英賽德 (INCY) 2008 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Incyte Corporation first-quarter 2008 financial results. 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 of Investor Relations. Thank you. Ms. Murphy, you may now begin.

Good morning and thank you all for joining us. With me today are Paul Friedman, Incyte's President and Chief Executive Officer; and Dave Hastings, Executive Vice President and Chief Financial Officer; and Rich Levy, Senior Vice President of Development, is also with us.

During today's call, Paul will begin with a brief overview of the progress we've made in our clinical programs, and Dave will follow with a discussion of Incyte's first-quarter financial results and the update we announced regarding our 2008 financial guidance. We will then the open the call for Q&A.

Before beginning, I would 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 program, including timing of our clinical trials and the potential efficacy of our compounds, as well as our expected financial results and financial guidance, 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-K for the year ended December 31, 2007, and from time to time in our SEC documents. Paul?

Good morning, everyone. As you saw in today's press release, it's been another productive quarter for us. While we have a lot going on currently, including eight active Phase II trials and several more that are expected to begin later this year, we've also been taking appropriate steps to focus our efforts on those programs that have the greatest potential for creating near-term value. In this regard, we announced recently that we are not going to move forward into the Phase IIb program with Incyte 9471, our lead CCR5 antagonist. Instead we're actively looking to outlicense the program. In the interim we've redirected resources, including those from CCR5, to our JAK inhibitor program, in which we've seen very positive results with the lead compound Incyte 18424 in myelofibrosis, rheumatoid arthritis, and in psoriasis. The JAK program remains our highest priority.

With respect to our ongoing clinical trial in myelofibrosis, we continue to see compelling and durable results, both with respect to reduction in spleen size and improvement in constitutional symptoms. Dr. Serge Verstovsek will be presenting a detailed update on the trial at ASCO in June; and so as to preserve the integrity of that presentation, I will restrict my remarks today to general information and leave the specifics to Dr. Verstovsek.

To remind you of where we are with this study, after completing enrollment of the two initial cohorts, where doses were 25 and 15 milligrams given twice a day, it was clear that 424 was providing rapid and unprecedented positive clinical results. This level of improvement encouraged us to expand the number of patients at the maximally-tolerated 25-milligram twice-daily dose, and to explore lower twice-daily doses as well as once-a-day dosing.

Enrollment into the study has been even more rapid than we anticipated. We now have over 60 patients on various doses of 424, all of which are showing good activity. Results continue to be very encouraging, with most patients demonstrating impressive responses. Details of these results will be part of Dr. Verstovsek's presentation at ASCO.

We are continuing to add patients to the trial, which will allow us to further refine the dosing regimen for the registration trials and to also assess prospectively a number of potential endpoints to use in the registration studies. I reported previously that some patients receiving 25 milligrams twice daily developed a clinically-significant thrombocytopenia. As we've enrolled more patients at that same dose, as expected we've seen some additional instances.

Patients with myelofibrosis, like those with other hematologic cancers, comprise a heterogeneous population with respect to clinical status and bone marrow function; and thrombocytopenia is not a surprising side effect in these individuals.

We've learned that patients who enter the trial with a greater degree of bone marrow compromise -- in some cases indicated by platelet counts that are only slightly above the 100,000 level, which is the lowest level allowed into the study -- appear to be more susceptible, becoming, frankly, thrombocytopenic.

When significant myelosuppression of this sort has been encountered, it's been successfully managed in the overwhelming majority of cases by holding drug temporarily and/or by a reduction in dose. This is similar to other drugs including Gleevec, dasatinib, and Revlimid, which are also used to treat hematological cancers.

Before moving to our timelines I do want to make an important point here. That is, based on our growing experience with 424 I am very confident that not only will we be able to select appropriate starting doses for individual patients in the registration trials, but that we will also have the flexibility with this compound to dose-adjust to meet individual patients' needs.

With respect to our timelines, we're on track to complete the dose regimen and endpoint selection process this fall. Provided the FDA is at that point in agreement with our plans, we would then move forward with a formal SPA submission. Because this will be the first time that the FDA has ever evaluated a compound for this indication, it's essential that we secure their agreement that the design and planned analyses of our registration studies are adequate to support approval.

So while our objective is obviously to begin the registration trials as soon as possible, we absolutely want to have clarity and agreement with the FDA prior to beginning these trials, as this ensures the most efficient -- and even more importantly, the lowest risk -- path to approval.

We're also on track to begin a trial this summer in two other myeloproliferative disorders, polycythemia vera and essential thrombocythemia, known as PV and ET for short. In this first PV/ET trial we plan to target patients who are at a stage in their disease where they have both enlarged spleens and significant constitutional symptoms, and important subsets of both PV and ET patients have enlarged spleens and significant constitutional symptoms.

Based on our experience in myelofibrosis, I think it is highly likely that 424 will also be effective in these indications, and I look forward to reporting results later this year.

