Investors lose billions as immunotherapies fall short of high expectations
When Cary Parton pulled a back muscle playing golf four years ago, he hardly gave it a second thought. But after several fruitless trips to a chiropractor, a series of X-rays led to a grim discovery: Mr Parton was suffering from advanced lung cancer that had spread to his bones and organs. The tumour in his liver was the size of a fist.
He was given two rounds of chemotherapy, neither of them successful, at which point doctors told his wife he might be dead in six months. He was 59.
“The big goal was to see my 60th birthday,” he recalls.
Then, in June 2013, Mr Parton enrolled in a trial at the nearby University of California, Los Angeles, where he received a new type of drug made by Merck & Co, the US pharmaceuticals group. The medicine, Keytruda, was a checkpoint inhibitor — a type of immunotherapy that removes brakes in the immune system to unleash the body as a weapon against cancer.
The drug saved his life. Before starting the treatment, Mr Parton had been virtually crippled by bone tumours that were pressing on his spine, causing multiple fractures. But by the time he celebrated his 60th in October 2013, he “felt pretty good”. The following January he returned to work. Today his weekly exercise regime consists of three trips to the gym, several three-mile walks and a round of golf on Sunday. His tumours have shrunk by 95 per cent.
Trial is no tonic for BMS

1. Aug 5 BMS reveals trial of Opdivo had failed against chemotherapy in head to head trial
2. Oct 30 The company publishes full results of clinical trial
3. Jan 20 BMS says it not seek quick approval of its immunotherapy combination
Since the first checkpoint inhibitors went on sale in late 2014, they have produced some remarkable results, helping even the sickest patients survive for months or years longer than might have been expected. Mr Parton is one of the lucky ones — despite all the enthusiasm, the drugs only benefit 20-30 per cent of cancer sufferers. “Immunotherapy is not a silver bullet,” says Bob Hugin, chairman of Celgene, the biotech company. “Checkpoint inhibitors only work in a minority of patients.”
Early hopes that pharmaceutical companies would be able quickly to raise response rates by combining the drugs with other medicines have not yet been borne out by large scientific studies. Now the leading makers of immunotherapies are racing to find a way of extending their benefits to a larger group of patients, while justifying the lofty valuations bestowed on them.
Pathways to progress
Recent events at Bristol-Myers Squibb, which helped pioneer checkpoint inhibitors, suggest progress will not be smooth. In August, the company dropped a bombshell when it revealed its checkpoint inhibitor, Opdivo, had flunked a large clinical trial, which concluded the medicine was less effective for untreated or “first-line” lung cancer patients than chemotherapy.
Patients taking Opdivo survived on average for four months before their tumours started to grow or spread, whereas those on chemotherapy — the poisonous cocktail of drugs that has been a mainstay of cancer treatment for decades — went for six months before their disease progressed. After sailing through every previous trial, most investors had expected Opdivo to succeed in the study. Mark Schoenebaum, a veteran pharmaceuticals analyst at Evercore ISI, the investment bank, described the failure as “the biggest clinical surprise of my career”.

Bristol-Myers insisted it could recover by developing a combination medicine that paired Opdivo with Yervoy, an older, complementary therapy that releases a different brake in the immune system. The company told investors it might be able to seek rapid regulatory approval to use the combination in first-line lung cancer patients at some point this year, having been encouraged by the results of earlier scientific studies.
But last month the company upset investors again when it said it had “decided not to pursue an accelerated regulatory pathway” for the combination therapy following a review of clinical trial data. Its reluctance to share further details with analysts has left investors speculating as to what prompted such a swift change of heart.
In a statement this week to the Financial Times, Giovanni Caforio, Bristol-Myers’ chief executive, said: “While acknowledging the competitive landscape continues to evolve, we believe the combination of Opdivo and Yervoy has the potential to play an important role in first-line lung cancer [treatment].”
