英賽德 (INCY) 2007 Q3 法說會逐字稿

Greetings, ladies and gentlemen and welcome to the Incyte Corporation third-quarter 2007 financial results call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Pamela Murphy, VP Investor Relations and Communications for Incyte Corporation. Thank you, Ms. Murphy. You may begin.

Good morning and thank you for joining us. With me today are Paul Friedman, Incyte's President and Chief Executive Officer; Dave Hastings, Executive Vice President and Chief Financial Officer. Rich Levy, our Vice President -- Senior Vice President of Development is also with us. We will begin with an update from Paul on progress in our clinical program. Dave will provide a brief overview on Incyte's third-quarter financial results and we will then open up the call for Q&A.

Before beginning, I'd like to remind you that some of the statements made during the call today, including statements regarding our plans and expectations for our drug discovery and development programs and our financial results and guidance, as well as the potential efficacy of our compounds, are forward-looking statements.

These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our most recent 10-Q for the period ended June 30, 2007 and from time to time in our SEC documents. Paul?

Good morning, everyone. I'm going to preface my remarks by saying that I have only positive results to report to you this morning. I am gratified by the progress we have made building our pipeline in what it is by all industry standards a remarkably short period of time.

As the press release this morning stated, we have now demonstrated clinical proof of concept in four of our wholly-owned internally developed programs. Our CCR5 antagonist for HIV, our JAK inhibitor for both myelofibrosis and for psoriasis and our 11beta-HSD1 inhibitor for type 2 diabetes.

And while we announced top-one results for the JAK inhibitor and the HSD1 inhibitor in late September at the UBS conference, I am going to begin today by providing updates on both programs that reinforce proof-of-concept data that we have seen with these compounds. Then I will review the status of our sheddase inhibitor, Incyte 7839 for solid tumors, our CCR5 inhibitor 9471 for HIV and our CCR2 antagonist for 8696 for multiple sclerosis.

Janus-associated kinases or JAKs for short are critical components of cell signaling mechanisms utilized by a number of cytokines and growth factors and there is abundant pharmacologic and genetic evidence and recently clinical evidence as well that indicates the importance of the JAKs in the pathogenesis of a number of diseases.

The information has convinced us that identification of small molecule JAK inhibitors could prove to be a powerful approach to treat inflammation, myeloproliferative diseases and certain cancers. Our lead inhibitor is Incyte 18424. It is currently in the clinic as an oral, as well as a topical treatment. We have a number of follow-on compounds well along in preclinical development and we plan to advance at least one through IND-enabling studies and into Phase I next year to provide us with maximum flexibility in pursuing this mechanism.

In June, we began evaluating 18424 as an oral treatment for myelofibrosis, one of the myeloproliferative disorders called MPDs for short. Recent studies have provided a causal link between an activating mutation in Janus-associated kinase 2, that is JAK2 and the MPDs. This mutation in which the amino acid phenylalanine replaces a valine at position 617 is present in the majority of patients with MPD, including polycythemia vera and essential thrombocythemia, as well as myelofibrosis.

Advanced MPD patients and particularly myelofibrosis patients suffer from splenomegaly. That is enlarged spleens. This can be a major source of morbidity, as well as a serious detriment to quality of life. The massive spleens in these patients can displace and compress other organs in the abdomen causing a variety of symptoms like pain and early satiety.

Additionally, increased levels of inflammatory cytokines, which contribute significantly to the malaise fatigue, etc. occurring in these patients are thought to be produced by the large mass of blood precursor cells in the enlarged spleen. And currently, there are no existing treatments that effectively address these clinical problems.

In our UBS presentation, I first mentioned the dramatic decreases in spleen size we have seen in all six of the myelofibrosis patients we have treated with 18424. We have enrolled several more patients to the study and we are seeing the same level of spleen size decrease. Patients have also reported significant improvements in their quality of life, including less fatigue and improved sense of well-being and the ability to return to activities they have been unable to perform prior to treatment.

