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The Global Collapse of the Oncology Market

Credit: bunhill/iStockphoto

Credit: bunhill/iStockphoto

By Martin Ashdown

A new approach to cancer treatment promises the use of fewer drugs and shorter treatment periods, leading to a “big short” of stocks that profit from oncology.

The cancer industry is literally a “growth” industry worth hundreds of billions of dollars per annum. A lot of people make a living out of cancer, and each year the market expands: global estimates predict 6.5 million cancer fatalities this year.

While the industry’s outdated practices haven’t significantly improved outcomes for patients in decades, they are now being replaced by a new paradigm of immune-based cancer therapy. This new therapeutic approach “tweaks” the individual patient’s immune system to destroy the cancer – and it works.

This seismic shift portends the overthrow of a traditional business model’s value chain, with potentially broad economic consequences. If cancer becomes curable, the cancer sector’s valuation would collapse along with careers, companies and downstream effects to other sectors.

Fanciful a few years ago, this scenario is now being played out with significant aspects of the cancer industry now under assault. In 2014 global pharmaceutical giant GlaxoSmithKline off-loaded a significant portion of its cancer drug portfolio to another corporate giant, Novartis, for US$16 billion. Other major corporate players are now moving into the new era of cancer immunotherapy, buying companies at inflated prices. For instance, Gilead recently purchased Kite Pharmaceuticals for US$12 billion. More recently, Australian biotech company Bionomics announced its exit from cancer drug development. These are all signs of a strategy to dispose irrelevant assets of questionable value while clambering for a stake in the next big thing.

Investment momentum in companies drives their share prices higher due to the prospect of new products, considerable future earnings and a dominant market position. Any hint of a threat to the status quo will attract the attention of savvy market operatives who could “short” the share price of exposed companies, thus snowballing a collapse.

A New Approach

In 2008 the US President’s Cancer Panel made several stark admissions. “The toll of cancer has become simply an awful part of life... incidence is rising for several cancers… the most intransigent of malignancies remain impervious to treatment... and both proven cancer prevention and absolute cure remain elusive”. The report went on to say:

Despite (President Nixon) declaring a national war on cancer in 1971 and investing many billions of dollars since then to understand and defeat cancer, our success against the disease in its many forms has been uneven and unacceptably slow. The reduction in suffering by patients and their families would be incalculable. The benefit to our nation in lower health care costs and heightened productivity would be an untold bounty to our economy.

These comments had been preceded in 2006 by US health economists Kevin Murphy and Robert Topel, who made the following modelling observation in the Journal of Political Economy: “A permanent 1 percent reduction in mortality from cancer has a present value to current and future generations of Americans of nearly $500 billion, whereas a cure (if one is feasible) would be worth about $50 trillion”.

Recent advances in cancer immunotherapy have revealed a profound flaw in our previous understanding of how to successfully treat cancer. Rather than focusing attempts on directly treating the cancer with extended periods of chemotherapy or radiotherapy, this new era of immuno-oncology is attempting to leverage the patient’s own immune system by targeting and disturbing the control mechanisms that the immune system normally uses to quell inflammation. These insights have shown that limited treatment can achieve complete responses where all cancer disappears, obviating the need for extended periods of treatments and their associated costs, not only for the patient but also under-resourced healthcare systems.

Data emerging from recent cancer immunotherapy trials potentially explain the decades of failure in treating this disease effectively. In simple terms, we may have been looking in the wrong place by being too cancer-centric in our approach to treatment. This misunderstanding has led R&D down blind alleys and made the effective treatment of late-stage patients elusive, time-consuming and expensive.

Such trial reports are also bringing into question the random and toxic “carpet bombing” of patients and their immune systems with chemotherapy and radiotherapy, which appear to have been indiscriminately destroying the very thing we are now attempting to preserve and accurately manipulate.

