Incyte Set for a Great Year in 2011?

Incyte Corporation $INCY looks set for an exciting year in 2011.Incyte has a few catalysts which, I believe, could lead to a substantial re-rating. I bought a small position, but would caution that the company’s outcomes will be guided by its lead compound. Any failure to execute on this program will hurt Incyte significantly. On balance, I think it is worth buying.

Incyte’s Pipeline in 2011

 Incyte could end the year with its first drug on the market with INCB18424. This drug is the co’s lead compound in clinical trials and, is a JAK-2 inhibitor which is currently in Phase III for myelofibrosis. Initial results were given in December 2010 and were positive, which suggests that if Incyte announce good final results by Q2 2011, than INCB18424 could get FDA approval by year end. In fact, this looks set to be the first approved JAK inhibitor for any indication. Incyte also has this drug in Phase II trials for Polycythemia Vera and Essential Thrombocythemia.

The second catalyst will be the results of the phase II trial with another JAK inhibitor, INCB28050, which is in clinical trials for Rheumatoid Arthritis. Incyte recently gave excellent Phase IIa results and, moved into Phase IIb trials in late 2010. I have featured this, amongst others, in an article on drugs in clinical trials for Rheumatoid Arthritis, found here

A third catalyst could be a partnership deal for INCB13739, which is an 11beta-HSD1 inhibitor. It gave good Phase II results in 2009 in reducing HbA1c, blood glucose, insulin resistance and cholesterol levels in patients with Type 2 Diabetes. Incyte are looking for a partner but as yet, have no deal.

Finally, Incyte has a few programs in early stage clinical trials including a Sheddase inhibitor INCB7839 for breast cancer.

INCB18424 a JAK-2 Inhibitor in Phase III Trials for Myelofibrosis

Incyte is partnered with Novartis for this drug. However, there are another two JAK inhibitors that, according to the principal investigator for both, Mayo Clinic, are producing significant responses in myelofibrosis. The first drug is YM Bioscience’s CTY387. According to Ayalew Tefferi of Mayo Clinic…

‘CYT387 not only works to reduce spleen size and to help with other symptoms, but it is the first in its class to show a significant response rate in anemia in myelofibrosis patients’

…and this anemia response affect, would appear to give YM Bioscience an edge. However, I would caution against getting too worried for Incyte, just yet. This was a Phase I/II trial with only 36 patients and CYT387 is years-and clinical trials-behind INCB18424.  YM Bioscience is looking for a partnering deal and, I suspect they will get it. CYT387 reduced spleen size by 50% in 37% of patients who achieved spleen reduction (97% of patients) in this trial.

The other potential competitor is TargeGen’s TG101348 whose Phase I/II results were so impressive that Sanofi-Aventis bought the company. More studies are underway.  Although the results were impressive, they too, are years behind Incyte’s drug. According to Mayo, TG101348 reduced spleen size by 50% in 72% of the responders (95%) in the trial.

As for INCB18424, Incyte released data from the Phase III trial involving 309 patients

The primary endpoint was the response rate defined as the percentage of patients achieving a 35% or greater reduction in spleen volume at 24 weeks as measured by magnetic resonance imaging, or computerized tomography, comparing the rates in patients receiving INCB18424 or placebo. The response rate was 42% in patients randomized to INCB18424 versus less than 1% of patients randomized to placebo

The drug is also in a European 219 patient Phase III, trial, with results due by mid 2011.  According to the JP Morgan Presentation, Incyte feel that there are 16-18,500 myelofibrosis sufferers in the US and the potential pricing could be around $50k. They believe there are 95,000 PV/ET sufferers.

Assuming, they grab 25% of the myelofibrosis market (not all sufferers will be eligible) and 10% of the PV/ET markets this could give around 14k*50k=700m in US revenue in 5-6 years. A hand waving guess sees Ex-US sales royalty bringing in 10% of that figure, so possibly around 770m.

In addition, this is the type of indication that will see favorable demographics in future years, as the amount of older people increases.

INCB28050 a JAK Inhibitor for Rheumatoid Arthritis

This drug is in partnership with Eli Lilly. I have written extensively about the drugs in development for Rheumatoid Arthritis here. As discussed in the article, tasocitinib is the leader and is set to be a blockbuster drug for Pfizer. Furthermore, Rigel/AstraZenexa has R788 in Phase II trials and, Vertex is currently in Phase IIa with VX509.

