Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Technology isn't the only industry where companies loudly accuse each other of IP theft. Biotech sees its share of action, too.

Incyte Corp., for example, claims a former employee stole information that helped Flexus Biosciences Inc. develop a competitor to its heavily hyped cancer drug. Bristol-Myers Squibb & Co. acquired Flexus in 2015 and is working hard on that rival medicine. But Incyte has sued Flexus' founders, and the case is headed to trial, reports the Delaware News Journal. But even if Incyte succeeds in its lawsuit, robust competition in this space is inevitable.

Twin Peaks
Incyte's shares have soared as investors have gotten increasingly excited about one of its cancer drug candidates
Source: Bloomberg

There's mounting evidence that Incyte's drug epacadostat -- a so-called IDO inhibitor -- boosts the effect of immune-boosting cancer medicines called PD1/L1 inhibitors, a higly lucrative drug class. The drug's prospects have propelled Incyte to a giddy $26 billion valuation.

Incyte is currently waiting on late-stage data from a trial of its drug in combination with Merck & Co. Inc.'s Keytruda in treating melanoma patients. The drug is being tested in concert with three other PD1/L1 inhibitors on the market, too.

But even as they're working with Incyte's IDO inhibitor, drugmakers are also chasing it.

Bristol-Myers has that Flexus drug. Merck bought IOmet Pharma Ltd. for its IDO work in 2016. Roche Holding AG gave up on a NewLink Genetics Corp. IDO inhibitor earlier this year after mediocre results. But it is still partnered with the company on early stage research and bought access to a different drug in 2015. And Pfizer has a licensed IDO inhibitor in an early stage trial. NewLink is independently testing its drug with others from Merck and Bristol.

Incyte has a significant lead, but the hunt is on.

If Incyte's drug lives up to the hype, then rivals will work even harder on in-house alternatives. It isn't just about the $4 billion in peak revenue estimates for Incyte's drug -- this is about pricing power. PD1/L1 inhibitors cost $156,000 a year. Add Incyte's sure-to-be-costly medicine to that, and you've got a very expensive treatment plan. Any company with an in-house IDO inhibitor will be able to undercut other drugmakers on price.

Incyte's valuation has come down from some past giddy heights, but it still trades at a premium to the already frothy NBI
Blended forward two year estimates

Incyte's lawsuit is unlikely to alter this landscape. Two of its claims have already been dismissed. Even if the lawsuit is successful -- a Delaware Superior Court jury trial is tentatively set for October 2018 --  it's likely to drag on for years and probably won't delay the development of Bristol's drug or stop it from getting to market.

The more probable upside case for Incyte is a settlement or royalty payments on future sales of Bristol's drugs. Any such outcome would probably be meager compensation for the cost of a rival drug hitting the market. Bristol is a particularly threatening competitor, but there are plenty of others behind it. 

If Incyte believes its former employee stole information, it's right to fight. But the stakes of its suit pale in comparison to the competitive challenges ahead. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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