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NewLink Genetics: Initiating Coverage With Buy Rating And First Price Target = $24 (Multiple Upcoming Catalysts) – NewLink Genetics Corporation (NASDAQ:NLNK)

NewLink Genetics (NASDAQ:NLNK) is Ames, Iowa, based emerging biotechnology company in the field of immuno-oncology. The company’s common stock sank last year after the failure of two Phase 3 trials of its HyperAcute cellular immunotherapy in metastatic pancreatic cancer. Afterwards, the stock more than doubled from its 2016 lows in anticipation of data from its IDO inhibitor pipeline and has pulled back from the recent highs, thus providing an attractive long entry point.

(NewLink Genetics, common stock price chart. Source: Bloomberg)

Product Pipeline:

(NewLink Genetics, IDO inhibitor immuno-oncology product pipeline)

The company’s immuno-oncology pipeline is focused on the inhibition of IDO (indoleamine-2, 3-dioxygenase) pathway which is believed to be an immune checkpoint similar to PD-1 and CTLA-4 pathways. It is one of the handful of companies which are developing IDO inhibitors (and the one of two public ones). The IDO pathway regulates the immune response by suppressing T cell activation, which enables the tumor cells to evade the host immune response. IDO inhibitors are believed to be the next potential blockbuster class of checkpoint inhibitors. Incyte (NASDAQ:INCY)’s direct IDO enzyme inhibitor epacadostat is being tested in various solid tumors in partnership with Merck’s (NYSE:MRK) Keytruda. Peak sales estimates for epacadostat are as high as $9 billion in various solid tumor indications.

(Mechanisms of actions of Indoximod and GDC-0919)

Indoximod: It acts on the T cells by mimicking tryptophan and, thus, signals the activation of T cells. It, thus, acts as an indirect inhibitor of IDO pathway. Indoximod attracted widespread investor attention after its recent data release in the treatment of advanced melanoma at the recently concluded AACR meeting. In an ongoing Phase 1b/2 trial in 60 patients enrolled so far, Indoximod and Keytruda combination resulted in 59% overall response rate (ORR) and 74% disease control rate (DCR). The cohort also included ocular melanoma patients (which have poor treatment response) and when these were excluded, ORR was 59% and DCR was 80%. The results were spectacular considering that Keytruda alone has shown ORR of only 33% in this patient population. A combination of Bristol-Myers Squibb’s (NYSE:BMY) Opdivo and Yervoy (anti-CTLA-4) resulted in 58% ORR in advanced melanoma but had higher incidence of Grade 3 and 4 treatment-related adverse events (58% in the combination vs. 21% in Opdivo alone).

In a smaller Phase 1 study of 19 patients with advanced melanoma, Incyte’s epacadostat and Keytruda combination resulted in 58% ORR, 26% complete remission rate (CR) and 74% DCR. The CR was lower in the above mentioned Phase 1b/2 trial of Indoximod+Keytruda (10%). However, Indoximod+Keytruda have shown efficacy and safety in the largest patient population of advanced melanoma treated with anti-PD1+anti-IDO combination so far, and till Incyte and Merck show efficacy and safety in a similar sized patient…

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