I also expect to report topline results later this year for two additional oncology trials which initiated during the first quarter, one in hormone-refractory prostate cancer and the second in multiple myeloma.

Moving to the JAK programs in inflammation, we will be giving an oral presentation at EULAR on June 12, describing results from the now-completed first cohort of patients with rheumatoid arthritis who were in a dose-ranging 28-day Phase IIa study. These are patients who are poorly controlled on a background DMARD-containing regimen, primarily methotrexate.

In January, we reported encouraging response data on a few of these patients; and as you will hear at EULAR, the level of clinical improvement seen in the full cohort of 12 patients who received 15 milligrams of 424 twice a day is quite striking. I will repeat that, quite striking. Not only when compared to the four patients on placebo, but also when viewed in context of results seen with the anti-TNF biologics.

The drug has been extremely well-tolerated. Importantly, in this group of patients with good bone marrow function, platelet counts have remained constant. We're enrolling additional cohorts into the study at two different twice-daily doses and also at a once-a-day dose. We hope to present these additional results at the ACR meeting in the fall.

We are also planning to initiate a six-month Phase IIb RA trial with 424 in the second half of the year.

We have a strong follow-on JAK inhibitor compound, Incyte 28050. It's on track to begin Phase I in healthy volunteers next month, with results expected in the fourth quarter. Provided 28050 looks as good as 424 -- and we have every reason to believe at this point that it should -- we would be in the enviable position of having the option to develop two distinct oral compounds, one for oncology and one for inflammation.

With regard to the topical program for psoriasis, we've completed a Phase IIa dose-ranging trial in mild to moderate patients in which 424 was extremely well tolerated with no adverse events at any dose. And we saw rapid and sustained improvements in the primary endpoints we evaluated. We are currently recruiting the second of three cohorts in a required subtotal inunction safety study. I think we have all the people enrolled in the second cohort now. In which each day for a month, the compound is applied topically to cover up the 20% of the subjects' total body surface. This exceeds the exposures you would see in the majority of mild to moderate psoriatic patients.

424 continues to be free of the troublesome skin atrophy seen with steroids, as well as free of the redness, scaling, and peeling associated with topical retinoids. Provided we see no significant local or any systemic side effects in this ongoing study, we will be in a position to start Phase IIb this year.

I think it is worth mentioning that in the subtotal inunction study the improvement in the psoriatic lesions treated with 424 has been impressive relative to the untreated control lesions. Because the size of the areas being treated in this study are significantly greater than those treated in the Phase IIa trial, and are more like what you're going to see in Phase IIb and Phase III, as well as in actual psoriasis patients post-launch, it makes us very encouraged that the level of efficacy being seen is as great as it is, and believe this indication could well prove to be a very significant commercial opportunity for us.

Importantly, as I have said before, we do appear to be the only company with a topical JAK inhibitor in clinical development.

Moving briefly to our two metabolic programs for Type 2 diabetes, HSD1 and HM74a. Our abstract describing the striking, though preliminary, results generated in the Phase II 28-day two-step clamp study with our lead HSD1 inhibitor Incyte 13739 has been accepted for oral presentation at the upcoming ADA meeting on June 9. Dr. Meredith Hawkins, the lead investigator, will present the results of the study.

As we've indicated, we intend to initiate the three-month multiple-dose Phase IIb study in May. This study will evaluate multiple once-a-day doses of 739 given in combination with metformin in patients with poorly controlled hypoglycemia.

In addition to measuring hemoglobin A1c we will assess multiple cardiovascular risk factors which we think could significantly differentiate 739 from the glitasones, and thus establish a positive cardiovascular risk-modifying profile for the compound.

Considering the 28-day results in which we saw improvements in glucose control, like fasting plasma glucose, clamp measured liver glucose production, and clamp measured peripheral glucose uptake, improvements in LDL and total cholesterol, and improvements in triglycerides, I continue to believe that HSD1 inhibition represents a unique opportunity to assess broadly the needs of Type 2 diabetes patients by improving many of the risk factors associated with a metabolic syndrome profile.

We've recently begun Phase I trials for the follow-on compound Incyte 20817 in healthy volunteers. But given how well 739 has performed, at this point we are not planning to advance this compound into Phase II.

For our other metabolic disease program, HM74a, we've completed a 10-day single- and multiple-dose escalation Phase I trial in healthy volunteers. We confirmed that Incyte 19602 lowered free fatty acids without rebound and did not produce the flushing seen with niacin and its derivatives, suggesting that 602 has the potential to overcome the two major limitations of niacin and Niaspan.

We will begin a 28-day Phase IIa trial in Type 2 diabetics this summer, a study which I believe has the potential to provide proof-of-concept for 19602 as a treatment for diabetes. I will look forward to updating you on the results of this trial hopefully late this year or very early next year.

Our sheddase inhibitor, Incyte 7839, is being evaluated in metastatic breast cancer patients in an ongoing Phase IIa trial in combination with Herceptin. We expect to have topline results before year-end.

