April's been a month of biotech bloodbaths. In a 15-day span, Incyte Corporation (NASDAQ: INCY), Prothena Corporation PLC (NASDAQ: PRTA), and Celldex Therapeutics Inc. (NASDAQ: CLDX) have all reported clinical trial failures that have hammered their stock prices.
While there's no use crying over spilled milk, there were some important lessons to be learned. Here are a couple of important takeaways that could save you a bundle down the road.
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1. Comparison shop
Incyte and Prothena's meltdowns occurred in different fields of medicine, but both companies could have saved a bundle by generating some comparison data before investing heavily into a slate of big phase 3 trials. In June 2016, Merck & Co. (NYSE: MRK) started the first trial to see if its lead cancer therapy, Keytruda, could get a boost from Incyte's epacadostat by comparing melanoma patients receiving the combo against those given Keytruda plus a placebo. Rather than wait for this study to complete before forging ahead, the partners enrolled patients with four more tumor types into similar phase 3 studies last January.
While the single-arm data was encouraging, phase 3 melanoma results released earlier this month didn't show any evidence that adding epacadostat to Keytruda makes a difference. Assuming ongoing studies will also flop, nervous investors pressed Incyte's market cap $4 billion lower overnight.
Incyte has other irons in the fire, so its market clubbing wasn't nearly as severe as Prothena's. Shares of the pre-commercial stage biotech nosedived 69% after announcing its lead candidate failed to deliver the goods.
To Prothena's credit, the company is looking for a clean break from NEOD001 instead of plodding along at the expense of its shareholders. In 2015, the company started a 260-patient phase 3 trial designed to compare NEOD001 to a placebo as a treatment for newly diagnosed patients with light chain amyloidosis. The study was supposed to follow each patient for up to 42 months.
Not too long after starting its big phase 3 trial, Prothena began a much shorter placebo-controlled study with previously treated patients that failed to show a significant benefit. Rather than wait around for trouble, Prothena asked investigators to peek into the phase 3 data. It turned out, the larger trial was headed for disaster as well, but at least the company won't shovel any more resources in its direction.
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2. Maintain subgroup suspicions
In two short years, Celldex Therapeutics suffered two major meltdowns. In 2016, it had the same problem as Incyte and Prothena. The company's experimental brain cancer therapy seemed like a winner in single-arm trials, but it showed no benefit over standard care.
This time around, Celldex had comparison data that strongly suggested its lead candidate, glemba, could provide a survival benefit over chemo for patients with a difficult-to-treat form of breast cancer. Unfortunately, the data came from a subgroup contained within an otherwise failed trial. In retrospect, it looks like several outliers resulted in a lot of wasted resources.
During a study with 124-patients split into groups receiving chemo or glemba, there wasn't a clear benefit for the experimental drug until you looked at a subgroup of 16 patients that met several criteria. By focusing on those with triple-negative tumors that over-express glemba's target, it looked like Celldex's candidate extended progression-free survival by 167%.
Sadly, glemba couldn't repeat the performance against standard chemo in a pivotal study with 327 more patients that shared similar characteristics. In fact, progression-free survival in the group treated with Celldex's candidate was just a few days longer, at 2.9 months. Following the announcement, the stock tanked around 65%.
The wrong moves?
Before we beat up on these biotechs, it's important to understand they can't afford to wait for perfect pitches the way you and I can. Celldex would have been downright irresponsible not to follow up on the subgroup observation. That said, I'm not ashamed of my previous optimism for glemba. From now on, though, I'll probably be even more skeptical of subgroup data.
Light chain amyloidosis is a debilitating disease that progresses slowly, so we can't blame Prothena for trying to get a jump on things. If the company hadn't initiated a second placebo-controlled trial with advanced stage patients when it did, investors would have lost a lot more over the long run.
Hopefully, Incyte will tear a page from Prothena's playbook and let investigators unblind data from six ongoing studies with epacadostat. Be sure to listen for hints of interim analyses when the company reports quarterly results on May 1.
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