Analyst Conference Summary



conference date: April 30, 2019 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2018 (Q1, first quarter 2019)

Forward-looking statements

Overview: Continued strong revenue growth.

Basic data (GAAP):

Revenue was $498 million, down 6% sequentially from $528 million, and up 30% from $382 million in the year-earlier period.

Net income was $102 million, up 48% sequentially from $69 million, and up from negative $41 million year-earlier.

Diluted EPS was $0.47, up 12% sequentially from $0.32, and up from negative $0.19 year-earlier.


Tweaked 2019 guidance slighly by raising research and development expense estimates by about $40 million.

Conference Highlights:

Hervé Hoppenot, Incyte's CEO, said "Underlying demand for Jakafi is strong, and we look forward to the FDA decision on ruxolitinib's approval in steroid-refractory acute graft-versus-host disease. We continue to make progress across multiple programs and towards our key strategic goals of further diversifying our revenue base and accelerating near-term growth. We expect to present data from ruxolitinib cream in patients with vitiligo later in the second quarter and to progress the program into Phase 3 development. In addition, we expect to file a New Drug Application with the FDA for pemigatinib and to receive the results from three Phase 3 trials of JAK inhibition in GVHD by the end of this year."

Believes long-term Jakafi revenue potential is $2.5 to $3.0 billion per year by 2027. We have almost ten years left on patent. Ready to launch for steroid refractory acute GVHD if approved.

The primary endpoint was met in the Phase 2 trial of ruxolitinib cream for the treatment of vitiligo; preparations now underway for Phase 3 development.

Incyte Revenue by Type
(in $ millions) Q1 2019
Q4 2018
Q1 2018
Jakafi product
Iclusig product
Jakavi royalty
Olumiant royalty
milestone, other
Total revenue:

Jakafi revenue growth was mainly driven by volume growth. Gross to net is typically highest in Q1 and drug manufacturers are now required to contribute 70% of the coverage gap or donut hole in Q1, as compared to 50% in previous years.

Non-GAAP numbers: Net income $135 million, up 55% sequentially from $87 million, and up from negative $15 million year-earlier. Diluted EPS $0.63, up 47% sequentially from $0.40, and up from negative $0.07 year-earlier.

Cash and equivalents ended at $1.70 billion, up sequentially from $1.4 billion. Debt $17 million in convertible notes. There is a $287 million acquisition-related contingent consideration liability.

Incyte no longer participate in the co-funding of the development of baricitinib, but will continue to receive royalties. This means it will receive less of the incremental portion of royalties based on that co-funding, but the base tiered royalties are expected to grow over time (see slide 18 of presentation).

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.

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. PDUFA date has been delayed to May 24, 2019. REACH3 and REACH2 Phase 3 trials for the chronic GVHD results are expected in 2H 2019. Jakafi for essential thrombocythemia Phase 2 trial RESET is ongoing.

INCB39110 (now Itacitinib) Phase 3 GRAVITAS-301 trial for treatment of patients with newly-diagnosed acute GVHD completed enrollment; results are expected before the end of 2019. If successful, Incyte expects to submit applications for itacitinib in major markets globally. GRAVITAS-309, a Phase 3 trial of itacitinib as a treatment for patients with newly-diagnosed chronic GVHD, was launched in January of this year. An NSCLC combination trial is in Phase 1/2.

Pemigatinib (INCB54828) for cholangiocarcinoma and bladder cancer data presented at ESMO showed promising efficacy. Expects to file with FDA in 2H 2019 for cholangiocarcinoma. The Phase 2 trial for bladder cancer with FGFR pathway alterations is recruiting patients with a Phase 3 trial expected to launch in 2019. Incyte plans to initiate a pivotal tumor-agnostic trial evaluating pemigatinib in patients with driver-activations of FGF/FGFR later in 2019.

Parsaclisib (INCB50465) the selective PI3Kδ inhibitor as monotherapy in patients with diffuse large B-cell lymphoma (DLBCL), continued the Phase 2 CITADEL 203, 204 and 205 trials (for follicular, marginal zone, and mantle cell lymphomas, respectively). Also in combination therapy with Jakafi.

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

INCB86550, an oral PD-L1 inhibitor, as entered Phase 1.

MCLA-145, a PD-L1 by CD137 bispecific antibory should enter Phase 1 in Q2 2019.

INCMGA0012 (PD-1) is now in Phase 2 for endometrial cancer, merkel cell carcinoma, and anal cancer, with data expected in 2020, and possible future combination studies.

INCB54707 (JAK1 inhibitor) Phase 2 underway for hidradenitis suppurativa.

INCB81776 (AXL/MER inhibitor) Phase 1 dose escalation underway for immune-directed cancer.

There are 12 compounds currently in proof-of-concept trials.

In partnership with Lilly, baricitinib is in trials for atopic dermatitis, psoriatic arthritis, and lupus.

Capmatinib, Incyte’s potent and selective c-MET inhibitor, for the treatment of patients with non-small cell lung cancer (NSCLC) harboring MET exon 14 skipping mutations, is partnered with Novartis, which anticipates submitting an NDA in 2019.

See also Incyte pipeline.

Cost of product revenue was $23 million. GAAP operating expenses were: $271 million for research and development; $124 million for selling, general and administrative expenses; and a $7 million charge for change in value of a contingent consideration. Total costs $424 million. Leaving income from operations of $74 million. Interest and other income was $9 million. Unrealized loss on investment was $21 million. Income tax $2 million.

Q&A Summary:

Gross to net in quarter? In Q1 17%. Full year should be near 15%. The change in donut hole rules resulted in about a $5 million change.

We have confidence in our atopic dermatitis data.

We are working with the FDA on the endpoints and size for the vitiligo Phase 3 study, which will have to be appreciable in size.

Needs for dermatology sales infrastructure is very different than for cancer. We are looking for best approach as to doing it alone or partnering.

Our tumor agnostic program could increase potential patients by 15,000 if it works for all the indications.

In 2020 the capital that would have been used for baricitinib development will be devoted to the late-stage clinical programs.

For Phase 3 for vitiligo one of the questions we are talking with the FDA about is whether it should be a study of just the face or the whole body. Stopping the cycle of melanocyte destruction, etc., could apply to other indications, but for now we are focused on vitiligo.

P13Kd (Parsaclisib) thoughts? This is a year of enrolling studies that are registration directed. Enrollment is going well. We should have data next year, and it could be submittable next year. This is a new generation of this type of therapy which seems to have dialed down the toxicity issues of prior generations (Gilead's idelalisib/Zydelig). It is incredibly active in B cell diseases, but we have been working to get dosing that minimizes toxicity. We are hoping the Phase 2 studies show high activity and low toxicity.

We have not seen the problems with irritation and burning with our cream that have been reported for Eurcisa cream for dermatitis. Relief of itch with our product was dramatic and occured within two days.

Reiterated long-term Jakafi revenue potential is $2.5 to $3.0 billion per year by 2027. We have almost ten years left on patent. Does not include potential revenue if approved for ET.

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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, really my personal notes, not financial advice.

Copyright 2019 William P. Meyers