Lastly, we also have two discovery stage oncology programs that I have mentioned before. They look promising, both of them. Both have lead compounds in preclinical development, and we expect to file INDs for both programs this year.

I will now turn the call over to Dave, who will review our first-quarter results.

Thanks, Paul, and good morning, everybody. I will start with our updated financial guidance, noted in today's press release, and then give a brief overview of or first-quarter financial results.

We are revising three areas of our guidance -- cash, R&D expense, and interest income. We now expect our cash use to range from $132 million to $142 million, up from the previous range of $128 million to $138 million.

Our R&D expense is now expected to range from $140 million to $148 million from a previous range of $138 million to $145 million.

Interest income is expected to range from $5 million to $7 million, down from previous guidance of $8 million to $10 million.

These changes in our financial guidance are driven primarily by the continued progress in our JAK inhibitor program. This includes the increased clinical development expenses associated with the additional enrollment in our ongoing myelofibrosis study, partially offset by our recent decision to not initiate a Phase IIb study with our CCR5 antagonist.

Another factor that is impacting our financial guidance is decreased yields in our cash and marketable securities due to the significant reduction in interest rates that has occurred in 2008. In addition, we have shifted a significant portion of our investment portfolio into government agency and Treasury backed money market funds and away from traditional money market funds. While safer, these funds carry lower interest rates than traditional money market accounts; so this too has impacted our yield.

Now briefly turning to a couple areas in our Q1 financial results. Our ending cash at March 31, 2008, was approximately $219 million. During the first quarter, we used approximately $38 million in cash.

From an operating perspective, our R&D expense totaled approximately $33 million for the first quarter, which reflects our continued investment in our pipeline. As a reminder, our R&D expense tends to vary from quarter-to-quarter depending on the timing of our clinical development activities.

I believe we remain well positioned financially to focus our resources on our high-value programs as we move through 2008 and beyond. So with that, I will now turn the call back over to Paul.

Thanks. In the interests of time, I would like to open the call for questions now.

(OPERATOR INSTRUCTIONS) Richard Smith, JPMorgan Chase.

Yes, good morning and congratulations on the progress. Just a couple of questions, with respect to the data that's going to be shown at ASCO. I see a lot of it will be on the 25-milligram bid dose. Are we likely to see anything at the lower doses?

Maybe just talk about, beyond the reduction in splenomegaly, some of the other things that we might see in the presentation.

Yes, so, we will have some data on lower dose. Those will have fewer patients there, and they will have been on drug obviously less long than the 25-mg bid people. We're seeing good results there.

We will talk some about spleen reduction and improvements in constitutional symptoms. I think we will talk in general terms about -- because of what you're seeing with the constitutional symptoms, the kinds of areas you might want to go to for getting the second primary endpoint.

But what we would like not to do and what we are planning not to do is to lay out the one or two things we're really going to hone in on, because -- for competitive reasons. I mean, there are a panoply of possibilities; but there are a couple of things that we think make the most sense. And we would like competitors to have to figure that out for themselves.

So until we actually have generated that prospective data, we're not going to lay it out there for them any earlier than we have to.

Okay. So you mentioned that you're talking to the FDA, might have some form of protocol by the end of the year. Are you still on track maybe to start the trial by the end of the year? Or is it still hard to say?

Well, so this is what I would say. We're still planning to do everything we possibly can to start the study late this year.

Okay.

If you remember, the FDA commissioner a couple of weeks ago pointed out how overwhelmed they were and how they couldn't keep up with PDUFA commitments. They weren't sure they could turn around SPAs as rapidly as they had in the past. Those kinds of things are a little bit out of our control.

So we are still pushing to start, obviously, as soon as we can, and remain committed to trying to start by the end of the year. But they have to play and give us a good effort to get the SPA in place to be able to do that. Otherwise we could lose four to eight weeks.

In the grand scheme of things, I think that is relatively trivial. If we were going to lose six months, I would say that would matter. We just don't have control over how fast they will be able to turn things back around.

We will have finished by the fall the studies that we need to put the document together. Then, if we put a good document together, and we have good results, which we fully expect we will have, we would hope and expect that those folks at the FDA who would be responsible for the SPA would realize the potential importance of what we can offer to myelofibrosis patients. And we would hope we would get higher priority, and therefore relatively quick turnaround time.

Maybe just one quick follow-up. With respect to the number of patients being enrolled at say the lower doses and the qd, at what point do you get to -- you need to stop enrollment? Is it purely based on the results you are getting out of those? Or do you have a set sort of number in your mind where you get to?

You mean in the current study?

Yes, correct.

I think we will probably end up with something just north of 100, do you think, Rich? Total people by the time we stop?

Yes, I think it will be north of 100, but not far north.

Great, thank you very much.

Thomas Wei of Piper Jaffray.

