Ten days after its JAK1 inhibitor itacitinib failed a phase III trial in acute graft-vs.-host-disease (GVHD), Incyte Corp. has finalized a deal that could provide an alternative growth path. It is paying Morphosys AG $750 million up front, investing $150 million in its stock and is on the hook for up to $1.1 billion in milestones for a 50% interest in U.S. rights to the CD19-targeting antibody tafasitamab (MOR208) and for 100% of the rights in all other territories. Planegg, Germany-based Morphosys will receive tiered royalties, ranging from a mid-teens to a mid-20s percentage of net ex-U.S. sales.

Tafasitamab, which has breakthrough therapy designation, could gain U.S. approval in relapsing-remitting diffuse large B-cell lymphoma (r/r DLBCL) by the middle of this year. Morphosys completed a BLA submission on Dec. 30, 2019 and expects to hear whether the file has been accepted for review by the end of February. A European filing has been pencilled in for mid-2020.

The U.S. filing is based on data from an open-label, single-arm trial, L-Mind, which evaluated a combination of tafasitamab and Revlimid (lenalidomide) in 81 patients who were ineligible for high-dose chemotherapy and subsequent autologous stem cell transplantation. The overall response rate (ORR) was 67.1%, including a complete response rate (CRR) of 39.5% among 80 evaluable patients. Overall survival was not reached at the time of the analysis. Although the study was not controlled, Morphosys also conducted a retrospective, real-world analysis of similar patients on Revlimid only, in order to capture the single-agent activity of tafasitamab. Those in the Re-Mind study attained an ORR of 34.2%, including a CRR of 11.8%. Overall survival was 9.3 months.

The drug’s lead indication is part of a much wider and more ambitious agenda in which tafasitamab is being tested across various B-cell malignancies and in various combinations. The terms of the deal stipulate the division of labor ‑ and of costs ‑ between the two partners.

Wilmington, Del.-based Incyte will pay for 55% of the cost of U.S. and global trials, with Planegg, Germany-based Morphosys picking up the remainder. Incyte will also pay 100% of the costs for country-specific trials outside of the U.S., including China and Japan. In addition to the present indication, the partners will also develop tafasitamab in first-line DLBCL, follicular lymphoma, marginal zone lymphoma and chronic lymphocytic leukemia (CLL). Incyte will also conduct combination studies of its investigational PI3K-delta inhibitor parsaclisib and tafasitamab in r/r B-cell malignancies. Incyte will lead on potential registrational studies in CLL and a phase III trial in follicular lymphoma and marginal zone lymphoma. Morphosys retains responsibility for its ongoing trials of tafasitamab in non-Hodgkin lymphoma, CLL, r/r DLBCL and first-line DLBCL.

The timing of the deal indicates Incyte’s appetite for risk. Although there is little doubt that tafasitamab is an active agent, the BLA that is critical to its short-term prospects has yet to be formally accepted for review. In addition, Morphosys has not yet reported data from any large-scale randomized controlled trial of tafasitamab. A phase III head-to-head study in r/r DLBCL, dubbed B-Mind, which pits tafasitamab plus bendamustine against the Roche Holding AG’s blockbuster CD20 inhibitor Rituxan (rituximab) plus bendamustine, will not read out until Q1 2022. It recently came through a futility analysis, but the independent data monitoring committee recommended that enrolment should be increased from the original target of 330 to 450 to improve its statistical power.

Tafasitamab is, initially at least, aimed at patients who are too frail or otherwise ineligible for CD19-directed CAR-T cell therapies. But in the longer term, Morphosys aims to target first-line patients as well, and it recently reported at the 2019 American Society for Hematology (ASH) meeting that tafasitamab does not interfere with subsequent CAR-T therapy. The antibody is Fc-engineered to enhance its antibody-dependent cell mediated cellular cytotoxicity and antibody-dependent cellular phagocytosis activities. Unusually for Morphosys, tafasitamab is not the product of its in-house discovery research. It in-licensed the molecule, originally designated (XMAB5574), from Monrovia, Calif.-based Xencor Inc. in 2010. The partners amended their license agreement two years later – it is worth up to $315 million in up-front and milestone payments, as well as sales royalties in the mid-single-digit to low-double-digit percentage range.

For Incyte, “the deal is a boost given the recent setback for itacitinib”, Mizuho Securities analyst Mara Goldstein wrote in an investor note, “as well as an incremental step toward broader revenue diversification for the company.” How much revenue could be involved is currently unclear, however. “We do not have a revenue forecast for tafasitamab, but note that r/r DLBCL and other B cell malignancies could certainly support a drug with revenue potential [of over $1 billion],” Goldstein wrote. “The question of how quickly tafasitamab can ramp is one that we do not yet have an answer for as we note, even with good efficacy data, the competitive landscape could play a role in how quickly the drug captures share.”

One obvious competitor is Lausanne, Switzerland-based ADC Therapeutics SA, which is targeting CD19 with an antibody-drug conjugate (ADC) rather than a naked antibody. Last week, it reported that its agent, loncastuximab tesirine (ADCT-402), achieved a 45.5% ORR, including a 20% CRR, in a pivotal monotherapy phase II trial in 145 patients with r/r DLBCL. It is on track for a BLA filing during the third quarter and, following an accelerated review, hopes to launch by the second quarter of 2021.