Pharmaceutical giant Eli Lilly (LLY) saw its shares pop recently after revealing positive data about one of the lung cancer drugs in its oncological pipeline. The company issued a press release on the treatment (necitumumab), saying:
"SQUIRE, a recently completed Phase III study, met its primary endpoint, finding that patients with stage IV metastatic squamous non-small cell lung cancer (NSCLC) experienced increased overall survival (OS) when administered necitumumab (IMC-11F8) in combination with gemcitabine and cisplatin as a first-line treatment, as compared to chemotherapy alone."
While some have brushed off the news, this is very positive data for Eli Lilly. For one, the treatment met its primary endpoint, implying the efficacy of the drug should be enough for not only FDA approval, but also for overall success. Further, the NSCLC category that necitumumab treats is far from small. Also taken from the press release:
"Non-small cell lung cancer (NSCLC) is much more common than other types of lung cancer, and accounts for 85 percent of all lung cancer cases. Patients with squamous cell carcinoma represent about 30% of all patients affected by NSCLC."
Altogether, the treatment could address roughly 25% of total lung cancer cases. In the US alone, 373,489 people were living with lung cancer in 2012, with another 226,160 cases expected to be diagnosed. Lung cancer also accounts for approximately 28% of all cancer cases in the US, and with smoking only declining modestly, we suspect incident growth will continue.
To put it simply, necitumumab will have a chance to achieve wonderful results if it does indeed come to market. Given reasonable success, we could imagine a fully-ramped revenue stream exceeding $1 billion. AstraZeneca's (AZN) NSCLC treatment Iressa is on pace to top $600 million in sales this year after being reapproved in 2005. However, data implies that necitumumab would be a more valuable treatment (in terms of additional life expectancy) than Iressa.
Although immunotherapy stole the oncological treatment spotlight at ASCO in mid-June, Eli Lilly's new lung cancer treatment appears to have blockbuster potential. Nevertheless, we think shares look fairly valued, and we're happy to hold the Healthcare Select Sector SPDR ETF (XLV) in the portfolio of our Best Ideas Newsletter.
Additional disclosure: We include XLV in our Best Ideas portfolio.