英賽德 (INCY) 2009 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Incyte Corporation first quarter 2009 financial results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Pamela Murphy, Vice President of Investor Relations and Communications. Thank you, Ms. Murphy, you may begin.

Good morning and thank you all for joining us. On the call today are Paul Friedman, Incyte's President and Chief Executive Officer; Dave Hastings, Executive Vice President and Chief Financial Officer; and Rich Levy, Executive Vice President and Chief Drug Development and Medical Officer. Paul will start with a brief review of our lead programs and Dave will follow with a quick summary of our first quarter financial results. We'll then open up the call for Q&A.

Before beginning, we would like to remind you some of the statements made during the call today including statements regarding our plans and expectations for our drug development program, timing of our clinical trials, and the potential efficacy of our compound as well as our expected financial results and financial guidance are forward-looking statements. These statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially including those described in our Form 10-K for the year ended December 31, 2008 and from time to time in our SEC documents. Paul?

Good morning, everyone. We've had a productive first quarter and are looking forward to a number of important events over the next few months. These include the initiation of our phase three registration trials for INCB18424 in patients with myelofibrosis, final results from the three month Phase IIb trial of topical 18424 in psoriasis, the dosing of the first patient in a six-month Phase II trial for INCB28050 in rheumatoid arthritis, and the final results from our three month Phase IIb trial with INCB13739 in type II diabetes.

With respect to these pending events for 18424 for treatment of myelofibrosis, as we've stated before, we have resubmitted the SPA and expect to hear back from the FDA soon. If the FDA agrees with our submission, we remain in a position to start our pivotal Phase III in the first half of the year. We have over 70 sites set up to participate in this trial, and coincidentally, about the same number for the European registration trial. We anticipate that the European trial will also begin within the next month or so. We continue to believe it will take about six months to enroll each of these studies.

For 424 in polycythemia vera and essential thrombocythemia, later this year at ASH, we expect to present that from our ongoing Phase II trial. The study is fully enrolled and we're encouraged by the results we've thus far seen both in terms of safety and efficacy.

Regarding the Phase IIb study using topical 424 in psoriasis, we look forward to having results late this summer.

For 28050, our oral JAK inhibitor for inflammation, we started screening subjects this week for a six-month Phase II trial in rheumatoid arthritis patients. Dosing should begin in the last week of this month and we expect to have results of the trial in the first half of 2010.

With respect to Incyte 13739, we have just heard back from ADA that the abstract, which you'll remember was submitted back in March based on the interim analysis that we did, was accepted for this year's late breaking clinical therapeutics poster session at ADA on June 7th in New Orleans. All patients have now completed the trial and we expect to have the final data in early June in time for ADA.

Turning to our partnering efforts for the JAK oncology program, it remains our intent to keep North American rights, but as we've said before, we would consider an ex US alliance if the deal terms were attractive. The strong rest of world partner could certainly help us rapidly optimize the MPD opportunity for 424 as well as improve our financial position. For the JAK inflammation program, we could do a broad global licensing deal or there may be opportunities in which we could retain certain indications and/or share in downstream economics.

So, in completing my opening remarks, while we don't have a lot of new news to report to you today, we've had a productive quarter. It sets us up for a very eventful next few months. I'll turn the call over to Dave Hastings now, who will walk through a quick review of our first quarter financial results.

Thanks, Paul. Good morning, everybody. I'll start my brief overview this morning by discussing our cash position. We ended the first quarter with $175.6 million in cash and investments and our cash use this quarter was $42.2 million. This performance is right on plan and our cash use guidance for the year remains unchanged in the range of $122 million to $128 million. As always, this guidance excludes funds that could be received from any potential partners this year.

Another area I would like to briefly discuss this morning is our operating expenses, particularly R&D costs. Our operating expenses for the quarter were in line with our expectations. R&D expense totaled $29.6 million, which is lower than 2008's first quarter R&D expense, and reflects our intent to focus on spending on programs that we feel have the greatest likelihood of creating near term value.

Finally, in terms of our overall capital structure, we understand and appreciate that our convertible note balance represents a significant financial overhang. There are various alternatives and strategies available to us to restructure or reduce the notes. And while it is not appropriate to openly discuss all of our options and strategic plans, the steps we take to deal with the debt will be focused on maximizing shareholder value. So, with that, I'll now turn the call back over to Paul.

Okay, thanks, Dave. Operator, we can now open up the call for questions.

(Operator Instructions). Our first question comes from Mona [Ashaya] with JPMorgan. Please state your question.

Hi, good morning. I'm here for Cory. A couple of questions, one on the acceptance of the 13739 data for ADA. Is it safe to assume you wouldn't have pushed this if you weren't excited by the findings from the interim analysis?

I think that is a safe assumption, but that interim analysis was done on about 35% of the patients who were -- who ultimately enrolled in the study. So, I think it would be prudent to not make assumptions until we get the final data set very early in June.

