Nail-biting from the ESMO Box Seat

For investors in Merck and Bristol Myers, it’s a nail-biting weekend as Copenhagen hosts the 2016 European Society of Medical Oncology (ESMO) Congress. Here’s what’s a stake:

Last December in our inaugural edition, In Sickness and Wealth featured two big pharma titans wrestling for the number one position in the immuno-oncology race. Bristol Myers had the lead with two major drugs by the names of Yervoy and Opdivo. Merck’s horse in the race went by the name of Keytruda. All three drugs are checkpoint inhibitors (more specifically PD-1 and PD-L1 inhibitors).

Some cancer cells have the ability to switch off our immune system. Thus, our immune system can’t mount an attack on the invading cancer cells. PD-1/PD-L1 inhibitors block cancer’s ability to turn our immune systems off. With certain cancers, this allows our T-cells (part of the immune system’s arsenal) to search and destroy cancerous growths.

Initially, these drugs were approved for late stage melanoma. But as doctors, patients and investors were hoping for, the drugs were approved for other cancers too, thus opening up the chance for greater market share in the promising immuno-oncology area. Those suffering from blood cancers and kidney cancers also had greater hope. But Opdivo, Yervoy and Keytruda’s real potential rested with FDA approval for use in lung cancer. The incidence of lung cancer is far greater than most other cancers. Analysts estimate the market for a successful immuno-oncology drug in lung cancer in the five to seven billion dollar range. Both Keytruda and Opdivo won approval for use in non-small cell lung cancer, but only after other methods failed — a so called “second line” defense as opposed to a first line. But in August came the results of a late-stage clinical trial for Keytruda and Opdivo as a first line treatment. Merck’s Keytruda did very well, sending the stock dramatically higher on the day of the announcement. Opdivo failed to hit its endpoint as a first line treatment for this type of lung cancer; the market’s reaction was swift and violent as Bristol lost $22 billion in market capitalization.

But if you dig deeper into the trial data, the Keytruda patients were mostly from a pool that had high expression of PD-1 (i.e. those patients’ tumors had overexpressed PD-1 receptors on the tumors… meaning that a PD1 inhibitor is very likely to have some positive effect). Twenty-five to thirty-five percent of the Merck patients had at least 50% expression of PD-1. The Bristol study had patients with far lower percentages of PD-1 expression. Bristol was trying to go after a broader range of lung cancer tumor types.

Can Bristol Myers snatch victory from the jaws of defeat?

The answer may come this weekend at the ESMO Congress 2016 in Copenhagen, Denmark. The European Society of Medical Oncology (a European equivalent to ASCO) is host to the oncology world from October 7th through 11th. And Merck and Bristol Myers will reportedly release the results of additional studies/data on Keytruda and Opdivo in lung cancer. Should Opdivo come up with more convincing data, they will likely regain some momentum and possibly retake the lead in this closely contested race. Keytruda is already expected to gain FDA approvals soon in non-small cell lung cancer. Could Bristol follow soon thereafter? Bristol shareholders sure hope so. And Merck shareholders too, hope that the studies continue to reflect higher progression-free and survival rates.

We will be watching the markets closely, early in the week, as our portfolio owns Merck and is watching Bristol Myers carefully for a potential entry point.

Happy Columbus Day !!

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