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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.