Okay. And then my second question is so it sounds like in the SPA, the second iteration is wrapping up. I wonder if you could speak to how much the trial design might have changed from what you had originally envisioned. Is it similar to what you had spoken about earlier?

Well, I don't want to get into that until we get agreement from the FDA.

Okay.

I think if they agree with our resubmitted SPA, we'll be able to start the pivotal, and I think at that point in time, we will provide you with a very clear description of what we're doing. Suffice it to say, we're still anticipating completing the study and filing the NDA in late 2010 or early 2011. But I just think it is not prudent to be talking about things that the FDA is reviewing. I would rather wait until we get the feedback from them.

Okay, fair enough. And then my last question is you've spoken about potentially partnering your early stage oncology assets. And I wonder if you could just provide an update and maybe speak about how much of a priority that is at this point?

You mean c-MET and sheddase?

Yes.

I think for c-MET, if we could find an appropriate partner, we think we have the best molecule of the c-MET inhibitors. There has been a fair amount of interest and it is a reasonably high priority for us. But if you think about the other things that we talked about partnering and our balance sheet issues, it doesn't move the needle as a preclinical entity in the way that an inflam deal or an MPD deal could do, because those programs are significantly farther along. With respect to sheddase, I think until we finish the study that we're currently doing in combination with Herceptin in metastatic breast cancer, I think that program will -- I think it will be hard to get the value that it would have should that study end up positive, as the early results suggest it could. So, those are the two early programs we have. The IDO program, we've not attempted to partner at this point in time.

Okay. Thank you.

Our next question comes from Thomas Wei with Piper Jaffray. Please state your question.

Thanks. First one is on the partnership stuff. In the prepared comments, you focused on the partnership for JAK2, in the hematologic indications, didn't mention the inflam partnership progress. Should we assume that it's on the oncology side where you've gotten the most interest and where things have moved along the fastest?

Well, I did. Actually, I did. Let me read it again. I said for the JAK inflammation program, we could do a broad global licensing deal or there may be opportunities in which we could retain certain indications and/or share in downstream economics.

Okay. Sorry about that.

There's a lot of interest in that program.

Okay. And have you encountered any issues there in terms of splitting out the JAKs by indication? Have partners raised at all that as an issue?

I think that's kind of difficult for me to get into at this point in time. I mean the fact that you ask it, I think it's -- I think because the molecules are different that we're going forward with, I think we've minimized that issue. But I don't think I can comment any further on that at this point in time.

And just scanning through the ASCO abstracts and the presentation that Rubin [Mace] is making, is that based on a cohort of your patients?

Rich, you want to answer that?

It is based on a combination of two data sets, all from Mayo. One are the baseline patients that were -- baseline data on the patients who enrolled in our study. And then there's a second group of patients that were not enrolled in our study for whom they also have data. There's no data in that abstract or in the presentation on the results of treatment with 424 in terms of improvement in the six minute walk test. We'll most likely present that data, assuming we get an abstract accepted, at ASH for December.

So, no data at the European Hematology Conference on what this other coprimary endpoint might be?

We don't -- we decided that we've been presenting quite a bit on this program and that it was better to wait until ASH to do an update a year later. So, we'll talk once we define exactly what the agreement with the FDA is, about the endpoints as well as the data that we have that suggests that those endpoints would be easily achievable. But not in a scientific presentation in the first half of this year.

Okay. Then just lastly, on the PVET trial, you had shared with us some insights into the early patients who had been enrolled last -- during the last call. Did the data -- now that the trial is fully enrolled, still look consistent with those early findings?

Yes, they do.

Okay. Great. Thanks.

Our next question comes from Tom Russo with Robert W. Baird & Company. Please state your question.

Good morning. I was wondering after you got the interim results for 739, did you at that time reach back out to some of the partners you talked to in the past or did they reach back to you at that time?

So what we decided -- remember, because I think mainly because a lot of Exubera trials never got done, we were able to enroll the study significantly faster than we had anticipated. So when we looked at where we were with respect to the final data versus the interim analysis, we were close enough to having the final data that we thought it was going to be essentially not a good use of our business development time to go out and reengage everybody with data. We're in the process of reengaging and we've never disengaged with some people, but we thought we would just wait for the final data because it was only like seven more weeks that you had to wait. So that's where we are. We decided to wait until early June before getting back to people.

Sounds like you'll have all of that data before the ADA meeting, I guess -- is that the logical place to begin those partnership talks again? Would we see all that data at that time or are we just going to see the interim data?

You'll see the data from the study. I mean that's the idea. I mean we put the -- we use the interim data to write the abstract, but we should have all of the data from the study collated and ready for the ADA presentation by early June.

Okay. And then with 424 in Europe, is the only thing left before starting to get the SPA in the US agreed to so that the two trials will look the same? Or is there anything else that has to happen in Europe before you could start?

