英賽德 (INCY) 2011 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Incyte Corporation first quarter 2011 financial results conference call. 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. Thank you, Ms. Murphy, you may begin.

Thank you and good morning. On the call today are Paul Friedman, Incyte's President and Chief Executive Officer; Dave Hastings, Executive Vice President, Chief Financial Officer; Rich Levy, Executive Vice President, Chief Drug Developmental and Medical Officer; and Pat Andrews, Executive Vice President and Chief Commercial Officer. Regrettably Paul is trapped in a major traffic jam. So, while he'll be with us here on the call and part of Q&A, Rich will open up the call with a brief review of our first quarter accomplishments, then Dave will follow with a discussion of the quarter's financial results, and we'll then open up the call for Q&A.

Before beginning, we'd like to remind that you some of the statements made during the call today, including statements regarding our plans and expectations for our drug development programs, including timing of our clinical trials, regulatory submissions, anticipated launch plans, and the potential safety and of our compounds as well as our expected financial results 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 Form 10-K for the year ended December 31, 2010 and from time to time in our SEC documents. Rich?

Good morning, everyone. In the first quarter we focused on the preparation of the NDA for our most advanced developmental compound ruxolitinib for the treatment of myelofibrosis, or MF for short. The NDA is based on the positive results we reported in December for COMFORT- 1, our first pivotal Phase III trial. Now that the positive data from COMFORT- II, the second Phase III pivotal trial, are available, Novartis is moving forward with its regulatory submission to the EMEA in Europe. These data will also be included as an important supportive study in our NDA. As reported in mid-March, COMFORT- II achieved its primary endpoint of significantly reducing spleen size in patients when they have MF when compared to best available therapy. These results complement what we saw in COMFORT- I and here too the safety profile was consistent with previous studies.

We now have a very comprehensive data set to present to the regulatory authorities evaluating ruxolitinib versus 2 relevant comparators, placebo and best available therapy. I can confirm that we and Novartis are both on schedule to submit the MNDA and MAA in June. Since the FDA has given ruxolitinib fast track designation we think it's likely that the agency will grant the NDA a 6-month priority review. Because ruxolitinib is the first JAK inhibitor for MF, we also think it's likely that the agency will schedule an advisory committee meeting and we already started to prepare for this. If the FDA does complete its review within the 6-month time frame and approves the product, we prepare to launch it later this year.

As you saw in today's press release, the results from COMFORT- I and COMFORT- II will be featured in consecutive oral presentations at ASCO on June 6 beginning at 9.30 in the morning Chicago time. On that evening, we plan to host an investor meeting with the two presenting authors, [Dr. Perstopix], the lead investigator for COMFORT- I and [Dr. Banuki], an investigator for COMFORT- II will discuss their presentations. The investor event will be webcast. Both studies will also be featured in the upcoming, quote, Best of ASCO, which is an educational initiative that features representations of key data that were presented at the annual meeting. Abstracts selected for this program include research that ASCO considers relevant and significant to practicing oncologists.

The two studies have also been accepted for presentation at the 16th Congress of European Hematology Association, or EHA, which will be held in London. The COMFORT- I abstract which will be presented in a Presidential symposium plenary session on June 11 and the COMFORT- II abstract will be the subject of an oral presentation the following day June 12. I think you will be very impressed with the level and breadth of the data that will be reported from these studies not the least of which will be the demonstration or the benefit of JAK inhibition compared to placebo as well as to best available therapy beyond the safety-- beyond the data and safety and reduction of spleen sizes, substantial impact of ruxolitinib on reduction of symptoms that may impact the patient's quality of life will also be described. These aspects of the disease, an enlarged spleen, debilitating symptoms and inability to live life normally, are the ones that place such a tremendous burden on the patient. Our market research indicates that ruxolitinib's ability to address these negative outcomes should be very meaningful to both patients and physicians who treat them.

