Jakafi-maker Incyte has effectively made Olumiant (baricitinib) — the tarnished JAK inhibitor dogged by safety concerns that barely crossed the FDA finish line with a smaller dose — Eli Lilly’s problem.
Last June, the FDA approved only the small 2 mg dose of the drug — which Incyte partnered with Lilly on — with a black box warning highlighting the therapy’s side effects, including a startling thromboembolism signal, quashing Lilly’s blockbuster dreams. The agency had initially rejected the drug, demanding a new study, but under the leadership of now former FDA commissioner Scott Gottlieb, the FDA had an unexplained change of heart, and allowed the marketing application to proceed.
In the first quarter of 2019, Incyte $INCY earned baricitinib royalty payments of roughly $16 million. The company, as part of its quarterly results on Tuesday, said it had elected to no longer co-fund the development of baricitinib, but will continue to receive royalties on global net sales of the drug, in accordance with its deal with Lilly $LLY.
Data from two late-stage studies evaluating baricitinib in patients with moderate-to-severe atopic dermatitis is expected to be presented by Lilly later this year, in addition to results from other ongoing Phase III trials in the same indication. Lilly, which is combating its own pipeline issues, has shelved plans to test the treatment for psoriatic arthritis
The decision to pull out of baricitinib is not based on the drug’s future, but rather on the cumulative investment Incyte has made so far, Incyte chief Hervé Hoppenot told analysts in a post-earnings conference call. “There is a point we reached where we believe we have a better return-on-investment…by reallocating our resources to other programs.”
The move is set to save Incyte between $40 million and $60 million this year, which it can pour into other programs such as its experimental ruxolitinib cream, which is being evaluated for use in atopic dermatitis and vitiligo, company executives underscored.
On Tuesday, Incyte also issued a spate of pipeline updates, including that ruxolitinib cream had cleared a mid-stage vitiligo study, for which detailed data will be disclosed in the second quarter. Meanwhile, an FDA decision to expand the use of Jakafi for treatment of steroid-refractory acute GvHD is expected by May 24. Sales of its flagship drug, Jakafi, continue to grow steadily.
“Incyte posted a reasonable quarter…We are encouraged that Incyte has decided to discontinue co-funding of baricitinib as we viewed that product as “damaged goods” based upon its DVT/TE risk. We think in 2019 investors will seek confidence that Incyte’s broad oncology and inflammation pipeline contains growth asset(s). With multiple pipeline opportunities (itacitinib, pemigatinib, topical ruxolitinib, etc.) beginning to emerge we remain at Outperform,” Cowen’s Marc Frahm wrote in a note.
Shares of the Wilmington, Delaware-based drugmaker were up nearly 5% at $78.01 in early Tuesday trading.
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