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Smid-cap smorgasbord

Buysiders like 2Q cancer catalysts, rare diseases and small- to mid-cap milestones

While the biggest milestone of the second quarter came early and turned out to be a disappointment, investors still have plenty to look forward to in immuno-oncology. In addition, specialist investors’ current strategy of overweighting small- and mid-cap plays correlates with greater interest in a slew of milestones, with a particular focus on rare disease catalysts.

The negative news came early from Incyte Corp. and Merck & Co. Inc.’s Phase III ECHO-301 trial in first-line unresectable or metastatic melanoma. The combination of Incyte’s epacadostat with PD-1 inhibitor Keytruda pembrolizumab missed the primary endpoint of progression-free survival (PFS), leading the partners to stop the trial for futility.

In their April 6 announcement, the companies said the study was unlikely to meet the secondary endpoint of overall survival (OS).

On a conference call, Incyte’s Chairman, President and CEO Hervé Hoppenot said the hazard ratio for PFS was 1, while “for the less mature survival analysis,” the hazard ratio was 1.13.

Detailed data will be presented at an upcoming scientific meeting.

Results hadn’t been expected until the American Society of Clinical Oncology (ASCO) annual meeting in June, and nearly all 12 buysiders contacted by BioCentury had said it would be the most important readout for the sector.

After the announcement, some investors told BioCentury the result could negatively affect sentiment across the sector, while others expect a limited effect because the failure was specific to indoleamine 2,3-dioxygenase 1 (IDO1) inhibition, epacadostat’s mechanism.

ClearBridge Investments’ Marshall Gordon worried it could scare some generalists away. “A high-profile, negative binary outcome can highlight the risks of investing in biotech to non-specialists,” he said.

Loncar Investments’ Brad Loncar thought the data would sour sentiment toward all the companies developing therapies in combination with PD-1/PD-L1 inhibitors. “It calls into question how all these drugs are being developed with

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