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The American Society of Hematology's (ASH) annual meeting is the most important event in the field of hematology. Although blood cancers represent the minority of cancer cases, the field is garnering a lot of attention thanks to great advancements over the past decade which translated to huge commercial success stories.

This year's meeting, scheduled for next month, will include important data for the following companies.

Incyte (INCY)

My top pick is Incyte, which should have a very positive meeting for its myelofibrosis (MF) drug, Jakafi. The drug had a strong launch and is expected to achieve U.S. sales of $130M in its first year. Incyte's partner, Novartis (NVS) is about to launch Jakafi in Europe, where Incyte is eligible for a double-digit royalty rate.

As the first drug ever to be approved for MF, Jakafi is enjoying favorable market dynamics. Still, its use is limited to advanced stage patients due to 2 issues: Unproven survival benefit and side effects. Both issues will be addressed at ASH and could lead to market expansion beyond critically ill MF patients.

Myelofibrosis is a very heterogeneous condition, ranging from minimal symptoms to advanced disease that often leads to death due to progression to leukemia or other co-morbidities. Even late stage patients have a life expectancy of several years, implying that this indication is more chronic and that safety hurdles are higher.

Jakafi's pivotal trials clearly demonstrated the drug's effect on spleen size and symptoms relief. Nevertheless, it is still unclear whether the drug improves overall survival, which led some to view Jakafi more as a "quality of life" rather than a "life extending" treatment. In addition, Jakafi leads to bone-marrow toxicities (low platelet count and anemia), which are present in many MF patients at baseline.

The lack of survival benefit coupled with the drug's side effects encouraged physicians to use Jakafi only in advanced stage patients with a high symptom burden. Earlier stage patients or those without symptoms are typically not prescribed the drug. Even among patients with advanced disease who are started on Jakafi, there is a substantial rate of discontinuation due to side effects.

At ASH, Incyte will present updated survival data from its two pivotal trials (COMFORT I & II). Although both studies were not designed to assess survival, there appears to be a strong trend favoring Jakafi according to the abstracts. The clear and early separation between the curves (see figure below) is remarkable given the short follow up and the fact that many patients in the control arm crossed over to receive Jakafi. It is important to note that the FDA is unlikely to add a survival benefit to the drug's label, but assuming the signal persists, it could dramatically change market perception of Jakafi.

Source : ASH 2012 Abstract #800

On the safety profile front, Incyte is educating physicians to start patients on low doses and titrate the dose in the absence of bone marrow toxicities. At ASH, investigators will present clinical experience using lower doses of Jakafi in patients with low platelet counts. According to the abstract, this strategy retains substantial activity with limited effect on platelet count, which should pave the way for Jakafi use in this subset of patients. In the general MF population, it could decrease dropout rates and lead to longer average treatment duration.

Incyte will also present Phase II results for Jakafi in Polycythemia Vera (PV), a more common but less aggressive blood disorder. The abstract confirms previous results, demonstrating very high efficacy in 34 PV patients. After 24 weeks of treatment, response rate was 97% and symptoms dramatically improved in the majority of patients.

Jakafi is currently in a Phase III in PV patients who are resistant to or intolerant of hydroxyurea. Results are expected late in 2013 with approval in 2014. Although the prevalence of PV is higher than that of MF, PV patients are typically less symptomatic and are better served with available treatments. There is probably a subset of patients for whom Jakafi is suitable, but the size of this opportunity is debateable.

Pipeline progress

Incyte's second most advanced drug is baricitinib, another Jak inhibitor partnered with Lilly (LLY). The drug's primary indication is rheumatoid arthritis (RA) and a Phase III is expected to start shortly. Later this week, Incyte and Lilly will present updated results from a Phase IIb trial in RA. Results are likely to be positive and in line with previous data given the decision to start Phase III.

If approved, Incyte's baricitinib will be the second Jak inhibitor (Pfizer's tofacitinib recently won FDA approval) and potentially the third oral drug to reach the RA market. Still, RA represents a large enough opportunity for several oral drugs and based on experience with biologics, baricitinib could retain a substantial market share. In fact, Incyte could benefit from Pfizer's market education efforts to transition patients from injectable biologics to oral medicines. The drug is also being evaluated in psoriasis and diabetic nephropathy.