Another interesting and important observation is that treatment of both myelofibrosis patients with and without the V617F JAK2 mutation result in decreases in spleen size and improvements in quality of life of the same magnitude. The data so far then suggests that inhibiting through the JAK2 pathway could benefit a large proportion, if not all, of myelofibrosis patients. It also strongly suggests that this therapeutic approach could well be effective in other JAK2-driven MPDs such as polycythemia vera and essential thrombocythemia and importantly, these positive clinical effects are achieved at doses that are well-tolerated.

We recently learned that the abstracts submitted to the upcoming American Society of Hematology meeting by our lead investigator has been accepted for oral presentation and we look forward to sharing updates and more detailed results on these patients with you in December.

And finally, as I mentioned, there are no approved drugs for this clinical situation. We intend to meet with the FDA early next year to review the data, define requirements for approval and discuss the potential for an expedited regulatory path.

In addition to diseases of malignancy or pre-malignancy like myelofibrosis, we also intend to evaluate the oral form of 18424 in inflammatory diseases such as rheumatoid arthritis and psoriasis. Pharmacological blockade of JAK pathways with either systemically administered antibodies or small molecules has been validated as a mechanism for treating both these inflammatory diseases.

In this regard, the Phase I studies in healthy volunteers that we have been conducting in parallel with the myelofibrosis studies are now complete. The compound was well-tolerated in the healthy volunteers and exhibited a good oral bioavailability. A 28-day dose-escalating Phase II trial in rheumatoid arthritis patients who are failing methotrexate has been initiated. In fact, the first patient was dosed this week and we expect top-line results from this trial early next year.

Provided the compound continues to be well-tolerated and demonstrates efficacy in these patients as we expect it should, we would plan to begin a six-month Phase IIb trial. We are also planning to evaluate oral 424 in a one-month Phase IIa trial in psoriasis patients, which we expect to begin in the first half of the year.

Now, although psoriasis is recognized as a systemic inflammatory disease and when severe, it is treated systemically, local therapy remains the preferred approach for treating mild to moderate disease. And this accounts for over 80% of psoriasis patients.

Although many compounds can't be formulated into a topical, we have successfully formulated 18424 as one and have advanced it into a 28-day dose-escalation Phase Ib/IIa trial. In this study, the patient serves as his or her own control with two lesions of equal size and intensity of inflammation being identified on each individual. One lesion then gets treated with 424 while the other is treated with the vehicle cream. And so far, we have studied three different doses, three different strengths of 424 in the topical formulation, six patients per cohort and in all three, the compound was well-tolerated with no adverse effects.

And while this is a small study, the effects we're seeing with topical 424 in terms of its rapid onset of action and its ability to reduce lesion thickness, redness and scaling are quite encouraging and are quantitatively comparable to those seen in similarly designed studies with steroids. We plan to move topical 424 into a three-month Phase IIb study in mild to moderate psoriatic patients in the second half of '08 provided the compound continues to be well-tolerated in the required clinical safety studies that are currently underway.

Now moving to our HSD1 inhibitor program. We believe our lead compound, Incyte 13739, has the potential to be first in a new class of drugs to treat both type 2 diabetes and a number of key risk factors for cardiovascular disease. We are enthusiastic about the program because we believe that for a compound to be commercially successful as a new treatment for type 2 diabetes it is going to have to positively impact cardiovascular risk, as well as control hyperglycemia.

And this view is underscored by the recent meta-analyses of cardiovascular endpoints after rosaglitazone therapy in which the drug has been shown to increase the relative risk not only for congestive heart failure, but for myocardial infarction as well.

In contrast, the preclinical data with HSD1 inhibitors indicate that this mechanism produces antidiabetic activity, as well as positive effects on cardiovascular disease, including hyperlipidemia and atherosclerosis. And additionally, HSD1 inhibition may positively impact cardiovascular comorbidities, including high blood pressure and the size of the visceral fat mass.

Historical data on insulin sensitizers, the glitazones being a prime example, indicate that in a typical one-month study in diabetics, trends of improvement in the classical blood measurements, such as fasting plasma glucose, might not be seen.