Moving beyond the COMFORT studies, we also have a very well conceived plan for further development of ruxolitinib in MF as well as other myeloproliferative neoplasms and other malignancies. With respect to MF, we recently initiated a joint global Phase II trial in patients with low platelet counts, those starting between 50,000 and 100,000, and will soon initiate a second related Phase II study in the same population of MF patients only in the US. Although we have successfully treated patients with platelet counts in this range during Phase II and III studies, these new studies will effect dosing regimes in patient who have low platelet counts at entry.

Beyond MF, there is a global Phase III trial called RESPONSE evaluating ruxolitinib in patients with advanced polycythemia vera which began in the fourth quarter of last year. We're conducting the trial in the US while Novartis is conducting it outside of the US. Most of the US sites are now active and Novartis continues to initiate sites in all of its territories.

In addition to the ongoing trials in MPNs, there are Phase I and Phase II trials with MD Anderson and the Children's Oncology Group evaluating ruxolitinib and other leukemias and other hematolgic malignancies and solid tumors. Phase II investigator RESPONSE study with patients with lymphoma is expected to initiate in the second half of the year, as well we plan to initiate our own Phase II trial in patients with pancreatic cancer, also in the second half.

For our second oral JAK I and JAK II inhibitor, which is partnered with Lilly, about all I can say to you is that the Phase II-B trial is progressing and Lilly expects to complete the enrollment by the second half of the year.

To finish up, I'll give you brief updates on our earlier stage oncology compounds beginning with the sheddase inhibitor INCB7839. We hope to complete the analysis of the tissue samples from the HER2 positive breast cancer patients mid year. We plan to use these results to finalize interpretation of our Phase II data and determine whether moving into Phase III development is warranted. Our indoleamine 2,3-dioxygenase I, or IDO inhibitor Incyte 24360, represents a novel cancer immunotherapeutic approach and is currently in a Phase I trial in patients with solid tumors. The trial is progressing and is expected to complete the dose escalation phase by the end the year. Although this mechanism has potential application in a variety of consumer types, we'll likely focus on melanoma and ovarian cancer in our Phase II clinical development program.

Our dose-ranging Phase I trial for our oral cMET inhibitor, Incyte 28060, in patients with solid tumors is ongoing. As you know Phase I trials are designed to find the maximal tolerated dose and we're not there yet, so we'll continue the study until we reach that dose level. This compound is part of our collaboration with Novartis, and in the first quarter we earned a $15 million milestone payment based on the achievement of this predefined milestone. In addition, we're on track to file an IND for another oncology target mid year, and once the IND has been cleared by FDA, Paul and I will be in a better position to describe the program in further detail. I'll now turn the call over to Dave.

Thanks, Rich, and good morning, everybody. I'll start my brief overview this morning by discussing our cash position. We ended the first quarter with $384 million in cash and investments, excluding $38 million in restricted cash held in escrow for interest payments through October 2012 on our 4.75% convertible senior notes. Our ending cash also doesn't include the $15 million milestone earned from Novartis for the cMET program. Cash used this quarter was $45 million, excluding $4 million in proceeds from stock option exercises. Our cash use for the quarter was on plan and 2011 cash use guidance is unchanged at $185 million to $200 million. This guidance, as always, excludes actual and potential milestones received from partners and proceeds from stock option exercises. Because of the milestone we earned this quarter, we are increasing our revenue guidance from $67 million to $82 million for 2011.

Now moving to our operating expenses. These too were in line with our expectations and our guidance remains unchanged in both R&D and selling, general and administrative expense as we prepare for the potential launch of ruxolitinib. In terms of hiring in the commercial area, while we've had a core marketing team in place for some time, this quarter we continued the build out and staffing of sales operations and training functions including our first Regional Business Manager. Importantly, our medical affairs team is now almost fully staffed. So, now with that overview, Paul, I'll turn the call over to you.

All right, thank you, Dave. Operator, let's open the call for Q&A now, please.

(Operator Instructions) Karen Jay with JPMorgan. Please proceed with your question.

Good morning, this is Karen Jay for Cory Kasimov. I just-- 2 quick questions. When on the commercial build out could you update us on your plans for the next couple of quarters as to whether or not they've changed and what has been Novartis' rule, have they been instrumental or helpful in that? And secondly, if you could comment on the importance or benefit of being first to market with the JAK inhibitor, that would be great.

