HONG KONG - Incyte Corp. entered a collaboration and licensing deal to flip its greater China rights to an investigational anti-PD-1 monoclonal antibody to Zai Lab Ltd., of Shanghai. The candidate, INCMGA-0012, is currently being evaluated as a monotherapy in registration-directed trials for patients with MSI-high endometrial cancer, Merkel cell carcinoma and anal cancer.

Under the terms of the agreement, Zai Lab, which also has offices in San Francisco, will pay Wilmington, Del.-based Incyte $17.5 million up front. Incyte is also eligible to receive up to an additional $60 million in potential development, regulatory and commercial milestones, as well as tiered royalties in the low to mid-20% range.

In return, Zai Lab will receive the rights to develop and exclusively commercialize INCMGA-0012 in hematology and oncology in mainland China, Hong Kong, Macau and Taiwan. Incyte will hold on to the option of assisting in the promotion of INCMGA-0012 in Zai Lab's licensed territories.

Incyte will be responsible for all royalties and pass-through payments to its licensing partner, Macrogenics Inc. It was an exclusive global collaboration and license agreement with Macrogenics that first gave Incyte the global rights to INCMGA-0012 in 2017. (See BioWorld, Oct. 26, 2017.)

"Since then, Incyte has advanced the studies of the compound into multiple tumor types," said Tao Fu, president and chief operating officer of Zai Lab, during an investor conference call to announce the collaboration. "What is important for Zai is that we can leverage this and the data that emerge from it to support development and regulatory approval in China."

Hervé Hoppenot, the CEO of Incyte, stated that Zai Lab would be an important strategic partner in helping to support the expansion of research and development efforts for INCMGA-0012 in greater China.

Tao explained that there were a few particular reasons that made the deal compelling to Zai Lab.

The first is to control what the firm believes is a competitive PD-1 in China. According to Zai Lab, the PD-1 market in China is estimated to be worth up to $14.2 billion by 2030, but only $100 million of that has been covered. Tao said he expects there to be "explosive growth ahead and significant global opportunities as well."

"Anti-PD-1 therapies have become the backbone of many current and future immuno-oncology therapies," said Samantha Du, founder and CEO of Zai Lab. "We believe the addition of a competitive anti-PD-1 like INCMGA-0012 is critical to executing Zai Lab's long-term strategy and unlocking the full potential of our pipeline."

Another reason is the potential for INCMGA-0012 to complement Zai Lab's oncology franchise. It currently consists of synergistic, late-stage assets across four common tumor types in China, namely gastric intestinal, lung, brain and women's cancers.

"We intend to rapidly explore the potential of INCMGA-0012 as both monotherapy and combination therapy with several of our existing pipeline products," said Du.

The company also said that its molecular profile is quite similar to that of Keytruda (pembrolizumab, Merck & Co. Inc.) and Opdivo (nivolumab, Bristol-Myers Squibb Co.).

Tao also mentioned that Macrogenics has been evaluating margetuximab, which Zai Lab has already licensed in China. He said he hopes they can harmonize the studies with Macrogenics' global gastric cancer study in the second half of this year.

In May, Macrogenics announced positive results from a phase III study of margetuximab in patients with HER2-positive metastatic breast cancer who have previously been treated with anti-HER2-targeted therapies. The study met the first sequential primary endpoint of progression-free survival in head-to-head tests with current standard of care (trastuzumab and chemotherapy).

Du said Zai Lab has already been in talks with Chinese regulators about using global data for approval in China.

"We invited regulators from the Chinese CFDA [now known as the National Medical Products Administration] to the analyst-investor meeting in New York earlier. They talked about how since China joined the International Council for Harmonization, it has been pretty open to accepting global data. Of course, there are still bridging studies we have to do. But we can now leverage extensively on our partner's global data," said Du.

Though Du cited it as a good time to license this program, she declined to provide a more specific timeline or expected dates for approval and commercialization as "different indications are in different stages." Zai Lab will work with its partners to solidify its filing strategies.

In response to whether there's a danger in overpaying for candidates, Jonathan Wang, senior vice president and head of business development, said that Zai Lab has been "selective and disciplined in selecting good assets" that match its criteria and licensing strategy.

Incyte's shares (NASDAQ:INCY) closed Wednesday at $86.52 and Zai Lab's shares (NASDAQ:ZLAB) closed at $36.33.

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