Investors have been unnerved too by the actions of AstraZeneca, which is studying a combination of two immunotherapies that is very similar to the one being investigated by Bristol-Myers. Last month, the Anglo-Swedish drugmaker pushed back the completion date for its large lung cancer trial and altered the design. Some interpreted the move as a sign the company was losing faith in the virtues of twinning the two medicines. Shares in Bristol-Myers have fallen by as much as 30 per cent since August, while its market capitalisation has dropped by more than $35bn to $87bn over the same period.
The industry’s choice
The company’s travails reflect the unpredictability of drug development and the giddy excitement that can take hold on Wall Street in the early stages of a medical breakthrough. Some analysts were predicting that Bristol-Myers would generate up to $12bn of revenues from Opdivo by the end of the decade, as oncologists chose its immunotherapies rather than chemotherapy to treat the majority of lung cancer patients. They proffered such estimates even though there had been no large clinical trials showing the drug was better than existing treatments for most patients.
Since launching Opdivo in December 2014, Bristol-Myers has built a blockbuster drugs franchise, generating nearly $3.8bn in sales last year. It secured regulatory approval to treat melanoma, before winning permission to use the medicine on a range of other cancers including Hodgkin lymphoma and those in the kidney, and head and neck.

But the main driver of revenues has been the rapid uptake among oncologists treating “second-line” lung cancer that has already been treated with chemotherapy, but which is no longer responding to the treatment.
The biggest prize is yet to come: the chance to usurp chemotherapy as the drug of choice for untreated first-line lung cancer patients, described by analysts at Leerink, an investment bank, as the “single largest market opportunity in oncology”. The American Cancer Society says about 222,500 people will be diagnosed with lung cancer in the US this year, while about 156,000 will die from it. Only breast and prostate cancer are more common, although they kill far fewer people.
Bristol-Myers’ hopes of dominating the first-line lung cancer market started to fade with the failure of the trial in August, and have dimmed further still since it dashed expectations for a quick approval of its combination therapy. Now some investors say they detect hubris in the company’s strategy.
When the lung cancer trial failed, the company’s subsequent conviction in the effectiveness of combining Opdivo with Yervoy gave false hope, say investors.
“Shareholders are angry — a ton of people loaded up on the shares [after the first trial failed],” says Brad Loncar, founder of the Loncar Cancer Immunotherapy exchange-traded fund, which holds shares in Bristol-Myers. “But in hindsight, they exuded too much confidence about having a plan to get out of the hole in a semi-near timeframe.”
Another investor says the company has been “ideologically dogmatic” about the benefits of combining two immunotherapy drugs.
Analysts suggest the fall in Bristol-Myers’ value has turned it into a takeover target, most likely for Pfizer or Novartis. “Why doesn’t Pfizer just buy Bristol-Myers today, given its floundering share price,” asked Timothy Anderson, an analyst at Bernstein, in a recent note to investors, adding that he expected the drugmaker to bide its time.
Investment bankers have started to chatter about such a takeover, according to one senior banker, who says Wall Street is salivating at the huge fees that would be earned by working on a transaction that has the potential to be the biggest pharma deal of all time.
Analysts say the biggest beneficiary will be Merck. “It is pretty amazing that the company that drove all the innovation is slowly becoming second fiddle,” says one large life sciences investor who holds shares in both companies.
Whereas Bristol-Myers tested its drug in a broad group of lung cancer sufferers, Merck limited its trials to smaller subsets of patients that it thought would be most likely to respond. In doing so, Merck limited the size of its commercial opportunity, but also reduced the chance of flunking a large clinical study.
As a consequence, Merck’s Keytruda has been approved to treat a group of first-line lung cancer patients who have tumours that contain high amounts of a protein known as PD-L1, which is thought to make them good candidates for checkpoint inhibitors. Merck could expand further into the first-line market if the US Food and Drug Administration approves the use of Keytruda in combination with chemotherapy. The surprise submission in January was based on a study of 123 patients, which showed that the drugs shrank tumours in 55 per cent of patients versus 29 per cent for chemotherapy alone.
