Checkpoint Inhibitors: How Keytruda and Opdivo Work

You see “anti-PD-1” and “checkpoint inhibitor” in every oncology headline. Keytruda is a $25 billion-a-year drug. Merck’s biggest revenue line by a mile. Opdivo, Yervoy, Tecentriq, Libtayo add billions more. The checkpoint inhibitor market was valued at roughly $52 billion in 2023 and is projected to exceed $90 billion by 2028. If you invest in oncology biotech, you need to understand what these drugs actually do, because every modern cancer trial uses a checkpoint inhibitor as its control arm.

The problem

Cancer cells survive by hijacking the immune system’s natural brakes. Your T-cells, the soldiers of the immune system, are perfectly capable of killing cancer cells. But tumors evolved a defense: they flip a switch that shuts the T-cell down before it attacks. The drug class that blocks that switch is called a checkpoint inhibitor. If you don’t understand the mechanism, you can’t read an oncology trial, because the control arm is almost always a checkpoint inhibitor.

The solution

A checkpoint inhibitor is an antibody that blocks the “brake” signal between a cancer cell and a T-cell, releasing the immune system to attack the tumor. The two main brakes are PD-1 (on the T-cell) and PD-L1 (on the tumor cell). Block either one, and the T-cell wakes up and starts killing. That’s the whole mechanism.

Step 1: Understand the PD-1 / PD-L1 brake

Here is the core mechanism in plain terms. T-cells express a protein called PD-1 (programmed cell death protein 1) on their surface. Some cancer cells express a protein called PD-L1 (programmed death-ligand 1). When PD-1 binds to PD-L1, the T-cell shuts down. The cancer cell has effectively said “don’t attack me” and the T-cell obeys.

A checkpoint inhibitor is an antibody that binds to either PD-1 or PD-L1, physically blocking the interaction. The brake is released. The T-cell attacks the tumor. The approved anti-PD-1 drugs include Keytruda (pembrolizumab, Merck) and Opdivo (nivolumab, Bristol Myers Squibb). The approved anti-PD-L1 drugs include Tecentriq (atezolizumab, Roche) and Libtayo (cemiplimab, Regeneron). Anti-PD-1 and anti-PD-L1 drugs work similarly: both prevent the brake from engaging.

Step 2: Know the CTLA-4 pathway

Before PD-1, there was CTLA-4. It’s an earlier brake that acts at the lymph node, where T-cells are first activated, rather than at the tumor site. Yervoy (ipilimumab, Bristol Myers Squibb) was the first CTLA-4 inhibitor, approved in 2011 for melanoma. It was the first checkpoint inhibitor to reach the market and the first to demonstrate that releasing the immune brake could produce durable cancer remissions. Opdivo (anti-PD-1) and Yervoy (anti-CTLA-4) are now used in combination for melanoma, renal cell carcinoma, and non-small cell lung cancer. The combination blocks two different brakes at two different stages of the immune response.

Step 3: Understand why PD-L1 testing matters

Not every patient responds to checkpoint inhibitors. The response depends on whether the tumor expresses PD-L1 in the first place. If the tumor has no PD-L1, blocking the PD-1 / PD-L1 interaction has no effect because there’s nothing to block.

This is why PD-L1 companion diagnostics matter. Pathologists test tumor biopsy tissue for PD-L1 expression using immunohistochemistry and score it. A high PD-L1 score means the tumor is using the brake, which means a checkpoint inhibitor can release it. A low score means the drug is less likely to work. Clinical trials often enroll only PD-L1-positive patients for this reason, and the PD-L1 companion diagnostics field is a growing investment theme. When you read a trial result, check the PD-L1 cutoff: a drug that works in PD-L1-high patients may fail in PD-L1-low patients.

Step 4: Learn how combination therapy works

Checkpoint inhibitors are rarely used alone in modern oncology. The dominant approach is combination therapy: checkpoint inhibitor plus chemotherapy, checkpoint inhibitor plus ADC, checkpoint inhibitor plus targeted therapy. The reason is biological. Checkpoint inhibitors release the immune brake, but the immune system often needs help finding the tumor. Chemotherapy and ADCs kill tumor cells and release tumor antigens, which train the immune system to recognize the cancer. The checkpoint inhibitor then keeps the T-cells active long enough to do their job.

