Loxo Oncology Inc (NASDAQ:LOXO): What Just Happened?


Loxo Oncology Inc (NASDAQ:LOXO) just presented data at The American Society of Clinical Oncology, or ASCO’s, 2017 meeting. The meeting is one of the hottest dates on the biotechnology calendar, with a host of companies taking the stage to bring markets and physicians updates as to how their spectrum of development programs are going. With Loxo specifically, the program in question involves a drug called larotrectinib (LOXO-101), with three separate clinical trials ongoing right now – all three of which served up some degree of insight into progress at the above-discussed presentation.

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As things stand, the company currently trades for a little over $70 a piece; that’s a close to 45% appreciation on Loxo’s pre-announcement pricing and brings the company to a more than 118% premium on its year to date opening.

So, the year so far has been a good one for Loxo’s shareholders, but the question now, is what’s next?

Let’s try and figure it out.

So, as we’ve noted, the data refers to a drug called larotrectinib and the company is targeting an oncology indication, and specifically, those patients whose tumors harbor what are called tropomyosin receptor kinase (TRK) fusions. The MOA is pretty neat. The drug is a TRK inhibitor, meaning it stops the TRK signaling pathway from activating. This pathway is responsible for the fusion and growth (and replication) of cancerous cells of this type. The MOA isn’t the only interesting thing, however. What’s really interesting is that the drug targets cancers based on their genetic makeup (and specifically, their expression of TRK) as opposed to the location of the cancer in the body. In this sense, it’s similar to Merck & Co., Inc. (NYSE:MRK)’s Keytruda, which just earned the title of being the first drug ever to pick up approval in the US for a genetic target and not a locational target in the oncology space.

So why is the company running to the degree that it is?

Well, because from the data we’ve seen, it almost looks as if it is outperforming Keytruda.

The data derives from relatively early stage trials – a phase I, a phase I/II and a phase II, with a total patient count from all three of about 55 patients total. All of the patients in the study had the TRK mutation that the company is looking to target and the trial measured efficacy against the trifecta of gold standard measurement endpoints in oncology – objective response rate (ORR), partial response rate (PRR), and complete response rate (CRR).

As per the data reported at ASCO, the trials hit against these endpoints to the tune of 76%, 64% and 12% respectively. This means more than three out of every four patients achieved an objective response and more than one in ten achieved a complete response. That may not sound great right off the bat, but these are tough to treat cancers in patients that have essentially run out of treatment options. In other words, the numbers are very strong. The drug actually outperformed Keytruda in a direct comparison, when looking at the data from these three studies and the data from the trial on which Keytruda’s registration application, and in turn, its approval, was based. A direct comparison like this is a little misleading (Keytruda is going to be targeting some tougher cancers and the data derived from a patient sample size of about a three times multiple) but it does give readers some idea of how these numbers compare to what’s out there right now.

So what’s next?

Well, now it’s all about clinical advance. The company has strong proof of concept data in hand with this early stage data in hand and – and here’s the best part – there’s a good chance that the FDA will allow this data to serve as underpinning a registration application. That’s the current line of thought, anyway, and if it proves valid (and we believe it will) then it paves the way for a late 2017 submission. This, in turn, sets up the potential for a 2018 approval in the US. These timeframes are slightly optimistic (a small pushback could see a 2018 submission run into a 2019 approval), but whatever happens, it’s looking as though Loxo is going to get a green light for larotrectinib before the end of the decade.

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