There's nothing else that needs to happen in Europe, other than that the [INPDs] are still pending approval in some countries and have been approved in others. So, that's completely independent of the FDA review.

Okay. And then real quick one for Dave, the pattern of R&D, there was a comment in the press release over the remainder of the year -- just how lumpy should that look or will it look more flat than lumpy the rest of this year?

It should look pretty flat this year, Tom.

Okay. Thanks very much.

Thank you. (Operator Instructions). Our next question comes from [Arlinda Lee] with FTN Equity Capital. Please state your question.

This is Arlinda sitting in for Josh Schimmer. The question is seeing as how the value of converts are likely close to as low as they will ever get, have you attempted to repurchase any of the notes on favorable terms, and if not, why not?

I appreciate the question. I think as I mentioned in my script, I don't want to disadvantage us in terms of getting into details about our strategies around the convertible notes. I just want to assure you that any actions we take would obviously -- we would want to focus on maximizing shareholder value. So, I don't really want to give you a play by play there on that particular set of strategies.

Okay, thank you.

Our next question comes from Eric Schmidt with Cowen and Company. Please state your question.

Thanks for taking my question. I'm a little less familiar with potential FDA responses to SPAs. I guess I'm wondering if you can outline what the potential outcomes are when you hear back from the FDA later this month. Is it black and white? They either accept all changes or just reject your amendment? Or is there potential for some middle ground, and if so, how do you move forward under any of those scenarios?

So, in practice, there is middle ground. Because the FDA doesn't really want to be in a position where -- for a minor, minor tweak to a sentence or something like that, they're going to reject an SPA and say you need to fix this sentence and start again. So that's an extreme example, of course.

So, whereas they have the legal right to simply say yes or no and then give the comments as to what needs to be changed then ask for another submission -- if it is close, the practice is that they'll usually meet with the company, either right before the deadline or come back at the time of the deadline and ask for a couple of extra days to try to work out the absolute details and then give an approval.

So it is not completely black or white. If you're far off, you're obviously not going to get just a quick meeting to fix everything up. But since we've been through this process once with them already, including having meetings in response to the first SPA, we're pretty optimistic that we'll either get approval or be in a position where the small changes can be quickly made and not have to resubmit.

So, it's possible we might not hear anything in mid May, but rather a couple of weeks later, if you're still ironing out minor details.

It is possible. But my feeling is I'm pretty optimistic that we will be able to talk to you in the second half of May.

And then a question on 424 in the topical version in psoriasis. Could you talk a little bit about what type of profile you think is today attractive in terms of efficacy for a topical agent?

So first of all, a topical agent has to be pretty safe. I mean that's clear. In terms of efficacy, if you look at the vitamin D and the vitamin A analogs, the typical primary endpoint for approval now for topicals is an investigator's assessment of clear or almost clear. And generally, with those products, you get responses in the 20% range. In fact, there's a drug approved within the last year that I think had about 23% clear or almost clear. So I think that that's about the minimum that you need to see and obviously you would like to have advantages over what's out there.

Thanks a lot.

Our next question comes from Liisa Bayko with JMP Securities. Please state your question.

Hi, good morning. Thanks for taking the question. Can you just maybe review with us how you're going to communicate the design of the Phase III once you achieve an SPA? Are you going to -- will that be informal or will you put out a press release? What should we expect?

Well, we're still thinking about the most optimal way to do that. And both of the possibilities that you mentioned are being considered, but we haven't finalized how we're going to do it yet.

Okay. And just in the offchance that you're far away from FDA in terms of what they would want to see in a trial, are you committed to an SPA? Or if you can't reach an agreement, would you just go ahead, regardless?

We'd very much would like to have the SPA. We're not wedded to it.

Okay. Fair enough. And then I think that's actually the majority of my questions. Thanks.

Thank you.

Our next question comes from Thomas Wei with Piper Jaffray.

Thanks for taking the follow-up. I just wanted to go back to, Dave, a comment you made a little bit earlier about R&D being flat for the remainder of the year. I guess with the burn being some $40 million in the first quarter, can you just help us reconcile that against the cash burn guidance for the year and the R&D spend being flat from the first quarter? How do we actually get to the cash burn then?

You have a little bit of a reverse hockey stick in our burn. So Q1 is seasonally the highest quarter for our burn. We pay our interest on our notes and plus we pay a lot of our working capital down in Q1.

Okay. So, it is all on the cash flow statement.

Right.

Changes in working capital and the one-time payment on all of the interest due on the notes.

We make two payments a year.

Two payments a year. Okay. Great. Thanks.

Thank you. Ladies and gentlemen, there are no further questions at this time. I'll now turn the conference back to management for closing comments.

Okay. Thank you, all, for joining us this morning. As I said, I think we are making good progress in the clinical programs. Clearly, our top priority is to begin the registration trials in myelofibrosis and to improve our financial position by partnering one or more than one of our programs. I look forward to keeping you informed of our progress over the next few months. With that, let's end the call.

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