STAMFORD, Connecticut (Reuters) – In record time, Loxo Oncology (LOXO.O) developed a novel drug for a wide variety of tumors that share a rare mutation. It recently struck a partnership with Germany’s Bayer (BAYGn.DE). Its stock tripled in the past year.
But in an unusual move for biotech – where hype is often the norm – its founders are tempering expectations.
They are quick to point out that their task ahead is no small one: Getting doctors and insurers to agree to testing several hundred thousand cancer patients to find the one percent, or less, whose tumor has the mutation its drug targets.
“We’re very cautious about this because we understand that for all of these patients to be identified, broad testing across the spectrum of human cancer has to happen,” Jacob Van Naarden, Loxo’s chief business officer, told Reuters. “It’s an exquisitely rare patient population.”
Because of its small size and narrow focus, Loxo is among the most dependent on adoption of widespread genomic testing. But they aren’t alone. Bigger drugmakers, such as Roche Holding (ROG.S), are also working on treatments that depend on finding a mutation driving many different cancers.
Loxo, founded in 2013, leapt from obscurity last year. The turning point came at a major cancer conference in June, when it released data showing its pill, larotrectinib, shrank tumors significantly in 75 percent of patients with cancer in the lung, pancreas, colon or more than a dozen other locations.
Its stock skyrocketed and the company now has a market valuation more than $3 billion. (For a graphic, see tmsnrt.rs/2Id3kCD)
Loxo’s trial tested 55 advanced cancer patients, all of whose tumors had the mutation, TRK fusion. Many had run out of treatment options, while some were children facing limb amputations.
Wall Street analysts expect U.S. approval this year and forecast annual larotrectinib sales reaching $500 million to $1 billion. Bayer, which expects to file for European approval this year, will help bring larotrectinib and a potential successor drug to market in a partnership worth up to $1.6 billion.
With Bayer in charge of pricing, the drug could cost $15,000 a month, said Bernstein analyst Wimal Kapadia.
In interviews at company headquarters in Stamford, Connecticut, Loxo executives addressed the hurdles ahead. For starters, “we don’t actually know how many patients there are,” Van Naarden said. An estimated 1,500 to 5,000 people may be candidates out of 500,000 U.S. cancer patients diagnosed each year.
To find them, new genomic tests will need to include the TRK fusion defect.
“These drugs will do well as people adopt this testing,” said Dr. David Hyman of Memorial Sloan Kettering Cancer Center in New York, who led larotrectinib clinical trials.
But getting doctors and pathologists across the country to order that testing is a significant hurdle.
The U.S. government last month said the Medicare program for the elderly will cover so-called next generation sequencing (NGS) which looks for hundreds of mutations across all solid tumors for advanced cancer patients. Loxo will need TRK fusion to be included in those tests once its drug is approved.
For the moment, private insurers such as Anthem Inc (ANTM.N) and Humana Inc (HUM.N) typically only pay for narrow diagnostic tests for a particular type of cancer.
Given uncertainties around finding the right patients, “we don’t think it’s a billion-dollar drug,” said Loxo Chief Executive Joshua Bilenker. Bayer said it was too soon to predict eventual sales.
GETTING TESTED Until now, cancer drugs that target mutations have been primarily limited to the tumor type against which it was tested. Pfizer Inc’s (PFE.N) Xalkori works against ALK and ROS1 mutations in lung cancer. Roche’s (ROG.S) Zelboraf treats melanoma with an abnormal BRAF gene.
Merck & Co’s (MRK.N) Keytruda was the first cancer drug approved for many tumor types based on a single mutation and will benefit from large scale testing, though that remains a relatively small market for its treatment.
Newer players, such as Loxo, Blueprint Medicines Co (BPMC.O) and Ignyta, recently bought by Roche, target tumor mutations regardless of their organ of origin. This requires far more people to be tested, since such a small number of patients will have the mutations in any one tumor type.
While the cost has dropped dramatically, to about $1,000-$1,500 per patient, private insurers argue such comprehensive testing amounts to funding research, not medical care.
Foundation and Thermo said they are talking to private insurers about coverage. Humana and Anthem said they are evaluating their policies following the Medicare decision.
“Reimbursement is a continuous and ongoing battle,” said Foundation Chief Medical Officer Vince Miller.
Major cancer centers, which conduct extensive research, use tests that detect hundreds of mutations. But to justify such testing, community hospitals will need know it will identify the patients likely to benefit.
Bayer will reach out to cancer doctors about larotrectinib once it is approved, while Loxo will educate pathology laboratories on the need to test for TRK, Loxo said.
The companies say the cost is worth it since doctors could prescribe a highly effective drug if their patient has the TRK defect instead of more toxic chemotherapy or expensive immunotherapy with a lower probability of working.
“That’s an amazing return on investment for the healthcare system,” Bilenker said.
April 3, 2018