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In today’s news, Incyte’s (INCY) immuno-oncology IDO1 inhibitor product Epacadostat in combination with Merck’s immuno-oncology product Keytruda® did not meet the endpoints of the trial in patients with unresectable or metastatic melanoma. The stock was subjected to a selloff – a market’s reaction pattern that occurs whenever negative news comes out of experimentation without consideration of the extent of their impact.

A serious question to ask now would be: How bad is the bad news in this case?

Although the failure occurred by the combination of Merck’s drug Keytruda® with Incyte’s drug Epacadostat, it is evident that nobody would conclude that Keytruda is a failure. Keytruda has proven itself in many trials and has already been granted FDA and EU approvals for several cancers. But no drug should be expected to treat all cancers. That’s why the regulatory agencies ask for new trials to be conducted for each cancer the drug is meant to approve.

With regard to Incyte’s product Epacadostat, investors rushed to sell the stock without doing any new diligence towards considering Incyte’s technologies, revenues, income, and cash. Without putting any value on the firm’s pipeline products. They did not assess Epacadostat mode of action, its target and the validity of its target, which evaluates the drug’s potential for treating cancers.

Slashing the price of Incyte’s stock by causing a selloff, investors’ minds must have considered Epacadostat no better than a total failure. The question becomes:  

Is Epacadostat really a total failure? Let’s see.

 EPACADOSTAT TARGET

Designed and developed by Incyte, Epacadostat is an investigational drug described as highly potent and selective oral inhibitor of indoleamine 2,3-dioxygenase1 (IDO1) enzyme. This enzyme is one of several immune modulators involved in cancer immune escape by suppressing the T cell function, hence, helping cancer cells evade the immune system cells’ surveillance.

IDO1 is, indeed, validated as an immune system suppressor. By inhibiting this enzyme, Epacadostat frees the immune system T cells to attack cancers. This successful outcome, however, does not usually occur in all cancer, but in some of them. That’s why even when the drug succeeds in shrinking cancer, or even curing it, the FDA demands that new clinical trials should be done before using the product on other cancers.

Conclusion: To be used on various cancers, approved, or investigational products should enter clinical trials alone, or in combinations with different other products. Some of these trials will succeed while others will fail, but the successful outcome of more than one cancers would stretch the market of the drug in favor of the product developer and obviously of the patients.

  EPACADOSTAT IN CLINICAL STUDIES

Epacadostat is in 9 clinical trials most of them are in final pivotal trials for a variety of cancers and in combination with a variety of checkpoint inhibitors belonging to various firms. In trials other than the one that failed today, the combination of Epacadostat with immune checkpoint inhibitors has shown proof-of-concept and demonstrated improved response rates compared with using the immune checkpoint inhibitors alone. The trials are being conducted as follows:

Epacadostat plus Keytruda (pembrolizumab): For bladder cancer, non-small cell lung cancer, renal cell carcinoma and carcinoma of the head and neck.

Epacadostat plus (Obdivo (nivolumab): For non-small cell lung cancer, renal cell carcinoma and carcinoma of the head and neck.

Epacadostat plus durvalumab: For non-small cell lung cancer.

And several trials for Epacadostat as monotherapy for solid tumors and combination therapies for other cancers.  

 Bottom line: It is fair to say that Epacadostat is far from being condemned.

INCYTE APPROVED PRODUCTS

 Incyte has three approved products:

 Jakafi (ruxolitinib): A JACK1/JACK 2 inhibitor approved for Myelofibrosis and Polycythemia Vera. Both are approved in the U.S.

Iclusig (ponatinib): A BCR-ABL Approved in Europe for CML, Ph+ ALL

 Olumiant (baricitinib): Approved in Europe for rheumatoid arthritis.   

 INCYTE PIPELINE

Incyte’s pipeline is one of the deepest, wealthiest promising pipelines. The firm has 18 products in 38 clinical trials. Most of these products are designed or cancer, inflammatory and autoimmune diseases.

The pipeline contains targeted therapies with 9 products in around 17 clinical trials; Immunotherapy with 7 products in 16 clinical trials; and partnered products with 2 drugs in 5 trials.

 Prohost Observations

2018 Upcoming Catalysts

– In recent news, Phase 2 REACH1 clinical trial evaluating Jakafi for steroid-refractory acute graft-versus-host disease (“GVHD”) has completed enrolment. The results are expected in the first half of 2018. If the results of the trial are positive Incyte intends to file a supplemental New Drug Application (sNDA) to the FDA for the approval of Jakafi’s for GVHD in the United States.

The FDA appointed independent committee will review Incyte’s New Drug Application (NDA) for baricitinib for rheumatoid arthritis. As you know, in February 2017, the product has been approved in Europe by the trade name Olumiant for rheumatoid arthritis in adult patients who did not respond to disease-modifying anti-rheumatic drugs or demonstrated intolerance to one or more of them. A voting in favor of approval could rally the stock.

– As we wrote above, Epacadostat is in several clinical trials with checkpoint inhibitors and other drugs. Any positive results that come out of these trials could tremendously boost INCY.

 – Incyte expects Jakafi revenues in the range $1.3 billion – $1.4 billion. Adding Iclusig’s revenues, which are expected to be between $80-$85 million, Incyte’s revenues could reach around $1,5 Billion. Adding these revenues to the possible upcoming good news from clinical trials good to all other possibilities of successes and failures in clinical trials, we believe that Incyte’s current market cap., which is around $13.56 B puts it in the oversold territory.

The economy is an OX and the stock market is nervous and eroding the prices of fantastic firms’ stocks. A smart thing to do now is to add undervalued firms’ stocks to our shopping bags.   

Prohost Forward-Looking Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives. Also, investing in stocks includes certain risks. Please consult with your own financial adviser before making an investment.

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