So if you recall, we had a choice at the end of the studies that we did where we demonstrated in fat biopsies very profound inhibition by the compound in people of the target enzyme. We had good PK; we had good tolerability.

At that point in time, we had only one-month animal safety data and so we had a choice at that point of simply waiting until we had three-month or more animal safety data to allow us to go into a classical three-month type 2 diabetes study or to try to design a one-month study where we could gain enough confidence and proof of concept to make us believe that the mechanism was working and that the three-month study was justified.

So we elected to do a one-month study in which we both measured all the classical parameters that one would measure, but in addition, incorporate into the study what is called a two-step insulin -- hyperinsulinemic clamp where a quasi experimental clamp analysis is done at the beginning of treatment and after 28 days of treatment.

The two-step hyperinsulinemic clamp has the potential to be somewhat more sensitive than the classical fasting blood chemistries to detect the presence of insulin-sensitization and also gives you the possibility of determining the actual mechanism for sensitization.

So at the UBS conference, I described an interim analysis involving 20 patients. After only 28 days of therapy, 13739 gratifyingly appears to be having positive effects on both fasting plasma glucose and plasma lipid profiles, including LDL cholesterol and total cholesterol. These trends have been maintained in several additional patients who have completed the study in the last month.

With respect to the two-step hyperinsulinemic clamp studies, you may recall when we started the study, we had problems with the three sites that we were using properly conducting the study and we had to -- much of the early data we got was not interpretable and we retrained the people doing the clamps and we have certainly seen improvement in the performance of the clamp procedure, but the clamp data is still relatively limited.

Nonetheless, as the fasting chemistries are more firmly established as reflections of the disease itself, the encouraging results we are seeing on these parameters with 13739 are more relevant than the clamp data and if these positive trends continue, I believe we will have achieved the necessary proof of concept to advance into a three-month dose-ranging Phase IIb study in the upcoming March/April timeframe. We are moving ahead and are as certain as we can be at this point that these trends are going to continue and that we will start the Phase IIb study in the March/April timeframe.

As I mentioned in the press release, the IND for the follow-on compound, Incyte 20817, was accepted and we will begin the Phase I trial in the first quarter.

Turning to our other clinical programs, beginning with the sheddase inhibitor. Results from the ongoing Phase Ib/IIa trial in refractory cancer patients are going to be presented in poster form at the upcoming San Antonio Breast Cancer Conference. Among the [valuable] patients studied, results in HER2 positive breast cancer have been the most encouraging with the majority of patients achieving stable disease.

As a result, our next Phase II trials are to be in HER2 positive breast cancer and I want to tell you that the first of these has begun and is evaluating 7839 in combination with Herceptin. The second trial is scheduled to begin in the first half of '08 and will evaluate 7839 as monotherapy and results of these trials are expected to begin to come in in the second half of '08 and extend into early 2009.

For 9471, our lead CCR5 antagonist, we are currently conducting the last of the required drug interaction studies that we need to do to support the two 24-week Phase IIb trials that are scheduled to begin in the first half of next year.

The first trial is expected to involve 150 treatment-experienced patients comparing two different once-daily doses of 9471 to twice-daily dosing of maraviroc in regiments in which the background therapy is comprised of two active drugs. One of which has to be a ritonavir-boosted protease inhibitor.

The second trial, which should begin about three months later, is expected to involve 75 treatment-experienced patients and will compare two doses of 9471 given once a day to twice-daily dosing of maraviroc in ritonavir-free regiments in which the background therapy is comprised of two active drugs.

We continue to believe that the impressive antiviral potency we see with 9471, its ability to be taken as a once-a-day therapy without ritonavir boosting, as well as its potential to be formulated and combined with other once-daily antiviral therapies have the potential to be clinically relevant, competitive advantages over other CCR5 antagonists.

Moving to our CCR2 antagonist, 8696, we have initiated Phase I trials. We just initiated those to evaluate the compound in healthy volunteers. There is ample preclinical data indicating that CCR2 inhibition could be an effective treatment for multiple sclerosis. The clinical data presented Millennium at the recent American Neurological Association meeting for their anti-CCR2 antibody demonstrated that MLN1202 treatment of multiple sclerosis patients produced a reduction in new lesions when compared to historical controls.

