Opportunities in Lung Cancer Therapies

Non-small-cell lung cancer is responsible for 80% of all lung cancer cases. Treatment for this type of cancer has a market value of more than $4 billion, which is expected to rise to near $7 billion by 2019. There are a number of treatments available, including Avastin from Genentech/Roche, Alimta from Eli Lilly, Tarceva from Genentech/Astellas Pharma, and Iressa from AstraZeneca (NYSE: AZN  ) .

Avastin is used to treat a number of cancers and is the big fish in the pool. It generated global sales of $6.1 billion in 2012 and $3.4 billion for the first half of 2013, a 12% rise. Avastin is the highest sales-generating product for Roche and benefits both from growth in existing markets and from being a new therapy to treat different cancers.

Alimta is often used in combination with other treatments but is primarily a lung cancer drug. Its global sales of $2.6 billion accounted for 11% of Eli Lilly's 2012 revenues, which was a 5% gain on 2011 and a 13% gain for the U.S. market.

The other common treatments enjoy smaller shares of the market. Tarceva, a lung and pancreatic cancer treatment, had global sales of $1.4 billion in 2012. Iressa, on the other hand, generated a more modest $611 million in revenues. 

It is within this market that new drugs are hoping to find an advantage. The primary driver for new therapies will always be better efficacy with fewer side effects, but genetic factors are increasingly become deciding factors in a therapy's success.

The phase 3 study for selumetinib, developed in partnership between AstraZeneca (NYSE: AZN  ) and Array Biopharma (NASDAQ: ARRY  ) , is finally under way. Selumetinib's advantage is that it is compatibility with other, potentially more effective, cancer treatments. Selumetinib is undergoing studies for patients with the KRAS mutation, which AstraZeneca estimate accounts for 25% of the non-small cell lung cancer patients. Patients with the KRAS mutation do not respond well to existing treatments, so Selumetinib has the potential of been first through the door as a treatment option.

Initial results have been positive, but AstraZeneca is also studying benefits of the drug for use in non-KRAS mutation patients. While there is no timeline for the release of a commercial drug, AstraZeneca's commitment to the treatment has been made clear with the 45 studies it has performed using selumetinib. 

Mutation in another gene, EGFR (which is mutually exclusive to the KRAS mutation), can also lead to certain cancers including lung cancer. Primary drug therapies, Tarceva and Iressa, were developed to target lung cancers of patients with the EGFR mutation. Unfortunately, associated mutations can interfere with these treatments in EGFR-positive patients.

It's in this space that we find Clovis Pharmaceuticals (NASDAQ: CLVS  ) , a $1.4 billion market cap company that is effectively a lung and ovarian cancer biopharmaceutical company. Its research program is built around CO-1686, a treatment that is not only geared toward patients with the EGFR mutation but also the resistance mutation T790M. It's this mutation that impedes the action of Tarceva and Iressa in EGFR-positive patients.

Approximately 50% of lung cancer patients with the T790M mutation do not see a benefit from Tarceva and Iressa therapies. There are currently no approved treatments for patients with the T790M mutation, meaning that there is a large commercial market opportunity for companies capable of isolating a successful treatment.

Clovis has reported a respectable initial response to its CO-1686 treatment, albeit in a very small sample; eight of nine evaluable patients experiencing tumor shrinkage greater than 10%. The company is also looking at an improved formulation which would require lower dosages of the drug, reducing the potential for side effects that are common with other EGFR therapies. This new formulation has not resulted in any side effects to date, although dosage studies remain under way. The company is looking to early 2014 to begin a Phase II study using the new formulation. The goal is to begin an initial registration study for the first half of 2014. 

Ariad Pharmaceuticals (NASDAQ: ARIA  ) had worked the T790M angle with a phase 1 study in 2011 and a phase 2 study earlier this year. AP26113 is a dual-action treatment, targeting lung cancers caused by two mutations; one of these was EGFR. The company noted in its most recent conference call that it was continuing with its AP26113 studies. The company anticipates that it will have sufficient clinical data to fully evaluate the potential for its use in EGFR/T790M-positive lung cancer patients by the end of this year.

If the company can deliver positive findings for AP26113, it should certainly boost what is now only a $470 million market cap company.

Conclusion
The treatment of lung cancer is a complex dance of environmental and genetic factors, but the financial reward for those companies able to offer effective treatment is substantial.

Despite a crowded market of therapies, none are able to offer an all-encompassing solution. This creates opportunities for companies to build a niche with treatments that could comfortably generate $1 billion to $2 billion in annual sales. Some of the smaller names in the sector are worth watching, but even for a larger company it looks like there's a strong revenue stream to tap right now.

