Immuno-Oncology Suffered a Setback in 2018. What’s Next?

PD-1 checkpoint inhibitors are among the most successful and widely used cancer drugs in the world, but they're not perfect medicines. Many people fail to respond to them or relapse after taking them, so studies have begun that team next-generation drugs with them to try to improve results. Unfortunately, optimism for combination approaches was dealt a big blow in 2018 when Incyte's (INCY -0.89%) trial of its IDO inhibitor alongside PD-1s failed.

In this clip from The Motley Fool's Industry Focus: Healthcare, analyst Shannon Jones and Todd Campbell review the performance of PD-1s in 2018 and offer up thoughts on their future.

A full transcript follows the video.

This video was recorded on Dec. 12, 2018.

Shannon Jones: We're going to talk about the leaders of the immuno-oncology front, specifically leaders who are producing a kind of drug called checkpoint inhibitors. These PD-1s continue to dominate, but as you describe it, Todd, there have been cracks in the armor. The next key is combination therapies. How do you get them working together?

Todd Campbell: Right. Immuno-oncology has been the big story of this decade. The launch of PD-1 drugs, Bristol Myers' Opdivo, Merck's Keytruda, they've revolutionized how we attack certain cancers like melanoma and lung cancer. But, now that they're being so widely used, we are starting to see that people do relapse after receiving these therapies, some people don't respond to them, maybe there are more side effects than we initially thought to their use. So, you've got a bunch of different companies who've gone out and said, "How can we improve upon these PD-1 drugs?" So, they're running combination trial therapies, where they're taking their drugs in development and using them alongside Opdivo and Keytruda and some of these others in that same class of drugs.

The hope had been that that would be a slam dunk. You take these drugs, they have mechanism of action X, you match them up with the anti-PD-1s that have mechanism of action Y, and sure enough, it all works perfectly. More people ended up responding for longer periods.

Unfortunately, some of that enthusiasm got tempered earlier this year. That was because Incyte had been doing a combination study matching up its IDO inhibitor with a PD-1 inhibitor, and unfortunately, when the trial results came in, that combo failed to outperform PD-1 use alone. That really threw a big monkey wrench in the concept of, will combination therapies actually improve upon the therapy or not?

Jones: Todd, I would dare say that that Phase III trial failure with Incyte's drug was probably the biggest pipeline failure, just because there was so much hype leading into that Phase III readout. Everyone said, "OK, these checkpoint inhibitors, we know that they work in some patients, and for those that do, you see some impressive results. But if we can start to combine with an IDO inhibitor... " There are other combinations that have been tested and haven't really proven them out. But, there was so much hype leading into this Phase III study. I think this was probably the biggest heartbreak for many of us that love this space. Yeah, a lot of chip in the armor when it comes to PD-1s. Definitely something to keep an eye on. Some of the hype related to these combination therapies has been tempered moving into 2018, and it'll probably continue to be so for 2019, as well.

Campbell: I mean, there are 1,500 clinical trials still ongoing for combination therapies with PD-1s. 1,500. Which is crazy. It's up from 216 in 2016. PD-1s are going to remain the mainstay. If you look at Opdivo and Keytruda, the two top-selling ones, if you combine their sales together, they did almost $4 billion in sales last quarter. If you look at estimates, PD-1s could be $30 billion drugs by 2025. I think PD-1s will remain a mainstay, but for investors heading into 2019, reign in a little bit of your optimism for any trial readouts that are combination-oriented.