Incyte has much to do, to grab market share in this potentially crowded space. INCB28050 Phase IIa results were excellent…

ACR responses improved between week 12 and week 24 achieving up to 72% for ACR20, 44% for ACR50 and 30% for ACR70 at week 24. Results seen at 12 weeks for placebo were 32% for ACR20, 13% for ACR50 and 3% for ACR70, and for patients treated with INCB28050 the results were up to 59% for ACR20, 35% for ACR50 and 16% for ACR70.

…and compare to tasocitinib in Phase III and R788 in Phase IIb. However, Pfizer are way ahead here and I find it hard to see that Incyte has a huge chance to grab a major market share. However, they may not need to!

Future Market for Rheumatoid Arthritis and INCB28050

This is very hard to predict. However, I want to look at the predicted sales for the TNF Blockers. TNF blocker biologics like Humira (injected on alternate weeks) Enbrel (injected once a week) or Remicade (intravenous every month or so) are the current ‘new’ class of drug for RA. According to a Reuters article, Humira sales in 2014 will be $8.5bn, Enbrel $8bn and Remicade $7.6bn.

These drugs are responsive in 70% of patients, including some who do not respond to the first line treatment of methotrexate. However, they are expensive and have significant side effects. JAK inhibitors tend to be taken orally, so they have an advantage and they may end up having better safety.

Adding up the 2014 forecast for TNF-blocker sales gives $24bn. I think JAK inhibitors will initially grab some market from the non-responders (20-30% of patients) and, in time, start to take market share from them. Analysts are forecasting $2bn for tasocitinib sales. If Incyte can achieve 5-10% of these sales this would give around $100-200m in US sales and, possibly $200-$400m including outside US sales. Assuming, a 17.5% royalty would give peak sales of around $50m

A Good Year for Incyte?

In 2011, Incyte are aiming for good results in Phase III in myelofibrosis plus submission by year end.  Incyte is also in Phase IIb in Rheumatoid Arthritis and, they may yet surprise with a partnering deal for the novel compound for type 2 diabetes.

Adding the two guesstimates together (770+52m) gives 822m by 2017, with 90% margin, 150m in SG&A and say, 170m in R & D, this suggests around $420m in operating profits. They have tax losses so I would expect this to drop into cash flow and give around $500m. They have enough cash before they will launch their new drug, so I think a figure of $1.5bn in cash by 2018 is not unreasonable. The current market cap is 1.97bn.

I bought some.

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Source:

Mayo Clinic ‘JAK inhibitors producing significant response in myelofibrosis patients’, physorg.com, accessed 13 Jan 2010

Reuters Article, ‘Factbox World’s top selling drugs in 2014 vs. 2010’

All Incyte Clinical Trial Data from Incyte Website, accessed 13 Jan 2010

Lexicon Pharmaceuticals Reports Top-Line Data for LX2931 Rheumatoid Arthritis Drug

I previously covered Lexicon Pharmaceuticals LX2931 as part of an article here.  Today they released top-line data fro LX2931 in patients with Rheumatoid Arthritis.

"the data also suggested that patients treated with 150 mg once daily of LX2931 showed an improvement in the primary efficacy endpoint, the percentage of patients achieving an American College of Rheumatology 20 (ACR20) response at week 12 (60% versus 49% for placebo).  Patients treated with 70 mg or 110 mg once daily did not indicate improvement in the ACR20 at week 12 (44% and 41% response rates, respectively) relative to placebo. Adverse events for all three LX2931 dose groups were predominantly mild-to-moderate, with frequencies similar to the placebo group."

So, we have no improvement with the 70mg and 110mg dose and only a 60% vs. 49% (placebo) in the 150mg dose. Lexicon reported 'disappointment' that the placebo effect was unusually high in this trial. However, this could indicate a soft trial base.

Lexicon stated they want to initiate discuissions with potential partners over LX2931. However, I think the competition in Rheumatoid Arthritis is stiff and these results can, in my view, only be seen as a disappointment to Lexicon's prospects.

New Drugs in Development for Rheumatoid Arthritis

I decided to take a look at which new drugs and treatments were in development in order to treat Rheumatoid Arthritis. There are a number of small molecules in development and it is noticeable how Janus kinase (JAK) inhibitors seem to dominate the landscape. Quite a few companies listed on the stock market are developing new drugs for Rheumatoid Arthritis.

