Astrazeneca plc's failure with the phase III MYSTIC trial in non-small-cell lung cancer (NSCLC) had investors asking what's next, and the $8.5 billion deal with Merck & Co. Inc. around Lynparza (olaparib) wasn't enough to satisfy them.

"The fact that Astrazeneca sold off 50 percent of the opportunity for Lynparza, while economically feasible risk management, raises near-term concerns about the sustainability of the company's cash flow," said Leerink analyst Seamus Fernandez, adding in a research report that he was "surprised [the company] did not already have a major cost restructuring plan" – as opposed to a deal with Kenilworth, N.J.-based Merck – ready in case MYSTIC fizzled. He downgraded his rating on Astrazeneca to "market perform" and knocked down the price target to $31 from $36.

Results on progression-free survival (PFS) from the study with checkpoint inhibitor Imfinzi (durvalumab) when paired with the company's CTLA-4 inhibitor, tremelimumab, vs. platinum-based standard-of-care (SOC) chemotherapy in previously untreated patients with metastatic first-line NSCLC showed the combo missed the primary endpoint of improving PFS compared to SOC in patients whose tumors express PD-L1 on 25 percent or more of their cancer cells. Shares of London-based Astrazeneca (NYSE:AZN) closed Thursday at $28.88, down $5.06 or 14.9 percent, after trading as low as $28.43.

As a secondary endpoint, although not formally tested, Imfinzi monotherapy would not have met the pre-specified threshold of PFS benefit over SOC, either, the company said. The MYSTIC trial will keep going in order to measure two more primary endpoints: overall survival (OS) for Imfinzi monotherapy and OS for the Imfinzi plus tremelimumab combo. Final OS data from both are expected during the first half of next year.

Meanwhile, the pact with Merck brings $1.6 billion up front, $750 million for certain license options and up to $6.15 billion more if regulatory and sales milestones are met. Development and commercialization costs will be shared for Astrazeneca's oral poly ADP ribose polymerase (PARP) inhibitor Lynparza as well as experimental MEK inhibitor selumetinib as a monotherapy plus various non-PD-L1/PD-1 combo therapy opportunities. Gross profits from Lynparza and selumetinib product sales will be split, too.

Merck has agreed to fund all development and commercialization costs of its cancer drug, Keytruda (pembrolizumab), when combined with Lynparza or selumetinib, while Astrazeneca will pay those costs with regard to combos that involve its urothelial carcinoma drug, Imfinzi, and Lynparza. Merck expects to book its share of product sales of Lynparza and selumetinib, net of commercialization costs, as alliance revenue and its share of development costs associated with the collaboration will be recorded as part of its R&D payouts. Shares of Merck (NYSE:MRK) ended Thursday at $63.69, up $1.89.

"Nothing is preordained in immuno-oncology," intoned Jefferies analyst Jeffery Holford, as pundits tried to sort out what the MYSTIC failure – and, for that matter, the Merck deal – might mean for other players. He said shares of New York-based Bristol-Myers Squibb Co. (BMS) are "primed to take a hit" as a result of Astrazeneca's misfortune, but they shouldn't. "If BMS moves lower today, it is the same risk/reward on CM-227, but at a lower price," hence a smart buy, he wrote in a report. His reference is to the phase III study known as Checkmate 227, testing BMS' Opdivo (nivolumab), or Opdivo plus BMS' Yervoy (ipilimumab), or Opdivo plus platinum-doublet chemo compared to chemo alone in stage IV NSCLC. The study is set to enroll about 2,220 patients, with an estimated primary completion date of next January. In Holford's view, MYSTIC's outcome says little about the BMS trial's odds because of "differences in molecules, patients, study/statistical designs, etc." (See BioWorld Today, Aug. 8, 2016.)

Leerink's Fernandez had another perspective. "While there are differences in trial design between MYSTIC and CM-227, the inability for Imfinzi plus tremelimumab to demonstrate a benefit in patients with relatively high PD-L1 expression sharply reduces the chances of success for BMS' combo in lung cancer," he said, adding that the flameout "also increases the importance of success in the chemo-combo arms of the -227 study, and other monotherapy and combination studies of Opdivo."

