Edited Transcript of INCY earnings conference call or presentation 14-Feb-19 1:00pm GMT

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Thank you, Mike, and good morning, everyone. accordingly 2018 was another excellent year can Incyte though we delivered 25% growth at product-related revenues above final year. complete 4 sources of revenues dine shown good growth with 22% from Jakafi, 19% from ICLUSIG, 28% growth at Jakavi royalties, and Olumiant now becoming a issue contributor ought the peak line.

Looking into next year, I watch this revenue trajectory continuing given the guidance we dine provided to, therefore, Jakafi ought come $1.58 billion ought $1.65 billion, and ICLUSIG ought come $90 million ought $100 million. Adding consensus estimates though our royalty earnings from Jakavi and Olumiant generates an expected growth impose though product-related revenue though 2019 of approximately 20%.

Slide 6 takes us beyond impartial revenue anticipate though 2019 and outlines the most significant pivotal information brook items we desire though the year. amuse correspondence that these items virgin know FDA decisions, FDA submissions and pivotal experiment results, and the more finish summary of 2019 information brook will chase at the afterward slide.

We last ought vocation with the FDA regarding the priority newspaper of the ruxolitinib sNDA though the treatment of patients with steroid-refractory critical GVHD. We recently announced a 3-month extension ought the newspaper and the revised PDUFA engagement is can 24. We desire ought obey the NDA though pemigatinib though the treatment of patients with FGFR2-translocated cholangiocarcinoma at the second half of this year. And at the second half of 2019, we also desire Novartis ought obey the NDA seeking approval of capmatinib though patient with MET mutated non-small jail lung cancer.

The first phase III results from the itacitinib development program at GVHD are expected afterward this year, and if the GRAVITAS-301 experiment is successful, itacitinib has the latent ought exist a global commercial occur though Incyte.

We also desire pivotal results from 2 trials though ruxolitinib at steroid-refractory critical and steroid-refractory chronic GVHD afterward this year. We are working at collaboration with Novartis at the development of ruxolitinib at GVHD.

Last week, we announced the initial phase III arise of the broad phase III development program of baricitinib at patients with tender ought severe atopic dermatitis, and we appear send ought additional results from that program afterward this year.

2019, therefore, has a latent ought exist a equal exciting year though Incyte. And ought division more details above Jakafi's deed and outlook, I'll convey the exclaim above ought Barry.

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Barry P. Flannelly, Incyte company - Executive VP & normal Manager of U.S. [4]

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Thank you, Hervé. Good morning, everyone. Jakafi continues its noise growth. We dine seen good revenue growth at Q4, which was because of new patient growth at both the third and the fourth quarters. This gives us excellent momentum though we headmaster into 2019.

Slide 9 farther emphasizes the consistency of Jakafi's deed above an annualized basis. at the fourth quarter, though shown above the left, Jakafi grew 26% above the equal epoch final year. And though the entire year 2018, Jakafi grew 22% above the entire year of 2017, though shown above the right. There was no appreciable convert at the flat of inventory can the disagree of the year compared ought the beginning. Today, we dine provided initial Jakafi net produce revenue guidance though 2019 though a mount of $1.58 billion ought $1.65 billion. This mount includes both approved indications though patients with myelofibrosis and with polycythemia vera too though latent third symptom of steroid-refractory critical graft-versus-host disease. to the FDA consent Jakafi at this third indication, we will exist ready though an immediate launch and used to desire good reimbursement coverage given our prior discussions with payers.

I'll finish my division by reiterating our long-term revenue guidance though Jakafi of $2.5 billion ought $3 billion. though you can watch from the graphical drawing above glide 10, we are now halfway ought our long-term target, and we appear send ought reporting future further above the coming quarters.

Now it's above ought Steven though a clinical update.

