The PD-1 wave? Report says it's a $33B tsunami, with BMS surfing for first place

There's a reason immuno-oncology is among the hottest fields in biopharma today--and that's the $20 billion or so in 2022 sales that many analysts estimate. No wonder Bristol-Myers Squibb ($BMY), Merck ($MRK), AstraZeneca ($AZN) and Roche ($RHHBY) are speeding ahead with their research in the field, with Sanofi ($SNY), Novartis ($NVS) and Pfizer ($PFE) racing to catch up.

But according to Morningstar, those sales estimates are low--way low.

In fact, according to a new report from the investment firm, the market for PD-1 and PD-L1 drugs is billions of dollars richer than many analysts believe. These drugs--which include Bristol-Myers' Opdivo and Merck's Keytruda--are going to be worth $33 billion by 2022. The way Morningstar analysts see it, "striking efficacy and strong pricing power" will drive wide usage and impressive sales.

That's good news for every drugmaker in the field. But the best news from Morningstar comes for Bristol-Myers. The firm's researchers figure Opdivo is poised to grab the biggest share of that huge market--37%, to be exact.

It's partly a first-to-market story. Merck's Keytruda was first to win FDA approval, but Opdivo followed up soon after, and both are already vying to treat patients with advanced melanoma, while undergoing testing in a variety of other cancers.

But it's Bristol-Myers that has the pole position in non-small cell lung cancer: The FDA accepted its application for the new indication on Monday. With some impressive survival data on its side, Opdivo could pick up its lung cancer approval by June. Merck plans to file Keytruda for NSCLC in mid-2015.

That first-to-market advantage in NSCLC will make the difference in overall share, Morningstar figures, and here's why. The PD-1/PD-L1 market in melanoma will amount to about $3 billion, with kidney, bladder, and head and neck cancers each worth $5 billion or less. Lung cancer is by far the biggest market for these immunotherapies, with $21 billion in potential sales by 2022. Win in lung cancer, you win overall.

The lung cancer picture is pretty complicated, though, with differing study results in squamous versus non-squamous types, and new data rolling out as the year goes on. Merck is doing all it can to speed Keytruda toward a lung cancer use--it has breakthrough status at the FDA, which helps--and it could win the agency's blessing by year's end. Plus, Keytruda could hit the market with a broader NSCLC label than Opdivo's, Bernstein analyst Tim Anderson has said. Anderson expects Merck's drug to bring in $900 million this year, compared with $500 billion for Opdivo, with Opdivo pulling ahead later on as it racks up more indications.

But by Morningstar's calculations, Bristol-Myers is in line for a 37% share by 2022, with Merck in second place with 26%, Roche in third at 21% and AstraZeneca trailing with 16%. But even last place is worth $5 billion by 2022--and as part of the first wave of PD-1 and PD-L1 drugs, AstraZeneca would have the jump on an expected second wave from partners Regeneron ($REGN) and Sanofi, Pfizer and Merck KGaA, and solo act Novartis. "[G]iven the first mover advantage of Bristol, Merck, Astra and Roche, we see the potential of the second wave as unlikely to take much market share," the analysts figure. Until they can develop follow-up combo meds, that is.

Special Report: Top 10 best-selling cancer drugs of 2013