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Editor's Note: A previous version of this article was accidentally published before being edited. The Fool regrets the error.


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  • Report this Comment On November 23, 2013, at 6:22 PM, Robertgoulet1 wrote:

    Astra Zeneca states selumetinib has billion dollar potential....disclaimer I am invested in ARRY

  • Report this Comment On November 24, 2013, at 9:21 AM, betsbird wrote:

    "The treatment of lung cancer is a complex dance of environmental and genetic factors, but the financial reward for those companies able to offer effective treatment is substantial. After all, as long as there are tobacco products to smoke there will always be lung cancers to treat."

    Most of the time I just ignore silly statements like this...I mean...."They just don't know any better so just don't pay attention because they just do not know how hurtful their words are...” That is my philosophy in life now. Most people do not take the time to educate themselves or are ill informed that's all, but you??? Come on! I am a lung cancer survivor for almost 4 years now and I would not wish this dreadful disease and all the hoop-la that goes with it on ANYONE!

    One of the things that we (the survivors) hate is having someone point out that lung cancer is caused by smoking without bringing up all of the other factors that can cause lung cancer!!! The environment, radon gas, second hand smoke just to name a few. Almost 80% of the people who get lung cancer do not smoke or quit decades ago!!!

    November is Lung Cancer Awareness month and we want to educate all people about lung cancer so that we can bring awareness to everyone about the simple fact ANYONE CAN GET LUNG CANCER!! Not just smokers!!! If we can educate the unawares about this simple little fact maybe, just maybe they might allocate more money to the research for a cure and statements like the one that you made is not very helpful to our cause for the simple reason that in perpetuates the stigma that goes with lung cancer “Smoking causes lung cancer so ergo, if you get lung cancer you deserve it"!!

    I did not deserve lung cancer nor did I deserve my skin cancer. Did I cause it myself? Most likely I did. I worked in bars and night clubs most of my life, I put harsh chemicals on my skin, I breathed harsh cleaning chemicals & I ate foods made with preservatives and carcinogenic known to cause cancer but do I deserve this cancer? NO! So why not make the statement that as long as people are uninformed on all the causes of lung cancer...there will always be lung cancer!! Not only are you perpetuating the myth that you can only get lung cancer by smoking you are telling the world that lung cancer is profitable in the same sentence!

    You prob. will not post this but at least I was able to get my vent in and maybe, just maybe you will think twice before making a statement like that again. Hopefully it will cause you to take the time to become better informed about lung cancer and write an article to educate and inform the unawares about the causes and effects of lung cancer instead of telling the world about all the profits to be made from it!

  • Report this Comment On November 25, 2013, at 12:15 PM, fallond wrote:

    @betsbird No offense was meant by this article. Neither would I wish any serious illness - cancer, or otherwise - on anyone. Nor does anyone deserve cancer.

    According to the CDC, more people die of Lung Cancer than any other cancer in the U.S: 158,000 died of the disease, against a new diagnostic rate of 201,000 in 2010.

    The CDC also states that 90% of lung cancers are caused by smoking. But as you highlight, this would mean in 2010 there were over 20,000 new cases of lung cancer where smoking was not the cause of the disease; an incidence rate not far from the 60,000 for melanomas.

    Given the mortality rate for the disease, you were one of the few to successfully respond to treatment. Successful treatment of Lung Cancer by existing therapies is heavily tied to genetic factors. This is probably true for other cancer treatments, but particularly for defined-treatments like Tarceva and Iressa which targets a particular pathway of the disease.

    The unfortunate reality is that research into effective treatments takes time and money. This money either comes from the government (aka taxpayers), or private business (biotech/pharmaceuticals).

    Government funding of science continues to decline. The sequester further compounded the difficulties researchers have in managing reduced funds. This is not an environment conducive to finding new disease cures. And it's unlikely to improve.

    This leaves the private sector, who need to ensure they bring more money in from the drugs they develop than they spend. From a company's standpoint, new drugs have a finite life before they become generic, and therefore cheaper. However, it's in the interest of these companies to develop treatments which have the broadest range of efficacy. Not just against one cancer, but other cancers too.

    There may be associated costs with development, be it unwanted patient side-effects, environmental toxicity, etc., and these need to be weighed against the benefits. This is where regulation is important, particularly a robust FDA, to ensure what goes to market will bring long lasting benefits.

    Hopefully, some of these new treatments in the pipeline will come to market soon enough for those who have so far failed to respond to existing therapies, can benefit.

    Declan

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