pathological response rate (33%) than the historical trend seen with chemotherapy (27%) in the neoadjuvant setting.</li>
</ul>

The potential for Merck and Roche looks underappreciated.Innovation in immuno-oncology drugs has supported the moats for Merck &amp; Co Inc. (MRK US), Roche Holding Ltd (ROG VX), Bristol Myers Squibb Co (BMY US), and AstraZeneca PLC (AZN LN), and we expect expansion into the adjuvant/neoadjuvant settings to strengthen these moats. We project the lung adjuvant/neoadjuvant market to expand the potential by close to $10 billion in annual sales (not probability-weighted) by 2027, adding to almost $40 billion projected in the latestage metastatic settings. We estimate an 85% probability of success in this early-treatment setting based on early clinical data and the strength of the drugs in the late-stage setting. We view Merck and Roche as best positioned in the adjuvant setting due to a first-mover advantage with upcoming clinical data in 2020-21. While Bristol and Astra have earlier data in 2020 in the neoadjuvant setting, we are skeptical that these neoadjuvant studies without combination adjuvant chemotherapy will show strong enough efficacy to be competitive. Overall, including both early- and late-stage settings, we believe the potential of immuno-oncology drug sales is most underappreciated for Merck and Roche, and we see both of these companies as undervalued.Key Points
Merck's and Roche's potential in immuno-oncology looks underappreciated versus consensus expectations, and the addition of the adjuvant lung potential strengthens the firms' positioning.
We estimate the lung neoadjuvant/adjuvant market share for Merck (35%), Roche (35%), AstraZeneca (15%), and Bristol-Myers (15%) based on timing and design of clinical studies, early-stage study results, and data in the metastatic disease setting.
Successful studies in neoadjuvant lung, nonresectable stage III lung (early but not as early as neoadjuvant and adjuvant), and adjuvant melanoma support an 85% probability of adding neoadjuvant and adjuvant lung cancer indications to the leading PD-1/PD-L1 drugs.
Data at ASCO 2019 strengthens the outlook for neoadjuvant/adjuvant treatment with a PD-1/PD-L1 drug, with Bristol's combination of Yervoy and Opdivo showing a stronger major pathological response rate (33%) than the historical trend seen with chemotherapy (27%) in the neoadjuvant setting.


Immuno-Oncology Drugs in Adjuvant Lung: The Next Frontier in Strengthening Moats