Analyst Conference Summary

biotechnology

conference date: July 31, 2018 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2018 (Q2, second quarter 2018)

Forward-looking statements

Overview: Exceptional revenue due to a $100 million milestone.

Basic data (GAAP):

Revenue was $521.5 million, up 36% sequentially from $382.3 million, and up 60% from $326.4 million in the year-earlier period.

Net income was $52.4 million, up sequentially from negative $41.1 million, and up from negative $12.5 million year-earlier.

Diluted EPS was $0.24, up sequentially from negative $0.19, and up from negative $0.06 year-earlier.

Guidance:

Slighly lowered non-GAAP research and development expense to $1.008 to $1.203 billion.

Conference Highlights:

Hervé Hoppenot, Incyte’s CEO, said "With four sources of revenue driving our fast-growing top-line, and multiple opportunities in our later-stage development portfolio that may accelerate this growth in the near-term, we believe we are well-positioned for long-term success. over the next 6 months we expect to provide multiple updates from our later-stage portfolio. These include sharing data from, and submitting the supplemental New Drug Application (sNDA) for, Jakafi in steroid-refractory acute graft-versus-host disease (GVHD), as well as presenting data for ruxolitinib cream in atopic dermatitis and updated data from our FGFR program in cholangiocarcinoma. Later this year, we also plan to present data for ruxolitinib in combination with our PI3Kd inhibitor, which is part of our initiative to maintain and expand our leadership position in the treatment of patients with myeloproliferative neoplasms."

Royalty revenues dip in Q1 vs. Q4 because royalties reset to a lower level.

Non-GAAP numbers: Net income $56.9 million, up sequentially fromnegative $2.6 million, and flat from $57.0 million year-earlier. Diluted EPS $0.36, up sequentially from negative $0.01, and down 4% from $0.27 year-earlier.

Cash and equivalents ended at $1.2 billion, down sequentially from $1.33 billion. Debt $25 million in convertible notes. There is a $288 million acquisition-related contingent consideration liability.

In June 2018, the FDA approved the 2mg dose of Olumiant (baricitinib) as a once-daily oral medication for the treatment of adults with moderately-to-severely active rheumatoid arthritis (RA) who have had an inadequate response to one or more tumor necrosis factor (TNF) inhibitor therapies. The atopic dermatitis trial is in Phase 3. Baricitinib is licensed to Ely Lilly; Incyte receives royalties. A $100 million milestone payment was recorded in Q2.

The pivotal REACH1 trial of ruxolitinib (Jakafi) in combination with corticosteroids for the treatment of patients with steroid-refractory acute GVHD met its primary endpoint. Incyte plans to file an sNDA for the approval of ruxolitinib for the treatment of steroid-refractory acute GVHD with the U.S. Food and Drug Administration (FDA) in Q3 2018, with breakthrough designation. REACH3 and REACh2 Phase 3 trials for the chronic GVHD are ongoing. Jakafi for essential thrombocythemia Phase 2 trial RESET is ongoing.

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. An NSCLC combination trial is in Phase 1.

Pemigatinib (INCB54828) for cholangiocarcinoma and initial data showed promising efficacy. Expects to file with fDA in 2019. The Phase 2 trial for bladder cancer with FGFR pathway alterations is recruiting patients. 54828 is a FGFR inhibitor.

INCB50465, the selective PI3Kδ inhibitor as monotherapy in patients with diffuse large B-cell lymphoma (DLBCL), continued the Phase 2 CITADEL-202, 203, 204 and 205 trials. Alos in combination therapy with Jakafi.

MGA0012 Phase 1 solid tumor monotherapy trials are in expansion cohorts. MGA012 is licensed from MacroGenics.

INCMGA0012 (PD-1) is now in development for endometrial cancer, merkel cell carcinoma, and anal cancer, with data expected in 2020, and possible future combination studies.

INCB54707 (JAK1 inhibitor) Phase 2 expected to begin in H2 2018 for hidradenitis suppurativa.

The therapies licensed from Agenus continue development. INCAGN1876 (GITR) completed dose escalation; INCAGN1949 (OX40) also completed dose escalation. For both development is expected to focus on combination therapy. INCAGN2390 (TIM-3) is expected to enter clinical trials in 2018. INCAGN2385 (LAG-3) in now is Phase 1 dose escalation.

There are also many candidates in, or about to enter, early clinical trials.

In partnership with Lilly, in December an NDA for baricitinib was resubmitted. The advisory committee review at FDA recommended approval for moderate-to-severe rheumatoid arthritis. Baricitinib is approved in the EU for rheumatoid arthritis and is in trials for atopic dermatitis, psoriatic arthritis, and lupus. Lupus data should be presented later this year.

Capmatinib, Incyte’s potent and selective c-MET inhibitor, for NSCLC, is partnered with Novartis, which anticipates submitting an NDA in 2019.

Itacitinib (JAK 1) is in Phase 3 trials for GVHD, including treatment-naive.

See also Incyte pipeline.

Cost of product revenue was $24.9 million. GAAP operating expenses were: $298.1 million for research and development; $108.0 million for selling, general and administrative expenses; and a $7.0 million charge for change in value of a contingent consideration. Total costs $438,3 million. Leaving income from operations of negative $83.2 million. Interest and other income was $5.4 million. Unrealized loss on investment was $34.6 million. Income tax $1.6 million.

Q&A:

MPN (myeloproliferative neoplasm) combination work? Will this open up a set of new patients? We believe would could extend the duratino of therapy for patients who are on Jakafi, by combining with one of our pipeline products. We believe there is still a lot of progress to be made, including for patients who can't be treated with Jakafi.

Pemigatinib criteria for filing? We just have interim data. We need to complete recruitment and see the duration of effect.

Size of GVH opportunity? In the U.S., for acute and chronic steroid refractory population about 1,500 patients apiece. Itacitinib for steroid naive about 15,000 globally. The value for Jakafi and Itacitinib depends on duration of treatment, with Itacitinib much larger.

Price increases for Jakafi? We don't talk about pricing strategy in advance, but we may increase prices modestly going forward.

Catalyst to compensate for epicatostat failure? You can see how extensive our pipeline is, which should be meaningful for topline growth.

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