(Bloomberg) -- Four days after Incyte Corp.’s once-promising cancer drug failed in the most anticipated clinical trial of the year, chemists in the firm’s newly renovated labs were back at work, while other employees milled about the quiet headquarters, perched on a hill above Wilmington, Delaware.
On the previous Friday, Wall Street had fled the stock after the experiment investors hoped would pave the way to a new cancer blockbuster suffered what one investment analyst called “the worst possible outcome.” Incyte’s market valuation dropped by $4 billion in a day, almost a quarter of the company’s market value.
To Chief Executive Officer Hervé Hoppenot, who himself suffered one-day paper losses of about $1.7 million, that’s just the risk of the biotech industry.
“When you are the first with a new mechanism, you are the one doing the trailblazing and you can hit a tree in the process,” Hoppenot said in an interview four days later at Incyte’s headquarters. “Every scientific story has all kinds of twists and turns. When we are in that situation, you should not believe it is the end of the world. You need to stand up and see where we go from there.”
The drug, epacadostat, was supposed to be the first in a new class of therapies to boost the power of existing treatments that help the immune system kill tumors. After the failure, Incyte is no longer one of the hottest names in U.S. biotech, and few think it’s at the top of big drugmakers’ takeover lists.
Yet unlike the countless biotech companies that didn’t survive similar blows, Incyte has a business to fall back on: an existing blockbuster drug for the bone marrow disorder myelofibrosis, Jakafi, whose sales are predicted by stock analysts to rise 24 percent to $1.4 billion this year. It also has treatments being tested for different types of lymphoma that Wall Street, obsessed with the now-scrapped skin-cancer trial, mostly ignored.
Six months ago, analysts anticipated that epacadostat’s sales could top $5 billion by 2025 -- more than three times Incyte’s total revenue for 2017.
Epacadostat was being tested with Merck & Co.’s Keytruda in advanced, deadly skin cancer. It was the most-advanced trial of so-called IDO inhibitors that -- researchers hoped -- would break through clouds of protections surrounding cancer cells and give drugs like Keytruda a better chance to kill tumors. As recently as March, Hoppenot was touting the drug as the first in a class “more or less embraced by the entire scientific community” at an investor conference.
On the first Wednesday of April, Hoppenot and his top scientific and medical executives, Reid Huber and Steve Stein, received the results: The drug had little to no effect on patients’ tumors. After double-checking the numbers with the independent committee monitoring the trial and with Merck, Incyte went public that Friday, April 6.
The town hall meeting for the 1,200 employees, was “not very poetic,” said Hoppenot, who took the helm at Incyte in 2014 after running the oncology unit of Swiss giant Novartis AG. Some workers joined the conversation remotely from as far as Europe and Japan, where Incyte opened an office last year. Many were gathered at the headquarters, a gleaming structure of glass unveiled last October in a ceremony attended by Delaware’s two U.S. senators.
“The sadness after the news was in was obvious, and I’m sure it’s still there today,” the CEO recalled.
It was particularly tough for the research team that discovered the drug and spent eight years developing it in the clinic. But employees have to move on and work on discovering the next promising compound.
“If you have a fear of failure Incyte is not a good place to be, because we are committed to being an innovative, research-driven company,” said Huber, who as chief scientific officer leads the research departments. “That means we’ll have some really interesting successes along the way and we’ll have our fair share of failures.”
Ups and Downs
Huber has witnessed the pitfalls of science over his career with the company. He joined in 2002 with a group of 23 researchers in Delaware -- 17 are still at Incyte -- and now oversees about 50 chemists and 200 biologists that test and purify hundreds of compounds a week.
In the short term, Incyte expects news from U.S. regulators on a rheumatoid arthritis treatment made in with partnership with Eli Lilly & Co. Hoppenot calls the tablets “a semi-success and a semi-failure.” They gained approval in Europe and other countries, but not in the U.S., where a Food and Drug Administration advisory panel will discuss its fate this month. In the pipeline are drug candidates for graft-versus-host disease, a severe complication that can arise after transplants when transplanted bone marrow or stem cells attack the recipient’s body.
“We’ve been conservative with expansion in terms of hiring, so that we’re in a position where we’ve got so much else to do on the other compounds, with enough people to do it,” said Stein, the chief medical officer. “I don’t think there’s this fear, where, you know, with a company that goes down, ‘dear me, I’m not going to have a job.’”
The recent failure may resonate far beyond Incyte, and could signal a dead-end in an entire field of experimental treatments that also target the enzyme called IDO. For Hoppenot, it seemed refreshing to be able to talk about more than just the compound. For the past year, he said he’s mostly been fielding questions about whether or not it would work.
“The world without IDO is not gloom and doom at all,” he said.
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