So Pat Andrews should address that question.

Great, thanks, Paul. So our plans are the same, we plan on hiring our Regional Managers in the second quarter and reps in the third quarter. We are on track for that. Our plans are in place and we're moving and as Dave mentioned we've actually already brought on board the first Regional Manager. And our Head of Sales has been on board since mid last year. So those plans are on track.

Novartis has the ex-US portion of this and we have the US piece, so of course, we talk frequently. We have excellent communication between the 2 Companies, but the US build out is ours. Where possible and appropriate, we align on global aspects. We previously said that the brand name that we're working on for example is a global brand name. Now, that may, because it still needs to go through regulatory authorities, may not ultimately end up being the circumstance but that's the type of thing that we would plan on within Novartis because there are certain synergies associated with it.

And then being first to market is a very, very strong plus. It allows us to shape the market. It allows us to create the first impression of JAK inhibition in myelofibrosis patients. It of course gives us a window of time before our competitor comes in, which is in the 2 to 3-year range, assuming some of the competitors do progress their studies. So there are tremendous advantages to it. It's an excellent position to be in.

Great, thank you.

Salveen Richter with Collins Stewart. Please proceed with your question.

So at ASCO we'll see data from ruxolitinib and other MF drugs using varied definitions for an [EMEA] response. Maybe you could just give us some clarity in terms of your physician feedback, what are they most focused on here?

Yes so I'll start and then I'll have Rich and perhaps Pat follow up. Obviously if you had-- the-- some people are focused on the thrombocythemia. And there's much less focus frankly on dealing with anemia because physicians are used to doing that. Obviously, if you had a drug that would cure the anemia along with all of the other benefits, that would be an advantage. But mainly interested in the ability to shrink the spleen by at least 10%, is significant shrinkage of the spleen, and the relief of these profoundly debilitating symptoms. Obviously, there also would be interest in improving survival although that was not an outcome that was -- that we expected in either study to yield statistical significance, although we've indicated that there are positive trends. But I'll turn it over to Rich and Pat to see whether they want to add anything further.

I don't have too much to add. I mean I don't hear from the physicians that they're particularly concerned about the side effect profile of the drug. In fact, the things that we hear is how remarkably well tolerated it is. I mean anemia is something that they're very used to dealing with and not something that is a particular concern. Of course they'd prefer a drug that didn't have any effects on anemia or cured anemia, but that's not the focus. And so they're focused on the safe and effective use of the drug and I don't know what more to say on that.

So, I would just add that many of these physicians have been treating their patients for a number of years and during that period of time they've not been able to help them with the debilitating symptoms that they have. And the symptoms really do give MF patients a poor quality of life. There's a lot of them, and while any one of them may be mild to moderate, collectively they pose quite a disease burden on the patients. So the physicians, they're looking for something which has a good risk benefit profile and they're focused in on efficacy and they believe like oncologists typically they focus in more on efficacy and they try to manage just any side effects or consequences that might occur with taking a medication, and that's what we've seen consistently in all of our research. We've interviewed probably close to now 1,000 physicians in the US and in some other countries and the overwhelming response is that if the improvement in these debilitating symptoms and the reduction in spleen are there, that any other consequences that might include thrombocythemia or anemia are manageable.

Great and just a follow up if I may. How many patients from COMFORT- I remain on drug?

Rich, you want to answer that?

Yes, I don't have that number off hand but it's a vast majority. I mean there were some placebo patient who didn't make it through to the crossover, probably over 90% of the patients who originally randomized to ruxolitinib did and the dropout rate after the crossover, I don't have quantitative information on but my understanding is that it's minimal.

Great, thank you.

Brian Abrahams with Wells Fargo. Please proceed with your question.

