Incyte Corp.'s decision to back away from experiments in solid tumors with Janus kinase 1 (JAK1)/JAK2 inhibitor Jakafi (ruxolitinib) was not exactly a surprise but undercuts future profit potential for the drug still selling well in its approved indications and turned investor attention to the indoleamine 2, 3-dioxygenase (IDO) program with epacadostat, bound for phase III trials in melanoma this year.
Questioned about the hefty research and development spending guidance for 2016 of $620 million to $640 million, despite Incyte's solid-tumor retreat with Jakafi, chief financial officer David Gryska said the amount signals "a lot of things going on in our pipeline, a lot of value to be built for shareholders. There is no conservatism in that number," he added during a conference call, and called the outlay "appropriate for where the year is going to be."
Epacadostat will be tried in first-line advanced or metastatic melanoma in combination with Kenilworth, N.J.-based Merck & Co.'s anti-PD-1 therapy Keytruda (pembrolizumab). Phase II, tumor-specific expansion cohorts of epacadostat in combo with anti-PD-1 and anti-PD-L1 checkpoint modulators are under way as well, Incyte said.
The Wilmington, Del.-based firm's stock (NASDAQ:INCY) closed Thursday $65.51, down $6.80, or 9.4 percent, after Incyte disclosed, in the course of unwrapping fourth-quarter and full-year earnings, that solid-tumor indications would no longer be pursued with Jakafi. Approved by the FDA for the treatment of certain people with polycythemia vera (PV) and myelofibrosis (MF), Jakafi reaped sales in the fourth quarter totaling $182 million, 13 percent growth quarter over quarter and 72 percent year over year. Incyte credited a "robust" launch in PV after a late-2014 approval as the main source of growth, and predicted the opportunity would eventually surpass that of MF. Sales and earnings per share totaled above consensus estimates, but Wall Street was distracted by the Jakafi solid-tumor news, and analysts wanted to know more about the plans for epacadostat.
Late last month, investors fretted over Incyte's futility-driven stoppage of a phase II sub-study testing Jakafi and Stivarga (regorafenib, Bayer AG) against metastatic colorectal cancer (CRC), and speculated about what it might mean for a phase III experiment with Jakafi in metastatic pancreatic cancer (mPC) that was expected to yield results this year. Their answer came when Incyte also said Thursday that it will discontinue the JANUS 1 experiment with Jakafi or placebo in combination with capecitabine for the second-line treatment of patients with advanced or mPC. A planned interim analysis showed not enough efficacy to keep going. (See BioWorld Today, Jan. 29, 2016.)
Jefferies analyst Brian Abrahams said in a research report that "complete Jakafi discontinuation in solid tumors is a negative headline, but we believe after the CRC failure it was already written out of expectations." Now that Incyte has given up on solid tumors, prospects are being mulled with the IDO push.
CTI'S PACRITINIB MAYBE 'NOT A DRUG'
An enzyme encoded by the IDO1 gene, IDO has immunosuppressive functions that lead to generating and activating regulatory T-cells, which lets tumors dodge immune surveillance. The idea is that inhibiting those mechanisms with combo therapy could re-establish anti-tumor immunity. Cowen and Co. analyst Eric Schmidt called epacadostat "by far Incyte's most closely watched and valuable pipeline candidate." The compound has phase II efforts enrolling with about 600 patients in 13 tumor types expected to be on the drug by the end of this year. "The systemic inflammation hypothesis behind JAK inhibition was always viewed as unproven," in his view, "and last month's failure [in the CRC study] further highlighted this program's risk to investors. Perhaps it is also not surprising that Jakafi's failure appears to have had a disproportionate impact on Incyte shares in today's 'glass half empty' biotech tape."
Piper Jaffray analyst Joshua Schimmer, in a more sharply worded report, said those at his firm are "disappointed management never provided the insights we had asked for around the internal consistency of the phase II Jakafi pancreatic cancer data, and we're disappointed in ourselves for not being able to mobilize pancreatic/CRC doctor checks fast enough to get ahead of this news, following the CRC phase II study update a few weeks ago." But, he said, "the damage is done, and we are stripping out about $1 billion of Jakafi solid tumor sales in both the U.S. and ex-U.S. and lowering our terminal growth [rate] from 5 percent to 4 percent." At this point, he suggested, Incyte could be subject to a takeover. "While we had not viewed Incyte as an attractive acquisition candidate until now, [the situation] has changed as it is now capable of delivering meaningful growth to an acquirer at what we view as a reasonable price. However, whether [the company] is willing to sell at levels well below its peak is a totally separate question."
The week has been less than good for JAK inhibitors. Incyte competitor CTI Biopharma Inc. said its phase III JAK2/FMS-like tyrosine kinase-3, or FLT3, inhibitor pacritinib for MF has been moved by U.S. regulators from partial to full clinical hold, and Seattle-based CTI has withdrawn the new drug application (NDA) for pacritinib. Jefferies' Abrahams said Incyte probably wasn't sweating pacritinib much anyway. "While we had not seen a significant market share threat to Incyte from pacritinib, if approved it may have attracted some MF patients from Jakafi, particularly those with lower baseline platelet counts," he opined. "Due to less myelosuppressive effects, pacritinib had been positioned as having milder platelet toxicity and as such being more optimal in populations such as those with baseline platelet [counts] at less than 100 [per cubic millimeter]. While 25 percent to 30 percent of MF patients are believed to have platelet counts less than 100, only about half of these (12 percent to 15 percent) are likely have platelet counts between 50 and 100, a population for which Jakafi is used and which could have been at some risk." But even that potential share loss "could have been limited by Jakafi's entrenchment, increasing [physicians' comfort with] starting Jakafi at lower doses, and Jakafi's overall survival benefits," he said.
CTI said data from the PERSIST-2 phase III trial with pacritinib are undergoing review, and next steps won't be known until the process is finished. Regulators pointed out in a letter to the company that interim overall survival results from PERSIST-2 show a detrimental effect on survival like the results from PERSIST-1. Deaths in PERSIST-2 in drug-treated patients included intracranial hemorrhage, cardiac failure and cardiac arrest. Piper Jaffray analyst Charles Duncan conceded that it's "still possible the events are not drug related, or are related to use in a vulnerable population, but there is also a chance this is not a drug. We are therefore stepping to the sidelines with a 'neutral' rating until there is greater clarity on the clinical and regulatory path forward for pacritinib." Shares of CTI (NASDAQ:CTIC) closed Thursday at 32 cents, up 2 cents.
Incyte's position in the JAK pack remains strong. In January, licensor Indianapolis-based Eli Lilly and Co. submitted an NDA for baricitinib in rheumatoid arthritis, triggering a $35 million milestone payment to Incyte. Baricitinib met its primary endpoint in four global phase III studies and, if it's approved, Lilly expects to launch the drug early next year.