Ten days after its JAK1 inhibitor, itacitinib, failed a phase III trial in acute graft-vs.-host-disease (GVHD), Incyte Corp. has finalized a deal that could provide an alternative growth path. It is paying Morphosys AG $750 million up front, investing $150 million in its stock and is on the hook for up to $1.1 billion in milestones for a 50% interest in U.S. rights to the CD19-targeting antibody tafasitamab (MOR-208) and for 100% of the rights in all other territories. Planegg, Germany-based Morphosys will receive tiered royalties, ranging from a midteens to a mid-twenties percentage of net ex-U.S. sales.
Tafasitamab, which has breakthrough therapy designation, could gain U.S. approval in relapsing-remitting diffuse large B-cell lymphoma (r/r DLBCL) by the middle of this year. Morphosys completed a BLA submission on Dec. 30 and expects to hear whether the file has been accepted for review by the end of February. A European filing has been penciled in for mid-2020.
Closing the deal is the first major milestone in Jean-Paul Kress’s leadership of Morphosys. He replaced longtime CEO – and company co-founder – Simon Moroney at the beginning of September. The fit between the two companies was an important factor in Incyte getting the deal after a very competitive process, Kress said on an analyst call Monday. “We didn’t let anyone who could be interested or interesting out of the process, and Incyte won the prize,” he said. The dedication to the asset and to the therapeutic area were key considerations – Morphosys explicitly wanted to avoid signing up with any partner with a potential internal competitor. “Beyond that, I think the other thing is they have a very nice balance of commercial and development acumen, which we really value very much.”
Incyte has seven years of commercial experience in the U.S. hematology/oncology space plus four years operating in the European market, CEO Hervé Hoppenot said on the call. “It’s clear that we will dedicate resources to this project,” he said. Much of the commercial infrastructure is already in place. SVB Leerink analyst Geoffrey Porges noted that Morphosys had obtained “generous financial terms” but suggested there is commercial risk attached to the alliance. “Incyte’s limited commercial experience and resources in the ex-U.S. markets could raise some concerns given the highly competitive hematology-oncology category and the immediate challenge of going toe-to-toe with Roche in those markets,” he wrote in an investor note. Basel, Switzerland-based Roche Holding AG gained FDA approval last year in r/r DLBCL for Polivy (polatuzumab vedotin-piiq), a first-in-class CD79b-targeting antibody-drug conjugate administered in combination with Rituxan (rituximab) and bendamustine. Some investors concurred. Shares in Morphosys (Frankfurt:MOR) closed Monday at €123.60 (US$137.72) down 9% on their previous close, after initially trading to a one-year high of €146.30.
Another obvious competitor is Lausanne, Switzerland-based ADC Therapeutics SA, which is targeting CD19 with an antibody-drug conjugate (ADC) rather than a naked antibody. Last week, it reported that its agent, loncastuximab tesirine (ADCT-402), achieved a 45.5% overall response rate (ORR), including a 20% complete response rate (CRR), in a pivotal monotherapy phase II trial in 145 patients with r/r DLBCL. It is on track for a BLA filing during the third quarter and, following an accelerated review, hopes to launch by the second quarter of 2021. Amgen Inc.’s bispecific fragment-antibody-based Bite drug, Blincyto (blinatumomab), also targets CD19, as well as CD3. It is approved in B-cell precursor acute lymphoblastic leukemia only, but Thousand Oaks, Calif.-based Amgen is testing a successor, AMG-562 (CD19 x CD3), which has an extended half-life, in non-Hodgkin lymphoma, which includes DLBCL and follicular lymphoma.
Ambitious agenda for tafasitimab
The U.S. filing is based on data from an open-label, single-arm trial, L-Mind, which evaluated a combination of tafasitamab and Revlimid (lenalidomide) in 81 patients who were ineligible for high-dose chemotherapy and subsequent autologous stem cell transplantation. The ORR was 67.1%, including a CRR of 39.5% among 80 evaluable patients. Overall survival was not reached at the time of the analysis. Although the study was not controlled, Morphosys also conducted a retrospective, real-world analysis of similar patients on Revlimid only, in order to capture the single-agent activity of tafasitamab. Those in the Re-Mind study attained an ORR of 34.2%, including a CRR of 11.8%. Overall survival was 9.3 months.
The drug’s lead indication is part of a much wider and more ambitious agenda in which tafasitamab is being tested across various B-cell malignancies and in various combinations. The terms of the deal stipulate the division of labor – and of costs – between the two partners.
Wilmington, Del.-based Incyte will pay for 55% of the cost of U.S. and global trials, with Morphosys picking up the remainder. Incyte will also pay 100% of the costs for country-specific trials outside of the U.S., including China and Japan. In addition to the present indication, the partners will also develop tafasitamab in first-line DLBCL, follicular lymphoma, marginal zone lymphoma and chronic lymphocytic leukemia (CLL). Incyte will also conduct combination studies of its investigational PI3K-delta inhibitor, parsaclisib, and tafasitamab in r/r B-cell malignancies. Incyte will lead on potential registrational studies in CLL and a phase III trial in follicular lymphoma and marginal zone lymphoma. Morphosys retains responsibility for its ongoing trials of tafasitamab in non-Hodgkin lymphoma, CLL, r/r DLBCL and first-line DLBCL.
“It’s very important to realize that we believe – frankly, with a lot of input from the scientific community around us – that inhibition of CD19 is one of the key mechanisms that will transform the treatment of B-cell malignancies,” Hoppenot said.
The timing of the deal indicates Incyte’s appetite for risk. Although there is little doubt that tafasitamab is an active agent, the BLA that is critical to its short-term prospects has yet to be formally accepted for review. In addition, Morphosys has not yet reported data from any large-scale randomized controlled trial of tafasitamab. A phase III head-to-head study in r/r DLBCL, dubbed B-Mind, which pits tafasitamab plus bendamustine against Rituxan (rituximab) plus bendamustine, will not read out until the first quarter of 2022. It recently came through a futility analysis, but the independent data monitoring committee recommended that enrollment should be increased from the original target of 330 to 450 to improve its statistical power.
Tafasitamab is, initially at least, aimed at patients who are too frail or are otherwise ineligible for CD19-directed CAR T-cell therapies. But in the longer term, Morphosys aims to target first-line patients as well, and it recently reported at the 2019 American Society for Hematology (ASH) meeting that tafasitamab does not interfere with subsequent CAR T therapy. The antibody is Fc-engineered to enhance its antibody-dependent cell-mediated cellular cytotoxicity and antibody-dependent cellular phagocytosis activities. Unusually for Morphosys, tafasitamab is not the product of its in-house discovery research. It in-licensed the molecule, originally designated XMAB-5574, from Monrovia, Calif.-based Xencor Inc. in 2010. The partners amended their license agreement two years later – it is worth up to $315 million in up-front and milestone payments and also includes sales royalties in the mid-single-digit to low-double-digit percentage range.
For Incyte, “the deal is a boost given the recent setback for itacitinib,” Mizuho Securities analyst Mara Goldstein wrote in an investor note, “as well as an incremental step toward broader revenue diversification for the company.” How much revenue could be involved is currently unclear, however. “We do not have a revenue forecast for tafasitamab, but note that r/r DLBCL and other B-cell malignancies could certainly support a drug with revenue potential [of more than $1 billion],” Goldstein noted. “The question of how quickly tafasitamab can ramp is one that we do not yet have an answer for as we note, even with good efficacy data, the competitive landscape could play a role in how quickly the drug captures share,” she concluded.