The main short term catalyst for Incyte Pharmaceuticals (Nasdaq: INCY) is a PDUFA date of Dec 3 for its JAK1/JAK2 inhibitor ruxolinitib -ruxo for short. This drug met its primary and secondary endpoints in two pivotal Phase III trials named COMFORT I and COMFORT II. In both trials patients treated in the ruxo arm experienced significant spleen reduction as well as clinically meaningful improvements of symptoms and quality of life. These trials were conducted under a Special Protocol Assessment with the FDA.

In addition, Incyte will also be presenting data at the ASH meeting that will be held on Dec10-13. Specifically, Incyte will present data in several sessions that will allow investors to get a sense of the clinical benefits associated with ruxo therapy. Among the most important, investors will find sessions that tackle the overall survival advantage of ruxo over placebo in the COMFORT-I trial and over a historical control group, sessions that address JAK2 mutations that confer resistance to ruxo treatment and sessions focused on the long-term outcomes from the MD Anderson Cancer Center Phase I/II trials.

Ruxo is not a cure for myelofibrosis, but rather provides some clinical benefits that are likely to be perceived as a competitive advantage over hydroxyurea, the current standard of care for myeloproliferative disorders (MPDs). Hydroxyurea was the most commonly used drug in the best available therapy arm in the COMFORT II trial. Besides the high reduction in spleen size, ruxo has demonstrated it has a benefit on survival. Also, rates of thrombocytopenia decreased dramatically in a dose reduction study while maintaining the same efficacy as higher doses. On the contrary, hydroxyurea’s severe adverse events include bone marrow depression, gastrointestinal complications, and dermatological reactions.

But not everything is bright for Incyte, on Oct 13, a paper published in the New England Journal of Medicine, titled “Long-term outcome of Treatment with Ruxolitinib in Myelofibrosis” drove Incyte’s shares down almost 7% on twice the usual volume. The stock price has suffered a steady sell-off until now. In his article, Dr Tefferi discusses the long-term effect of the drug observed in a subset of 51 patients of a Phase I/II trial that involved 153 patients in total and was conducted at the Mayo Clinic. The article points out problems with adverse events, mild activity not always durable and toxicity. So, the question is: how can this impact on ruxo’s approval prospects? well, on the one hand, ruxo passed the two Phase III trials successfully meeting all primary and secondary endpoints and demonstrating activity and durable response while maintaining a moderate rate of adverse events. Moreover, the studies were conducted under a SPA that sets the basis for approval, although it’s not a guarantee for it. Since some studies have found mutations that impair the binding between the mutated JAK2 and ruxo, it’d be interesting to have more information on the genetic profile of that subset of patients.

From a commercial viewpoint, ruxo is the most advanced JAK2 inhibitor in the myelofibrosis space. The rest of the drugs are undergoing clinical trials in Phase II or early Phase I/II e.g. YMI’s CYT-387 (investors are eagerly waiting to see updated data on the anemia effect of its drug at the ASH meeting in a poster session that’ll be held on Mon, Dec 12 from 6-8pm), S*Bio’s Pacritinib (it’ll begin Phase III trials in 1H 2012), Sanofi’s TG-101348, Bristol Mayers Squibb’s BMS-911543 that just began Phase I/II trials in June 2011 or Nippon Shinyaku’s NS-018 that started Phase I/II clincal trials in August 2011. None of these drugs are expected to directly compete with Ruxo near-term since they’re several years behind, although I’d keep an eye on CYT-387 and its effect on anemia.

In addition to this, ruxo is partnered with Novartis, which in November 2009 acquired ex-US rights to the drug and the MET inhibitor INCB28060, for $150 million upfront and up to $1.1 billion in potential milestone payments. According to Thomson Pharma, analysts’ consensus is that Ruxo sales could reach $592 million for Incyte and $357 million for Novartis by 2015.

Incyte’s pipeline doesn’t end there, ruxo is being tested for other MPDs such as polycitemia vera (PV) in phase III clinical trials and essential trombocitopenia (ET) in Phase II trials. So far, the drug has performed very well in both indications and could be a candidate to treat those patients refractory to hydroxyurea that account for 20% of the approximately 80,000 to 100,000 patients of PV and 10% of the 60,000 to 80,000 ET patients in the US. At a price of $50,000, the market opportunity for these indications would be between $1.2bn and $1.4bn.

It’s worth noting that Incyte is pursuing other indications for ruxo, particularly in  inflammatory diseases. It’s testing a topical formulation of the drug in psoriasis and rheumatoid arthritis (this one partnered with Lilly in a pretty lucrative deal for Incyte). Since IL12 and IL23, among other pro-inflammatory cytokines, signal through JAK 1 and JAK2, ruxo might elicit a similar response to that of Johnson and Johnson’s highly effective psoriasis drug Stelara. It’ll be interesting to see how the drug does as it makes its way to more advanced clinical studies.

Conclusion: in light of the data presented from both pivotal Phase III trials I think there are high chances that ruxolitinib gets a market green light on Dec 3. Also, in my opinion, Incyte’s current valuation represents a good opportunity for investors according to its commercial potential.

Disclosure: I’m long on Incyte.

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