The American Society of Clinical Oncology meets every spring. It's attended by some 30,000 people and hosts 4,000 presentations.
Investors like us love ASCO because of the so-called "ASCO Effect"—a hefty surge in cancer-focused biotech stocks that always accompanies the start of this meeting.
And we usually recommend an oncology stock or two ourselves.
This year's ASCO turned us on to an important new trend—one that's shaping up as the next big profit opportunity in biotech.
Scientists and other researchers refer to this emerging opportunity as "immuno-oncology"—a new category of drugs that draft the body's own immune cells to target a broad array of cancers. The market potential is so huge—as much as $35 billion—that it may be the biotech sector's version of a California Gold Rush.
It's so big, in fact, that stock-watchers are talking about the trend as "Immunopalooza."
"Rarely a week goes by without a few new immuno-oncology research deals to report," the FierceBiotech trade journal reported yesterday. "The reason is simple: Investigators believe they have figured out a way to dismantle the mechanism used by cancer cells to stay hidden from the immune system. It's a broadly applicable approach, which is likely to work in combination with a number of therapies. And after Citigroup last year put a $35 billion figure on the market potential for these drugs, the oft-cited mega-blockbuster number helps explain why [immuno-oncology] companies are so interested in being among the first to the market."
Here's how these new drugs will work. In the human immune system, there are "attack cells" that respond whenever the body comes under attack from a foreign intruder—like a tumor cell. A protein called PD-1 can serve as a switch to "turn off" that attack-cell action. Some cancers are somehow able to get to that switch and flick it off, Bloomberg writers Naomi Kresge and Robert Langreth reported.
These new drugs we're talking about today can "bind" to that PD-1 protein to protect it from manipulation. Or they can connect with a "related" protein PD-L1 that some tumor cells deploy to trigger the PD-1 switch.
At an ASCO meeting two years ago, Bristol-Myers Squibb Co. (NYSE: BMY) stunned onlookers by reporting that its drug nivolumab shrank tumors in 28% of melanoma patients, 27% of people with kidney cancer, and 18% of those with advanced lung cancer.
The implication: Immune therapies could find uses beyond the initial target - which had been melanoma.
University of California (Los Angeles) melanoma expert Antoni Ribas, who has tested the Merck & Co. Inc. (NYSE: MRK) drug MK-3475, said the heart-pounding revelation jump-started research.
Companies now know they must move very quickly: If they don't, "somebody else will do it and then it will be too late," he told the Bloombergreporters.
As London-based Bloomberg analyst Asthika Goonewardene told reporters: "I have never seen this much enthusiasm collectively for a class of drugs before. This is essentially what we call a 'Land Grab.' There's opportunity, and everybody is going out to find what that opportunity is."
The Next "Effect"
The "ASCO Effect" typically buoys small-cap biotech stocks.
But at this year's ASCO meeting, look for a handful of Big Pharma players to stake a claim in that $35 billion "Immunopalooza Land Grab."
We're going to take a look at what each of these players is up to. But we're first going to take a peek at the drug that has these companies feeling giddy about immuno-oncology.
Industry insiders are calling it the "Sovaldi Saga."
And insurers seem ready to label it the "Sovaldi Scourge."
Vilifying an Innovator
Experts estimate that 3 million Americans are infected with hepatitis C. But it's very much an asymptomatic disease—which is why most folks don't know they have it and only 20% seek treatment, said a recent report in Forbes.
That doesn't mean hep C isn't dangerous. Since the virus lives in a person's liver, it can actually cause liver failure.
Treatments were marginally effective - with cure rates of 40% to 80% - and had many side effects from a treatment regimen that could stretch from 24 weeks to as long as 48 weeks.
But a breakthrough drug from Gilead Sciences Inc. (Nasdaq: GILD), Sovaldi, promised to boost cure rates all the way to 90%—with only 12 weeks of treatment required.
There was a catch, of course—and this catch is why bioscience firms are so excited.
Gilead, you see, was charging $84,000 per patient for the treatment—or about $1,000 per pill. That's still 20% less than older treatments, which were more expensive because they took longer to work.
Other companies suddenly viewed immuno-oncology as the next potential cash cow.
But the "exorbitant" amount Gilead was charging for Sovaldi ignited a massive backlash from insurance companies and other healthcare groups. This conflagration of protests has yet to burn itself out, meaning there's no guarantee that this realm will be as lucrative as hoped.
In the meantime, however, these Big Pharma players are investing as if they believe it will be.
In a comprehensive look at the pipeline for immunotherapies, Bloomberg said companies have committed an estimated $1.3 billion to fund 78 currently known trials, which will enroll 19,000 cancer patients.
Bristol-Myers is leading the charge. The New York-based Big Pharma firm is devoting an estimated $649 million to its immuno-oncology work, which is primarily devoted to getting monoclonal antibody drug nivolumab through clinical trials and through regulatory approval, Bloomberg said.
FierceBiotech says Merck is "furiously at work on MK-3475 (a drug for metastatic melanoma) as many of the rest of its projects struggle. . .but the pharma giant is actually a distant second at this stage of the race, at least in terms of spending, with an estimated commitment of $327 million."
With planned program outlays of $189 million and $145 million respectively, Roche and AstraZeneca round out the "Immunopalooza Big Four."
"It was AstraZeneca's budding prospects with its immuno-oncology program for the PD-L1 therapy MEDI4736 that helped it avoid the clutches of Pfizer Inc. (NYSE: PFE), first by demonstrating that its pipeline had real potential and then by figuring in on [AstraZeneca CEO] Pascal Soriot's claim that a Pfizer takeover would disrupt their R&D efforts, potentially leaving patients to die."
MEDI4736, a monoclonal antibody, has been referred to as a "new great white hope" in the fight against cancer. The drug is viewed as so important to AstraZeneca's future that Soriot will fly to the United States from Great Britain and will attend the ASCO meeting to supervise the full presentation of the company's drug research.
The drug works by stripping the "stealth cloak" away from cancer cells—enabling the patient's own immune system to detect and destroy the tumors. It could replace chemotherapy in some instances, the company says.
The drug has been "fast-tracked" to phase 3 hospital trials—meaning the tests started more than six months ahead of schedule. AstraZeneca wants the drug to hit the market before rival offerings, The Guardian newspaper reported.
Then there's Roche, which experts at FierceBiotech say has yet to grab attention for its PD-L1 program for MPDL3280A.
"But new data from a small study on bladder cancer looked promising and its Genentech unit is looking to make a splash in Chicago," the trade letter reported before the conference.
And it certainly did. We'll keep following the "Immunopalooza" trend; it's sure to be good to us.