Pfizer (NYSE:PFE) had big expectations for Inlyta when it launched in 2012. Over the past few years, though, it's fallen out of favor as new, more effective treatments set up camp in its neighborhood.

Despite being unremarkable as a monotherapy, it turns out Inlyta added to Keytruda from Merck & Co. (NYSE:MRK) gives new kidney cancer patients a much better chance at long-term survival than standard care. Here's what's behind the most unlikely Cinderella story the biopharma space has seen in a long time.

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Minding the gaps

Earlier this year, Merck's head of research and development admitted there were big gaps in the company's understanding of Keytruda. We know this PD-1 checkpoint inhibitor stops tumors from shutting down the immune system when it attacks, but that isn't much help if an attack doesn't begin in the first place. Unfortunately, nobody can pin down why a majority of immune systems aren't willing to play ball.

Merck and dozens of partners have started hundreds of combination studies with different drugs in hopes they'll boost patients' chances of responding to Keytruda. So far, though, the best combination for lung cancer patients has been old-fashioned chemotherapy plus Keytruda.

An unlikely Cinderella story

Pfizer's Inlyta is a VEGF inhibitor that earned approval to treat kidney cancer patients who relapse after their first treatment in 2012, and so far it has not lived up to anyone's expectations. Annual Inlyta sales peaked at $430 million in 2015 and sank to an annualized run rate of just $288 million during the last three months of 2018.

Unremarkable results from pivotal trials with newly diagnosed patients and patients still responding to their first round of standard care were expected to limit Inlyta to the second-line indication. That's a problem, because Opdivo from Bristol-Myers Squibb (NYSE:BMY) and Cabometyx from Exelixis (NASDAQ:EXEL) are both approved to treat Inlyta's only addressable patient population, and they appear to work better.

When Merck and Pfizer reported Inlyta-plus-Keytruda results from the Keynote-426 trial last October, the combination reduced the risk of disease progression by just 31% compared to Sutent. Cabometyx acts on VEGF and a bunch of other targets, and it earned approval to treat first-line kidney cancer patients after reducing their risk of disease progression by 52% compared to Sutent.

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Sorry, Exelixis

Just when it looked like Pfizer's VEGF inhibitor was washed up, another look at overall survival results from Keynote-426 changed everything. Adding Inlyta to Keytruda reduced patients' risk of death by 47% compared to Sutent.

Cabometyx from Exelixis outperformed Inlyta plus Keytruda in terms of progression-free survival, but overall survival is still the gold standard that determines which treatments reach the most patients. Cabometyx couldn't extend overall survival any better than Sutent, which means it could have a hard time competing with an Inlyta-plus-Keytruda combination that's on its way.

What's next for Inlyta?

There's a chance that Pfizer could announce a first-line approval for the Inlyta-plus-Keytruda combination before the end of 2019. The FDA recently granted the combo's application to treat first-line kidney cancer patients a priority review that should wrap up this summer.

Inlyta isn't the only kinase inhibitor that tries to starve tumors by inhibiting VEGF, but it's a lot more specific than other members of its class. It looks like specificity makes a difference, because two multi-kinase inhibitors, Sutent and Votrient, proved too toxic when combined with Bristol-Myers Squibb's PD-1 inhibitor, Opdivo. If this is the case, Inlyta could sew up the newly diagnosed kidney cancer niche and start adding more than $2 billion annually to Pfizer's top line in the process.

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What's next for Pfizer?

Pfizer markets a PD-1 inhibitor in partnership with Merck KGaA called Bavencio. While Pfizer would probably like Bavencio plus Inlyta to move forward, results from the Javelin 101 study with new kidney cancer patients suggest this combination isn't going anywhere. Bavencio plus Inlyta significantly reduced the risk of disease progression compared to Sutent, but hasn't yet hit the mark for overall survival, although the trial is ongoing.

Inlyta isn't the only drug about to drive growth for Pfizer in the years ahead. In 2018, sales of Pfizer's breast cancer treatment, Ibrance, soared 30% to $4.1 billion, and there are plenty of new blockbusters coming through the pipeline. Inlyta plus Keytruda for kidney cancer was just one of 25 applications Pfizer plans on sending to the FDA by 2022, and a majority of them could add more than $1 billion in annual sales. With an oncology sales explosion ahead, Pfizer looks like the best pharma stock you can buy right now.