Roche Takes Aim at Bristol-Myers Squibb and Merck & Co.

Roche Holdings (NASDAQOTH: RHHBY) unveiled top-line data from a lung cancer study this week for its PD-L1 drug, Tecentriq. The interim results put Roche in position to challenge Merck & Co (NYSE: MRK) and Bristol-Myers Squibb (NYSE: BMY) for sales in what's fast become one of the most important cancer drug classes. Can Roche carve away market share and turn Tecentriq into a billion-dollar blockbuster drug?

Improving outcomes

Over 222,000 Americans are diagnosed with lung and bronchus cancer every year, according to the National Cancer Institute, and an estimated 60% of those diagnoses are made when the disease is in the advanced stages, when it's far more difficult to treat.

Sadly, a single-digit five-year survival rate for advanced non-small-cell lung cancer (NSCLC) presents one of the biggest challenges, but a new class of drugs called PD-1/L1 inhibitors is offering new hope. PD-1/L1 drugs prevent cancer cells from hijacking PD-1 proteins to escape detection by a patient's immune system, and in trials, the response rates to these drugs have been impressive.

Bristol-Myers Squibb's Opdivo became the first of these drugs to win approval for use in advanced NSCLC in 2015, after trials showed that 19% of patients responded to it and that it extended overall survival by an average of 12.2 months, versus 9.4 months for patients treated with docetaxel, a chemotherapy.

Merck & Co.'s Keytruda secured an FDA OK in advanced NSCLC shortly thereafter when it got the nod for use in patients whose disease has progressed if a companion diagnostic shows the tumor over-expresses PD-1. Since then, Keytruda's label has expanded to include its use alongside chemotherapy as a first-line treatment, regardless of PD-1 expression. In trials, 55% of patients responded to treatment when it was included alongside Alimta and carboplatin, and progression-free survival was a median 13 months, versus 8.9 months for Alimta plus carboplatin alone.

Keytruda's expanded label in advanced NSCLC has turned it into one of the fastest-growing cancer drugs on the market, but Roche's Tecentriq may challenge Keytruda in that patient population soon. Although Roche is saving the full results from its advanced NSCLC study for a presentation later this year, it did tell industry watchers this week that adding Tecentriq to Avastin, carboplatin, and paclitaxel significantly extended overall survival versus Avastin, carboplatin, and paclitaxel alone. Roche's news follows results released in December showing that this cocktail reduced the risk of worsening disease or death by 38%, regardless of PD-1 expression. It also said in December that the median progression-free survival in the study was 8.3 months versus 6.8 months and the overall response rate to the four-drug combination was 64%.

A lot at stake

If Tecentriq can elbow market share away in advanced NSCLC, it would be a boon for investors. Opdivo and Keytruda are also used in non-lung cancer indications, but their use in advanced lung cancer is a big reason why each is a multibillion-dollar blockbuster drug. In 2017, Opdivo and Keytruda's sales were $4.95 billion and $3.8 billion, respectively.

Roche's ability to displace Opdivo and Keytruda in this indication, however, is going to depend a lot on the full data from this study, and unfortunately, we're going to have to wait patiently for this data to be released. Its success will also depend on how other trials at Bristol-Myers Squibb and Merck pan out. For instance, Bristol-Myers Squibb reported in February that treating first-line advanced NSCLC with a combination of Opdivo to Yervoy outperformed chemotherapy in terms of progression-free survival and that study is continuing to determine if there's an overall survival advantage too.

Overall, it's probably best to avoid making a decision to buy or sell any of these stocks based on their potential in advanced NSCLC until we see all the detailed clinical data. Hopefully, that will happen sooner rather than later.

10 stocks we like better than Roche Holding Ltd. (ADR)When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Roche Holding Ltd. (ADR) wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.