Thanks very much for taking the question. Just wanted to follow up on a couple of the comments that you made about thrombocytopenia that has been seen in the subsequent patients who have been enrolled. You said the vast majority have gone on with no issues.

Does that mean that there were some patients or a patient who either had thrombocytopenia that didn't resolve or prior to the continuation couldn't be restarted on drug?

Can you talk about these new cases of thrombocytopenia? Have they all been Grade 3? And the time course, have they all been early in the course of treatment? Or are you talking about some patients who have had late thrombocytopenia develop?

So, a lot of those details Serge Verstovsek is going to get into.

So what we see is an incidence of thrombocytopenia that is a lot less pervasive than for example what you see with Revlimid, Gleevec, or dasatinib.

The other thing that you should realize is that when you first start these studies, you have to learn where you are and then you put amendments in. So the first set of studies, where we had a couple of people in the first 12 to 16 who became thrombocytopenic, the ground rules there were you did not allow for dose adjustment until the patients reached, let's say, Grade 3.

Now, with the experience that we have, we've written amendments that allow you to mitigate by dropping dose the extent of thrombocytopenia that you're likely to see. So with implementation of those amendments, the prediction will be that the incidence, which is already significantly lower than what you see with Revlimid, Gleevec, and dasatinib, will be even lower in terms of Grade 3s and Grade 4s.

Virtually everyone has had -- when they have had thrombocytopenia, it has reversed when you stop. Some people come back a little faster than others, but they come back.

We've had one individual who probably did not have myelofibrosis, but had progressive leukemia, who entered the study. His platelets have only very slowly come back because currently his bone marrow is full of leukemic cells. So he probably should not have been in the study in the first place.

We've had no significant bleeds. We've had no deaths from thrombocytopenia. I actually -- I think it's very manageable.

The overwhelming majority of the occurrences have occurred relatively early. We probably have had one or two people who have been maybe after their third cycle and have slowly dropped platelet counts, but not precipitously.

So it's a very manageable side effect. The incidence is significantly less, even now, when we're just implementing amendments to mitigate further the extent of thrombocytopenia in those patients that get it. It even now is below what you see with Revlimid, Gleevec, or dasatinib.

Just a quick follow-up. Can you tease out -- do you have enough patients to say whether or not it seems less at these lower doses?

Yes, it seems less at the lower doses.

Great, thanks.

Eun Yang of Jefferies.

Thanks very much. Just [in] checking, [it relates to] kind of a general question. There are a number of JAK inhibitors currently in development. When you read and talk to the companies developing those products, they mostly claim that they are selective.

So (inaudible) the selectivity is based on inhibitory concentrations, and most of them show kind of in the nanomolar range. So the question that I have for you is that -- in terms of selectivity, when you see differences in nanomolar concentration for inhibitory concentration, does that really make a difference in clinical profiles?

Yes, I think it's too early in the clinical game to with certainty predict or answer that question. But what I can say is the nanomolar potency that you get against JAK1, JAK2, JAK3, and TYK2, the fourth member of that family, depends critically on the assay conditions.

If you do the assay at the EC50 concentration for ATP, you get very different numbers than if you use saturating or millimolar concentrations of ATP.

As you probably know, in cells ATP is present at several millimolar concentration; it is meant to be at saturating concentrations for enzymes like kinases that require ATP to function.

So we always do our assays at millimolar. That is what we think are the most relevant readouts. If you do that, you find that the Pfizer compound has very little selectivity for JAK 1, JAK2, JAK3. Although it was originally identified as a JAK3 inhibitor, it inhibits JAK1 and JAK2 virtually the same amount at cellular levels of ATP.

So -- and I don't think they have ever claimed they're selective. So I would call that a pan-JAK inhibitor.

The TargeGen compound that is in development and the one that is [Excelicis] compound, they actually look like they do have JAK2 selectivity, when you assay the way we assay. So it's JAK2 over JAK1 and JAK3. Unfortunately, for Excelicis compound, whatever that structure is that gave them JAK2 has also given them significant neurologic toxicity which is, I'm almost certain, is off target. They are hitting something else. TargeGen, I don't know enough about their compound at this point in time.

Our compound, it takes out JAK1 and JAK2, and we designed it to do that; but spares JAK3 at high ATP concentrations, because JAK3 is mainly active in T-cells and was at first -- JAK3 concept was to be used in transplantation to prevent rejection through immunosuppressive mechanisms. Well, immunosuppressives don't work that well in RA. They just buy you immunosuppression.

So we wanted to not have JAK3, and we have very, very little at the concentrations that we achieve in blood. But we wanted to have JAK1 as well as JAK2 because IL-6, IL-23, their receptors utilize both JAK1 and JAK2. And we thought that in addition to inhibiting JAK1 -- JAK2, which everybody knew was relevant because of the mutation and the constitutive activity of the V617F JAK2 -- but you also could get greater efficacy with respect to the interleukin signaling that leads to the constitutional symptoms that are really bothersome to these patients by having JAK1 activity.

