Analyst Conference Summary

biotechnology

conference date: October 31, 2017 @ 7:00 AM Pacific Time
for quarter ending: September 30, 2017 (Q3, third quarter 2017)

Forward-looking statements

Overview: Rapid revenue ramp with a very extensive pipeline in development. Increased 2017 revenue guidance.

Basic data (GAAP):

Revenue was $381.5 million, up 17% sequentially from $326.4 million, and up 42% from $269.5 million in the year-earlier period.

Net income was $36.0 million, up sequentially from negative $12.5 million, and down 2% from $36.9 million year-earlier.

Diluted EPS was $0.17, up sequentially from negative $0.06, and down 11% from $0.19 year-earlier.

Guidance:

2017 product revenue increased to range of $1.195 billion to $1.2 billion. But also increase R&D expense projection to $1.25 to $1.3 billion. SG&A at $340 to $360 remained unchanged. Net loss of $290 to $300 million.

Conference Highlights:

Hervé Hoppenot, Incyte’s CEO, said “Jakafi and Iclusig continue to outperform our expectations, and we are now evaluating ten different indications across our five late-stage development candidates. We are also on track to initiate the next wave of pivotal trials planned for the epacadostat development program. We are striving to build Incyte into a world-class biopharmaceutical company, and we are very pleased to report another quarter of significant progress towards that goal.”

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.

Cash and equivalents ended at $1.28 billion, up sequentially from $609 million. Debt $23.7 million in convertible notes. There is a $284 million acquisition-related contingent consideration liability. In the quarter Incyte raised $649 million through a public common stock offering.

In October announced a collaboration and licensing deal with MacroGenics for MGA012.

Epacadostat, a IDO1 inhibitor, Phase 3 trial 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 to begin enrollment by year end. Also in collaboration with Bristol-Myers Squibb in combination with nivolumab in pivotal studies for two cancer types.

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.

INCB39110 (now Itacitinib) is 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. Both trials are recruiting well.

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.

A large number of other trials continued, or are expected to be launched in 2017. the number of drug trials is so vast that status is reported on two large and two small tables on the press release. Here is the targeted cancer therapy table:

And here is the cancer immunotherapy table:

See also Incyte pipeline.

Cost of product revenue was $22.0 million. GAAP operating expenses were: $269.6 million for research and development and $91.3 million for selling, general and administrative expenses, and a $16.3 million benefit for change in value of a contingent consideration. Leaving income from operations of $15.0 million. Interest and other income was $5.6 million. Unrealized gain on investment was 23.0$ million. Income tax $7.3 million.

Q&A:

Epacadostat combination for lung cancer? Premise is it may work best where there is low disease burden. We have both a chemo and chemo-free option with the combination.

Macrogenics PD1 inhibitor deal? PD1 has been the driving force in immuno-oncology. The next stage is combinations that improve the PD1 profile.

Epacadostat for PDL1 minimal expressers? We have data across multiple tumors with some intriguing data for low expression. In lung cancer there is selection upfront, but we are also trying with and without chemotherapy.

Adjuvant setting for epacadostat? Immunotherapy could be most effective in those settings, some data is out to support that. So we would like to test in the melanoma adjuvant setting. Tolerability is key in an adjuvant population, so our tolerability profile is encouraging.

Many questions about the trials that have already been covered, or to which no new information was added in answers. It is hard to keep track of the variations in the numerous trials.

Macrogenics goal to establish new triplets? Epacadostat is not the key driver of this agreement. It is more combinations with the other six products, and economically easier because we have our own PD1. We could start safety studies in 2018.

Jakofi revenue stream sustainability, extensions? We expect to exceed $2 billion in revenue once we have GVHD. Also essential thrombocythemia. We are also working on combination therapies. Selection of targets is partly because of potential utility with Jakofi.

Strategy for OX40 and other I-O assets, just your own PD1 now? The goal is to use products in our own portfolio. For some indications we might use a different PD1.

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