The American Society of Clinical Oncology meets every spring. It's attended by some 30,000 people and hosts 4,000 presentations.
Investors like us love ASCO because of the so-called "ASCO Effect" – a hefty surge in cancer-focused biotech stocks that always accompanies the start of this meeting.
And we usually recommend an oncology stock or two ourselves.
This year's ASCO turned us on to an important new trend – one that's shaping up as the next big profit opportunity in biotech.
Scientists and other researchers refer to this emerging opportunity as "immuno-oncology" – a new category of drugs that draft the body's own immune cells to target a broad array of cancers. The market potential is so huge – as much as $35 billion – that it may be the biotech sector's version of a California Gold Rush.
It's so big, in fact, that stock-watchers are talking about the trend as "Immunopalooza."
"Rarely a week goes by without a few new immuno-oncology research deals to report," the FierceBiotech trade journal reported yesterday. "The reason is simple: Investigators believe they have figured out a way to dismantle the mechanism used by cancer cells to stay hidden from the immune system. It's a broadly applicable approach which is likely to work in combination with a number of therapies. And after Citigroup last year put a $35 billion figure on the market potential for these drugs, the oft-cited mega-blockbuster number helps explain why [immuno-oncology] companies are so interested in being among the first to the market."
Here's how these new drugs will work. In the human immune system, there are "attack cells" that respond whenever the body comes under attack from a foreign intruder – like a tumor cell. A protein called PD-1 can serve as a switch to "turn off" that attack-cell action. Some cancers are somehow able to get to that switch and flick it off, Bloomberg writers Naomi Kresge and Robert Langreth reported.
These new drugs we're talking about today can "bind" to that PD-1 protein to protect it from manipulation. Or they can connect with a "related" protein PD-L1 that some tumor cells deploy to trigger the PD-1 switch.
At an ASCO meeting two years ago, Bristol-Myers Squibb Co. (NYSE: BMY) stunned onlookers by reporting that its drug Nivolumab shrank tumors in 28% of melanoma patients, 27% of people with kidney cancer, and 18% of those with advanced lung cancer.
The implication: Immune therapies could find uses beyond the initial target – which had been melanoma.
University of California (Los Angeles) melanoma expert Antoni Ribas, who has tested the Merck & Co. Inc. (NYSE: MRK) drug MK-3475, said the heart-pounding revelation jump-started research.
Companies now know they must move very quickly: If they don't, "somebody else will do it and then it will be too late," he told the Bloomberg reporters.
As London-based Bloomberg analyst Asthika Goonewardene told reporters: "I have never seen this much enthusiasm collectively for a class of drugs before. This is essentially what we call a 'Land Grab.' There's opportunity, and everybody is going out to find what that opportunity is."
The Next "Effect"
The "ASCO Effect" typically buoys small-cap biotech stocks.
But at this year's ASCO meeting, look for a handful of Big Pharma players to stake a claim in that $35 billion "Immunopalooza Land Grab."
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.