So we have designed our compound that way, and so far it looks like we did what we should have done because of the results that we're getting. If there are other ones out there, I think Vertex has one, I don't know enough about the other JAK compounds to make any cogent comments.

Okay. Then, on the follow-on product, 050, are there certain characteristics that you are looking for?

And in preclinical studies, can you actually comment on the preclinical -- based on preclinical studies, what is different about this product compared to 424?

Well, it has a very similar JAK inhibitory profile -- JAK1, JAK2, not JAK3. It has a somewhat longer half-life, but not dramatically longer.

We are of the opinion, although it is early, that you may well want during the dosing intervals some off-time to allow hematopoietic growth factors to do their business in the bone marrow.

So, you may not want something that has 24-, 36-hour half-life. Rather, you want something that is potent, has a half-life that gives coverage for most of the dosing interval, but gives you maybe a little time off at the end of the dosing interval.

So 28050 still has those characteristics, but it has a little bit longer half-life than 424. We haven't talked about those half-lifes publicly yet for competitive reasons.

But the real reason is that, if you had your druthers, and it was a perfect world, and you were taking one compound, and you were treating acute leukemias and multiple myeloma and very sick myelofibrosis patients, where you know -- no matter how wonderful the compound is -- that you're going to see side effects and toxicity, some of which would be related to the drug, some of which might not be because these people are so sick; versus people with psoriasis who you want to treat systemically, or with inflammatory bowel disease, or with rheumatoid arthritis. If you had your druthers you would rather have separate entities to treat inflammatory diseases versus malignant disease.

So in addition to always wanting to have a second, a third, even a fourth compound for a very, very important area to you, you would like to have that flexibility if you choose to go that way. So that is to me the most important point about 28050.

Okay. Then in the press release on 424, it says that you guys are not going to be required to demonstrate a normalization of cell counts in the blood and bone marrow in the registration study.

Does that mean you don't need it to show that there is an improvement in anemia in these patients?

Yes, we don't have to -- we do not have to show that.

Okay, and last question is on sheddase inhibitor. Genentech has pertuzimab, and they studied it in Phase III. I would just like to get your opinion on how that may impact your future programs of a sheddase inhibitor in breast cancer.

What do you think, Rich?

Yes, it is a moving field, so we recognize that new drugs are coming along and from time to time can make a significant difference. So, when we get to the point where we're ready to start our registration studies, we will look at what the standard of care is for first and second line, and try to decide where there is the level for improvement.

There is no possibility, in my mind, that breast cancer or HER2 positive breast cancer will be a cured condition and one for which there is no level of improvement. But it's hard to say exactly where our drug will fit in based on what the standard of care is at the time.

We'd just say one other thing about that. None of the current agents, including Genentech's latest entry, really clamp down on signaling through HER3. Our mechanism can do that. Since there is data which shows that escape in clinical samples as well as in cell culture often occurs through heregulin stimulation of HER3, which makes sense because HER3 is the commonest partner in heterodimers, HER2-HER3, HER1-HER3.

If you can't shut down signaling by impacting HER3, you don't completely shut down the pathways. So our mechanism does that. That is why we remain optimistic that in these combinations we should see additional efficacy as long as the combinations are safe.

The first one we picked to look at, because it was the first one, was Herceptin. That study is ongoing, and there are some titillating early results, but it is just too early to say anything publicly.

Thank you.

Sapna Srivastava of Morgan Stanley.

Hi, it's Dave calling in for Sapna. Just a question on the JAK program as well as the HSD1 diabetes program. How are you thinking about partnering these types of programs?

How far would you be willing to go on your own in the diabetes program

and in the JAK programs? Aside from myelofibrosis where you've already made it clear that you want to own that program. You know, in terms of the RA or the cancer, would you be willing to bring these through to Phase III if you didn't have a partner at that time? Or what are you thinking about that?

Well, let's start with JAK. For all myeloproliferative diseases, we think that the size of a sales force required to effectively market is of the size of an HIV sales force. Maybe even smaller, because everything is at tertiary care facilities.

So that one, we plan to take all the way and sell it. If we're fortunate enough to get a topical through -- and we have very interesting results, and we don't see any toxicity at the moment. But to get a topical through, you have to have at the end of the day a reasonably pristine compound; and we need more data to know whether we have that or not.

But if we do, and we are the only game in town right now, there are ways of renting derm sales forces to sell for you. So at this point in time, that is our plan for that indication.

For other malignant indications, such as multiple myeloma, I don't see why the same sales force could not handle that.

Hormone-refractory prostate cancer may be a more challenging entity, which we would be happy to think about if we get positive results in these Phase II trials. And then we will have to think about that issue, but it's a little early to do that.