Promising Results

The longstanding cancer-centric therapeutic business model places the patient on an expensive and toxic “merry-go round” where companies, medical specialists and others using costly diagnostic and therapeutic equipment and drugs “clip the ticket” on each revolution as the patient is managed into the ground over a 5–­10-year period.

However, this global business model’s value chain is now under assault. The newly gained insights into the fundamental nature of cancer immunology may rapidly lead to the use of fewer drugs and resources over shorter treatment and post-treatment periods.

New immunotherapeutic drugs can have spectacular clinical effects and deliver complete responses in a minority of advanced cancer patients for whom other previous attempts have failed. The mode of action of these drugs is clearly telling us that when these drugs work, they are manipulating a pre-existing cancer immune response, and not establishing a new response. This tells us that the immune system is not ignorant of the presence of the cancer; rather, the immune system appears to be attenuating itself through its normal control mechanisms.

These new drugs are guiding us towards the use of our limited resources more effectively, with potentially massive cost savings. The obvious consequence of this profit reduction to the corporate sector, and reduced distributions to shareholders, will be stockmarket downgrades.

Structural cracks are already appearing in the oncology edifice. Trial data are showing that shorter courses of chemotherapy or radiotherapy give similar results to longer standard treatment protocols. Obviously, this reduces the debilitating toxic side-effects of therapy, as well as the expense of treatment. Furthermore, trials have shown that patients who were thought to be refractory to a drug can later respond when retreated.

Further research has discovered off-target effects of radiation treatment, with distant untreated tumours remarkably disappearing in addition to the therapy-targeted lesions. This is most likely immune-mediated.

Similarly, a compound known as PV-10 can cause complete responses when injected into malignant melanoma lesions. Remarkably, nearby uninjected lesions can also regress via immune-based destruction, not unlike a vaccination event. PV-10 is actually the cheap food and fabric dye Rose Bengal made up as a 10% water solution. This dye seems to work just as well as more expensive and more complicated agents such as oncolytic viruses.

Further, the recent clinical success of immune “checkpoint inhibitors” (which take the brakes off the immune system) has created renewed interest in the mode of action of an older (off-patent) immuno­therapeutic drug, interleukin-2. This drug, first introduced in the early 1990s, is still used to treat two very different advanced cancers: melanoma and kidney cancer. Approximately 5–10% of these patients consistently experience complete responses and can survive long-term.

This shift in scientific and clinical thinking towards cancer immunotherapy, together with the general public’s awareness of reports of high profile cancer patients attaining these remarkable responses (some with limited treatment), is changing our expectations of a cure. It’s predicted that this transition, while expensive now, will rapidly lead to dramatic cost reductions for primary cancer drugs, surgical procedures and secondary maintenance drugs used to manage treatment-related co-morbidities, infections, nausea and pain.

The Next Big Short?

With the prospect that more patients being successfully treated or living longer will lead to falling revenues and 5-year sales projections across the sector, informed market analysts could downgrade longstanding pharmaceutical, biotechnology and healthcare stocks. These market operatives could then short-sell these exposed stocks, with obvious consequences – a broader market sector collapse. There may also be some significant downstream economic effects into the health insurance and general insurance sectors, with possible changes to actuarial life tables as more patients live longer with and without disease, or are cured entirely.

As these developments unfold we’ll see an increasing number of immunotherapy trials and regulatory approvals, more patients responding to treatment or retreatment with a variety of agents, more articles discussing the off-target effects of radiotherapy, more trials using interleukin-2, and shorter courses of chemo­therapy and radiotherapy performing at least as well as current lengthy regimens. Of great interest is the evolving story of how a cheap food and fabric dye, Rose Bengal/PV-10, can cause complete remissions.

A cure for cancer would be an economic disaster for the global healthcare market and a boon for government healthcare budgets. This is palpable and imminently on the horizon as, after decades of research activity without insight, oncology has finally focused on the best rational drug design factory – the immune system.


Martin Ashdown is a Research Fellow in The University of Melbourne’s Faculty of Medicine.