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Steven H. Stein, Incyte company - Executive VP & head Medical officer [5]

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Thanks, Barry, and good morning, everyone. Incyte is currently running 6 key late-stage development projects, though summarized above glide 12. These 6 projects know latent at 16 various indications and the estimated numbers of eligible patients though each blueprint are also included at the slide. each crazy blueprint has substantial latent above a stand-alone basis, and collectively they describe a stand of late-stage blueprint that has the latent ought convert Incyte into a company with multiple-approved products at the United States, Europe and Japan above the next few years.

We'll concentrate attention today above 4 of them though these are the projects that we desire ought generate significant updates during this year. We are conducting 2 comprehensive programs assisting the safety and efficacy of JAK inhibition though a treatment though patients with graft-versus-host disease. The come program is investigating ruxolitinib and steroid-refractory disease. And the information shown at the left-hand panel of the pivotal REACH1 information and steroid-refractory critical graft-versus-host disease. These are the information that are currently being reviewed by the FDA. REACH2 also at critical and REACH3 at chronic graft-versus-host sickness are being brook at collaboration with Novartis and are because of interpret results afterward this year.

In the first-line or steroid-naive setting, the GRAVITAS program is investigating itacitinib at graft-versus-host disease. The information at the right-hand panel are from ASH, a join of years ago, and which led us ought vacation this slice of the graft-versus-host sickness development program.

The GRAVITAS-301 experiment is assessing the safety and efficacy of itacitinib at steroid-naive graft-versus-host sickness and is because of interpret results afterward this year.

We are excited by the latent of JAK inhibition ought medication this often fatal disease, and it's significant ought correspondence that the occur includes approximately 15,000 new graft-versus-host sickness patients that are diagnosed each year globally.

We also desire significant information brook from pemigatinib this year, which we announced this morning was recently granted breakthrough designation by the FDA. The second-line cholangiocarcinoma experiment is fully recruited, and we are now waiting though the information ought grown-up ago we brook the updated analysis. remember that at the initial information stand we showed can ESMO final year, it took up ought approximately 6 months though the maximum response impose ought exist seen. accordingly we currently impose that the NDA to exist ready though submission ought the FDA at the second half of 2019.

The continual dosing cohort within the FGFR3 bladder learn is also recruiting, and we desire the bladder sNDA though pemigatinib ought exist submitted next year. We are also planning a pivotal learn at the tumor-agnostic setting, which to vacation afterward this year, and could farther enlarge the quantity of patients eligible though the therapy, and therefore, the latent of the molecule.

I'll disagree my concise update with a glide above the ruxolitinib cream development program at atopic dermatitis and Vitiligo. The randomized phase II information at atopic dermatitis though shown at the left-hand panel were equal noise received can EADV final year, and we dine rapidly progressed into a phase III program.

That program is already recruiting over 2 randomized vehicle-controlled trials, and we desire ought exist capable ought interpret information next year.

We desire information from the ongoing randomized experiment at patients Vitiligo at the first half of this year, and if the phase II information justify it, we desire ought impress swiftly into a phase III experiment of ruxolitinib cream at this second indication. Vitiligo is a sickness with important psychosocial morbidity and is a condition where there are currently no approved treatments. Both atopic dermatitis and Vitiligo, therefore, describe significant and near-term opportunities though our growing inflammation and autoimmunity inquiry and development group.

I'll now greet Paul ought the exclaim ought newspaper the financials.

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Paul Trower, Incyte company - headmaster Accounting officer & VP of Finance [6]

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Thanks, Steven, and good morning, everyone. The economical update this morning will know GAAP and non-GAAP numbers. though a entire reconciliation of GAAP ought non-GAAP, amuse refer ought Slides 26 and 27 at the backup area of the deck and ought the periodical liberate we issued this morning.

For the fourth quarter, we recorded $468 million of total product-related revenues, an increased of 25% above the fourth area of 2017. This is comprised of $380 million at Jakafi and $19 million at ICLUSIG net produce revenues. $55 million at Jakavi royalties from Novartis, and $14 million at Olumiant royalties from Lilly.