Hi, thanks for taking my question and congrats on the continued progress. I had a question on the SR formulation. You mentioned that you initiated a Phase II study and we saw that recently posted at clinicaltrials.gov. Was just wondering if you could maybe talk a little bit about what the technology or approach here is with this formulation? What you're seeing so far in clinical and pre-clinical studies and whether or not you think the Phase II would be a sufficient enough bridging study to potentially expand the label to the Phase-- to once a day or whether you need a larger Phase III? And then I guess for passing the commercial standpoint, how much of an impact do you expect a once a day formulation to have? Is this more targeted towards-- is this targeted towards expanding the market potentially or more helping protect against future competition? Thanks.

Yes, so I'll start and then I'll pass the baton again to Rich and to Pat. We already have shown with doses of 150 once a day IR that we get very good responses. We're looking for a smoother profile, a lower peak and more extended AUC by using the SR formulation. We've seen that in animals and in early PK we've been able to demonstrate that as well. But I don't think we have -- Rich may have something to add to this, but it's-- we've just begun the study, so we don't have a whole lot of information yet from the Phase II trial. Would that be fair, Rich?

Yes, we-- I think we have only had our first patients receiving the drug for a few weeks now. And so I just know that there are no problems so far. I don't really know anything more than that. The study that we're doing now would not be all you would need to get it to market, that's pretty clear. This is essentially dose escalation and expansion added dose. What you would actually need to get it to market, if we decide that it has enough benefit over the IR in order to do that, is not exactly clear. When you look at the data that we have from the COMFORT- I study you can see that it wouldn't require a whole lot of patients in order to be able to demonstrate effectiveness versus control, if that was to be to required. It would be more of an issue as to how many patients we'd need to expose to that formulation for safety in order for regulatory authorities to be comfortable. But it shouldn't take too long, but this one study is not the only one.

Pat, do you have something to add?

Yes, a couple of things. So a twice daily drug commercially in myelofibrosis is fine and we would really be studying it more for competitive reasons to protect our share in case any competitor one day down the road did come in with a once a day product. By itself, that's not enough to make a difference but if someone came in with comfortable efficacy in once a day, it's a slight plus. There's also generally greater compliance with a once a day rather than twice a day. We don't expect it would have a huge difference in this particular therapeutic area because actually the patients feel pretty good on drug and they actually feel a little bit worse off drug so they're probably more inclined to have a high compliance rate in this area. Nonetheless, in general compliance is higher with a once a day drug, say maybe 10% to 15% higher. So while that doesn't "expand the market" in the sense that the number of patients remains the same, it might make it to be slightly more drug utilization through compliance. So those would the reasons why we would be-- and of course, with greater compliance comes generally greater efficacy so-- and that would benefit the patient population. So those would be the reasons why we would be looking at a once a day dose.

Thanks, that's very helpful. And then just a real quick follow up, any differences in the areas of focus between the ASCO presentations and the EHA data presentations?

Rich, I would say not really.

Yes, I mean as of now, absolutely not. It may turn out that based on some questions we may get at one presentation we might make some last minute modifications in order to be able to address those things more fully at the later presentation. But if you're asking whether you need to go to both, they are going to be fairly similar.

Okay. Thanks very much for the clarity.

Matt Roden with UBS. Please proceed with your question.

HI, good morning. This is [Leila Backwoods] on for Matt Roden. If I could sort of shift gears for a second and talk about the RA program. Have you had any potential discussions with Lilly or after thoughts regarding the imbalance of deaths that Pfizer has recently seen in their Phase III trials? And just as an aside or I guess a follow on to that, do you think there's anything that you might see in a potential safety benefit for being more of a JAK 1, 2 specific target rather than a pan JAK targeter? Thanks.

Yes, so we're taking Pfizer at their word that-- I mean they had in the one study that seems to have created all this excitement, there were 4 deaths in the on drug group. I think 2 of those deaths occurred after patients were off drug. One was a respiratory death and one was an acute heart failure, which Pfizer went to-- was willing to tell us was not related to drug. And so I am actually at a loss to understand what the issue is, frankly. We have in hundreds now of MF patients, older patients sick with cardiovascular disease have not seen any increased incidents in patients on drug in congestive heart failure or cardiac problems and I would-- so I don't understand what the issue is, frankly at this point unless you don't take Pfizer at their word. And so I would ask Rich to expand on that if he can, but that's my level of understanding of what's happened in the last couple of weeks around their publication of their abstracts.