The level of reduction of observed suggested CCR2 antagonism may well be competitive with existing therapies. We think these clinical results -- early clinical results are encouraging for our oral CCR2 antagonists and we look forward to seeing the safety and PK for 8696 in the Phase I trial to help guide future development of this compound.

In addition to these programs, we have several earlier ones that look quite promising. One is in the area of metabolic diseases for which Phase I has now begun. The mechanism here is one that allows you to tell a great deal from the initial studies in the healthy volunteers. And we are already seeing very encouraging pharmacodynamic and pharmacokinetic results that we believe bode quite well for both the mechanism and the compound as long as the compound continues to be well-tolerated.

The other two programs are in oncology and both have lead compounds in preclinical development, which are expected to enter human trials next year. And with that, I will turn the call over to Dave Hastings.

Thanks, Paul and good morning, everybody. I will start my overview this morning by discussing our cash position. We ended the third quarter with $266 million in cash and marketable securities. Our cash use so far this year has been $67 million. This excludes a $3 million milestone payment received from Pfizer during the second quarter. Importantly, our cash use guidance is unchanged for the year and remains $88 million to $95 million. This excludes the in-license or purchase of products, any milestones received from the Pfizer collaboration and the $10 million received from the issuance of the convertible subordinated note to Pfizer.

I would now like to highlight the two changes in guidance we noted in the press release in R&D and revenue. Given the steady advancement and expansion of our pipeline, which Paul just described, we now expect our R&D expense for 2007 to range from $98 million to $100 million, up from our previous guidance of a range of $88 million to $95 million.

In terms of our revenue guidance, we are increasing this from $29 million to $31 million to $32 million to $34 million as a result of the $10 million we received from the issuance of the convertible note to Pfizer for the filing and acceptance of the IND for 8696, our lead CCR2 antagonist.

The note was issued in connection with our collaborative research and license agreement with Pfizer, bears no interest and is due in 2014. The additional consideration associated with the interest-free nature of the note will be recorded as revenue primarily in the fourth quarter of 2007.

So with the $266 million of cash on hand, our continued investment in R&D and our cash use guidance on track for the year, we are well-positioned to continue to advance our pipeline and with that, I will turn the call back over to Paul.

Thanks, Dave. So to conclude, we have now built a broad and deep pipeline that offers tremendous opportunity to create value for both patients and shareholders. Over the next 6 to 12 months, we expect to progress several additional compounds into Phase IIb trials and to generate additional proof-of-concept data from ongoing and planned Phase IIa trials.

And finally on a personal note, I want to acknowledge the remarkable and I believe unparalleled level of productivity of our scientists. I have worked with many different R&D teams and on a pound-for-pound basis, this is by far the most tenacious, disciplined and uniquely talented group with whom I have had the privilege to work. They are in my opinion without peer. And so with that, operator, we should now open the call up for Q&A.

(OPERATOR INSTRUCTIONS). Rich Smith, JPMorgan.

Yes, good morning, everyone and congratulations on the progress.

Thank you.

Just a couple of quick questions on 424, just wondering -- you mentioned we have already seen some sort of top-line data on six patients. How many more patients do you have data on, what do we expect to see at ASH and do you see those patients that are receiving the drug at the moment still benefiting and over how long?

So we have I think three more people where we have enough data to state that we are seeing the same thing we saw in the first six. I think there are some other people who are earlier than that. So everyone who remains on drug is seeing the same benefits that they very quickly saw. The spleens are staying down, they are feeling pretty good. We have one guy who is now out past four months I think and a couple of others who are in the three to four-month timeframe.

So what you will hear at ASH are updates on I think those nine patients' [banded] cohort and there will be more details on different parameters than I have relayed to you because if I lay them all out for you here, there is nothing left for the investigators to present.

Maybe just one quick follow-up. Just from a safety perspective across all the different trials in the psoriasis and RA and MS, maybe just give us a sense -- are you seeing any particular safety signals or is it still as you say well-tolerated across all the different indications?

