ASCO conference will put the focus on the fight against cancer. These stocks are in the spotlight

Published Sun, May 28 20238:20 AM EDT

Christina Cheddar Berk @in/christina-cheddar-berk-b864404/

Developments in cancer research will be in the spotlight as the American Society of Clinical Oncology hosts the world's biggest cancer research conference in Chicago, starting Thursday. Investors have already caught a glimpse of the topics that will be discussed but many are eager to hear the details behind the abstracts, and no doubt there will be surprises. The immunotherapy known as CAR-T, for chimeric antigen receptor T-cell therapy, will be in focus, as it has been in recent years. This class of treatment takes immune cells from a patient, alters the cells to fight a specific type of cancer and reinfuses them back into the body. Andy Acker, a portfolio manager at Janus Henderson, called out the excitement around one CAR-T therapy, Carvykti, from Johnson & Johnson and Legend Biotech , for the treatment of multiple myeloma. According to data that has been leaked on the study , the treatment slashed the risk of a tumor or disease progression by 74% compared with current therapies for patients that previously failed other regimens. "That is sort of an unheard of benefit," Acker said. "... That essentially means you are quadrupling the progression-free survival, so … in other words, you could potentially go for years without the disease coming back." Johnson & Johnson shares are down nearly 13% since the start of the year, but Legend's U.S.-traded stock has gained about 26%. According to FactSet, analysts have an average price target of $81 for Legend shares, which implies 28% upside from Friday's close. Carvykti had $72 million in sales in the first quarter, and Piper Sandler predicts it will reach $366 million in 2023. If the data is positive at ASCO, it could set up Carvykti for a showdown with a competing treatment, Abecma, from Bristol-Myers Squibb . 'Smart chemotherapy' Antibody drug conjugates (ADCs) also will be top of mind at the meeting. In a research report in late April, Morgan Stanley said ADCs, also called "smart chemotherapy," could replace traditional chemotherapy and unlock a market worth more than $140 billion over the next 15 years or so. That's up from a base of $5 billion last year, the bank said. ADC treatments use antibodies to more precisely target cancer cells. In this way, healthy tissue is spared and mortality declines. ADCs usually combine an antibody that has been designed to seek out specific types of tumors connected via a linking component to a toxic chemotherapy. Earlier generations of these drugs struggled if any, or all, of the three components fell short. For example, sometimes the linking component didn't adequately secure the payload of chemotherapy to the antibody. But the next-generation of ADC treatments promise to resolve these issues. There has been an explosion of treatments in the space because some companies have developed a platform technology that can be used in a wide array of applications. "We expect positive clinical trial data over the next 12 months to catalyze investor awareness of the potential and boost the valuations of the key ADC players," the Morgan Stanley analysts wrote. They believe that both the buy-side and the sell-side have not "properly quantified" the ADC opportunity. Morgan Stanley cited data from Beacon Intelligence that said 1,567 programs are in development, with a significant amount of this activity coming from Asian companies including Daiichi Sankyo, Kelun Biotech, RemeGen , LegoChem and Lepu Biopharma. According to Janus' Acker, AstraZeneca and its partner Daiichi Sankyo are quickly catching up to Seagen , one of the leaders in the area. The pair has already has won regulatory approval for Enhertu for metastatic HER2-low breast cancer, but the companies are also studying its use in a variety other HER2 tumors in breast cancers. An update on this research will be shared at ASCO. Morgan Stanley expects Enhertu to become the "poster child" for current ADC medicines, with more than $6 billion in potential revenue. According to FactSet, 83% of analysts covering AstraZeneca rate the stock a buy, with the rest having a hold rating. The average price target of $83 implies 14% upside from where the stock closed on Friday. Kisqali shows promise in breast cancer Novartis shares already saw a bump in late March when it revealed Kisqali, its breast cancer drug, had significantly reduced the chances of the disease spreading when it was used after surgery along with an endocrine therapy. More detail at ASCO will help investors gauge how much of a threat Kisqali, a CDK4/6 inhibitor, poses to competing therapies from Pfizer and Eli Lilly . NVS YTD mountain Novartis shares are up nearly 8% since the start of the year. Lilly's drug, Verzenio, is used in high-risk patients with HR-positive HER2-negative breast cancer that is more likely to reoccur and has already breached the patient's lymph nodes. However, Kisqali could be used to treat a population that is two to three times bigger, according to Novartis. It would include both high- and intermediate-risk patients, who could use the treatment even if their lymph nodes haven't been affected. In this application, some analysts see an opportunity for as much as $6 billion in sales. In a research note earlier this month, Guggenheim analyst Seamus Fernandez said Kisqali is already taking market share from Pfizer's Ibrance in metastatic breast cancer. If Kisqali continues to show strong results, it's possible it will become the preferred treatment. Matt Phipps, an analyst at William Blair, expects there to be a lot of attention paid to Bristol-Myers Squibb as it presents more data from its Commands study on Reblozyl, a treatment for patients with myelodysplastic syndromes (MDS), a group of blood cancers. The data could potentially move Reblozyl to become a first-line treatment for MDS, which would give it an edge over Amgen and Johnson & Johnson's Epogen/Procrit. Phipps, who has an outperform rating on Bristol shares, said the key point people will monitor is whether or not Reblozyl worked well on patients who were RS-negative. This will help determine how broadly it can be used. Merck's Keytruda is also being watched for what benefits it could offer early-stage lung cancer patients . It's already been a gamechanger for those diagnosed with more severe metastatic non-small cell lung cancer. Separately, Kelun-Biotech, one of Merck's partners, will present early-stage data for SKB264, an in-licensed TROP-2 ADC, as well as data from a phase 2 trial for a type of lung cancer. Late-breaking ovarian cancer study William Blair analyst Andy Hsieh called out Immunogen 's late-breaking Mirasol study of Elahere, which is scheduled to be presented on June 4, as another report to watch. Hsieh has an outperform rating on the stock, which is up 182% since the start of the year. Elahere is the first medicine that has shown an advantage in improving survival against ovarian cancer versus the current standard chemotherapy. Ovarian cancer is the leading cause of death from gynecological cancers. Each year 20,000 people in the U.S. are diagnosed with it and 13,000 patients die. Hsieh said the drug has the potential to be "practice changing," and key opinion leaders in the field have been very "enthusiastic" about Elahere's potential. "They showed it can extend survival, which is the gold standard for oncology drugs," Hsieh said. IMGN 3M mountain News of the trial sparked a surge in Immunogen's shares in early May. In a research note dated May 11, Canaccord Genuity analyst John Newman said that Elahere sales could exceed the current consensus of $154 million this year, offering "potential upside to the current share price." "Cancer is one of the biggest unmet medical needs in the world," Acker said, explaining that 40% of people will be diagnosed with some form of cancer at some point in their lifetimes. "We're spending over a trillion dollars a year treating cancer, and so all of these therapies that can improve the lives of cancer patients — ideally improve overall survival — you know these are products that can really improve the lives of patients, of really everybody," he said.