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Ignyta Hopes Its Drug Results Will Trump Previous Bad Timing

Few biotechs were untouched by the gloomy market conditions of the past year, and local drugmaker Ignyta Inc. was no exception. But despite the company’s fall from the limelight, Ignyta could be nurturing a valuable asset — and one that analysts believe is being overlooked.

The company’s stock has tanked nearly 60 percent in the past 12 months, joining the ranks of many local biotechs who saw their valuations plummet during the dark days of biotech.

An infamous tweet from Hillary Clinton last September (in response to the Turing Pharmaceuticals drug pricing scandal) sent biotech stocks tumbling, with the Nasdaq Biotech Index falling over 20 percent across the board. It has yet to recover.

“Price gouging like this in the specialty drug market is outrageous,” Clinton tweeted. “Tomorrow I’ll lay out a plan to take it on.”

The drug pricing controversy has kept pharma in the doghouse ever since, but Ignyta may have suffered more than the average small biotech, possibly due to a simple case of bad luck.

Bad Timing

On Sept. 21, the date of Clinton’s stock-smashing tweet, Ignyta was presenting its clinical trial data to a crowd at the European Cancer Congress.

Jacob Chacko, Ignyta’s chief financial officer, laughs at the memory and shakes his head.

“All of that controversy happened that very weekend,” Chacko said. “Then Monday morning came and no one wanted to know about data, they just said ‘All these companies with expensive drugs are overvalued, and we’re going to drop them all.’ Nobody wants to listen to details in that kind of market.”

Ignyta’s valuation dropped from $450 million in June of last year to $236 million today.

And the thing is, Ignyta’s data was promising. In fact, it was the most promising and de-risked data the company had presented yet.

Precision Medicine

Ignyta is developing anti-cancer drugs using genetic testing — and its own diagnostic lab — to match the right drug with the right patients.

The company is studying a drug called entrectinib and how it works in patients with certain cancers. Cancer varies greatly from person to person, so drugmakers develop treatments based on various tumor types and the genetic mutations that activate cancer. Entrectinib is the perfect example of what those in the industry call “precision medicine,” as it’s meant to treat a small patient pool with more accuracy than other blanket treatments (like chemotherapy).

“The benefit of precision medicine is that the potential efficacy of the drug is much higher,” said Ignyta’s CEO Jonathan Lim.

That’s reflected in Ignyta’s latest clinical trial data, which showed that 79 percent of patients in the study (19 out of 24) responded to the drug, seeing their tumors shrink. The patient pool was small, but that’s relatively normal for precision medicine drugs.

‘Key Player’

The data was significant for two reasons: one, the response rate was promising; and two, the cancer is responding across multiple tumor tissues and genetic mutations. In the world of cancer drugs, this is unprecedented, Lim said.

Historically, drugs have received FDA approval on an indication-by-indication basis, meaning that doctors will prescribe one drug to treat lung cancer with an EGFR mutation, and a different drug to treat lung cancer with an ALK-positive mutation.

If the data continues to be supported with further clinical trials, entrectinib may treat multiple kinds of tumor tissue across three gene mutations: NTRK, ROS1, and ALK.

J.P. Morgan biotech analyst Anupam Rama said that he views Ignyta as an emerging “key player” in the field of targeted oncology drugs.

“We believe the company’s lead program entrectinib is an underappreciated and differentiated asset, both from a clinical and commercial perspective,” Rama said.

Phase 2 Data

Rama estimated that entrectinib could bring in $380 million in sales per year, and Lim added that the total market value was closer to $1.8 billion.

Ignyta is expecting data from its Phase 2 study in the second quarter of 2017. This data could possibly be all the company needs to get FDA approval, as precision drugs like entrectinib often get to skip Phase 3 trials based on unusually promising data.

Although Ignyta would not speculate on when entrectinib would reach the market, Rama estimated that the drug could be approved by 2018, with revenue of $9.5 million coming in by the end of that year.

Rama is not alone in his high hopes for Ignyta. All six analysts that cover Ignyta have labeled the stock a “buy,” and all expect commercialization could happen between 2018 and 2019.

IGNYTA INC.

CEO: Jonathan Lim

Revenue: Pre-revenue

Net loss: $92.5 million in 2015; $40 million in 2014

No. of local employees: 116

Headquarters: Torrey Pines/Sorrento Valley

Year founded: 2011

Stock symbol: Nasdaq: RXDX

Company description: Drugmaker developing cancer therapeutics

Key factors for success: Promising Phase 1 data, targeted therapeutics space means faster development cycle. $175 million in cash on balance sheet (which can carry the company through 2018)

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