With respect to RA, at the moment we've said that we are going to take it forward ourselves. There may come a time when we realize that we have too much on our plate to do that, and then we would seek a partner. We are certainly planning right now to start the Phase IIb study and run that ourselves. It is not that expensive to do, and it doesn't take that long to do.

So we would take that one almost certainly, unless somebody came and put a deal that you could not say no to on the table. We are almost certain to take that through IIb before we partner. Is that fair? I think that is.

But it is conceivable we will end up with a partner, maybe it would be a comarketing arrangement, you know, that sort of thing for rheumatoid arthritis.

For HSD, we have said from the outset that we want a partner. We have negotiations ongoing with a number of big pharmaceutical companies. We've also stated -- and we're not going to move away from this position -- that if either the financial terms or the -- I don't know what you would say, the cultural terms are not adequate, we are not going to do a deal.

By the cultural ones, that means a company that is organized, has prioritized, has given us assurances that this program would be highly prioritized, and would not be shelved for internal programs. If we got that, plus the financial terms we are looking for, which are not shabby, we would be interested in doing a deal now.

But short of that, we are planning to start Phase IIb in May. I think at this point we are going to start Phase IIb in May as we continue to talk to people.

But anytime from today through Phase III, we would consider a partner. I don't think we want to be marketing a primary care indication.

The same applies to HM74a; it is just at a much earlier time frame. That one has the potential, because of the data that already exists showing very rapid control of glycemia after even a few days of infusion of a niacin derivative, and after a couple of weeks of oral administration of a niacin analogue that is called Cipamox, that you can very quickly normalize glycemic control in uncontrolled Type 2 diabetics with this mechanism.

So the one-month study we are doing has the potential to give us obvious proof-of-concept and enough safety data that even at that early stage you could begin to aggressively look for a partner.

So those are what -- on the metabolism side, it is clearer that we are going to seek and find partners.

Thank you.

Annabel Samimy of UBS.

Hi, this is Stacey calling in for Annabel. Thanks for taking my question. You mentioned for the RA study that you completed the cohort of 15 milligrams bid for the JAK inhibitor. Could you provide more clarity on the other doses that you're using in RA?

Well, we're going -- we're trying a higher dose because I think we want to make sure we have maximal efficacy at 15 bid. 15 bid was beautifully tolerated over the month. We're going lower, and we're going once a day. So there are three other cohorts currently.

Okay. Are you comfortable that these doses won't cause bone marrow toxicity? Or is there a difference between myelofibrosis and RA patients in terms of susceptibility to bone marrow toxicity?

Yes, that was one of the points I tried to make. I'll try to make it clearer here. People with rheumatoid arthritis are not diseased in any meaningful way in their bone marrow. They have reasonably healthy bone marrows. I can't tell you that they are perfectly normal, but they are not diseased there in any significant way. Whereas myelofibrosis patients, they have a lot of -- they don't make -- they don't have much capacity in their bone marrow to make cells, so they are highly susceptible. As is a leukemic patient whose bone marrow is filled up with immature leukocytes, to not be able to make platelets. So they are a setup for becoming thrombocytopenic.

Rheumatoids on the other hand are not. My guess, at 15 milligrams, we saw essentially nothing; the platelets didn't change, period, over a month. With myelofibrosis, most everybody who is going to drop their platelet count has done it by then.

So, yes, we're pretty comfortable. We're also pretty comfortable that Pfizer is in a large Phase IIb study looking at five or six different doses. They are planning to report that study at ACR. From what we know, none of those doses have been dropped for toxic reasons, so they must not be seeing much in the way of bone marrow suppression at their doses either.

Now, the results that we got at 15 milligrams bid, I think I said -- I repeated, quite striking. I think even lower doses are going to show very good results. I'm not convinced that the 25 bid is going to be any better than the 15, but we'll see; that is why you do the experiments.

But I was thinking about this movie analogy, sports movie analogy, where I won't give away the EULAR presentation.

But if you remember in On the Waterfront Marlon Brando is sitting in a car with his brother, and he is commiserating about what his life has become. He said he could have been a contender. Remember that? He could have been a contender. So you could say this drug could have been a contender.

But then in The Natural, before the crazy lady in the black hat shot Robert Redford, remember he said -- he was the best that ever was, right? So these results are like the best that ever was, and you'll see that when they get presented.

Compared for example to what you see with anti-TNFs, and this is an oral agent, so this is an incredibly exciting early program.

Looking forward to it. Thank you.

Katherine Kim of Banc of America Securities.

Hi, thanks are taking my question. I have several follow-ups on the RA program. So right now, how many patients do you have in the RA study that is enrolled currently?

We probably have now in the low 20s, something like that. But the first -- maybe 25. We've just started the other cohorts.

The first cohort consisted of 16 people. There were four placebos and 12 treated at 15 milligrams twice a day. That was done as a single cohort because we wanted to see what we had before we started to look at other cohorts.

