As genetically targeted therapies gain ground against cancer, another treatment strategy called immunotherapy is emerging as a potentially powerful new partner against malignancies.

At least five major drug companies, including Bristol-Myers Squibb Co., Merck & Co. and Roche Holding AG, are developing drugs known as immune checkpoint inhibitors that work by unleashing the body's immune system to enable it to recognize and attack tumor cells. Small biotechnology companies are also embracing the approach.

While one such agent, Bristol-Myers' Yervoy, is already on the market for melanoma, recent small studies suggest the strategy has promise against lung and kidney tumors and possibly such cancers as ovarian, head and neck and colon.

Meantime, a pooled analysis of 1,800 advanced melanoma patients treated with Yervoy showed late last month that 22% were alive three years later—most after a single 12-week course of therapy.

Such a durable stifling of malignancy in a significant number of patients with advanced disease is almost unheard of in cancer, and it is triggering palpable excitement across the world of oncology.

"That these agents can produce a long-term stable response in multiple tumor types is a whole new approach to treating cancer," said Roy Herbst, chief of medical oncology at Yale Cancer Center, New Haven, Conn.

Wall Street is enthusiastic as well. Leerink Swann analysts told investors recently that half of all cancer treatments could involve immunotherapy agents within the next 10 years, not only transforming treatment but boosting the fortunes of several companies testing candidate drugs in clinical trials.

Some analysts believe the market for such agents could ultimately exceed $10 billion.

Unlike genetically targeted drugs, which disrupt mutations that fuel tumor growth, the new agents treat the immune system.

Most of the interest is focused on drugs that target a molecular pathway known as PD-1, for programmed death receptor 1, which acts as a brake on the immune system to prevent it from attacking healthy cells.

Cancer cells can exploit the mechanism by latching on and using PD-1 to escape destruction by the body's immune system.

Bristol Myers' experimental PD-1 inhibitor nivolumab and Merck's candidate, MK-3475, block this interaction, allowing the immune system to attack the cancer cells. Yervoy inhibits a similar checkpoint.

Barclays analyst Tony Butler estimates that Bristol's nivolumab could eventually generate annual global sales of $6 billion for its use in lung cancer. He says the potential advance in cancer treatment that such agents represent is similar to Gleevec—a Novartis drug launched in 2001 that vastly improved treatment of a form of leukemia—but the new agents have "potentially much larger market implications" because they have potential to treat multiple tumor types.

Many researchers believe the broadest impact of the drugs will come from combining them with other treatments—including radiation, chemotherapy and targeted agents as well as other checkpoint inhibitors—to mount a more potent attack on the tumor.

Bristol-Myers, regarded as the checkpoint market leader, sees combining two such inhibitors as an important element of its strategy. A study last May found that combining Yervoy and nivolumab achieved better results in melanoma patients than either drug alone.

"Our approach is to use the proof of that paradigm [from melanoma] in lung cancer and other tumor types," said Nils Lonberg, senior vice president, Immuno-Oncology & Biologics Discovery at Bristol-Myers.

Challenges loom. Only a minority of patients respond to the drugs when given as a single agent.

Combining them with other therapies "is trickier than you think," said Charles Drake, a researcher at Johns Hopkins Kimmel Cancer Center, Baltimore. "Sometimes, you give one drug first and then the other; the order is critical," he said, based on results of studies in mice. "Other times it's parallel." How this will pan out in people isn't clear.

Another challenge is cost. Yervoy currently costs about $120,000 for four doses given over 12 weeks. Use in combination with another big-ticket drug could be a big barrier to access. One question, Dr. Drake said, is whether competition to develop such agents will lead to reduced costs.

Meantime, Merck's MK-3475, and a drug from Roche that targets a different part of the PD-1 mechanism, are showing promise in melanoma, lung and other cancers.

Positive findings reported this month for MK-3475 prompted Merck to move that drug into advanced-stage testing for lung cancer, said Eric H. Rubin, vice president, oncology for Merck Research Laboratories.

AstraZeneca and GlaxoSmithKline are also testing PD-1 inhibitors. "It's a race. It's a very competitive environment right now," said Dr. Herbst at Yale, which is involved in several late-stage trials of the approach.

Another contender is Jounce Therapeutics Inc., a Cambridge, Mass., startup founded by James Allison, now an oncologist at MD Anderson Cancer Center, Houston, whose research in the 1990s led to the development of Yervoy. Among other projects, his company is working on a new checkpoint blocker that in animal studies significantly improved the effectiveness of Yervoy, he said.

Write to Ron Winslow at ron.winslow@wsj.com and Peter Loftus at peter.loftus@dowjones.com