Well, we haven't -- for topical psoriasis, the only exposure has been on these two small lesions. So you get very little systemic drug in, so the current clinical safety studies that we are doing are designed to stress the system to see what happens when you get more in, but there is no -- absolutely no adverse effects at the level of the epidermis or dermis.

With respect to RA, we are just into that study and the doses we are likely to use based on what we have seen from Pfizer's data on their a little bit more JAK3 selective compound, it is likely we will use doses that are lower than the doses that we're currently using in myelofibrosis. Although, it is conceivable they would be the same.

If you go high enough and we have found maximally tolerated doses in the myelofibrosis trial, you get the expected suppression of bone marrow activity and you will see reticulocytopenia and thrombocytopenia and drop in neutrophil counts. All of which are rapidly and completely reversible when you stop the drug and they are expected at the higher doses. So those are the side effects that you see.

Excellent. Thank you.

Thomas Wei, Piper Jaffray.

Thanks. I had a follow-up on the JAK2. At this stage, do you have long enough follow-up? Is three or four months sufficient time to see effects on other clinical endpoints like anemia?

It is still on the early side if you look at the situation where people get radiation and autologous transplantation. You would just be beginning to see things at that point in time. We see little hints of things, but I think it is too early to be definitive as to what you might see with respect to the hope that we have that the bone marrow will eventually be repopulated with more normal cells.

And at the ASH meeting, do you think that that will have been sufficient follow-up for you to be able to present some data on some of these endpoints.

Rich, what do you think?

I think there will be data. I don't know that it will be definitive to be able to answer every aspect of what the long-term benefits of the therapy are going to be. As Paul said, we have about 9 or 10 patients who are substantially out, been treated for a month or more now. Those will be -- add another month to that in terms of the long-term patients. The other patients that will come in will be short term, although there may be a number of additional patients. But I think it is not going to be the final answers, but there will be more data on each of these aspects.

What is the extent of the animal data, the animal tox data that you have on the JAK2?

Well, what you see in animal tox is what we see in humans. If you go high enough, you will because the JAKs are involved in signaling for epo and the hematopoietic growth factors, you see suppression of bone marrow.

And then a question on the CCR5 inhibitor. With 150 or 75 patients, what would the efficacy difference need to be between 9471 and maraviroc for you to actually show something that is statistically superior?

These studies are not powered to be able to demonstrate statistical superiority to maraviroc. They are largely there to confirm long-term safety, efficacy at least comparable and possibly numerically better than maraviroc with a simpler dosing regimen and more flexibility, but I really think that those improvements will likely come only with the larger Phase III registration studies.

Okay. Thank you.

Annabel Samimy, UBS.

Hi, thanks for taking my call. Given that you have all these programs now and development moving forward, how do you prioritize the programs in terms of what you keep and what you consider for partnership? Clearly, with the JAK2 moving into psoriasis and RA are some bigger indications, so can you give us a little bit of color around that?

Sure. We have -- we almost -- I'd say for the last year, we have had ongoing talks with potential partners for a number of programs. The one that we have not talked to people about up till this time point is the JAK program. And I think we will mature that program a bit more before we change that tack.

With respect to CCR5, with respect to CCR2 for MS, with respect to sheddase and with respect to HSD, we have conversations going on with potential partners and we have not determined in our own mind yet which of those makes sense to try to keep, which of those makes sense to partner, but we are -- so it is still a little bit premature for me to be able to answer that question for you.

I mean if you think about where we are and what we say we want to ultimately be and that is a company that remains opportunistic with respect to bringing programs into early development, but with an emphasis on becoming fully integrated in cancer/some aspects of inflammation -- if you consider the fact that we have one HIV program, you could certainly come to the conclusion that a partnership that made sense to us from a shareholder value standpoint, if that occurred, that might be a reasonable thing to do. If you consider the size of the development program and marketing requirements for a type 2 diabetic program, you would envision that we would be making efforts to find a partner at some point for that program.