Incyte recently started Phase I for its selective Jak1 inhibitor. Selective Jak1 inhibitors might be ideally suited for RA due to their benign safety profile (no anemia). The most advanced Jak1 inhibitor in development is Galapagos' GLPG0634, which was licensed by Abbott (ABT) in February this year for an upfront payment of $150M.

YM Biosciences (YMI)

YM Biosciences will present Phase II data for its Jak inhibitor in MF,CYT387, which is a direct competitor to Incyte's Jakafi. Investor focus will be on the drug's alleged "anemia effect", which could be an important differentiator from Jakafi.

MF patients often suffer from impaired bone marrow function which leads to anemia and require patients to receive blood transfusions. Jakafi does not resolve this symptom and in some cases leads to a worsening in anemia which requires treatment discontinuation.

Theoretically, YM's CYT387 should have a similar clinical profile to that of Jakafi, as both drugs are Jak1/2 inhibitors. But clinical experience to date suggests the drug leads to resolution of anemia in a substantial portion of patients who are transfusion dependent. This discrepancy leads to widespread skepticism, which is justifiable unless YM provides a mechanistic explanation for the anemia effect.

At ASH, the company will present updated Phase II results in 166 MF patients who received a range of CYT387 doses. According to the abstract, patients experienced reduction in spleen size and symptoms, which was similar to that observed with Jakafi. The anemia effect was maintained, as more than half of the transfusion dependent patients became transfusion independent. The anemia response was durable ranging from 3 months to 2 years.

Durability of response will be a major issue for YM at ASH, as transfusion frequency can be variable and unpredictable. The longer the follow up, the more robust the data set is, although the effect can be validated only in a randomized trial. Another important parameter would be incidence of anemia as a side effect in patients who are not anemic at baseline.

The market is waiting for 2 major catalysts to occur: A licensing deal with a large partner and initiation of a Phase III. Both were expected to occur in the 2nd half of 2012 but still have not materialized. This delay raises some uncertainty regarding the validity of YM's claims and also extends time to market. Analysts who cover the stock still unanimously expect a licensing deal to be announced in the very near future and attribute the delay in Phase III start to YM's decision to wait until it has a partner.

It is important to note that even if the anemia effect is not real, CYT387 still has a place in MF and PV. Even as a "me too" drug that will capture only 20% of Jakafi's expected sales, the drug could generate $150M in sales in MF and PV alone.

Array Biopharma (ARRY)

Array will present results for its Ksp inhibitor, ARRY-520, in multiple myeloma. Data will include three regimens:

1) ARRY-520 monotherapy

2) ARRY-520+ dexamethasone

3) ARRY-520 + Kyprolis

As single agent, the drug led to a partial response in 5 of 32 (16%) heavily pretreated patients (median of 6 prior regimens). This clearly shows the drug is active in multiple myeloma, but it is not potent enough to be pursued as a single agent.

When given with dexamethasone, ARRY-520 led to a PR rate of 22% (4 out of 22 patients) in more heavily pretreated patients (median of 10 prior regimens). Although the numbers are small, this response rate is encouraging given the advanced stage disease. As a benchmark, an abstract for Celgene's (CELG) pomalidomide reports a PR rate of 26-29% in less heavily pretreated patients. It is plausible that ARRY-520 + Dex will be more active in earlier stage patients (~5 prior regimens), like those enrolled in Kyprolis' and pomalidomide's Phase II trials.

Array also identified a potential biomarker for patient selection. When used retrospectively, the selected patients had a response rate of 33% (4 of 12). It remains to be seen whether this biomarker will be validated prospectively in larger patient cohorts.

Data at ASH will include additional patients in the combination cohort as well as duration of response. A response rate above 20% and a 5-month response duration could justify pursuing accelerated approval for ARRY-520 + Dex.