TNF Blockers

Unlike TNF blocker biologics like Humira (injected on alternate weeks) Enbrel (injected once a week) or Remicade (intravenous every month or so), these drugs (kinase inhibitors) tend to be taken orally. The three afore mentioned TNF blockers are responsive in 70% of patients, including some who do not respond to the first line treatment of methotrexate. They are expensive and have significant side effects.

JAK Inhibitors for Rheumatoid Arthritis

Janus kinases are receptor associated kinases that provide a pathway for the cytokines that are seen as playing a pivotal role in inflammation of the joints for the Rheumatoid Arthritis sufferer. Of the four JAKs that have been discovered JAK3 has attracted the most attention because it doesn’t seem to have actions outside of hematopoietic cells. I’ll go into more detail on the individual programs below. For reference, the other three JAKs are JAK1, JAK2 and TYK2.

New Drug Pipeline for RA

Company	Compound	Action Inhibitor	Timeline
Lexicon	LX2931	SP1L	Phase IIa ,top line results due by end 2010
Pfizer	CP 690,550	JAK 1/3	Completed Phase III. Four more studies before FDA submission in 2011
Galapagos	GLPG0259	MAPKAPK5	In Phase II, interim results due Q2 2011, top line Q4 2011
Vertex	VX509	JAK 3	In Phase IIa, results due 2011
Morphosys	MOR103	GM-CSF	In Phase Ia/IIb, final results due H1 2012
Incyte/Eli Lilly	INCB28050	JAK 1 / 2	Phase IIb begun in late 2010
Rigel/AstraZeneca	R788	SYK	Phase III begun in late 2010

Pfizer’s CP 690, 550  Tasocitinib

Pfizer’s CP 690 (tasocitinib) is in Phase III for both Rheumatoid Arthritis and Psoriasis. They recently gave Phase III results in Rheumatoid Athritis and it was claimed that CP 690 reduced inflammation in 71 percent of patients. Tasocitinib is an oral indication taken on a once a day regimen. According to the Reuters article

“On the study's first primary goal, 65.7 percent of patients who received 10 milligrams of tasocitinib twice a day achieved ACR20, meaning at least a 20 percent improvement in disease activity and symptoms, after three months of treatment. Nearly 60 percent of 5 mg patients reached ACR20, compared with 26.7 percent of those who received a placebo, researchers said.”

This would appear to be the leader here and Pfizer are developing tasocitinib for other inflammatory diseases such as ulcerative colitis, psoriasis, and Crohn’s disease. FDA submission could take place for RA in 2011.

Interestingly, a study was carried out in 2010 (Cohen) which demonstrated that there weren’t any clinically significant effects on the pharmacokinetics of either drug, if they were taken together. Therefore, there would be no dosage adjustment if taken together.

Rigel/AstraZeneca R788 Fostamatinib Disodium

R788 was in licensed by AstraZeneca early this year in a deal that is potentially worth $1.25bn. This was seen as a significant sign of approval for a drug that had failed one of three Phase II studies in 2009.  R788 or Fostamatinib Disodium is an orally taken (twice a day) SYK inhibitor. Despite the setback in 2009, they reported superb results in a six month Phase IIb study this year. According to Rigel

  “  - The ACR 20 response was achieved by significantly more patients in both the fostamatinib 100mg bid group and the fostamatinib 150mg qd group (67% and 57% respectively) than the placebo group (35%, p<0.001).
- The ACR 50* response rates were 43%, 32% and 19% for the fostamatinib 100mg bid group, 150mg qd group and placebo group respectively (p<0.01). The ACR 70* response rates were 28%, 14% and 10% for the fostamatinib 100mg bid group, 150mg qd group and placebo group respectively (p<0.001 for fostamatinib 100mg bid, p=0.34 for fostamatinib 150 mg qd)
- In addition, the DAS 28 remission rate was significantly higher in both the fostamatinib 100mg bid group and the fostamatinib 150mg qd group (31% and 21% respectively), compared to the placebo group (7%, p<0.01).”

Furthermore, 36 percent of patients achieved ACR20 after just one week, so these phase IIb results demonstrate that R788 has a faster mode of action than Pfizer’s CP 690. Furthermore, remission was statistical significant and this was something that Pfizer could not achieve in Phase III. 

Side effects included increased risk of diarrhoea and hypertension. Phase III trials will begin in late 2010.