But right now with the data that we have there, unless we get a very sweet deal, we are intending to take that through what is not a very expensive Phase IIb trial. If you look at multiple sclerosis, that is a long trial. It is expensive and a partner there wouldn't be a bad idea. But until you have the bird in hand for any of these things, you don't have it and so we will continue to talk to people. We have enough money in the bank right now that we are not with our backs against the wall where we have to prematurely license something at less than optimal terms and that is something we definitely don't want to do.

I guess along those lines, at what point do you feel that your back will be against the wall in terms of having to do something in regards to the level of cash?

Dave, do you want to answer that?

Yes, I mean I think we are well-positioned. With $266 million on the balance sheet certainly through the end of '08, we are well-enough capitalized to progress all these multiple programs in the Phase IIb and we will give our '08 guidance as we usually do at the year-end call.

I think it is obvious when you consider what the burn is likely to be, the money that we have in the bank, the fact that at some point obviously we will have to recapitalize. We haven't decided when we would do that. In the next year let's say timeframe, one or more of these programs is going to have to be partnered. And I think that is as precise as we should try to be at this point in time.

Okay. Thank you very much.

Sapna Srivastava, Morgan Stanley.

Hi, it's Dave just calling in for Sapna. Just a question on the diabetes program. You've started a second compound in development. Is that something you plan on developing in tandem with 13739 or will it stop at some point?

So for all programs, it really is -- the way -- you want to have at least one backup somewhere in early development in case you have safety issues associated with the lead compound. That becomes I think especially important for a primary care indication like diabetes. And so we felt that it was prudent both for partnering talks, as well as for our own program if we kept it to late in development to have a structurally distinct compound that had the good features of 739, but had some structural distinctiveness so that you could protect yourself against some unforeseen safety issue with the lead compound. We haven't seen that and so what we will do with 817 is, as you implied, we will take it to some early stage of development as long as 739 continues to move smoothly and then not push it through in tandem.

Okay. And then just on 739, if you could just expand a little bit on what has been happening with the clamp study and any more detail about what you think the data might be useful for and where you think it will not be useful or as useful as you had thought it might be?

So the bottom line here is that it is at the end of the day a technique used by academics in their human experimentation. There is one drug study that was done on Actos done by Meredith Hawkins, which involves -- which ended up involving nine individuals who served as their own control, their own placebo. There was a crossover period and in that study, you see a decent amount of improvement in liver glucose production. It goes down after treatment with Actos for about a month.

If you look at uptake, improved uptake of glucose into the muscle, you see a borderline effect there after a month and there is a fair amount of variability. And if you look at each individual in the study, they don't tend to have both parameters improve. Like half of them had the liver aspect show improvement; half of them had the muscle aspect show improvement. So going in -- and there was a fair amount of variability.

So going into this, we were hoping that if we could control -- so we went into this saying we either had a choice of doing nothing and sitting on the program until we got the longest animal safety or to try to devise a one-month study that gave us as many possibilities to show us that we had something as we could.

So we put all the usual parameters in and then we added this on top in the hopes that if we could control the variability and do the clamps properly that in the event that we saw nothing in the fasting blood chemistries, we might see something in the clamps.

Well, it has turned out to be the other way around. The fasting chemistries look good and they are more relevant because they are -- they are showing you that the drug decreases fasting plasma glucose and even as important, we are getting very nice effects on the lipids, which is quite different than what you see with the glitazones and even with metformin where you don't see much in the way of lipid improvement.

This is a transcriptional mechanism, which makes it similar mechanistically, although quite different in other respects, to the glitazones and that was one of the reasons that we were concerned we wouldn't see anything in a month, but in fact we do.

It also predicts that being a transcriptional mechanism that it is very likely that we are just beginning to see effects that are going to become significantly more profound at two months and at three months. If you look at metformin data by contrast, it is pretty much all over by four to five weeks. You don't see a whole lot of improvement. I think Ralph DeFronzo has a fairly convincing study looking at that.

