Combination Frustration

Incyte Cancer Drug Flop Is Costly and Likely to Be Duplicated

Companies fear ceding a sales-expanding breakthrough to rivals, so they are pursuing the same elusive combination cancer strategy.
INCYTE CORP
-0.29
At Closing, April 23th
68.14 USD
BRISTOL-MYERS SQUIBB CO
+0.06
As of 9:43 AM EDT
50.95 USD

A failed drug trial can derail a company or ruin a fund's year, but the flop on Friday of a heavily scrutinized trial of Incyte Corp.'s epacadostat and Merck & Co. Inc.'s blockbuster Keytruda in melanoma patients could have far broader implications. 

Spin Cycle

The potential of a cancer drug sent Incyte shares to dizzying heights. Its failure prompted a bruising fall.

Source: Bloomberg

This trial was one of the first key tests of an idea that has driven billions of dollars worth of research spending -- that the effectiveness of so-called PD-1/L1 cancer drugs like Keytruda and Bristol-Myers Squibb & Co.'s Opdivo could be bolstered with the addition of other drugs. PD-1/L1 drugs help the immune system recognize tumors and can be highly effective -- but only in a subset of cancers and patients.

Adding drugs that supercharge the immune system differently could expand the reach of PD-1/L1's and increase sales by billions of dollars. Incyte's failure is a blow to that idea, or at the very least to the way it is being pursued.

Epacadostat flopped when used as a solo treatment, but it attracted a lot of hype based on very early combination results. Merck and several competitors have dived headfirst into additional expensive R&D. At least 30 active trials are underway with Incyte's drug in different cancers, and additional tests are using other medicines in the same class. At one point last year, analysts projected that epacadostat would generate $3 billion in revenue in 2022. They now expect $600 million, and that's most likely too optimistic.   

Don't Believe the Hype

Sales expectations for Incyte's epacadostat have plummeted

Source: Bloomberg

Incyte's drug was most likely to succeed in melanoma patients, and Keytruda is a premium partner. Yet the combination flat-out didn't work. The data will be sliced and diced to find a possible path forward, but this bodes poorly for tests in other cancers that are based on even flimsier evidence. 

This is just one example of a wider epidemic of often duplicative and risky combination trials.

Five PD-1/L1 drugs are on the market 1 and more are on the way. The first five alone are expected to generate more than $20 billion in combined sales in 2020. 

Companies fear ceding a sales-expanding breakthrough to rivals, so they have been glomming on to what competitors are doing. It takes time to recruit patients for studies -- especially when firms are doing similar research -- and to actually run them. If a company doesn't start early, it will be left in the dust. And in search of differentiation, they are running a number of highly speculative trials. The Cancer Research Institute published a report last year that said 469 trials were launched in 2017 involving the Keytruda family of drugs, many of them combinations. There are 251 different studies testing just one combination approach, according to the report. 

Rather than being tested against older chemotherapies, drug combinations will have to beat drugs like Keytruda in trials to be adopted broadly. That's a high bar. More Incyte-like failures are likely, and they are going to be costly and have similar contagion. Shares in NewLink Genetics Corp., which is developing direct rivals to epacadostat, fell 42 percent on Friday. Nektar Therapeutics, a company with a different feverishly hyped combination candidate, fell more than 7 percent. The five companies with PD1-L1 drugs on the market have boosted annual R&D spending by nearly $8 billion since 2013. 

Spending Money to Make Money?

The five firms that have been leading the way on immune-boosting cancer drugs have substantially boosted their research spending

Source: Bloomberg

Includes Merck, Bristol-Myers Squibb, AstraZeneca, Pfizer, and Roche

Incyte should serve as a sign that it's past time for investors to rein in combination expectations and for drug developers to restrain their more monomaniacal tendencies. But given the amount of upside drugmakers see in this market, it most will likely take a few more bruising setbacks to actually drive the lesson home. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. Keytruda, Opdivo, Roche Holding AG's Tecentriq, Pfizer Inc./Merck KGaA's Bavencio, and AstraZeneca Plc's Imfinzi.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net

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