What Drug Study Flop Means for Merck, Incyte
The failure of their cancer immunotherapy combination is a bigger blow to Incyte than to Merck.
Merck (MRK) and Incyte (INCY) announced that the phase 3 Echo-301/Keynote-252 study of epacadostat in combination with Keytruda in metastatic melanoma has failed, with the combination unable to improve progression-free survival over Keytruda alone and unlikely to improve overall survival as well. With a hazard ratio of 1.00 (no trend toward a benefit), the companies are halting the study. We expect this to have a significant impact on our fair value estimate for Incyte, as we’ve previously pointed to epacadostat as a key driver of the company's valuation. The impact on Merck is more muted, as the company is already an established leader in immuno-oncology with Keytruda monotherapy and is in the process of launching and gathering more data on the combination of Keytruda with various other regimens, including chemotherapy.
Early data for the combination of Incyte’s IDO inhibitor and Merck’s Keytruda in melanoma was promising, with what looked like slightly better efficacy without the additional side effects that some drug combinations can trigger. Management is still diving deeper to see if there could be some patient subgroups (PD-L1 status, BRAF status, and so on) that did better on the combination. However, given the hazard ratio for the overall study and what we see as similar profiles for PD-1 antibodies Keytruda and Opdivo, we think this bodes poorly for epacadostat’s other phase 3 programs that remain ongoing.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.