New cancer drugs from Bristol-Myers Squibb and Merck wowed a major oncology meeting over the weekend and drove both companies' stocks significantly higher Monday as analysts said billions stood to be made from the treatment breakthroughs the developmental drugs promise.
"Some of the most exciting cancer data that I've ever seen," Tony Butler, a pharmaceutical analyst at Barclays Capital, told CNBC.com as he left the American Society of Clinical Oncology annual meeting in Chicago. "It certainly is the biggest change in oncology that we've seen."
Butler had to cram into a seat in the back row of Sunday's symposium, where an overflow crowd heard details of Bristol-Myers' and Merck's new anti-PD-1 drugs, which in early-stage clinical trials are showing a dramatic increase in survival rates for surveyed melanoma patients.
"Let me just be clear: If you go into a big auditorium, and you can't actually get into the room, what does that tell you?" Butler said. "It's something that is different."
Both Bristol-Myers' nivolumab and Merck's lambrolizumab employ cancer immunotherapy, which uses a patient's own immune system to destroy cancer cells. The data from the drug trials demonstrate how immunotherapy might dramatically stem the growth of all kinds of tumors—not just melanoma—and increase survival rates.
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"There's no question it's scalable," Butler said of the drugs' potential. "You're going to have a dramatic shift in the way cancers are treated. It's also going to affect future cash flows," he added.
In contrast, Butler said that GlaxoSmithKline's ovarian cancer drug Votrient and Amgen's melanoma drug T-Vec, which broadcast similarly positive research data at ASCO, do not represent a sea change in treatment. The companies' stocks showed little positive movement after ASCO.
Hal Barron, chief medical officer of Roche's Genentech, told CNBC's "Squawk Box" Monday said that studies have shown that "by tackling the immune system and helping it recognize cancers, you can have some pretty impressive impacts.
"What's amazing about this new immunotherapy is that it actually has a very sustained and prolonged responses, about 90 percent of those patients whose tumors shrank actually maintained their shrinkage for long periods of time," Barron said, referring to a Roche/Genentech study of 141 patients. "We think this is an important advance in cancer."
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Biopharmaceutical expert Barbara Ryan of FTI Consulting said the market for cancer immunotherapy drugs has been estimated at up to $10 billion because "the feeling is that this may be probably applicable in a range of cancers.
"There's already been visibility on Bristol's program," Ryan said, adding that Bristol-Myers' stock has been a strong performer over the past few years. "Merck has been more of a laggard, and there's been much lower expectations for Merck for the drugs in their pipeline," she said.
Judson Clark, who analyzes pharma stocks for Edward Jones, said, "It's clearly some good days for those two names. Merck's PD-1 data was pretty encouraging. I think that's a market that could be quite strong."
But the big upward moves by both stocks "call into question if it's a little too much, too soon," Clark said. "I think it's kind of an outsize move due to pent-up release of data."
The research is "the next big advance," he said, but warned that "we're still talking about a hard-to-treat area."
Butler at Barclays Capital said he doesn't expect the stock market to fully react to the revenues that immunotherapy drugs represent to Bristol-Myers and Merck until they go on sale, which won't happen until at least 2015.
At that point, he said, people may "scratch their heads and say, 'I wish I saw that 20 points ago.' "
—By CNBC's Dan Mangan. Follow him on Twitter