What happened

Shares of Loxo Oncology (NASDAQ:LOXO) soared nearly 59% today after the clinical-stage biopharma announced interim data for three clinical trials over the weekend at the American Society of Clinical Oncology's annual meeting, which is more commonly referred to as ASCO. The company's lead drug candidate, larotrectinib, demonstrated a 76% objective response rate in adult and pediatric patients with tumors that have specific genetic markers. It also showed a high level of tolerability, with 93% of patients remaining on the drug or having received surgery with the intent to be administered the drug. 

The mid-stage data are pretty impressive. In fact, they stack up quite favorably to Keytruda from Merck (NYSE:MRK), which recently became the first cancer drug to win marketing approval based on a genetic marker being present in any solid tumor, rather than what part of the body a cancer has started. As of 1:01 p.m. EDT, the stock had settled to a 48.4% gain, representing a $656 million increase in market cap.

A businessman pulling money towards him with a magnet.

Image source: Getty Images.

So what

Loxo Oncology provided the update based on results from a phase 1 adult trial, phase 2 trial, and phase 1/2 pediatric trial. In all, the data set included responses from 55 patients with over 12 types of cancers. Each patient's cancer harbored a TRK fusion, which is a mutation of a normal cell communication pathway that can result in tumor growth.

Larotrectinib, which received Breakthrough Therapy Designation from the U.S. Food and Drug Administration in July 2016, achieved encouraging results at the follow-up, including:

  • Objective response rate (ORR) of 76%
  • Partial response rate (PRR) of 64%
  • Complete response rate (CRR) of 12%

While it's not an apple-to-apples comparison, Merck's Keytruda won approval from the FDA with an ORR of 39.6%, PRR of 32.2%, and CRR of 7.4% from a population of 149 patients. The drug will treat adult and pediatric patients with difficult-to-treat cancers harboring one of two genetic markers and that have no other treatment options. Therefore, investors should expect lower response rates for Keytruda in that specific indication, compared to what may be achieved from larotrectinib. 

Still, that helps to put the data from Loxo Oncology into perspective. That's good news, too, considering that these results will become the basis for the company's New Drug Application that will be submitted in late 2017 or early 2018. That could put the drug on the market sometime in 2018 or early 2019.

Now what

Improvements in genetic sequencing technologies are promising to usher in a new age of medical treatments and cancer therapeutics that are safer and more effective. Loxo Oncology figures to play an important role in that future -- its entire pipeline is dedicated to treating cancers with specific genetic mutations. It's even already working on a next-generation TRK-inhibitor for patients that develop resistance to prior-generation therapies, which may very well include the yet-to-be-approved larotrectinib. With this weekend's news, investors in this forward-thinking company are on the cusp of product revenue for the first time ever, although a (wisely timed) stock offering to raise cash may also be around the corner.