Warning to I-O drugmakers: If investors were hyperfocused on data this year, just wait till 2018

Keytruda Opdivo
All four "first-wave" PD-1/PD-L1 meds—Merck's Keytruda, Bristol's Opdivo, AZ's Imfinzi and Roche's Tecentriq—have now missed the mark in at least one phase 3 trial.

If 2016 was the year immuno-oncology first stopped looking invincible thanks to a shocking phase 3 miss, 2017 was the year misses like that one became more commonplace.

Gone is the notion that an I-O regimen’s success in any particular tumor type is a givenand with it, it seems, Wall Street’s faith. These days, perhaps more than ever, analysts and investors are watching every development like hawks, scouting for signs of failure.

Just ask Merck, which induced panic among some investors when it withdrew its European Keytruda-chemo combo application for lung cancer thanks to the small number of patients in its phase 2 trial. Skeptics looked at the move “as a signal there could be some issue” with an ongoing phase 3 trial meant to confirm Merck’s findings, sending shares lower, Evercore ISI analyst Umer Raffat wrote to clients at the time.

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“From a stock perspective, it seems that KN-189 is no longer being thought of as a foregone conclusion,” he added, in the first of two investor notes containing the phrase “overblown concerns” in the subject line.

More recently, Bernstein’s Tim Anderson admitted that the hoopla around some of Roche’s own chemo combo results from the IMpower150 study was likely because the data industry watchers really want to see aren't available yet.

Had IMpower150 read out after Tecentiq's other kidney cancer trials—which can more easily be compared to those of its competitorsIMpower150 “probably would not be getting this much attention,” he wrote earlier this month. Even still, analysts drew somewhat negative conclusions that they admitted were based on flawed comparisons.

RELATED: AstraZeneca's Mystic shortfall is an immuno-oncology shake-up for Bristol-Myers and a bolster for Merck and Roche

Meanwhile, some execs have seemed almost exasperated by the I-O attention. AstraZeneca’s leadership, for their part, have not-so-subtly hinted that they’d rather discuss other matters; “Can I give like a bottle of champagne for the first person that asks a question about CV, metabolic or respiratory?” company EVP Mark Mallon joked at the 58-minute mark of AZ’s Q3 earnings call.

That’s not to say investors and analysts don’t have good reason to keep the heat on. Following AZ’s headline-making phase 3 miss for its Imfinzi-CTLA4 first-line lung cancer combo regimen, it’s no surprise the company’s leaders would rather highlight other areas of their business.

Plus, it’s not just AZ that’s come up short in a closely watched trial this year. Roche, for its part, saw its trial of Tecentriq in second-line bladder cancer miss the mark in May. And Merck deepened the mystery when Keytruda, which previously had succeeded where Opdivo had failed in first-line lung cancer, misfired in a phase 3 head and neck cancer studyan area in which Opdivo had already aced its own trial.

RELATED: Does Pfizer really want Bristol-Myers? Likely, says one analyst. What's it waiting for?

“Up until yesterday, I would have told you that there are at least 2 different indications where Merck worked and others failed ... and perhaps Merck is just executing these trials much better,” Raffat wrote to clients at the time. Keytruda has since missed its primary endpoint in a second-line gastric cancer trial, and multiple myeloma combo studies of the med have been cut off in light of an imbalance in patient deaths, too.

But if the stakes were high and attention was focused last year, expect things to intensify even further in 2018 as key readouts approach. Among them is an interim overall survival analysis from a phase 3 study pairing Bristol’s Opdivo and Yervoy in first-line lung cancer. And then there's a final overall survival analysis from Mystic, the trial in which AZ recorded this summer’s progression-free survival miss.

Results from those studies could not only help determine the overall I-O “pecking order,” as Anderson has put it, but they could also set the stage for some large-scale M&Aespecially if tax reform puts extra cash in the hands of ever-aggressive dealmaker Pfizer.

Our prediction? It’s going to be a fun ASCO meeting.