The abstract for the ARRY-520 + Kyprolis trial has limited data. Regardless of actual results at ASH, it will be hard to assess ARRY-520's contribution as Kyprolis is an active agent.

The company already disclosed plans to start Phase III trial next year.

Seattle Genetics (SGEN)

After reaching saturation with Adcetris in its approved indications, Seattle Genetics needs to find additional growth drivers. At ASH, three trials could serve as near term catalysts in the eyes of investors.

One trial evaluates Adcetris in CD30-positive DLBCL, an aggressive lymphoma with limited treatment options. In 15 DLBCL patients reported in the abstract, 7 (47%) achieved an objective response. This response rate, if replicated in larger studies, could make this indication very attractive for Adcetris. CD30 is expressed in 20-25% of DLBCL cases, which implies a patient population of 2000 patients per year in the US. This could translate to $100-150M in annual sales.

Genentech will present Phase I results for two ADCs (anti-CD22 and anti-CD79b) based on Seattle Genetics' platform. As I discussed 2 months ago, Genentech is Seattle Genetics' most important partner with 8 ADCs in clinical testing, all of which utilize Seattle Genetics' technology.

The data in the abstracts are limited but in both cases there were early signs of anti-tumor activity in non-Hodgkin lymphoma (NHL) patients. The anti-CD22 abstract reports tumor shrinkage in 5 patients, most of whom were treated at higher doses. The anti-CD79b abstract also reports tumor shrinkage in 5 patients, including 2 of 4 patients treated at the highest dose who experienced > 80% reduction in tumor burden.

Although it is still early to assign a commercial value to these programs, updated data at ASH could give investors a better sense of their value proposition. In particular, they will be compared to Pfizer's (PFE) CD22 ADC (inotuzumab) and Sanofi CD19 ADC (SAR3419, based on Immunogen's technology), which demonstrated activity in NHL as monotherapy.

Genentech already started Phase II evaluating both ADCs in combination with Rituxan.

Genmab (OTC:GNMSY)

Genmab and its new partner J&J (JNJ) will present updated results for daratumumab, a CD38 antibody in multiple myeloma. As a reminder, daratumumab demonstrated remarkable activity at ASCO earlier this year in heavily pre-treated patients. Its novel mode of action, its strong efficacy and benign safety profile make it one of the most important hematology agents in development.

The abstract does not reveal new information, but investigators will present updated results including a new cohort of 24 mg/kg. Late stage trials will probably start next year, as Genmab could face competition from Morphosys and Sanofi, which are also developing CD38 antibodies.

Onyx (ONXX)

Onyx's Kyprolis recently got FDA approval for multiple myeloma based on a 23% response rate in heavily pre-treated patients (median of 5 prior regimens). At ASH the company will present initial results for a higher dose of the drug using a longer infusion time. Of 20 evaluable patients, 11 (55%) achieved a PR. Although the sample is size is very small and patients had only a median of 4 prior regimens, this response rate is promising. Onyx recently initiated a Phase III trial which compares high dose Kyprolis to Velcade.

Portfolio update

We are adding another position in Incyte going into ACR and ASH.

At ACR, the company is expected to present strong RA data for baricitinib, which should have a similar clinical profile to that of approved and investigational oral agents. The recent approval for Pfizer's Jak inhibitor, Tofacitinib, and its relatively high pricing bode well for baricitinib's long term potential.

At ASH, the company should present updated overall survival data for both pivotal trials in MF. If the trend in the abstracts is maintained, it should enable Jakafi to branch beyond late stage patients and facilitate broader adoption across all subtypes of MF.

We are keeping YM Biosciences going into ASH, based on the compelling anemia response data in the abstract. Although the anemia response can only be validated in a randomized Phase III trial, there is substantial clinical evidence suggesting YM's hypothesis is realistic. Even if CYT387's has no effect on anemia, it still has some commercial value as an effective Phase III-ready MF drug.

Portfolio holdings - Nov 11th 2012

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Source: ASH 2012 Preview: Top Picks For Upcoming Blood Cancer Meeting