The other three cohorts are now being done in parallel, so the recruitment has picked up. But we won't have any significant data from those three cohorts by EULAR, which is barely a month away. But we will be able to talk about those cohorts at the ACR meeting later in the year.

Is it possible to get any safety data on the additional patients beyond the first cohort?

Sure.

At EULAR?

Oh.

We will have to see. We will just have to see what the data -- how much data there actually is and whether it is worth mentioning at the last minute.

I mean, for example, if we were seeing good efficacy at all doses, and we were seen the same pristine safety profile that we're seeing at 15, somebody might make a statement about that and then say the details will be presented at ACR.

Or, if by chance we had seen some safety issue at 25 and we decided to stop that, we might say that.

If we were seeing good efficacy at the lower doses, early good efficacy without any safety, which is what we would expect based on the 15s, you might make some global statement about that. But we just don't have data enough to know if anything would make sense and if so, what, at this point.

Okay, so in terms of the 050, the follow-on, when is the earliest that you could start a similar Phase II program?

We would take a slight delay if we did that and the FDA agreed with our plan that we intend to provide them with. It would be about -- we would lose about four months in time.

Versus going forward with 424?

424, yes. The other possibility is to go forward with both of them, and then make the decision after you do the three-month dose-ranging studies with both compounds, to give you even longer time frame to make up your mind if the second one is the right one to go with.

So you would -- the first Phase II program for 050 would be a three-month study versus currently for 424 you started with one month?

Yes, it's hard to recruit. See, it's not easy to recruit rheumatoids into one-month studies because they barely get started feeling good and you take them off drug. It's much easier to get them to come in to three-month studies. One of the reasons it took us a while to get that first cohort done with 424.

So we have a plan, which I don't want to get into publicly right now, to omit a one-month study in rheumatoids and do certain Phase I things with rheumatoids and with normals for longer exposure periods; and then move into a three-month study. We will have the tox, the animal tox to do that.

So my last question is on 424, in terms of the dose response, I mean, dosing. The responses that you've seen, how early do you normally see a response? I know it's only one month; but do you see it early, like in the first couple weeks, and then --?

In RA?

In RA.

Yes, you see it within a week.

Within a week? The responses when you see them, do they improve, pretty much stay the same throughout the rest of the period?

Well, we had one guy who had an ACR90 response by two weeks, so he couldn't have improved much more.

Okay, but he stayed at ACR90?

Yes, he did. Then we have other people who continue to improve throughout the dosing interval, which I think is the more likely time course that you're going to see. I think that you will see continued improvement beyond one month when we do the three-month study.

But what we are seeing is pretty interesting. I mean it is pretty profound.

Okay. Well, thank you.

Tom Russo of Robert W. Baird.

Good morning, thanks for taking the questions. Paul, in your prepared remarks, I think you mentioned that constitutional symptoms would be coprimary. I was just wondering if that was intentional and that has been decided with the FDA. Or is that the direction things are going versus it being a secondary endpoint?

Well, no, just let me clarify that. There are aspects of the symptoms that these patients have that improve that are more readily quantifiable, and thus more FDA friendly than just saying I feel better, you know? Which they don't like very much.

The I feel better type responses usually end up in the secondary bucket. You see what I'm saying? So you need to find something that you can measure.

What we want to do -- we believe we have four or five very high probability possibilities for measuring. But what we want to try to do in this next set of patients prospectively is to find which of those four or five gives the most solid quantitative responses. So that we can go into the registration study with the absolute lowest risk possible, which will be good for you and good for us. And that is basically what we are about doing right now.

Okay. So then I know at this point you don't want to give any visibility into that for competitive reasons. But maybe beyond ASCO, is there a point in time where you would anticipate giving us some visibility, or through a medical meeting?

Yes, by ASH for sure, because we would have picked it by then, and ASH is in, when, November? By ASH, for sure, because we would hope we would have our SPA in; or done, if not in; and I would hope in.

By then, we would have selected the one -- and we probably would have had some conversation with the FDA before that to make sure that the one that we picked is the right one for them.

We will have prospective data on a number of things that we're going to quantify where we think we should see positive results. Then if you couple one of those with a decrease in spleen size, you've got your primaries.

Okay. Then just last question. Are you able to be specific? Is it just the 15-milligram dose below 25, or can you say which doses you are looking at below 25 in MF?

Well, we are not looking at much above 25 bid. We're looking at once-a-day doses. We've looked at 25, we've looked at 50, we've looked at 100 once a day. We probably will even look at 200 once a day, although we're not going to end up at 200 once a day; it is just that is a typical dose escalation that you do with malignant disease.

We've looked at 10 bid. We are almost certain to do some looking at 15 and 20, and that will be it.

Okay, thanks a lot.

So we've narrowed between 10 and 25 for where are you going to be bid. It's not clear that every patient who would come into the registration trial would come in on the same starting dose. That is another area that we've learned a lot about and would influence how we would write the entry criteria for the registration study.

Eun Yang of Jefferies.

