Analyst Conference Summary



conference date: August 1, 2017 @ 7:00 AM Pacific Time
for quarter ending: June 30, 2017 (Q2, second quarter 2017)

Forward-looking statements

Overview: Jakafi revenue continued to grow on a y/y basis, but revenue down sequentially as Q1 was boosted by $90 million in contract revenue.

Basic data (GAAP):

Revenue was $326.4 million, down 15% sequentially from $384.1 million, and up 33% from $246.3 million in the year-earlier period.

Net income was negative $12.5 million, down sequentially from negative $187.1 million, and down from $34.4 million year-earlier.

Diluted EPS was negative $0.06, down sequentially from negative $0.96, and down from $0.18 year-earlier.


Updated full 2017 guidance is for Jakafi product revenue of $1.09 to $1.12 billion (up); Iclusig unchanged at $60 to $65 million. R&D up to $1.05 to $1.15 million. SG&A $340 to $360 million. Change in fair value of acquisition related contingent consideration $30 to $35 million.

Conference Highlights:

Hervé Hoppenot, Incyte’s CEO, said “Revenue growth from Jakafi and Iclusig continues to be very robust, driven by strong demand, and we have also made significant progress across our clinical portfolio. As we look forward to the second half of 2017, we anticipate the publication of important data from our development candidates, as well as the initiation of multiple additional pivotal combination studies with epacadostat. Investment in innovation has created significant value for Incyte, our stakeholders and for the patients that our products treat. With strong revenue growth, a broad clinical development portfolio, comprehensive drug discovery capabilities and an expanded geographic footprint which now includes the U.S., Europe and Japan, we believe that we are well positioned for long-term value creation.”

Jakafi is now the NCCN recommended treatment for myelofibrosis and second-line polycythemia vera.

Baricitinib (Olumiant) for rheumatoid arthritis, which was approved in Europe, is being subjected to a longer review by the FDA (complete response letter). The FDA has now indicated a new clinical study is needed, but management disagrees.

Incyte Revenue by Type
(in $ millions)
Q2 2017
Q1 2017
Q2 2016
product royalty
Total revenue:

Cash and equivalents ended at $609 million, up sequentially from $512 million. Debt $23.4 million in convertible notes. There is a $306 million acquisition-related contingent consideration liability.

Proof-of-concept data for epacadostat plus PD-1 inhibition was presented at ASCO across multiple tumor types. An expanded Phase 3 program is on track for initiation this year.

Epacadostat, a IDO1 inhibitor, Phase 3trial in first-line advanced or metastatic melanoma in combination with Merck’s pembrolizumab could have the 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 (the ECHO series trials). Phase 3 trials for NSCLC, bladder, renal, and head and neck cancers are planned. Also in collaboration with Bristol-Myers Squibb in combination with nivolumab in pivotal studies for two cancer types. "In June 2017, Incyte and Roche/Genentech decided to close the ECHO-110 trial of epacadostat plus atezolizumab to further enrollment because of slow study recruitment."

Novartis expects to announce NSCLC data for Capmatinib in 2017, with an NDA submission expected in 2018. Jakofi (ruxolitinib) for GVHD (graph v. host disease) is in development, with a Phase 3 trial sponsored by Novartis for acute GVHD started in March and a trial for chronic GVHD initiated in Q2.

Ruxolitinib versus anagrelide for the treatment of thrombocythemia trial opened for enrollment.

INCB39110 (now Itacitinib) is also in a proof of concept trial for graft vs. host disease and has completed recruitment, with initial data expected this year. A combination Phase 1 trial for lung cancer should start this year. The Phase 3 trial for treatment-naive acute GVHD began in July.

INCB54828 Phase 2 trial for bladder cancer with FGFR pathway alterations is recruiting patients. 54828 is a FGFR inhibitor. Another Phase 2 trial was started for cholangiocarcinoma.

INCB50465, the selective PI3Kδ inhibitor as monotherapy in patients with diffuse large B-cell lymphoma (DLBCL), continued the Phase 2 CITADEL-202 trial.

"Novartis anticipates submitting an NDA for capmatinib, Incyte’s potent and selective c-MET inhibitor, in 2018."

INCB57643 has been selected over 54329 for further development. Both are BRD inhibitors.

A Phase 1 trial for INCB62079 began in June for hepatocellular carcinoma.

A large number of other trials continued, or are expected to be launched in 2017.

See also Incyte pipeline.

Cost of product revenue was $20.3 million. GAAP operating expenses were: $201.8 million for research and development and $90.7 million for selling, general and administrative expenses, and $7 million for change in value of a contingent consideration. Leaving income from operations of $7.2 million. Interest and other income was $4.1 million. Unrealized loss on investment was $19.6 million. Senior note conversion expense $1 million. Income tax $3 million.


[note: this summary nowhere near captures all the details. Listen to the Incyte Q2 audio recording if you have the time.]

Epacadostat ECHO-110 results implications? Negative result has not effected our plans. Opens up IDO doublet with PD1 as a cornerstone.

Why did you pick one bromo-domain inhibitor (BRD)? Data from each will be presented in the second half of the year. 57643 had a more optimal profile, as you will see when the data is released.

ECHO-110 has been a laggard in terms of enrollment. It could have been the particular PDL1 combination. We will present the data when it is available.

There are a number of ways the cancer benchmarks might be moved forward by adding a third drug to an IO - IO combination.

Epacadostat with checkpoint inhibitors, balancing risks and opportunities? The aim is to improve the event-driven endpoints, life progression-free survival or overall survival. Tolerability is important as well as efficacy. We have a variety of potential therapies to try. For now we are going after cancers where PD1 is the care standard. There is a substantial unmet need, since the PD1 response rates tend to be around 20%. There is the question of what drives PD1 resistance; we are looking at what mechanisms cause that.

Biomarker for Phase 3 program? IDO1 expression, PDL1 status, potentially others, we need to be smarter in picking the populations to test the doublets and triplets on.

PFS assumptions in Merck trial? No decision has been made yet. The primary endpoint is combined PFS and OS. You can read into it what you want, we don't have the data yet. The question is what can be achieved with the Doublet over PD1 alone.

Ruxolitinib? Three separate clinical studies, for acute GVHD, chronic GVHD, and essential thrombocythemia. [audio cut to music. Glitch?]

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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 2017 William P. Meyers