A report from Boston's Decision Resource Group last month suggested that the immuno-oncology drugs garnering excitement from patients, doctors, and investors could balloon into a $9 billion market by 2022. That would represent a 23.8% CAGR from the $1.1 billion recognized in 2012, as an estimated four new checkpoint inhibitors and five new cancer vaccines pass regulatory hurdles and hit the market. As exciting as that sounds, it may still be difficult for investors to find returns in cancer vaccine investments as the immuno-oncology market becomes lopsided in favor of checkpoint inhibitors. Here's why.
Staggering checkpoint inhibitor growth
Checkpoint inhibitors help to boost the immune system's ability to fight cancer more directly than traditional chemotherapy. But without the precision accuracy of targeted cancer vaccines, checkpoint inhibitors still show promise in a wide range of cancer types. That's been the fuel behind intense R&D spending at Bristol-Myer's Squibb, Merck, and Roche, and behind AstraZeneca's (NASDAQ:AZN) indignant rejection of a take-over by Pfizer.
Bristol's Yervoy, the first FDA approved checkpoint inhibitor, brought in $706 million in 2012, giving it an early leading position in the market. Now the Who's-Who of Big Pharma players is facing an intense round of competition over another class of checkpoint inhibitors, the PD1/PDL-1 inhibitors. Bristol again appeared to be the early winner with success in melanoma and lung cancer, but Merck has since fought back with rolling submission of regulatory documents for its pembrolizumab. AstraZeneca must keep pace now, after making the bold claim that its immuno-oncology pipeline could drive future value that Pfizer hadn't appreciated in its buyout bid.
The big variable for checkpoint inhibitors will be partnerships. The drug that appears to have the widest range of uses with the largest number of dual treatment options could win the lion's share of the market. Decision Resource Group's report estimates that this widespread use could account for 85% of the total $9 billion market.
Less impressive vaccine growth
For those keeping score, 85% market share for checkpoint inhibitors leaves only 15% market share for cancer vaccines. The report estimates that cancer vaccine sales will grow at 13% annually, but achieve only $1.2 billion in sales by 2022. For argument's sake, spread that evenly over the five anticipated approvals and each approved vaccine will bring in only $240 million in sales in 2022.
Lowered expectations centered around a string of clinical failures and the enduring legacy of a vaccine marketing flop. Because cancer vaccines are targeted to specific molecular signatures on the surface of tumor cells, their addressable markets are quite limited, particularly in comparison to the broader market for checkpoint inhibitors. To account for lower sales volume and higher development risk, cancer vaccines are likely to be priced extremely high and face payer resistance.
Case in point: Dendreon's (NASDAQ: DNDN) prostate cancer vaccine Provenge. Approved in 2010, excitement over Provenge sent shares to an all-time high of around $54, but its hefty price tag prevented it from gaining traction by the time competition from Johnson & Johnson appeared. Now Dendreon trades around $2 and is struggling just to pay its debt.
Not all gloomy
Dendreon should serve as a warning that regulatory approval isn't the only determinant of success for cancer vaccines, and Decision Research Group's report suggests that the landscape may not change much in the next ten years. But ten years is a long time, and already we are seeing clinical data that could undermine those estimates.
Take Novartis' (NYSE:NVS) new breakthrough leukemia therapy, CTL019, for example. While not quite a cancer vaccine in the vein of Provenge, CTL019 genetically modifies a patient's T-cells to target the CD19 marker on the cells that cause acute lymphoblastic leukemia. That technique induced complete remission in 19 of the 22 patients in early stage trials.
While still lacking measures of long term durability, these results suggest that the field is continually evolving. Analyst estimates may indicate slow growth for cancer vaccines, but exciting opportunities may emerge to prove them wrong.