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What: Shares of Incyte Corporation (NASDAQ:INCY) fell by more than 21% in early morning trading today after the company announced that it is discontinuing the clinical development of Jakafi (ruxolitinib) in solid tumors due to insufficient efficacy. 

So what: The Street expected about half of Jakafi's peak sales to eventually come from solid tumors.  

Now what: Despite this clinical setback, Jakafi's sales still rose by a healthy 68% in the fourth quarter compared to a year ago, as a treatment for myelofibrosis and polycythemia vera. The concern, though, is that Jakafi could have significant competition in the hematological malignancy arena in the not-so-distant future.

After all, Geron (NASDAQ:GERN) and its partner Johnson & Johnson (NYSE:JNJ) are developing the telomerase inhibitor imetelstat as a disease-modifying treatment for myelofibrosis. In early stage trials, for instance, imetelstat produced both partial and complete responses in a handful of myelofibrosis patients.

Jakafi, on the other hand, mostly lessens the symptoms associated with myelofibrosis, implying that it would probably be at a significant competitive disadvantage if pitted against imetelstat.

Having said that, imetelstat has run into problems from a safety standpoint in the past, meaning that its approval is far from a sure thing. Even so, Incyte shareholders will definitely need to keep a close eye on this growing competitive threat, especially after this disappointing news regarding Jakafi's solid tumor program. 

George Budwell has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.