With sparse R&D prospects, In­cyte bets $900M on Mor­phoSys' CAR-T ri­val taf­a­sita­m­ab

Hav­ing suf­fered a string of pipeline set­backs in re­cent years, In­cyte is rein­vig­o­rat­ing its R&D prospects with a pact to de­vel­op and mar­ket Mor­phoSys’ an­ti-CD19 an­ti­body taf­a­sita­m­ab, a drug be­ing primed as an al­lur­ing al­ter­na­tive to the ex­ist­ing CAR-T ther­a­pies Kym­ri­ah and Yescar­ta in pa­tients with a com­mon, treat­ment-re­sis­tant form of non-Hodgkin’s lym­phoma.

Un­der the deal, Mor­phoSys and In­cyte will co-com­mer­cial­ize taf­a­sita­m­ab in the Unit­ed States, while In­cyte has ex­clu­sive com­mer­cial­iza­tion rights out­side the re­gion. For these rights, In­cyte is giv­ing Mor­phoSys an up­front pay­ment of $750 mil­lion as well as mak­ing an eq­ui­ty in­vest­ment worth $150 mil­lion in the com­pa­ny. The Ger­man drug­mak­er is al­so el­i­gi­ble to re­ceive mile­stone pay­ments of up to $1.1 bil­lion, in ad­di­tion to roy­al­ties.

Mor­phoSys ex­pects the FDA to make its de­ci­sion on taf­a­sita­m­ab, or MOR208, for use in pa­tients with re­lapsed or re­frac­to­ry dif­fuse large B-cell lym­phoma (DL­B­CL) by mid-2020.

The ap­pli­ca­tion to mar­ket the drug was based on da­ta that showed taf­a­sita­m­ab, in com­bi­na­tion with lenalido­mide, in­duced me­di­an pro­gres­sion-free sur­vival of 12.1 months, with a me­di­an du­ra­tion of re­sponse at 21.7 months. The over­all re­sponse rate among 80 pa­tients was 60%, with a for­mi­da­ble 43% com­plete re­sponse rate.

It will com­pete with No­var­tis’ Kym­ri­ah — which se­cured ap­proval for DL­B­CL in 2018 based on an over­all re­sponse rate of 50%, and a com­plete re­sponse rate of 32% in 68 evalu­able pa­tients — al­though its adop­tion has been plagued by man­u­fac­tur­ing prob­lems, mak­ing way for Gilead’s Yescar­ta to deep­er pen­e­trate the CAR-T mar­ket. Taf­a­sita­m­ab — which has been be­stowed with the FDA’s break­through ther­a­py sta­tus — is a gar­den va­ri­ety an­ti­body un­like the two CAR-T ther­a­pies, which re­quire an elab­o­rate per­son­al­ized man­u­fac­tur­ing process (cells are iso­lat­ed from the pa­tient, ma­nip­u­lat­ed in the lab by adding chimeric anti­gen re­cep­tors to di­rect T cells to snuff out can­cer cells and then re-in­fused in­to the pa­tient).

The two part­ners are al­so plan­ning to co-de­vel­op taf­a­sita­m­ab in oth­er DL­B­CL in­di­ca­tions, as well as fol­lic­u­lar lym­phoma (FL), mar­gin­al zone lym­phoma (MZL) and chron­ic lym­pho­cyt­ic leukemia (CLL).

In 2019, Mor­phoSys saw some top man­age­ment changes and some re­or­ga­ni­za­tion as the com­pa­ny pre­pared for taf­a­sita­m­ab’s loom­ing ap­proval. When the com­pa­ny’s 17-year vet­er­an Markus En­zel­berg­er de­part­ed from his post as chief sci­en­tif­ic of­fi­cer, the com­pa­ny’s re­search arm was merged in­to the de­vel­op­ment di­vi­sion un­der chief Malte Pe­ters. CEO Si­mon Mo­roney al­so un­veiled plans he would step aside — he was re­placed by Jean-Paul Kress, the for­mer CEO of Boston’s Syn­tim­mune, which was swal­lowed by Alex­ion.

The Mor­phoSys deal is key for In­cyte — ear­li­er this month the drug­mak­er’s ex­per­i­men­tal itac­i­tinib failed a piv­otal study, dubbed GRAV­I­TAS-301, in first-line acute graft vs host dis­ease.

“While itac­i­tinib did not rep­re­sent a ma­jor fun­da­men­tal dri­ver of val­ue in our mod­el, ~ $5/share, we be­lieve the fail­ure of GRAV­I­TAS-301, which fol­lows three pri­or high pro­file pipeline dis­ap­point­ments in four years (Jakafi in sol­id tu­mors, epaca­do­stat, and Olu­mi­ant), may lead some in­vestors to ques­tion the com­pa­ny’s abil­i­ty to con­sis­tent­ly gen­er­ate val­ue from R&D in­vest­ment,” SVB Leerink An­drew Berens wrote in a note in ear­ly Jan­u­ary.

In­cyte for years has leaned on its flag­ship JAK in­hibitor Jakafi, which se­cured about $1.2 bil­lion in sales in the first three quar­ters of 2019.

“We be­lieve this is a sol­id deal, as the tafa pro­file ap­pears to be the best-in-class CD19/CD20 for the treat­ment of R/R dif­fuse large B-cell lym­phoma (DL­B­CL), giv­en the to­tal­i­ty da­ta of ef­fi­ca­cy, safe­ty, and treat­ment con­ve­nience. While the deal could so­lid­i­fy IN­CY’s pipeline and fur­ther di­ver­si­fy rev­enue, we be­lieve the deal may dis­ap­point some in­vestors who are look­ing for a trans­for­ma­tive deal to strate­gi­cal­ly ex­tend the Jakafi in­tel­lec­tu­al prop­er­ty run­way be­yond 2027,” Berens wrote in a note on Mon­day.

“Giv­en the SVB Leerink’s es­ti­mate of taf­a­sita­m­ab’s world­wide peak sales of ~$1bn, we al­so think deal might not be suf­fi­cient to po­ten­tial­ly re­place Jakafi rev­enue for the long term. Al­so, due to the fi­nan­cial terms, it is un­clear to us when the com­pa­ny would be ca­pa­ble of do­ing a more trans­for­ma­tive deal.”

So­cial im­age: In­cyte, AP Im­ages

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2021 saw a record $600B in healthcare M&A activity. In 2022, there is an anticipated slowdown in activity, however, M&A prospects remain strong in the medium to long-term. What are future growth drivers for the healthcare sector? Where might we see innovations that drive M&A? RBC’s Andrew Callaway, Global Head, Healthcare Investment Banking discusses with Vito Sperduto, Global Co-Head, M&A.

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