Deciphera: Analysis Of The Market Potential Of Ripretinib


  • Deciphera's lead drug ripretinib showed positive phase 3 results.
  • We recommended the company last year, when it was trading at half the price.
  • Currently, DCPH seems fairly valued.
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Ripretinib is Deciphera's (NASDAQ:DCPH) lead drug candidate and it is being tested in GIST, or gastrointestinal stromal tumors. Recently, the drug fared positively in a phase 3 trial called INVICTUS evaluating ripretinib in patients with fourth-line and fourth-line plus GIST.

Given those results, it is becoming important to be able to put a number to the drug's market potential, and the company's eventual valuation.

However, it is something of a problem to determine ripretinib's market potential because, as we said in our previous article, it isn't just GIST that the drug is targeting. GIST is simply the lead indication, with GIST 4th line in the latest phase. However, we suspect that as soon as we see ripretinib approaching the market in this indication, a host of other indications, currently merely indicated as "solid tumors" in its pipeline, will enter late stage. As such, it isn't, like we said before, just GIST that is the target market - it is TKI resistance across the board. So we need to figure out what the market size is for TKI resistance, and then account for factors like primary and secondary resistance, indication-wise approval and its limitations, competition from other modes of resolving TKI resistance, and then arrive at a number.

There are two sorts of TKI resistance - primary and secondary. But first, a brief aside on TKIs and what they are all about.

Tyrosine kinase inhibitors

TKIs or tyrosine kinase inhibitors are among major innovations in oncology therapeutics. Indeed, the application of the first TKI, Gleevec or imatinib, in GIST, has been something of a paradigm shift in modern oncocare. Imatinib has been one of the most successful drugs in the world, becoming the standard of care in first-line GIST. However, patient responsiveness to TKI is somewhat selective; many patients demonstrate primary resistance, meaning they do not respond to TKI at all. Usually these are patients who have a wild-type EGFR and/or KRAS mutation. On the other hand, patients who respond to TKIs have a mutation in their epidermal growth factor receptor or EGFR gene. These are called activating mutations.

The EGFR gene facilitates the growth of cancer cells, and TKIs bind to the ATP binding sites on these genes, preventing their phosphorylation and thus the subsequent cancerogenesis. A number of mutations facilitate the kinase inhibition by increasing the affinity of the drugs to the EGFR. Patients who have these are those having primary response to TKIs.

Almost all responsive patients, however, develop secondary resistance after some time, often after over 10 years of staying responsive. This secondary resistance to the drug occurs through further mutations to the EGFR gene post-treatment. A number of such mutations responsible for this acquired resistance are being identified. This is the population that is being targeted by ripretinib.

There are two possible ways to tackle this secondary resistance. One is the reiterative process of finding a new TKI inhibitor for every new TKI being resisted, much like antibiotic resistance. The other method, adopted by ripretinib, is to identify the cause of all TKI resistance and mitigate it.

The market

It is difficult to put a specific figure to the number of people developing secondary TKI resistance; however, almost every patient becomes resistant to the drug at some point of time. Initial treatment for imatinib resistance is using second line Sutent (sunitinib), or third line regorafenib. However, eventually, all these drugs fail due to TKI resistance. According to Deciphera, there are at least 15k patients in GIST KIT second and fourth-line and GIST PDGFRα in the developed world.

However, 15,000 patients is not the ultimate target market for ripretinib. The company is planning to eventually make ripretinib a first line drug in GIST. That scenario, whether as a combo therapy or monotherapy, will vastly improve the market potential.

Besides GIST, TKIs are used in a number of other solid tumors, and TKI resistance is also a problem in those indications. Therefore, those cancers also add to the market of a drug like ripretinib which can help overcome TKI resistance.

Deciphera provided the following chart for the two indications it is currently targeting:


So we have 15000 patients in GIST and another 4000 in mastocytosis. Gleevec was priced at around $150,000 couple years ago, right before it went generic. There are a lot of factors that will create pricing pressure on ripretinib, including generic TKIs. Let's put a very conservative price tag of half the above, i.e., $75,000. That gives us a gross market potential of $1.5bn, which is about a third of what Gleevec made before it went off-patent. This difference is happening because Gleevec is indicated for a number of other cancers. Anyway, if we do a 10% penetration at the first year, and assuming rapid induction, peak potential of $1bn in the 7th year, we see the total worth of the drug, in these two indications, over a period of some 6-7 years, is about $4bn. This simple analysis ignores the drug's other potential indications, as well as the rest of DCPH's pipeline. Given that DCPH is being valued by the market at around $2.4bn right now, we think the valuation is fair. There is still some upside before PDUFA, and like I said, I have completely ignored the rest of the long-tailed pipeline as well as expanded labels for ripretinib.

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