Shares of the company (NYSE:BMY) closed Thursday at $54.24, down $1.74.

Tagrisso news, too

The deal for Lynparza cast into the speculative limelight another independent, late-stage PARP developer as a takeout prospect. Clovis Oncology Inc., of Boulder, Colo., has Rubraca (rucaparib) for ovarian cancer.

Last month, the company said top-line data from the confirmatory phase III ARIEL3 trial hit the primary endpoint of improved PFS in each of three populations studied. PFS was improved in the rucaparib group compared with placebo by blinded independent central review, too – a key secondary endpoint. The company said it would submit a supplemental NDA within the next four months for a second-line and later maintenance treatment indication for all women with platinum-sensitive ovarian cancer who have responded to their most recent platinum therapy. It's approved to treat germline and somatic BRCA-mutated tumors. (See BioWorld Today, Aug. 22, 2016.)

Leerink analyst Michael Schmidt wrote in a report that, "while much of the upside for Lynparza seems tied to contingent payments, only very modest probability-adjusting (less than 10 percent) of licensing/milestone payments in addition to the $3.2 billion cash valuation for Lynparza gets you above Clovis' current market valuation of $4.3 billion," which means "a theoretically more competitive takeout situation" for the company.

Also Thursday, Waltham, Mass.-based Tesaro Inc. disclosed a licensing deal with Takeda Pharmaceutical Co. Ltd., of Tokyo, for the commercialization and clinical development of PARP inhibitor Zejula (niraparib). The terms involve moving niraparib along for the treatment of all tumor types in Japan, and all tumor types excluding prostate cancer in South Korea, Taiwan, Russia and Australia. Tesaro gets $100 million up front and as much as $240 million in milestone payments. Jefferies analyst Eun Yang said the Takeda tie-up "indicates an unlikely near-term buyout of Tesaro," and added that she found "interesting" the fact that Merck, the original developer of Zejula, put its PARP chips on Astrazeneca rather than Tesaro. (See BioWorld Today, March 28, 2017.)

MYSTIC's flop means less near-term competition for others in NSCLC, which is "incrementally positive" for the likes of Wilmington, Del.-based Incyte Corp., said Leerink analyst Michael Schmidt. At the American Society of Clinical Oncology meeting last month in Chicago, Incyte offered updated data from the ongoing phase I/II ECHO-204 trial evaluating epacadostat, an oral selective IDO1 enzyme inhibitor, in combination with Opdivo in multiple advanced solid tumors. "Much of the epacadostat opportunity depends on the drug's potential as part of anti-PD1 combinations in NSCLC," he wrote in a report.

Incyte and partners BMS and Merck plan to start four phase III trials in the indication this year and early next year, studying epacadostat in combo with either Opdivo or Keytruda across the spectrum of PD-L1 expression. "The next main key de-risking event for epacadostat will be randomized-controlled phase III results in first-line melanoma in early 2018," Schmidt wrote.

Astrazeneca rolled out a third news item Thursday that was overshadowed by the other two. The phase III FLAURA trial turned up a statistically significant and clinically meaningful PFS benefit with the approved epidermal growth factor receptor (EGFR) inhibitor Tagrisso (osimertinib) compared to current first-line SOC treatment (erlotinib [Tarceva, Roche Holding AG/Astellas Pharma Inc.] or gefitinib [Iressa, Astrazeneca plc]) in previously untreated patients with locally advanced or metastatic EGFR mutation-positive NSCLC. In late March, the FDA gave full approval to the compound for patients with EGFR T790M mutation-positive NSCLC whose disease has progressed on or after EGFR tyrosine kinase inhibitor therapy. The agency had granted accelerated approval in 2015. Leerink's Fernandez called the Tagrisso results positive but anticipated. (See BioWorld Today, Nov. 16, 2015.)

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