Merck's (MRK) upcoming phase 3 OptiTrop-Lung06 readout could establish SAC-TMT as a chemotherapy replacement in lung cancer, potentially supporting upside to $5 billion peak sales forecast, BofA Securities said in a note Tuesday.

The analysts said OTL-06 will test whether SAC-TMT can replace chemotherapy as the treatment backbone in PD-L1-negative non-small cell lung cancer, or NSCLC. Based on prior data, they expect clinically meaningful improvements in progression-free survival and overall survival, based on modeled assumptions.

"A positive result could support further global development, but competitor readouts could alter development strategy," they added.

Key questions for investors remain whether SAC-TMT can outperform chemotherapy alone, whether combining with Keytruda is sufficient or if alternative combinations such as PD-1 x VEGF are superior, and what level of efficacy is needed for meaningful differentiation, the analysts said.

The analysts said they continue to forecast $5 billion in SAC-TMT sales by 2035, based on clinically de-risked indications including EGFR-mutated lung cancer, PD-L1-high lung cancer, endometrial cancer, and breast cancer.

BofA raised its price target on Merck to $141 from $130 while keeping its buy rating.

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