Special Report: Biopharma rides a new wave of targeted treatments for cancer

Cancer drugs that target gene abnormalities in tumors were all the rage in oncology clinics and on Wall Street for much of that last two decades. Then, in 2017, Novartis won approval for blood cancer treatment Kymriah, the first personalized CAR-T therapy that’s made from patients’ own immune cells.

Kite Pharma’s Yescarta followed close behind, having already fueled a $12 billion buyout by Gilead Sciences. The pair of deals kicked up investor enthusiasm for countless upstarts working on gene and cell therapies to treat cancer.

To the casual observer, it might appear as if pharma had shunted aside the quest for new targeted cancer drugs. But that’s far from the case. In fact, biopharma companies both large and small continue to search for molecular drivers of cancer—and to develop drugs to block them.

Three drug categories dominate the pipeline of targeted cancer drugs. First are drugs that block cancer-causing enzymes known as tyrosine kinases. They formed the backbone of oncology drug development in the early 2000s and continue driving interest today. Often, cancers that initially respond to tyrosine kinase inhibitors evolve to escape them—a problem that has inspired a whole new class of targeted drugs designed to combat drug resistance. Finally, there's the rapidly growing category of medicines that ramp up the immune system's ability to recognize and fight cancer.

This frenzy of research is not only improving the outlook for patients fighting cancer; it’s also creating opportunities for investors to get in on the ground floor of what can best be described as the next wave of targeted oncology treatments.

In search of new targets

The biopharma pipeline, coupled with a spate of high-value deals over the past couple of years, tells a compelling story about the continued interest in targeted cancer drugs. For example, the number of immuno-oncology treatments in development jumped 16% to 2,731 between 2018 and 2019, while the pipeline of anticancer treatments hitting non-immunological targets rose 3% to 2,450 in the same period, according to Informa UK. And 16 of the top 25 diseases biopharma companies were chasing that year were types of cancer, with breast, lung and colorectal cancers leading the way.

What's driving this feverish pace of targeted oncology development? A few critical stimuli. One, the rising ease and availability of biomarker testing. Among the companies leading the charge is Foundation Medicine, which has been racking up approvals for its FoundationOne CDx test.

The test—the first approved by the FDA for all solid tumors—detects 324 cancer-causing genes and rearrangements that can be targeted with drugs. It was most recently approved as a companion diagnostic to Novartis’ Tabrecta, a metastatic non-small cell lung cancer (NSCLC) drug specifically for patients with a mutation that causes MET exon 14 skipping.

RELATED: Cancer drugs' share of new FDA approvals doubled this decade thanks to smarter R&D: report

It helps that the FDA has streamlined its own approach to reviewing targeted cancer drugs. In 2018, the agency issued two guidance documents for developing and validating next-generation gene sequencing tests. The guidelines were designed to “give developers new tools to support"  the new technologies, then-Commissioner Scott Gottlieb, M.D., said in a statement at the time.

What’s more, the time FDA took to approve cancer drugs in the decade ending in 2018 was 48% shorter than it was for treatments in other therapeutic fields, according to a report (PDF) from the Tufts Center for Drug Development. That's because of its new “priority review” designation and other programs designed to speed assessment of new drugs—policies that have benefited cancer drugmakers particularly. Over the past decade, 77% of kinase inhibitors to treat cancer were evaluated under priority review, SVBLeerink data showed.

The FDA has also proven willing to move beyond the traditional approach to cancer—treating it based on where it resides in the body. In 2017, the FDA approved Merck & Co.’s anti-PD-1 drug Keytruda to treat microsatellite instability-high (MSI-H) tumors, regardless of their location in the body.

MSI-H cancer cells are unable to properly repair their DNA when errors occur during the copying process. The defect is most often seen in colon, stomach and endometrial cancers, but it can appear in dozens of other cancer types, so the FDA nod opened the door for Merck’s immuno-oncology blockbuster to be widely prescribed for MSI-H tumors.

Targeted drug deals

Some of the biggest biopharma deals of the last couple of years have centered on targeted cancer treatments—and kinase inhibitors are among those generating the highest buyout bids. In fact, 20 of the 70 oncology-focused mergers since 2010 included kinase inhibitors. Those deals were worth a total of $97 billion, according to SVBLeerink.

2019 delivered a couple of big kinase-focused buys worth almost $20 billion. Eli Lilly set the tone for a big year in oncology dealmaking with its $8 billion Loxo Oncology purchase. The deal gave Lilly Vitrakvi, the first NTRK inhibitor approved to treat any tumor with a genetic mutation, regardless of its location in the body. The drug targets NTRK genes that have fused to other genes in a way that speeds up tumor growth. In the clinical trial that yielded that approval, Viktravi produced a 75% response rate in a variety of cancers, including thyroid cancer, soft tissue sarcoma and infantile fibrosarcoma.

Lilly’s Loxo acquisition paid off again in May of this year, when the FDA approved the first-in-class RET inhibitor Retevmo (selpercatinib) to treat lung or thyroid tumors with mutations or fusions to the RET gene. The drug delivered a remarkable response rate of 84% in NSCLC patients who hadn’t been treated before. In thyroid cancer, Revetmo spurred a response in 84% of untreated patients with RET fusions.

RELATED: Lilly cashes in on Loxo buyout with FDA approval for first-in-class cancer drug Retevmo

Meanwhile, in June 2019, Pfizer CEO Albert Bourla led an $11.4 billion purchase of Array BioPharma, which brought to the deal MEK inhibitor Mektovi and BRAF inhibitor Braftovi. The two are approved in tandem to treat melanoma. Importantly, more than 30 studies are testing the duo in multiple solid tumor types. That likely drove Pfizer’s per-share offer of $48, which was a 62% premium to Array’s closing price before the deal was announced.

I-O drives deal-making, too

Immuno-oncology assets were just as hot. Witness Sanofi’s $2.5 billion acquisition of Synthorx, developer of the IL-2 targeted experimental drug THOR-707. Sanofi had to outbid three other suitors to get its hands on the drug, ultimately laying out a 172% premium in December 2019 to fight off a last-minute offer from a rival.

What’s so exciting about THOR-707? In targeting IL-2, the drug boosts the number of effector T cells and natural killer cells, both of which are key to the immune system’s ability to recognize and fight cancer. Sanofi’s R&D chief John Reed predicted THOR-707 would become “a foundation of the next generation of immuno-oncology combination therapies,” even though Synthorx has yet to generate clinical trial data to back up that forecast.

RELATED: Sanofi inks $2.5B Synthorx takeover to gain IL-2 cancer drug

All of this focus on treating cancer by hitting specific targets has led to a boom in cancer drug approvals. Cancer drugs have claimed 27% of all FDA approvals since 2010. In the 1980s, that figure was a paltry 4%, according to Tufts.

Despite the proliferation of targeted drugs, many of which have multiple competitors, they can still command high prices. Vitrakvi hit the market at nearly $400,000 per year, for example. And as the makers of targeted drugs master new ways of securing insurance coverage, they’re reaping the rewards. Loxo partner Bayer offered Vitrakvi with a money-back guarantee for any patient who didn’t respond within 90 days. Analysts expect that will help drive sales past $700 million a year.

No doubt all of these catalysts are setting the stage for the next generation of targeted cancer drugs.

This article is the first in a series.

Part 2: Next-gen kinase inhibitors march toward market—and spur billions in M&A

Part 3: Biopharma nurtures the next generation of immuno-oncology targets