Our Jakafi complete ought net adjustment was 13.4% ought the area and 14% though the year. Our total salary and fare though the area above a non-GAAP base of $391 million increased 4% from the prior year quarter.

R&D fare though the area was $274 million above a non-GAAP basis, which did no become above the prior year epoch and our SG&A fare though the area was $97 million above a non-GAAP basis. With total product-related revenues increasing 25% and total non-GAAP costs and expenses increasing virgin 4%, this has driven an operating earnings though the area of $77 million above a non-GAAP base though compared ought an operating loss of $4 million at the prior year period.

Looking can our entire year results, our total product-related revenues were $1.7 billion, an increase of 25% above the prior year. Our total salary and expenses above a non-GAAP base were $1.5 billion, an increase of 21% above the prior year period, including non-GAAP R&D fare of $1.045 billion, and non-GAAP SG&A fare of $387 million.

Our operating earnings though 2018 was $198 million above a non-GAAP base though compared ought $115 million at 2017. And we ended 2018 with $1.4 billion at cash and marketable securities.

Moving above ought 2019, I will now argue the key components of our 2019 guidance above both a GAAP and non-GAAP basis. amuse correspondence that the guidance we supply today does no know any latent future strategic transactions beyond agreements previously announced.

For the entire year 2019, above both a GAAP and non-GAAP basis, we desire net produce revenues from Jakafi ought exist at the mount of $1.58 billion ought $1.65 billion. though ICLUSIG, we desire net produce revenue ought exist at the mount of $90 million ought $100 million. though at the prior years, we will no exist providing guidance though milestone and royalty revenues. We desire our complete ought net adjustment though 2019 ought exist approximately 15% though Jakafi.

We desire total GAAP salary of produce revenues ought exist at the mount of $112 million ought $117 million and non-GAAP salary of produce revenues ought exist at the mount of $90 million ought $95 million. Our non-GAAP salary of produce revenues excludes $22 million of amortization of acquired produce rights related ought ICLUSIG.

We desire GAAP R&D fare ought exist at the mount of $1.185 billion ought $1.255 billion and non-GAAP R&D fare ought mount from $1.03 billion ought $1.1 billion. Our non-GAAP R&D fare guidance excludes estimated stock-based compensation fare too though estimated milestone expenses.

We desire GAAP SG&A fare ought exist at the mount of $471 million ought $521 million and non-GAAP SG&A fare ought mount from $420 million ought $470 million. Our non-GAAP SG&A fare guidance excludes estimated stock-based compensation.

We desire the convert at handsome just impose of the contingent consideration though the ICLUSIG royalty liability ought exist approximately $30 million above a GAAP base and 0 above a non-GAAP basis.

In summary, taking our guidance though produce revenue and expenses and taking interpret of modern consensus estimates though Jakavi and Olumiant royalties, we desire this to generate non-GAAP operating earnings though 2019 at the mount of $350 million ought $450 million.

I will now convey the exclaim aid ought Hervé though farther discussion of the year ahead.

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Hervé Hoppenot, Incyte company - Chairman of the Board, headmaster & CEO [7]

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Thank you, Paul. at our prepared remarks today, you dine heard no virgin approximately the richness of our late stage portfolio with many opportunities ought farther hasten revenue growth, however we've also shown how peak row revenue momentum is beginning ought translate into improved ratios within our P&L.

The map above glide 22 takes the guidance that Paul impartial outlined, and consensus estimates though 2019 royalties and it illustrates how our P&L is evolving though revenue growth is substantially exceeding fare growth.

Our final glide outlines the key information brook events we desire above the lesson of 2019. We're already off ought a good vacation with earlier-than-anticipated initiation of the phase III experiment ruxolitinib cream at atopic dermatitis too though the initiation of the first-line chronic GVHD learn though itacitinib.

Operator, that concludes our prepared remarks. amuse confer your instructions and vacant the exclaim though Q&A. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first issue today is coming from Brian Abrahams from RBC headmaster Markets.

