A Potential Challenger For AstraZeneca's Blockbuster Lung Cancer Drug?

The medicines company released scanty but promising results for an experimental drug just as its shares were joining the Hong Kong Stock Connect scheme

Key Takeaways:

• The drug being developed by TYK Medicines targets lung cancer that has spread to the brain, where market competition is already fierce
• The market leader in lung cancer drugs, AstraZeneca, declined to comment without seeing more detailed clinical data about the Chinese product

A victory in head-to-head clinical trials has the power to shake up the pharmaceutical industry, where companies are competing to deliver the next game-changing drug.

Which is why China's TYK Medicines Inc. (2410.HK) grabbed the sector spotlight this month when it announced that a drug under development had outperformed the world's leading lung cancer treatment in early trials. Investors wondered if they were witnessing the arrival of a new disruptor in the market for cancer therapies.

But the news left many questions still to be answered.

TYK released a short statement on March 9 saying that its candidate drug TY-9591 had, by one measure, demonstrated greater effectiveness against brain metastases from a type of lung cancer than the best-in-class treatment, osimertinib, developed by the pharma giant AstraZeneca (AZN.US).

However, it was worth reading the fine print about the comparison between the two drugs. The evaluation was made using a limited sample in a Phase Two trial and focused on a specific metric for effects on the brain. On that basis, the drug achieved "notably improved statistical and clinical significance over osimertinib", TYK said.

In a head-to-head trial, a new drug is tested under standardized trial conditions against a proven benchmark treatment. TYK's experimental drug is a tyrosine kinase inhibitor targeting cancers with a genetic mutation known as EGFR. The TYK version deviates from the osimertinib formula by replacing hydrogen atoms with deuterium, with the aim of allowing larger doses to be dispensed safely. The company said that it planned to file a new drug application for its product with Chinese regulators in due course.

EGFR, which stands for epidermal growth factor receptor, is a common mutation seen in lung cancer patients and is therefore a frequent therapy target. AstraZeneca's drug is a third-generation inhibitor in this field, used to treat the most common type of cancer affecting the lungs, non-small cell lung cancer. Osimertinib sales rose16% to $6.58 billion in 2024, confirming the drug's status as the leading weapon against lung cancer.

Investors were excited about a potential challenger. Shares in the Chinese drug developer surged as much as 50% on the first trading day after the announcement, before closing with a gain of 16.18%. Interestingly, TYK shares made their debut that same day in the Hong Kong Stock Connect system, which allows mainland Chinese investors to participate in the market. Trading turnover spiked to 3.39 million shares after languishing at a daily average of 200,000, but the euphoria quickly cooled. The price corrected over three days, falling more than 21% to sink below the pre-announcement level.

What could explain the volatility over four trading days?

Clinical findings under scrutiny

In its statement to the Hong Kong Stock Exchange about the trial results, the company did not reveal detailed data, saying that more comprehensive information would be shared at clinical conferences in China or overseas. Asked for its response, AstraZeneca said it could not comment on the limited data available so far.

The methodology also deserves a closer look. The industry-standard endpoints, or targeted outcomes, in cancer drug trials are overall survival, progression-free survival or disease-free survival. In this case, TYK chose to focus on the intracranial objective response rate, or iORR, which tracks lesions in the brain. Moreover, the study was small in scope with 244 test subjects, leaving a question mark over whether the drug can continue to outperform when it moves into a much larger Phase Three trial.

The competitive picture should also be factored in. Other drugs have beaten TY-9591 to market for treating secondary brain cancer that originated in the lungs.  Zorifertinib, jointly developed by Jiangsu Chentai Pharmaceutical Technology and AstraZeneca, launched last November as the world's first EGFR-TKI product specifically aimed at brain tumors triggered by lung cancer.

Novel drug developer TYK was founded in 2017 and went public in Hong Kong in August last year. The IPO prospectus showed that, aside from TY-9591, its 10 other candidate drugs are all at the pre-clinical research stage. With no products yet to sell, the company is far from the breakeven point. It made annual losses of 312 million yuan ($43 million) in 2022 and 383 million yuan the following year, before landing 108 million yuan in the red in the first quarter of 2024. Its pre-IPO financial profile raised other concerns, with net debt of 934 million yuan at the end of last March and a cash reserve of 77.21 million yuan.

The EGFR-TKI marketplace includes at least six products, with more advanced drugs lining up in the Phase Three stage of clinical testing.  Companies such as Betta Pharmaceuticals (300558.SZ), Chia Tai Tianqing Pharmaceutical, Shanghai Junshi Biosciences (1877.HK) and Qilu Pharmaceutical have all launched clinical trials for the latest iterations in this product category.

With fierce competition in a fast-evolving market for specialist drugs, it remains to be seen whether TYK Medicines can deliver a standout product.