Real examples from the coverage:

• Trodelvy + Keytruda in triple-negative breast cancer: the ADC (sacituzumab govitecan) kills tumor cells and releases antigens while Keytruda releases the brake. See the Gilead Trodelvy analysis.
• sac-TMT + Keytruda in PD-L1-negative non-small cell lung cancer: the Kelun ADC plus Keytruda showed results that challenged the idea that checkpoint inhibitors only work in PD-L1-positive patients. See the MRK Kelun lung trial analysis.
• ADC + checkpoint in small cell lung cancer: Merck’s I-DXd (ifinatamab deruxtecan) is being developed with checkpoint inhibitors. See the MRK I-DXd PDUFA analysis.

When you read an oncology trial, the control arm is almost always a checkpoint inhibitor, usually Keytruda. The experimental drug has to beat the checkpoint inhibitor, not beat nothing.

Step 5: Know the immune-related adverse events

Releasing the immune brake has a flip side: the immune system can attack healthy tissue. These are called immune-related adverse events (irAEs). Common ones include colitis (inflammation of the colon), pneumonitis (inflammation of the lungs), thyroid dysfunction, rash, and hepatitis. Severe irAEs can be fatal.

These side effects are different from chemotherapy toxicity. Chemotherapy kills rapidly dividing cells, causing hair loss and low blood counts. Checkpoint inhibitors over-activate the immune system, causing autoimmune-like reactions. The management is also different: irAEs are treated with corticosteroids or other immunosuppressants, and the checkpoint inhibitor is often held or discontinued.

For investors, irAEs matter because they affect the label. A checkpoint inhibitor with high pneumonitis rates may be restricted to specific patient populations or require a Risk Evaluation and Mitigation Strategy (REMS). Safety profiles influence which combinations are feasible. For a deeper look at the ADC side of oncology, see the antibody-drug conjugate (ADC) explainer.

Step 6: Understand why Keytruda is a $25B drug

Keytruda (pembrolizumab) is Merck’s anti-PD-1 checkpoint inhibitor. It generated over $25 billion in revenue in 2024 and continues to grow. The reason is label breadth. Keytruda is approved for dozens of indications across melanoma, lung cancer, breast cancer, head and neck cancer, gastric cancer, cervical cancer, and more. The National Cancer Institute’s immunotherapy overview covers the full range of immune checkpoint inhibitors. Every new combination trial that adds Keytruda to an experimental drug is a potential new indication.

The oncology catalyst calendar for 2026 is dominated by checkpoint inhibitor combinations. Keytruda is the backbone of modern oncology trials. When you evaluate an oncology biotech, the first question is often: does this drug combine with Keytruda, and does the trial design use Keytruda as the control arm?

Common mistakes

• Thinking checkpoint inhibitors cure cancer. They produce durable remissions in a subset of patients, typically 20-40% of PD-L1-positive patients respond. Most patients do not respond, and the drug is not a cure. Read the response rate, not the headline.
• Ignoring PD-L1 status. A checkpoint inhibitor trial that enrolls only PD-L1-high patients will show better results than one that enrolls all comers. Compare trials with similar PD-L1 cutoffs.
• Assuming all checkpoint inhibitors are the same. Keytruda and Opdivo are both anti-PD-1, but they have different dosing, different half-lives, and different label histories. Opdivo missed lung cancer in 2016 due to a trial design error and never caught up to Keytruda in that indication.
• Underestimating irAEs. Severe immune-related adverse events can derail a combination trial or restrict a label. Safety data matters as much as efficacy data.

Final checklist

• PD-1 is on the T-cell. PD-L1 is on the tumor cell. Binding shuts the T-cell down. A checkpoint inhibitor blocks the binding.
• Approved drugs: Keytruda and Opdivo (anti-PD-1), Tecentriq and Libtayo (anti-PD-L1), Yervoy (anti-CTLA-4).
• PD-L1 companion diagnostics determine which patients are eligible. High expression equals better response.
• Combinations dominate: checkpoint plus chemo, checkpoint plus ADC, checkpoint plus targeted therapy.
• irAEs (colitis, pneumonitis, thyroid issues) are the flip side of releasing the brake.
• Keytruda is the $25B/year backbone. Most oncology trials use it as the control arm.

For the broader oncology catalyst calendar, see the 2026 oncology catalysts roundup. For the companion diagnostics side, read the liquid biopsy and PD-L1 testing guide.