Thanks for taking my follow-up question. Can you give us an update on CCR5a inhibitor 696?

Oh, CCR2?

Yes, CCR2 inhibitor? Is that kind of in the back burner, given the focus, the development on JAK2 inhibitor?

It is certainly our lowest priority program right now. We're just trying to inch it through single and multiple dose Phase I when we have time. Once that is done, it is highly likely that we will seek a partner for that program.

Because multiple sclerosis, while it is an unmet therapeutic need, it is a long, expensive trial, and I think we would be better served by having as a partner a company that is much more engaged with multiple sclerosis than we are likely to be.

Okay. Then oral formulation JAK inhibitor 424, previously you mentioned that you may begin 28-day study in psoriasis with that oral formulation. Is that still on track?

The oral formulation for psoriasis, it will get done. It is not, again -- what we are trying to do here is to do the things that make the most impact to our valuation, that we can afford to do, as early in the year as we can. So that one has gotten pushed back to the latter part of the year. It may even fall into the first quarter of next year.

It only makes up 20% of the psoriatic population. While it is important to do it, as we continually juggle our priorities here, it has kind of fallen to a lower rung on priority list.

Okay, thanks very much.

(OPERATOR INSTRUCTIONS) Soham Pandya of ThinkEquity.

Great, thanks for taking my question. I just had a question on 424 in MF patients in the pivotal trials. It seems like you're probably going to take about two or more doses into that study. Is that something that we can assume to that effect by your comments?

No, what you'd do -- what I would suggest, if what I say now does not clear this up, if you go to the package inserts for Revlimid, for Gleevec, or for dasatinib and look at their dosing regimens, they have a dosing regimen. It may be that every patient will start at the same dose. It may be that you could -- that may not be the case. It would be simpler if every patient started at the same dose.

But there are -- there is then a dosing paradigm that, depending on what happens to you both from an efficacy standpoint and both from a bone marrow suppression standpoint, that would allow the physician to alter your dose, either down or up, probably in 5-milligram increments.

So I probably misstated it a moment ago. Let's say everybody starts for example on 15 milligrams bid, and 50% of patients do swimmingly; their spleens shrink; their night sweats go away; they have lots of energy; and their blood counts remain stable. So they would just stay on 50 twice a day.

Then there will be a subset whose spleens will shrink some; they will get a little better constitutionally. But the doctor and the patient feel that they haven't maximally improved. But their counts are okay. They would go up to 20 milligrams twice a day, in a dosing regimen that you could conceive of here.

Then, there could be somebody on 15 who is doing fine but they have had a drop in their platelet count, and doctor recommends going to 10 milligrams bid. So, that patient could drop. We already know we're getting good responses at 10, so you have the flexibility to go to that 5-milligram lower dose.

So you have, within let's say -- maybe you will end up in the 10 to 20 range and that is kind of the way you would play, depending on patients' efficacy responses and their bone marrow responses.

I think from what we've learned already, for the vast majority of people who come in with the right diagnosis of myelofibrosis -- we've had a few who have entered the study who were already in their leukemic phase. If they have myelofibrosis and you have that kind of play, you're going to be able to find a dose which safely benefits the overwhelming majority of these patients.

So that is the kind of thing that will probably be part of the registration study.

Okay, that's very helpful. So, then, by the time you go to the agency with your SPA then, can give us a sense of at these lower doses how many months of therapy do you think you can have? Is it six months on treatment with patients? Is it more than that?

You mean how much patient treatment from this study will we have when we go?

Yes.

It will be about six months.

Six months? Okay, great. Thank you.

I think that's right, Rich, right?

Yes, the lower doses some patients will have six months and some patients will have less.

Yes.

Thank you. There are no further questions at this time. I would like to hand the floor back over to management for any closing comments.

Well, we thank you all for your attention and your questions. I hope we've left you with the feeling that we are very, very bullish on pretty much everything we've got in the pipeline, but especially the JAK program continues to progress well.

We think we're on top of the issues that have to be dealt with to get ready for the registration studies. The caveat I mentioned about the FDA Commissioner is one we're just going to have to anticipate and work with. We may be extremely lucky and avoid any delay. My suspicion is if they are a little bit slower, it won't be devastatingly so. And right now, we have no evidence that they would be; I just put it out there for you because they put it out there for us. So it's kind of where we are.

But we feel like we have a very, very good chance of having a drug here approved for this indication and farther along for a bigger indication for rheumatoid arthritis. We also feel that the topical program, as long as we don't get any systemic safety signals, is also a high probability program for success.

Put all that together and it comes out over a time period of beginning in 2010 for over a two to two and a half-year time period when all this comes together, the Company would have a large amount of yearly sales.

So we think we're on the cusp of a major transition which should be reflected in a rising valuation, if not later this afternoon --

Over time.

-- in the not too distant future. With that, I thank you again for your time, and we will end the call here. Thank you. Bye.

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