The Viewpoint: Moderna and Merck – who let the dogs out?

Pharmaceutical giant Merck, and Moderna – the biotechnology company that specialises in mRNA vaccines – recently announced encouraging clinical trial results as part of their joint venture to create a personalised mRNA cancer vaccine.

The results represent a potential breakthrough for patients with high-risk melanoma. They were also welcomed by shareholders in both companies. Moderna shares rose 177% following the announcement, while Merck’s were up 13% – the largest daily move in its share price since 2009.

This represents the first positive Phase 3 result for an individualised mRNA cancer therapy. For many people, mRNA remains synonymous with Covid-19. However, these results are a timely reminder that the technology's potential extends well beyond infectious disease and may prove to be an important tool for treating cancer.

The trial met its primary endpoint, showing statistically significant and clinically meaningful improvements in recurrence-free survival and distant metastasis-free survival versus the use of Keytruda (Merck’s flagship cancer medicine) alone.

The science also fits neatly with Merck's long-standing immunotherapy strategy. As Merck’s global head of R&D put it, if your body’s T-cells are hunting dogs, checkpoint inhibitors such as Keytruda are the key to open the kennel, allowing them to hunt and attack cancer more aggressively. The personalised vaccine then gives those dogs a scent to follow, training the immune system to recognise mutations unique to each patient's tumour and improving its ability to track down residual cancer cells.

For us as investors, the potential significance of this news lies beyond melanoma. One of the key debates surrounding Merck is how the company will navigate the eventual earnings headwind from Keytruda later in the decade when its exclusivity patent expires.

For us as investors, the potential significance of this news lies beyond melanoma.

This vaccine programme is one example of how the company is investing to extend its leadership in oncology. Another is a drug referred to as sac-TMT, a next-generation antibody-drug conjugate (think guided missiles for chemotherapy) where early clinical data suggest the potential to improve treatment across a number of tumour types. While neither programme needs to replace Keytruda on its own, together they highlight the breadth of Merck's oncology pipeline and the multiple avenues management is pursuing to develop the next generation of cancer medicines. The goal is to turn more cancers into chronic, manageable diseases.

This opportunity was one of the reasons we initiated a position in Merck during the first quarter of 2025. As Francois de Bruin highlighted in our Stocks in Motion series, talking about navigating global equities through the Corporate Life Cycle, successful Slowing & Maturing businesses are often those that use the cash flows generated by today's products to invest in tomorrow's growth drivers.

There is still considerable work for Merck to do, with further clinical, regulatory and commercial milestones to clear, but in our view, these latest data provide another encouraging sign that Merck's oncology franchise can extend well beyond a single blockbuster drug. As shareholders, we ultimately want to see Merck achieve two things: improve outcomes for cancer patients and demonstrate that its broader oncology portfolio can offset the anticipated decline in Keytruda earnings later in the decade.

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