Yes, so-- I mean abstracts are helpful, it's going to be a while both at the EULAR meetings and then again some of the data won't come out until ACR to be able to see a little bit more detail on these things. But just looking at it from what's available, I mean number 1, I think that there's a lot more exposure to drug than there are to controls over the long course here. Two, that these are, for the most part, patients who have comorbidities. It's quite well known for example that because of the inflammatory state that exists within rheumatoid arthritis as in other inflammatory states there are more risk for cardiovascular disease than an aged matched population.

I'd also say that we find it encouraging that they have completed all of their Phase III studies and they all showed positive efficacy results including within a very short time frame, which is only 6 months, showing difference in the x-ray changes indicating that it is a true [dmark], and we haven't seen any smoking guns by any means that suggests that the safety profile is going to be a problem for them. And with respect to our and Lilly's drug, I mean we haven't seen any of -- we clearly have fewer patients exposed with that particular drug so far, but we haven't seen heart disease, respiratory failure, any of those things. With respect to whether JAK 1, 2 versus JAK 1, 2, 3 is going to make a difference here, I mean it's just theoretical, it's possible but we don't have the data to really address that.

Great, thank you.

Eric Schmidt with Cowen and Company. Please proceed with your question.

Thanks for taking the call. Just a couple minor questions remaining, is there any update on enrollment in the RESPONSE study?

So enrollment in the RESPONSE study is proceeding reasonably well. We still have a number of the most important sites meaning that the academic sites with their longer times to get everything through, not only their IRBs but their oncology review committees, things like that, those always take more time and those are the sites that we except to enroll the largest number of patients and that's kind of where we are in the US. With respect to Europe, Novartis has really only gotten started within the past month and so they have some of their sites but the majority are still not up. So it's really going to take I think another quarter to have a good sense as to whether or not we have all the right sites to be able to complete this on time. Right now it's just a little bit behind.

On time being by year endish?

That's right.

Okay. And then the $15 million milestone from Novartis for the cMET Phase I, can you talk about what was accomplished in that trial? And also this may be a bit of nit, but Dave why doesn't the cash burn guidance go down by $15 million with that milestone in hand?

Yes, Eric, so in terms of the cash burn guidance we always give gross cash burn excluding milestone. So certainly on a net basis our cash burn will be lower, but on a gross basis we have not changed the $185 million to $200 million.

Okay and what was milestone 4?

Well, unfortunately, as you know because of confidentiality we can't go into vast detail. We can just say it was a predefined milestone for progress in the clinic. We're happy with where the program as is Novartis and we look forward to moving that program forward.

Thanks a lot.

Rachel McMinn with Bank of America Merrill Lynch. Please proceed with your question.

Good morning, this is Masha Chapman for Rachel. I have a question on ruxolitinib, how does the most recent pricing in the oncology accept your view of ruxolitinib pricing? And the second question is will Novartis have expanded access in Europe?

So, Rich, is Novartis doing expanded access program in Europe?

We know that they're doing something, but I don't have any details on exactly which countries are starting when. I think it's likely to start (inaudible) which again should be in June, but I have not been in privy to all of the details there because it doesn't really involve us directly.

Right. And Pat, would you like to comment on the question about pricing?

Sure, so of course we continually monitor what's happening in the oncology market place in all aspects including on price. So we're certainly aware of prices that have come out on drugs recently launched and we continually compare our thinking with that. We'll also be fielding some substantial market research over the next few months to help us determine what that price will be and then we will actually set it at launch.

Thank you.

Ying Huang with Gleacher & Company. Please proceed with your question.

Hello, good morning, guys, thanks for taking my question. I guess my first question is on the [standard release] formulation this year. Is there any reason to believe that based on what you have learned from pre-clinical studies that this formulation may have some beneficiary effect on myelosuppression?