So the clamp data in the beginning -- so it is hard -- it has been hard for us to get clamp data that we can go to the bank on. There is more variability than we had hoped for. We see hints of what we are looking -- of improvements in liver and improvements in muscle and we believe they are real, but the data is not as convincing at this point as the more relevant and more classical and accepted fasting chemistries.

So at this point, to me, the fasting chemistries are more relevant and I care more about them. We will continue to try to get whatever we can get on the clamps, but the particular difficulty in the clamps is the low insulin infusion part of the clamp. That has been very, very tricky for the investigators to do. And so if I had to design the study over again and I knew that we were going to get the fasting blood chemistry results that we are getting, I wouldn't have even incorporated the clamp into the study.

Okay. Thanks.

Soham Pandya, ThinkEquity.

Good morning and thanks for taking my question. I had a question -- further questions on the 739 program. Can you just -- I know it is early days. You've only dosed for short-term periods so far, but can you help us characterize the safety profile that you are seeing particularly with respect to adrenal?

Yes, so it looks quite benign. I mean there hasn't been -- we have seen nothing frankly. What you would predict physiologically and we do see -- we do see this with respect to the adrenal cortex -- about a third to maybe even 40% of plasma cortisol comes from the splanchnic bed, which involves the visceral fat in the liver.

And if you take HSD1 out, as we are doing, you will modestly decrease plasma cortisol at certain times of the day and you will get a physiologic compensatory increase in ACTH and that is essentially all that we have seen. Plasma cortisol stays normal. ACTH drifts up within the normal range and other than that, the drug has been remarkably well-tolerated.

Okay. And then you mentioned you had about data on 20 patients or so. Can you just help us -- what are the next steps here with this program?

Well, we have data now on maybe 23 to 25 people and we will continue to bring more people into the study probably through some time in December. And assuming that the final numbers look essentially the same as what we are seeing now with respect to the fasting plasma glucoses and the lipids, we will stop the study and go ahead and work on starting the more classical three-month Phase IIb study in the March/April timeframe.

That study will be one where we will be measuring things like hemoglobin A1c and beginning to try to differentiate 739 from other insulin-sensitizer mechanisms, especially with respect to cardiovascular risk factors and the lipid data that we have to this point in time I think is highly encouraging that we are going to be able to do that.

Great. Thank you. And then just one follow-up on the JAK2 program, 8424. You mentioned that you have reached sort of -- you have seen -- you have hit the dose-limiting tox. Can you tell us how many doses you have tested, how many dose levels you have tested so far?

Well, I think we shouldn't do that because again I don't want to compromise the ASH presentation. What I will tell you is that the dose we picked to start with turned out to be significantly more active than we had anticipated. So unlike the sheddase program, which took us a long time to get through Ib/IIa and in fact, we are currently in the expanded phase of that, that is still going on in parallel with the Phase II studies in the breast cancer patients. Here, we didn't have to go much higher to begin to see hematopoietic inhibition on hematopoiesis. So that is about as much as I think I should say at this point and kind of leave the rest of that for our investigators at the ASH meeting.

Great. Fair enough. That it is always a good -- response is always a good problem to have in an oncology setting.

Eun Yang, Jefferies & Co.

Thanks. I want to ask you questions on myelofibrosis. Granted that there is really no specific treatment for this disorder, can you comment on what are the other products in development that you think would be competitive to your JAK inhibitor in addition to other JAK inhibitors in development?

I think that it is mainly going to be the other JAK inhibitors. There are studies that are being done with some other drugs, including interferons, including thalidomide analogs, Revlimid, but to our knowledge, none of those other approaches are coming anywhere close to achieving the responses that we are seeing. So I think it is basically just going to come down to the JAK inhibitors and we are fairly confident that ours is as good as any.

Okay. And in the patients in the trial, are you looking at other endpoints besides the reduction in spleen size such as anemia and stuff like that?

Yes, that was asked before and we are certainly looking at hematologic parameters. We are looking at the predominance of the mutant clones for example and we are looking at quality of life issues.