Lexicon LX2931 

LX2931 inhibits sphingosine-1-phosphate  (S1P) lyase, which is an enzyme seen as being on a path to regulating the immune system. They’ve demonstrated-in pre-clinical- that inhibiting S1P has reduced inflammation in mice, however the Phase IIa trial is a 208 patient trial. What’s interesting about LX2931 is that it is intended as a combination therapy with methotrexate and is being trialled in this manner. Top line data is due by end 2010.

Incyte/Eli Lilly INCB 28050

Incyte has two JAK inhibitors in development. Its lead compound is INCB18424 which is in Phase III for myelofibrosis and Phase II for polycythemia and psoriasis, respectively.  INCB28050 is its JAK 1 / 2 inhibitor for RA. Eli Lilly paid $90m initially for this compound, with Incyte being eligible for $655m in milestones, as well as royalties on top. They recently presented results for a six month Phase IIa trial

“all three doses of oral INCB28050 (4 mg QD, 7 mg QD and 10 mg QD) improved on the primary endpoint, the percent of patients achieving American College of Rheumatology (ACR) 20 improvement, over the full 24-week treatment period. Importantly, ACR responses improved between week 12 and week 24 achieving up to 72% for ACR20, 44% for ACR50 and 30% for ACR70 at week 24. Results seen at 12 weeks for placebo were 32% for ACR20, 13% for ACR50 and 3% for ACR70, and for patients treated with INCB28050 the results were up to 59% for ACR20, 35% for ACR50 and 16% for ACR70.”
As with Rigel’s R788 adverse effects of diarrhoea and hypertension were reported. Eli Lilly plans to begin Phase IIb shortly. 

Vertex VX509 JAK3 II

I’ve previously discussed Vertex here but omitted to mention VX509. VX509 is a JAK3 inhibitor that Vertex has in a Phase IIa 200 patient proof of concept trial. Interim clinical data is expected in 2011.

Galapagos GLPG0259

Galapagos is another company I mentioned recently and MAPKAPK5 (a protein kinase) was discovered as playing a role in RA, via Galapagos’ proprietary discovery technology. It is a good illustration of their business model. Galapagos feel that it is involved in signaling a pathway to inflammation. GLPG0259 is orally taken, once a day regimen, and is compatible with methotrexate. Indeed, the initiated Phase II will be with methotrexate. Interim results are due in H1 2011 and top line results by end 2011.

Morphosys GSM-CF Inhibitor MOR103

I wrote a bit about MOR103 here and what makes MOR103 a novel antibody, is that it targets GM-CSF, which is seen as an inflammatory mediator that activates the JAK pathway. It is currently in Phase Ib/2a trial, with final results due in H1 2012.

Conclusion on New Treatments for Rheumatoid Arthritis

This new collection of drugs represents a potential improvement to the TNF blockers, in terms of regimen and side effects. Pfizer’s CP 690 is the leader and appears to be a blockbuster in the making. It should be well established by the time that Incyte and Vertex get their JAK inhibitors on the market. Pfizer’s is the only compound successfully through Phase III. Rigel’s R788 is very interesting due to its speed of action and efficacy, however this is yet to be confirmed in Phase III and it will be a while before they complete this. 

Lexicon and Galapagos present options for combination with the first line treatment of methotrexate. GLGP0259 is in early stage, but Lexicon’s LX2931 should give results soon in a Phase II trial. Morphosys MOR103 is early stage but potentially a blockbuster as they own the rights to GSM-CF inhibitors in inflammatory diseases in the US. I opened a small speculative position in Lexicon ahead of their Phase IIa data in LX2931.

Source:

Cohen S, Zwillich SH, Chow V, Labadie RR,Wilkinson B “Co-administration of the JAK inhibitor CP-690,550 and methotrexate is well tolerated in patients with rheumatoid arthritis without need for dose adjustment."  British Journal of Pharmacology, Volume 69, Issue 2, Pages 143-151, February 2010

Reuters “Pfizer Arthritis Drug Succeeds in Late Stage Trial”

Rigel Website (accessed Dec 2010) “Data Published Today Reveal That Novel Oral Therapy Fostamatinib Demonstrates Positive Response in Rheumatoid Arthritis Patients”

Incyte Website (accessed Dec 2010) “Incyte's Selective Oral JAK1 and JAK2 Inhibitor Demonstrates Positive Phase IIa Results in Patients with Active Rheumatoid Arthritis”