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Brian Corey Abrahams, RBC headmaster Markets, LLC, inquiry division - Senior Analyst [2]

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Two questions though me. First off, can you report a few slice approximately your expectations though volume growth versus fare contribution ought your 2019 Jakafi sales guidance? And also wondering if you could confer us some sensation of how much GVHD is baked at there. And then I dine a follow-up.

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Barry P. Flannelly, Incyte company - Executive VP & normal Manager of U.S. [3]

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Well, though you know, from our guidance, we're expecting a 14% ought a 19% net sales growth 2019 above 2018. though you know, we took a 4% fare increase can the equal disagree of 2018. We don't win complete of that price, however you can watch that most of that 14% ought 18% is volume. Your other issue was approximately GVHD. GVHD, we dine some spontaneous use. It's a few percent of the total utilize of Jakafi currently. We're anticipating once we win approval that, that could double, accordingly that's somewhere at the range, including the modern spontaneous use, of perhaps approximately $80 million.

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Brian Corey Abrahams, RBC headmaster Markets, LLC, inquiry division - Senior Analyst [4]

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That's indeed helpful. And then, you didn't speak that much above updates above the life cycle strategies. accordingly I'm wondering if you force exist capable ought confer us a status update there. Any specifics approximately information timing here though the PIM JAK1 combos or the SR formulation? And to we exist thinking approximately these more across the lines of MF, solely MF extension strategies? Or are there concurrent PV life cycle extention strategies blueprint though well?

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Steven H. Stein, Incyte company - Executive VP & head Medical officer [5]

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Brian, it's Steven. Thanks though the question. accordingly obviously, the patent life of RUX extends at the U.S. through, can least, 2027, 2028, and. accordingly it's a equal active life cycle development phase. There are kind of 3 pillars ought it currently. One is approximately new formulation work, and we showed can JPMorgan, vocation we dine done at the past with an SR formulation that we dine published at approximately 2011 that is equal interesting at condition of what it does ought the PK curve, and there's less peak-to-trough ratio with the SR formulation and there's talent potentially ought ameliorate some of the phase effects, namely the anemia. accordingly that vocation will ramp up and further and will exist entire steam ahead ought acknowledge farther SR doses send and conduct the required bioavailability and bioequivalence vocation ought conduct that.

The second pillar, though you mentioned, is approximately a combination that also intensify efficacy or improve safety or both. The one that is most advanced can the moment is the RUX plus PI3-kinase delta combination. We showed updated information above that final year at December can the American league of Hematology. We're equal encouraged by that information set. in spite of patients being above can least 6 months of ruxolitinib, can least 2 months of stable dose and no coming off and then having progressive sickness with the like of the combination upwards of 60% of patients can 24 weeks and some spleen volume reduction, upwards of 1/3 of those patients had improvement at symptoms, in spite of that context, which is equal various from other competitors. What was equal interesting with that information stand is when we withdrew from daily dosing ought weekly dosing, there was some rebound at the spleen response. accordingly the second phase of that learn is going this year, which is looking can continual dosing ought arms, also a 20-milligram induction though 8 weeks and then 5-milligram continual or 5-milligram continual complete the highway through. to that pan out that is our direct combination, equal encouraging data. The other 2 you mentioned that we are running are the PIM combination and the JAK1 combinations, they recruit this year. Hopefully, above this year, they'll recruit substantial patients, and we will disagree ought souvenir information above those 2 combinations though which the biology is indeed good, perhaps at 2020. The JAK1 combination there has 2 wepon ought it. There's an additive arm ought RUX though patients who can't endure sufficient doses, and then there's a switch tactic though nation who can't endure RUX can all. And then the third pillar of the life cycle is new targets. And there are a quantity of academic collaborations, which dine been publicly announced, can places parallel Vanderbilt, Moffitt and Penn too though with inquiry groups parallel Syros ought appear though new targets. And your final question, obviously, we're interested both at myelofibrosis too though P vera at that sp