As I said before, when you look at patients, sometimes these patients get treated by -- they get irradiated and then they get an autologous bone marrow transplant and if you look under those circumstances, you don't really see much in the way of bone marrow improvements. You begin to see them in the three to four-month timeframe, but it takes a bit longer than that to see much. So we really haven't had anybody -- I mean we had one individual who is out in that timeframe, so it is just too early for us to say anything.

The other -- what I will tell you and I don't know whether this will obtain when we talk to the FDA, but our experts, some of whom will be presenting this data and who are incredibly excited about what they are seeing here, believe that if you can reduce the spleen size and improve quality of life, because what you are doing when you reduce the spleen size is you are getting rid of this enormous mass of ineffectively erythropoietic blood precursor cells that sit in that enlarged spleen and contribute to the mass of the spleen, they are churning out cytokines like IL-6 leads to ischemia, weakness, malaise. So if -- and in addition, you have just the physical presence of this massive organ in the abdomen.

If you can reduce the spleen size, improve the quality of life, even in a situation where you simply maintain the bone marrow as it was before, their belief is that that is an approvable set of circumstances. And so we don't know what we are going to see yet with respect to marrow, but we do know that we are seeing unbelievably -- well, I believe dramatic decreases in the spleens and people who were barely able to get around who are now out gardening, playing golf and it is actually pretty remarkable what we have seen.

So in the study, are patients taking any other drugs such as Epogen or is it just a purely monotherapy of JAK inhibitor.

Yes, they are really on monotherapy in this study and probably in subsequent studies as well.

Okay. Thanks.

Katherine Kim, Banc of America.

Thank you and I am glad I got the last questions. So my questions are revolving around the JAK2 inhibitor. The first is in your conversations with your experts, what do you believe would be the duration of response to be clinically relevant?

I don't know, Rich, that you have gotten that answer from them. My guess is you would have to have at least six months of holding the responses that you have got, but what do you think?

I mean we haven't had that specific conversation with them. It's almost more of a regulatory decision in the end from FDA as to what they want to see. But I suspect that for our program, we will need to have patients -- a certain number of patients who have been on drug for more than a year and a certain larger number of patients who have been out longer than six months.

I will say that, although we don't have patients out beyond about four months, we haven't seen any evidence that these effects are only temporary. So at this point, we are confident that whatever duration we need to show the benefit for, we will be able to do so.

Okay. So following along that, assuming the trial continues to be positive, when is the earliest that you might meet with the FDA?

We are hoping to meet with FDA early next year in the first quarter.

So like within three or four months from now.

Will you provide an update following that I guess meeting?

I think we will be providing something.

Yes, and we have to be careful as well because, as we have said, there are other companies developing JAK inhibitors for the same indication and we don't necessarily want to give them information that we have.

Okay.

We obviously will give as much information as we can after that meeting.

Okay. And then my final question is what percentage of MPD patients have splenomegaly?

I don't know exactly how to answer that. If you look at patients who have myelofibrosis, it's almost all of them. If you look at patients that have advanced stages of MPD, it's a high percent, but I couldn't quote you a number. If you are talking about early in the disease, it is a much smaller number and those people have pretty good life expectancy. So that would not be the first indication for the drug anyway. But there's a substantial number of patients with splenomegaly who can benefit from a drug like this.

So my recollection is that most all of the myelofibrosis patients have it and the people who are advanced P vera patients and the people who are advanced essential thrombocythemia patients, again a majority of both of those populations have significant splenomegaly.

Okay. Thank you very much.

Thank you, everyone. I would now like to turn the floor back over to management for closing comments.

Okay, this is Paul. I appreciate your dialing in today. I think it is obvious we have a, I wouldn't say an embarrassment of riches here, but we have a very, very interesting pipeline at this point. I think Annabel's question is a relevant one. I think the key here now is to prioritize what we have got, use our cash in the most rational and value creating way, minimize dilution, find partners when it is appropriate, but we have a lot of very interesting shots on goal here and I hope that is the message that you will take away from the call today. Thank you very much for your attention and with that, we will end the call.

Ladies and gentlemen, this does conclude today's teleconference and you may disconnect your lines at this time. Thank you for your participation.