Merck Just Found a Way to Make Keytruda Even Better

This trial just handed the ADC camp a very loud megaphone.

Analysts noted the result could reshape how doctors treat PD-L1-positive lung cancer. Instead of giving Keytruda by itself and waiting to see if it works, physicians may soon have the option to hit tumors harder from day one. It's the difference between sending in a single striker and deploying the whole front line.

The China Connection

Sac-TMT was invented by Kelun-Biotech, a subsidiary of Sichuan Kelun Pharmaceutical in China. It targets a protein called TROP2 on the surface of cancer cells, then delivers a potent topoisomerase I inhibitor (a type of chemo drug) inside them. The drug has a clever linker design that keeps it stable in the bloodstream but releases its toxic payload once it gets inside tumor cells.

Merck didn't just license this one drug. The company has built a multi-billion-dollar ADC partnership with Kelun that spans at least ten separate assets. The relationship started back in 2021 with a $47 million upfront deal for sac-TMT. By December 2022, Merck had signed a mega-deal covering seven additional preclinical ADCs: $175 million upfront, with milestone payments that could theoretically reach $9.3 billion.

Across all their agreements, headline milestone potential exceeds $10 billion. Even if only a fraction of that gets paid out, it's a massive bet on Chinese ADC innovation.

And Merck isn't alone. Bristol Myers Squibb paid $800 million upfront for a Chinese ADC. GSK, AstraZeneca, and Roche all signed their own deals. By 2025, China represented approximately one-third of global licensing spend.

The era of dismissing Chinese biotech as a "copycat" industry is officially over.

Merck's Keytruda Insurance Policy

Zoom out, and you can see why Merck is playing this game so aggressively. The company faces a $29.5 billion revenue cliff when Keytruda loses patent protection. Biosimilar developers like Celltrion, Samsung Bioepis, and Amgen are already building their knockoff versions. Analysts project Keytruda sales could drop roughly 19% by 2029.

Merck's playbook has three parts. First, launch a subcutaneous version of Keytruda (called Keytruda Qlex, which received FDA approval in September 2025) that's more convenient than the current IV infusion. Second, keep expanding Keytruda into new cancer types. Third, and most importantly, create combination regimens that carry their own patent protection.

That third strategy is where sac-TMT fits perfectly. If Keytruda plus sac-TMT becomes a standard first-line treatment for lung cancer, the combination itself could enjoy years of exclusivity even after the standalone Keytruda patent expires. Biosimilar makers can copy Keytruda, but they can't replicate a patented combination regimen overnight.

It's like owning the recipe for a famous burger. When your patent on the bun expires, you don't just shrug; you create a signature sauce that makes people want the whole meal.

What's Still Missing

Before anyone gets too excited, there's a significant caveat: overall survival data aren't mature yet. In oncology, progression-free survival is important, but it's not the finish line. Regulators, payers, and doctors all want to know if patients actually live longer, not just whether their tumors stay quiet for more months.

The early trend on overall survival is positive, but the numbers need more time to develop. Analysts also want to see how the safety profile holds up, whether the benefit is consistent across different PD-L1 levels, and how global regulators (not just China's NMPA, which is already reviewing the data on a priority basis) respond.

The trial was conducted primarily in China, so questions about global applicability will linger until broader datasets arrive.

The Bottom Line

Merck placed a multi-billion-dollar bet that Chinese ADC technology could supercharge its crown jewel. The first big phase 3 readout suggests that bet is looking very smart. A 65% reduction in progression risk is the kind of number that turns heads at oncology conferences and on trading floors alike.

The real test comes when overall survival data mature. But for now, Merck has something it desperately needed: a credible answer to the question of what comes after Keytruda's patent expires. Turns out, the answer might be a better version of Keytruda itself.