Seeking approval
The FDA often gives the nod to drugs based on limited data, especially when the patients who might benefit are very unwell. Analysts at Leerink believe an approval could help Keytruda generate $3.8bn of sales this year, more than doubling its 2016 revenues, allowing Merck to narrow Bristol-Myers’ lead.
Roche, the Swiss pharmaceuticals group, is also trialling its checkpoint inhibitor, Tecentriq, in combination with various types of chemotherapy in more than 2,400 patients and expects to publish data that might lead to an approval in the second half of this year.
However, it is unlikely that a single combination will provide a one-size-fits-all solution, according to Roger Perlmutter, Merck’s top scientist. “What we are going to see is that different combinations will be more advantageous for different patients,” he says. “This is personalised medicine.”
Dr Perlmutter says that, in an 80-year-old patient who was already suffering from other illnesses, “the idea of giving them a very aggressive chemotherapy regime in combination with Keytruda doesn’t make a lot of sense”, because of the side effects. “Whereas in a patient who is an otherwise vigorous 45-year-old stricken with malignancy who has no other medical problems, you’re going to be a lot more aggressive.”
To that end, drug companies are running more than 800 clinical trials of combination drugs that include an immunotherapy, according to the Cancer Research Institute, testing the medicines alongside older treatments like radiotherapy as well as newer experimental compounds. It is impossible to predict which will work best, as evidenced by Bristol-Myers’ travails.
Dr Perlmutter recounts a story from October, when senior scientists from Merck and Bristol-Myers ended up dining a few tables away from each other at a restaurant in Copenhagen, where they were attending a medical meeting. Merck’s scientists had just unveiled their successful trial, whereas Bristol-Myers had just published the full details of its failed Opdivo study.
“I went over to see them, and they were so pleased, so congratulatory,” he recalls. “I hope that when the shoe is on the other foot — as inevitably it will be — that I will be as gracious as they were.”
Battling lung cancer: how immunotherapy helps tackle the illness
First-line This term covers the first treatment most commonly given for a disease. With advanced lung cancer it tends to be chemotherapy.
Second-line This treatment is given when first-line therapy either does not work or stops working. In the case of advanced lung cancer this is usually an immunotherapy.
Types of lung cancer:
Non-small cell lung cancer About 85 per cent of cases are NSCLC. It typically grows and spreads more slowly than small cell lung cancer.
Small cell lung cancer This makes up 15 per cent of cases. The tumours have cells that are smaller than in most other forms of cancer.
Stages of NSCLC:
Stage 0 Only a few layers of cancer cells are discovered in a local area. Treatment consists of surgery to remove the cells. The percentage of patients still alive after five years is 60-80 per cent.
Stage I Cancer is discovered in the lung tissues but has not spread to the lymph nodes. Treatment typically includes removing part or all of the lung, and sometimes chemotherapy or radiotherapy. Five-year survival rate: 60-80 per cent.
Stage II Tumours are larger and have begun to spread to lymph nodes but not to distant organs. Treatment includes surgery, chemotherapy and radiotherapy. Five year survival rate: 20-30 per cent.
Stage III Tumours are larger still and may be impossible to remove with surgery, in which case treatment includes chemotherapy and radiation. Five-year survival rate: 10-23 per cent.
Stage IV About 40 per cent of patients are diagnosed at this stage. It is the most advanced form of the disease, in which the cancer has spread to other areas of the body. Surgery is not usually recommended. Chemotherapy is the first-line treatment for patients, followed by a checkpoint inhibitor. Five-year survival rate: less than 10 per cent.
Source for survival rates: Cancer Treatment Centers of America
Source: https://www.ft.com/content/24441526-ede0-11e6-ba01-119a44939bb6
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