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 (AZN 0.57%).

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 (AZN 0.57%) and Array Biopharma (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 (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.

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.

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