Incyte falls victim to the biotech bear market

Since the start of this year’s JP Morgan investor conference it almost seems like biotech companies have gone into radio silence, presumably fearful of releasing any news that might be perceived as excessively negative by panicky investors.

Yesterday’s after-market announcement by Incyte shows that they might well be on to something. The group’s sole marketed asset, Jakafi, has failed in colorectal cancer, an additional use that had barely featured in sellside models; nevertheless the stock opened off 10% this morning – equivalent to the loss of $1.4bn of market cap.

Leerink analysts were quick to fight the fire, calling the failure and Incyte’s resulting weakness a “buying opportunity”, and pointing to other indications that remain in play. Indeed, at the current levels they opined that the stock was pricing in hardly any contribution for Jakafi in solid tumour indications.

However, this ignores the new market reality, which is that, after four years of a bull run, any setback has a disproportionate effect and causes swift deflation of the bubble of enthusiasm on top of which biotech had sat until recently.

Unusual combo

The Jakafi trial in question had recruited 373 patients with relapsed or refractory metastatic colorectal cancer. It was unusual in adding Jakafi on top of Bayer’s Stivarga – hardly a mainstay colorectal cancer treatment – and comparing this against Stivarga plus placebo.

Patients were stratified according to their levels of C-reactive protein (CRP), and interim analysis of those with high CRP showed insufficient efficacy, leading to discontinuation for futility of this sub-study.

EvaluatePharma’s sellside consensus estimate supports the opinion that the market selloff seems overdone: Jakafi sales are expected to reach $1.6bn in 2020, comprising hardly any contribution from colorectal cancer. Instead, its two approved haematological uses of myelofibrosis and polycythaemia vera will bring in $618m and $533m respectively, analysts reckon, with pancreatic cancer yielding $115m.

That said, Jakafi has some way to go to meet these expectations; when Incyte reports 2015 financials on February 11 analysts are expecting the drug to post revenue of $567m in what will have been its fourth full year on the US market.

It is undeniable that Jakafi in general has not quite lived up to its initial billing, and even in polycythaemia vera approval was based on underwhelming clinical data (Jakafi results no Relief to Incyte, July 24, 2014). This makes the importance of solid tumour studies, and what Incyte hopes will be its second approved drug, baricitinib, that much more important.

Leerink pointed to four other key Jakafi trials: two phase III studies in second-line pancreatic cancer, and phase II tests in Her2-negative breast cancer and NSCLC. Three of these should render results this year.

Since the start of the biotech bull market four years ago Incyte has climbed 333%, comfortably outperforming the Nasdaq biotech index. Investors should consider that performance, though the conclusion that some air just had to escape the bubble is unlikely to provide much solace.

Indication Study Design Trial ID Data due
2L pancreatic cancer Janus-1 (ph III) 318 pts, Xeloda combo NCT02117479 Apr 2016
2L pancreatic cancer Janus-2 (ph III) 217 pts, Xeloda combo NCT02119663 Jun 2017
Her2-ve breast cancer Ph II 148 pts, Xeloda combo NCT02120417 Jun 2016
Non-squamous NSCLC Ph II 156 pts, pemetrexed + cisplatin combo NCT02119650 2016
R/r colorectal cancer Ph II 373 pts, Stivarga combo NCT02119676 failed

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter

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