Analyst Conference Summary



conference date: May 11, 2018 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2018 (Q1, first quarter 2018)

Forward-looking statements

Overview: Revenue decline y/y was due to a $90 million milestone payment in Q1 2017. Jakafi revenue growing quickly, up 25% y/y. Epacadostat failure disappointed.

Basic data (GAAP):

Revenue was $382.3 million, down 14% sequentially from $444 million, and down 0.5% from $384.1 million in the year-earlier period.

Net income was negative $41.1 million, up sequentially from negative $148.3 million, and up from negative $187.1 million year-earlier.

Diluted EPS was negative $0.19, up sequentially from negative $0.71, and up from negative $0.96 year-earlier.


Updated full year 2018 guidance for expenses, lowering non-GAAP R&D to $1.013 to $1.108 billion and SG&A to $340 to $355 million.

Conference Highlights:

Hervé Hoppenot, Incyte’s CEO, said "We expect to be able to provide important updates from our development portfolio over the coming months—including the results of the first pivotal trial of Jakafi in graft-versus-host disease and initial data from our FGFR program in cholangiocarcinoma." Pipeline could lead to new marketed product over the next few years. Epacadostat had promising biology but did not work out in trials, so the program will be severely cut back. Lower R&D spend will lead to profitability sooner.

Incyte Revenue by Type
(in $ millions) Q1 2018
Q4 2017
Q1 2017
product royalty
Total revenue:

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

Non-GAAP numbers: Net income negative $2.6, down from $29.1 million year-earlier. Diluted EPS negative $0.01, down from $0.14 year-earlier.

Cash and equivalents ended at $1.33 billion, up sequentially from $1.30 billion. Debt $24 million in convertible notes. There is a $287 million acquisition-related contingent consideration liability.

Epacadostat, a IDO1 inhibitor, Phase 3 trial in first-line advanced or metastatic melanoma in combination with Merck’s pembrolizumab failed to achieve its primary endpoint. Eight Phase 3, tumor-specific, expansion cohorts of epacadostat in combination with anti-PD-1 and anti-PD-L1 checkpoint modulators are subject to change or cancellation (the ECHO series trials). But Incyte is "significantly downsizing the epacadostat development program."

Ruxolitinib (Jakafi) for GVHD (graft v. host disease) pivotal REACH1 Phase 2 trial has completed enrollment. Results could come in the first half of 2018. If positive an sNDA will be submitted to the FDA. REACH3 Phase 3 for the chronic GVHD is 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.

INCB54828 Phase 2 trial for bladder cancer with FGFR pathway alterations is recruiting patients. 54828 is a FGFR inhibitor. A Phase 2 trial is ongoing for cholangiocarcinoma and should have initial data in 2H 2018.

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.

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

INCB52793 for AML has been discontinued.

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) and INCAGN2385 (LAG-3) are expected to enter clinical trials in 2018.

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.

See also Incyte pipeline.

Cost of product revenue was $18.1 million. GAAP operating expenses were: $303.1 million for research and development and $121.5 million for selling, general and administrative expenses, and a $6.7 million charge for change in value of a contingent consideration. Total costs $449.4 million. Leaving income from operations of negative $67.1 million. Interest and other income was $4.0 million. Unrealized gain on investment was $22.7 million. Income tax $0.8 million.


PD1 Macrogenics program, monotherapy v. combinations? It was independent of IDO. We need it for up to seven combinations, but we have a monotherapy strategy. Patient selection for immunotherapy is based on a number of factors, including PD1 and other biomarkers.

Cholangiocarcinoma, hurdle for response, market opportunity? Chemo response rates are only around 10% with short duration. For us something like 20% with longer duration would be viable. We may also have better tolerability. About 1000 patients in the U.S., maybe 3000 global.

Bladder cancer accelerated approval? Would depend on the durability of the response.

R&D run rate in 2019? We don't break out IDO R&D, but it will be minimal in 2019 and 2020.

ECHO 301 insights into failure? We will have an oral presentation at ASCO Sunday morning, but it is early for biomarker data. We are continuing lung studies with Merck to isolate the potential effects of the drugs in the combination. The field remains interested in IDO1, so if there are indications of efficacy, we could pursue them in smaller trials or different combinations.

Ibrutiniv (Imbruvica) approval affect of GVHD opportunity? There is a spectrum of GVHD types. Ibrutiniv is in chronic disease, and we may include it in a best practices comparison. We have not seen much Ibrutiniv uptake in GVHD yet. Ruxolitinib for acute could treat 3,500, and another 3,500 with chronic disease. 10,000 in naive disease worldwide.

We will look at opportunities, we have some cash, but we will not do it at any price.

Sustained profitability a major goal? Right now it is happening because of our ramping revenue and reduced R&D spend. But it is always a goal.

OX40 and GITR, LAG3, TIM3? We have recommended doses for monotherapy, but we don't see much monotherapy effectiveness, nor was any expected. They are for combination immunotherapy. This are very early programs.

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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 2018 William P. Meyers