Analyst Conference Summary

biotechnology

conference date: October 29, 2019 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2019 (Q3, third quarter 2019)

Forward-looking statements

Overview: Rapid revenue and profit growth plus strong pipeline.

Basic data (GAAP):

Revenue was $552 million, up 4% sequentially from $530 million, and up 23% from $450 million in the year-earlier period.

Net income was $128 million, up 23% sequentially from $105 million, and up 341% from $29 million year-earlier.

Diluted EPS was $0.59, up 23% sequentially from $0.48, and up 321% from $0.14 year-earlier.

Guidance:

Increased full year revenue range slighly to $1.65 to $1.68 billion.

Conference Highlights:

Hervé Hoppenot, Incyte's CEO, said "Revenue growth continues to be very strong, driven by robust demand for Jakafi (ruxolitinib) in all three approved indications and, as a result, we are raising guidance for full year Jakafi net sales. At the beginning of 2019, we laid out an ambitious set of development goals for our late-stage portfolio, and in the third quarter we have continued to execute against them. The recent clinical success in the REACH2 trial of ruxolitinib in steroid-refractory acute GVHD; the updated data from pemigatinib in cholangiocarcinoma and subsequent NDA submission; and the recently-presented 52-week data from the randomized Phase 2 trial of ruxolitinib cream in vitiligo are all illustrative of the significant progress we have made this year"

Launch for Jakafi for steroid refractory acute GVHD began after FDA approval in May 2019. Initial feedback is good. In Q3 2019 received positive results from Phase 3 trials of ruxolitinib versus best available therapy in steroid-refractory acute GVHD (REACH2). Data from steroid-refractory chronic (REACH3) GVHD trial currently expected to be available in 2020.

The primary endpoint was met in the Phase 2 trial of ruxolitinib cream for the treatment of vitiligo; a Phase 3 trial has been initiated with results due in 2021.

Jakafi royalty revenue is from sales by Novartis outside the U.S.

Non-GAAP numbers: Net income $179 million, up 10% sequentially from $162 million, and up 106% from $87 million year-earlier. Diluted EPS $0.83, up 11% sequentially from $0.75, and up 102% from $0.41 year-earlier.

Cash and equivalents ended at $2.0 billion, up sequentially from $1.70 billion. Debt $18 million in convertible notes. There is a $282 million acquisition-related contingent consideration liability.

GVHD launch is early, but exceeding expectations.

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 with results expected in 2021. An NSCLC combination trial is in Phase 1/2.

Pemigatinib (INCB54828) for cholangiocarcinoma and bladder cancer data presented at ESMO showed promising efficacy. The NDA seeking approval for pemigatinib as a second-line treatment for cholangiocarcinoma patients with FGFR2 fusions or rearrangements was submitted to the FDA under Breakthrough Therapy designation. 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 initiated a pivotal tumor-agnostic trial evaluating pemigatinib in patients with driver-activations of FGF/FGFR in Q3 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, has 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.

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. Updated data was presented at ASCO.

See also Incyte pipeline.

Cost of product revenue was $30 million. GAAP operating expenses were: $281 million for research and development; $102 million for selling, general and administrative expenses; and a $3 million charge for change in value of a contingent consideration. Total costs $417 million. Leaving income from operations of $134 million. Interest and other income was $11 million. Unrealized ggin on investment was $2 million. Income tax $20 million.

Q&A Summary:

Jakafi GVHD feedback? Uptake has been good. Opportunity for iticitinib is the main opportunity.

Business development opportunities? We are looking for diversification and growth. Mostly looking at oncology, it is a continuous process. We hope to gain some additional products to fuel top line growth in the next few years.

Awareness campaign success, budget? It is early, in our initial markets we saw upticks in our social media sites. We started national expansion in October. The budget is relative small, it is a 30-second commercial in relatively inexpensive time slots.

Federatinib launch impact? Celgene is positioning it as a second line drug. The current trials are second-line, post Jakafi. We are confident, we have an overall survival advantage.

The $2.5 to 3 billion long term guidance still stands. Patients are on therapy for multiple years. PV patients grew 15% y/y.

GVHD push out to next year, iticitinib readout? Reach3 results had been expected in 2019, we are almost done with recruitment, we are confident in the data set we will get sometime in 2020. Iticitinib was strong in steroid naive GVHD, the specificity helping avoid complications in this population.

Believes may be top GVHD treatment in second-line, it is hard to get data.

Q4 expenses? 2020? We will continue to aggressively invest in development and commercialization. In Q3 we saved some on discontinued programs, that will not be teh case going forward. Q4 guidance does imply higher expenses than Q3 due to timing.

Capacity for business development? $2 billion cash. We are looking for assets that can contribute midterm, first oncology with strong science that is complimentary to our portfolio. Non-oncology, we are taking a longer view. Focus is on tuck-in, could be through licensing or acquisition.

Vitiligo Phase 3 study timeline? Just recenlty started, but recruitment has been quick. Looking for 52-week data. Results in 2021.

Jakafi life cycle management program? We continue formulation work including extended release and bioavailability. Combinations are being tested.

Pemigatinib differentiation? Ours is FGFR 1, 2, 3 specific inhibitor. We have a good pharma marker. FGFR commercial compound hits 4.

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