Analyst Conference Summary



conference date: May 9, 2016 @ 7:00 AM Pacific Time
for quarter ending: March 31, 2016 (Q1, first quarter 2016)

Forward-looking statements

Overview: Continues to ramp sales of Jakafi and to advance its pipeline.

Basic data (GAAP):

Revenue was $263.5 million, up 8% sequentially from $243.9 million, and up 65% from $159.3 million in the year-earlier period.

Net income was $24.0 million, down 57% sequentially from $55.2 million, and up from negative $18.4 million year-earlier.

Diluted EPS was $0.12, down sequentially from $0.29, and up from negative $0.11 year-earlier.


Raised Jakafi product revenue estimate for 2016 to $815 to $830 million. Iclusig revenue is expected to be $25 to $30 million. R&D expense $635 to $660 million including Ariad and milestones to Lilly. SG&A to $285 to $310 million. $10 to $20 million net income. Positive cash flow from operations offset by cash use for acquisition, leaving over $600 million cash and equivalents at end of year.

Conference Highlights:

Agreed to acquire Ariad's European business including development and commercialization rights to Iclusig in Europe. This will help with sales of future product in Europe. Revenue from Iclusig should offset cost of the European organization. Iclusig is already approved in Europe for CML and Ph+ AML that are resistant to dasatinib or nilotinib. Paid $140 million cash plus tiered royalties and some other milestone payments. Should be accretive beginning in 2018. [WPM: in the U.S. Iclusig (ponatinib) has a black box warning]

Baricitinib is expected to provide Incyte with a second significant source of revenue. An NDA for rheumatoid arthritis was submitted to the FDA and EU MAA, which generates a $55 million milesone for Q1, and if approved by the FDA a $100 million milestone payment from Lilly. Could be approved in 2017.

Revenue consisted of product revenue of $183.3 million, all from Jakafi; royalty revenue of $21.9 million from Novartis for ruxolitinib/Jakavi, and contract revenue of $58.2 million.

Saw the usual Q1 gross-to-net effect from Medicare donut hole. Jakafi had its label expanded to include new positive data.

Cash and equivalents ended at $810.7 million, up sequentially from $708 million. Debt $628 million in convertible notes.

Epacadostat, a IDO1 inhibitor, is expected to enter Phase 3 in the coming weeks in first-line advanced or metastatic melanoma in combination with Merck’s pembrolizumab. The trial will have 600 patients with initial data in 2018. Multiple Phase 2, tumor-specific, expansion cohorts of epacadostat in combination with anti-PD-1 and anti-PD-L1 checkpoint modulators are also underway.

Jakofi for GVHD (graph v. host disease) is in development and could create a second stream of revenue. INCB39110 is also in a proof of concept trial for graft vs. host disease as well as for NSCLC.

Expects the Phase 1 clinical trial for INCAGN1876 for the GITR checkpoint modulator to begin "in the next few weeks." The first patient was dosed in the new INCB59872 LDS1 Phase 1 program.

INCB52793 is in a dose escalation study of advanced malignancies.

Incyte has 14 development molecules in clinical trials.

See also Incyte pipeline.

Cost of product revenue was $6 million. GAAP operating expenses were $156 million for research and development and $65 million for selling, general and administrative expenses. Leaving income from operations of $36 million. Interest and other expense was $12 million. Income tax expense $0.4 million.


Reason to expand Europe at this time, before more Phase 3 advancement? We see advancement of many of our own projects. So we will need to be more active in Europe if any of these therapies make it through the process. We want to be ready by 2019 for launches, but before that it will help with trial patient recruitment. Plus Iclusig has a great deal of potential, including new indications. We would have needed to spend money in Europe anyway to prepare for future introductions.

Our infrastructure in Europe is spread across a number of the larger countries.

Epacadostat data expected? We now have additional scans on those patients increasing our confidence for melanoma. For Phase 3 will have 600 patients over 13 tumor types and data will come in by tumor type.

Jakafi guidance increase source? Seeing increases in PD and MF patients, plus staying on therapy longer.

In the past we have seen problems acquiring products because we had no presense in Europe. We no longer need to acquire outside products, but we are open to it.

GVHD size of opportunity, is it chronic or one-time treatment? 21,000 stem cell transplants per year in U.S., about half are of the type that can cause GVHD. It can be either acute or chronic and steroid treatable v. refractory. 39110 is in Phase 1. Jakafi (Ruxilitinib) rights acquisition allows us to start a program there, but there is already prior proof-of-concept data. 39110 and Jakafi target different types of GVHD.

Jakafi price increase in guidance? We took a price increase on April 1, we don't discuss future pricing strategy.

Even if we don't get the second line indication with Iclusig our team in Europe should be self funding. We will get some tax efficiency from the losses we acquire.

The idea is to create a portfolio where the value in the totality is much greater than the sum of the parts because the therapies are in related pathways.

Epacadostat lung cancer go/no go decision? We will have data availability across the second half of the year. But there are enough historical controls for response rate that we could use those to make the decison.

Ammortization of Iclusig? Over the life of the patent, which is into 2026.

Does ECO301 melanoma study have to hit the co-primary endpoints? It does not have to be both. The PFS endpoint is the basis for expectation of data in 2018.

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is investment journalism, not financial advice.

Copyright 2016 William P. Meyers