Biotech Loses Key Bet to Reignite Growth as Incyte Trial FailsBy
The late-stage trial of Incyte’s epacadostat in combination with Merck & Co.’s Keytruda to treat melanoma was widely viewed as one of the most anticipated events in biotech this year. Its failure removes a key boon that many expected would encourage generalist investors to re-enter the space and also endangers the rally in small- and mid-cap biotech stocks that had so far managed to avoid this year’s slump.
“Broadly speaking everybody knows that large-cap biotech sentiment is horrible,” Oppenheimer analyst Hartaj Singh said by phone. “The Incyte news is very unique to Incyte and its pathway, but it adds to the malaise in the large-cap biotech sector.”
The Nasdaq Biotech Index fell as much as 2 percent Friday with more than three-quarters of its 193 members declining. The index has dropped 4.4 percent on the year, while the broader S&P 500 is down 1.7 percent. Meanwhile, small- and mid-cap biotechs in the Russell 2000 Index have been among the best performers so far in 2018, climbing almost 10 percent as specialist investors focus on stock-specific catalysts.
“The question right now centers on how long the smid-cap space can hold up given specialist interest,” Singh said. “If that holds up, I think we’re good for the year. But if it doesn’t over the next two to four months, this could be a down year for biotech as a whole.”
The Nasdaq Biotech Index has posted two annual declines in the past 15 years -- in 2008 and 2016. The next test for the sector comes April 14-18 with data for new medicines being presented at the American Association for Cancer Research annual meeting.