Incyte Dives After Epacadostat Fails In Melanoma Regimen With Merck’s Keytruda

Incyte (INCY) plummeted Friday after a regimen that combines its immuno-oncology drug with another from Merck (MRK) failed in a late-stage study, prompting the duo to scrap the program.


Raymond James analyst Reni Benjamin minced his price target on Incyte to 85 from 159, noting other combinations using Incyte’s drug epacadostat with immuno-oncology drugs from Merck, Bristol-Myers Squibb (BMY) and AstraZeneca (AZN) are also likely to be duds.

“In our view, this event taints the entire epacadostat franchise and therefore we are removing all revenues associated with melanoma and other indications from our models,” he wrote in a report to clients. The study “missed big time.”

Shares of Incyte crashed by 22.9% to close at 64.02 on the stock market today. Incyte hit a two-year low, falling as much as 23.2%. Merck, a Dow Jones component, saw shares fall 2.2%, to 53.36. In sympathy, Bristol lost 2.3% to 60.88. AstraZeneca, though, lifted a fraction to 35.42.

Combining Immuno-Oncology Drugs

The regimen failed to improve progression-free survival in melanoma patients, and looked unlikely to have an impact on overall survival, Incyte said in a news release. The combination tested epacadostat, which inhibits the IDO1 enzyme, with Merck’s Keytruda, a PD-1 protein inhibitor.

Data from the study will help contribute to the overall understanding of IDO1 inhibition in combination with a PD-1 checkpoint inhibitor, Incyte Chief Medical Officer Steven Stein said.

“We remain dedicated to transforming the treatment of cancer and will continue to explore how IDO1 inhibition and other novel mechanisms can potentially improve outcomes for patients in need,” he said in a written statement.

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Safety from the combination was in line with previous studies, Incyte said. Patients will move off the regimen “in a manner consistent with the best interests of each patient.”

Epacadostat In Other Studies

Incyte is also testing epacadostat in lung cancer patients in combinations with Merck, Bristol and AstraZeneca. Investigators are also looking at epacadostat regimens in kidney, head-and-neck and bladder cancers.

Analysts had been bullish on Incyte’s chances with epacadostat. Broadly, they theorize that combining immuno-oncology drugs could offer a more potent cancer response.

Bristol has been at the forefront of combining immuno-oncology drugs. Its Opdivo, another PD-1 inhibitor, and Yervoy, which is known as a CTLA-4 inhibitor, are approved to treat melanoma. Bristol is also testing the regimen in other cancers.

Merck, on the other hand, has worked to combine Keytruda with chemotherapy. U.S. regulators approved the combination as a first treatment for advanced lung cancer. Merck is also studying Keytruda with another investigational PD-1 inhibitor called MK-3475.

‘Missed Big Time’

On Friday, analysts were less bullish on Incyte’s shot with epacadostat, but do see some value for Incyte’s other drugs including baricitinib, a rheumatoid arthritis drug with Eli Lilly (LLY), and cancer drug ruxolitinib, branded as Jakafi and Jakavi.

Raymond James’ Benjamin kept his outperform rating on Incyte. He sees Incyte’s Jakafi generating $2.5 billion to $3 billion by 2027. It also has the potential to book significant royalties from baricitinib as well as ruxolitinib outside the U.S., which is also sold by Novartis (NVS) as Jakavi.

RBC analyst Brian Abrahams chopped his price target on Incyte to 75 from 114, completely discounting epacadostat. He still has an outperform rating on the stock. Like Raymond James’ Benjamin, he still sees some value for Jakafi and baricitinib. But he expects Incyte to terminate other epacadostat studies.

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“Only silver lining in our view is that (the) results were unequivocal and should make future decisions clear,” he said in a note. “Based on the data we see very low likelihood any robust signals in biomarker-defined subgroups emerge that would support continuing anything other than studies substantially reduced in scope for exploratory purposes.”


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