Large pharmaceutical companies are pouring billions worth of funding into a new generation of anti-cancer drugs that use a newly discovered biological mechanism to trigger a strong immune response against tumors. This mechanism is centered around the interaction of two proteins known as PD-1 and PD-L1.
Given the data that have been released so far, it appears that the discovery of the PD-1/PD-L1 mechanism could be a huge leap forward in the immunotherapy space. Realizing the commercial opportunity of this mechanism, big pharma companies are now rushing to get an PD-1/PD-L1 drug onto the market.
The current leader in this race appears to be Merck (NYSE:MRK), the parent of anti-PD-1 drug pembrolizumab (also known as MK-3475). MK-3475 is currently in 21 clinical trails and received the FDA's "Breakthrough Therapy" designation for advanced melanoma in April 2013. This designation may allow Merck to accelerate the FDA approval process for MK-3475, which means that Merck is probably going to launch the first anti-PD-1 drug.
The drug also demonstrated early signs of tumor-shrinkage and survival-based efficacy in a variety of other cancer types (renal, brain, etc.), but many investors are now fixated on its unexpectedly potent activity against non-small cell lung cancer (NSCLC).
The interim data readout in October 2013 showed that MK-3475 had median OS of 51 weeks for patients with refractory NSCLC. Although the NSCLC patient population in this trial is quite small (meaning that the results are highly speculative) it is very encouraging to see such a noticeable survival benefit in a very sick patient population.
Other PD-1 drugs to watch include nivolumab (BMS-936558) and RG7446 (MPDL3280A), which are being developed by Bristol-Myers (NYSE:BMY) and Roche (NASDAQOTH:RHHBY) respectively. While these drugs have been overshadowed by the early momentum of MK-3475 (especially with its breakthrough therapy designation), these competitors still have the potential to surpass MK-3475 in one more more cancer indications later on. Bristol and Roche are running their own trials in non-small cell lung cancer, melanoma, renal cell carcinoma, and other important cancer types that will be hotly contested between PD-1/PD-L1 drugs later on.
How does Anti-PD-1/PD-L1 work?
Unlike traditional cancer treatments like chemotherapy, which look to destroy cancer cells directly, immunotherapies attempt to strengthen the immune system's ability to attack tumors. To target cancer, the immune system uses T-cells (and other cells closely related to T-cells) on literal "search and destroy" missions against mutated cells.
PD-1 acts as an "emergency brake" that is used by the body to "turn off" aggressive T-cells (to prevent autoimmune conditions). It turns out that cancer cells have been exploiting this emergency brake to avoid destruction by T-cells. Another protein, known as PD-L1, is the actual protein that triggers this emergency brake. By putting PD-L1 on its surface, a cancer cell can shut down a T-cell that is trying to destroy it.
Merck's MK-3475 and Bristol-Myers' nivolumab prevent use of the emergency brake by physically blocking PD-1 with an antibody. Roche's MPDL3280A targets PD-L1 instead, blocking the PD-1 and PD-L1 interaction from the opposite end.
Will immunotherapy succeed commercially?
Based on the stellar performance of a skin cancer drug known as Yervoy (ipilimumab), marketed by Bristol-Myers, the prognosis looks good for immunotherapy. Yervoy generated over $960 million in sales for Bristol-Myers Squibb in 2013 (just from metastatic melanoma), and continues to grow at a double-digit pace. And with peak sales that could clear $2 billion, it's a drug to watch.
I think immunotherapies will also be very cost-effective from a marketing perspective due to their high price, and the aversion that many oncologists now have to chemotherapy. Although Yervoy is somewhat toxic and very expensive (at $120,000 per patient), I think the patient need in metastatic melanoma will keep pushing uptake.
Considering that PD-1 and PD-L1 inhibitors are expected to outperform Yervoy, it's not hard to understand big pharma's eagerness to get these drugs onto the market.
Brian Wilson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.