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Why Cancer Drug Maker Incyte’s Stock Plunged—And Took Others Down With It

April 6, 2018, 6:43 PM UTC
A video display show's the day's closing numbers on the floor at the closing bell of the Dow Jones Industrial Average at the New York Stock Exchange on August 1, 2017 in New York. Wall Street opened on the upside, with the Dow pushing further higher after having finished Monday at a fourth-straight record high, and nearing breaking through 22,000 points for the first time ever. "US stocks are nicely higher in early action, with the global markets reacting positively to the continued mostly upbeat earnings season and favourable manufacturing data out of Europe and Asia," said analysts at Charles Schwab brokerage. / AFP PHOTO / Bryan R. Smith (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)
Bryan R. Smith—AFP/Getty Images

Shares of biotech Incyte tumbled following a clinical trial setback for one of the company’s marquee experimental cancer drugs. Incyte stock dropped nearly 20% in Friday trading, wiping billions off of the firm’s market value. But the disappointing results rippled across a significant segment of the cancer drug development industry, including pharmaceutical giants Merck and Bristol-Myers Squibb (BMS).

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Incyte’s experimental treatment, epacadostat, was being tested in combination with Keytruda—Merck’s flagship, multi-billion dollar cancer immunotherapy. The former drug is a so-called “IDO1” treatment; the latter is a “PD-1” checkpoint inhibitor. The hope, particularly in the case of these two drugs, was that a two-pronged combo approach would help cancer patients live longer.

But the late-stage clinical trial results for melanoma patients reported Friday put a big dent in those plans. It also raised questions for other biopharma companies pursuing similar cancer drug combinations (and there’s a fair number of them around). Merck stock fell 1.9% in Friday afternoon trading, for instance, while Bristol-Myers sank more than 3%; the much smaller biotech NewLink Genetics dropped more than 45%.

The disappointing results were fairly unexpected—but they do highlight the deep uncertainty that surrounds drug development, even for treatments that show early promise.