Well if you-- I don't think we can say that. It's more meant for protecting us and having what we believe is the best once a day formulation that you could have in the event that we need it vis-a-vis competition. And as Pat mentioned if you could have a once a day it has compliance advantages and convenience advantages over twice a day. I would say from the pre-clinical data, there'd be no way for us to know whether there'd be less myelosuppression. It's possible, but we'd have to see it [in man].

Okay, thanks. And then I have a follow up your findings here. So as I understand, you probably take both data from COMFORT- I and COMFORT- II to talk to the FDA in terms of US filing and is it also the same case with Novartis filing in Europe, are they also going to take data from COMFORT- I here?

Rich, that is what's going to happen, correct?

Yes, I mean first of all, you always have to essentially give all of the data that you have. It's a question of how you emphasize the data. So for the US, COMFORT- I is our pivotal study and COMFORT- II is supportive. And that also means that data from COMFORT-II can result in labeling claims including what we think is very important being able to compare to best available therapy and beyond just being compared to placebo. With respect to Europe, the symptom data for the most part comes from COMFORT- I which is the blinded trial. And although that symptom data hasn't been presented yet in any kind of detailed way, that will also be very important to Novartis' product profile that they want to get across in Europe. So the 2 studies are complimentary.

Thank you.

Dave Friedman with Morgan Stanley. Please proceed with your question.

Hi, thanks for taking the question. Can you discuss the dosing that you think will end up being the most successful in the low platelet study? And for patients in COMFORT- I and/or COMFORT- II who have had low platelets, where do they tend to settle out in terms of dose?

So, Rich, do you want to handle that please?

Yes. So what we've found is that 5-milligrams b.i.d. can be quite active dose but it's clearly not as effective as higher doses. 10-milligrams b.i.d. gets close to it's effectiveness the higher doses and that patients that we've treated before who come in with very low platelet counts and-- or I shouldn't say very low, come in with lower end platelet counts and then end up being managed with on drug tend to end up pretty much mostly around 10-milligrams b.i.d. Some at 5 and some at 15, not too many higher than that. So I think the doses for the patients who come into this-- these new studies with low platelet counts will probably end up on somewhat lower doses than we've studied in the Phase III trials but ones that we expect will give them much of the benefits that our patients with higher starting platelet counts have. But we need to see the data, of course.

And just a quick follow up, is there anything about the patients that get thrombocythemia to suggest that they're more sensitive to the drug that they could get a similar benefit with a much lower dose, or is it more about their own diseased status and the characteristics of their marrow that dictates the thrombocythemia?

So I can't give you an absolute answer to that question but it seems as if the most predominant thing is their diseased state. The degree to thrombocythemia that they already had before starting on a JAK inhibitor. So I don't know that anyone is more or less sensitive to the drug per se, it's just that you have less of a buffer before you start getting into platelet counts that you're trying to avoid.

Okay. Thanks very much.

Thank you, ladies and gentlemen, we're coming to the end of our time here today. Our last question comes from the line of Tom Russo with Robert W. Baird. Please proceed with your question.

Most of my questions have been asked but just with ASCO coming up and I know your data is going to be in the spotlight quite a bit there, but can you talk about just any other awareness? Maybe, Pat, maybe if you could address any other awareness programs that we should look for at ASCO or EHA or maybe even any patient-focused meetings that'll be coming up? Thanks.

This is Pam, Tom. There are no real formal patient meetings around either of those scientific forums. There's a concentrated effect obviously at this point with media that's not been there before and there's a lot of interest from the media. I think other than that there's an education session that ASCO has put in the agenda that Dr. Verstovsek will participate in. I think we might be sponsoring some CME there this year. We certainly will have a very large booth and which you should visit, it will have a lot of interesting stuff there and a medical information area.

Okay, thanks.

Thank you. Ladies and gentlemen, at this time I'd like to turn the floor back to Management for any closing comments.

All right, this is Paul. We're looking forward to being able to discuss our data at ASCO now only about a month away and then again at EHA. And we're, as we said in the beginning, working diligently to get both regulatory documents in, in the June time frame and we're on track to do that. So, I'd say stay tuned and we'll see everybody at ASCO and thanks for listening this morning. And with that I'll say goodbye.

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