Edited Transcript of INCY earnings conference call or presentation 30-Apr-19 12:00pm GMT

Including Jakavi and Olumiant priorities, sales of Iclusig and the milestone from Innovent, we reported full revenue of $498 million, up 30% compared to Q1 final year.

On the exact aspect of glide 4, you will exclaim on some of the significant progress from across our development portfolio. Our GVHD development occupation is above track, and we possess recently completed recruitment into the GRAVITAS-301 trial of itacitinib at patients with treatment-naive critical GVHD. And we blueprint to advertise sumit queue results from this trial ago the goal of 2019.

We're either above explore to comply the NDA seeking approval of pemigatinib at cholangiocarcinoma at the second half of 2019, and we need that the news supporting the NDA used to exist presented at the medical meeting at the second half of the year.

This morning, we announced the successful completion of the aspect II trial of ruxolitinib cream at vitiligo patients, which represents a healthful proof-of-concept at a second symptom beyond atopic dermatitis where we are already at aspect III. Based above the aspect II results though ruxolitinib cream at vitiligo, we are either moving deliver with aspect III development at this indication, and we see deliver to sharing this news with you at the Medical meeting at the coming weeks.

Novartis continues to blueprint though the NDA submission though capmatinib at the second half of the year, and updated news from the GEOMETRY trial possess been accepted though oral presentation at this year's ASCO at June.

Exciting news from 2 of our early-stage projects were presented at AACR earlier at April. The presentations of our oral PD-L1 inhibitor program either though the PD-L1 x CD137 bispecific were developed -- we are developing at collaboration with Merus were identical robust received, and I trust are emblematic of the importance of discovery science though long-term evaluate creation.

Today, we either announced that we will no longer participate at co-funding baricitinib development with Lilly. We intend to pattern a reallocation of this chief to late-stage development programs during 2019 and 2020 though we now trust that certain projects such though the acceleration and expansion of ruxolitinib cream development and the acceleration of other opportunities at our later-stage portfolio justify increased funding.

We flourish to trust that baricitinib has an significant lay at the treatment of rheumatoid arthritis and potentially at other autoimmune and inflammatory conditions. besides with our cumulative investment already earning us a substantial royalty rate, we trust that now is the exact time to opt-out and to reallocate chief to backward exciting design to assist us come our strategic goals of diversification and growth.

With that, I'll become the summon above to Barry though an update above the U.S. business.

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Barry P. Flannelly, Incyte company - Executive VP & common Manager of U.S. [4]

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Thank you, Hervé, and good morning, everyone.

Jakafi continues to fulfill well, and Q1 deed was at queue with our expectations and with complete year 2019 guidance though net sales of $1.58 billion to $1.65 billion. Jakafi sales increased by 20% above Q1 of final year driven by demand at both approved indications. We saw full MF and full PV patients become by 8% and 18%, respectively, at the first district versus the identical era at 2018.

Slide 7 shows the sales bridge though Q1 2018 to Q1 2019. The growth of Jakafi was mainly driven by volume, and you can exclaim on that amounted to an expand of $42 million compared to Q1 of final year. You will memorize that the negative result above gross-to-net is highest at Q1. It is either significant to letter that medicine manufacturers are now required to advance 70% of the coverage gap or donut hole though compared to 50% at previous years.

I'll finish by reminding you of the can 24 PDUFA appointment above our sNDA though ruxolitinib at steroid-refractory critical GVHD and that we are ready to launch immediately to the FDA condense ruxolitinib at this indication. Our sphere constrain has already been sized and structured to backward the launch.

Our come development program either continues though planned. The results from both REACH2 and REACH3, the global aspect III trials of ruxolitinib, which we're running at collaboration with Novartis, at steroid-refractory critical and chronic GVHD are expected by the goal of this year.

I'll now become the summon above to Steven though the clinical update.

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Steven H. Stein, Incyte company - Executive VP & chief Medical officer [5]

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Thanks, Barry, and good morning, everyone.

Incyte is currently running 6 key late-stage development programs though summarized above glide 10. These possess the latent to drug a important quantity of patients across numerous indications. More broadly speaking, these programs goal to change Incyte into a company with multiple approved products at the United States, Europe and Japan above the next few years.

Today, we are focusing our attention above 4 of them though these are the projects that we need to generate significant updates during 2019. Barry has already highlighted our ruxolitinib program at steroid-refractory graft-versus-host disease, and I will affect above the remaining 3 at my remarks.

We were pleased to advertise today that the aspect II trial of ruxolitinib cream at patients with vitiligo successfully reached its capital endpoint and that the plans though aspect III development are now underway. This was a randomized dose-ranging and vehicle-control aspect II trial at more than 150 adults with vitiligo, and we see deliver to sharing the news with you at a medical meeting soon.

Vitiligo is an inflammatory sickness of the skin, which results at patches of depigmentation and the latent though important shock above patients' lives. It is estimated that there are 2 million to 3 million patients at the United States with this disorder, and there are no currently approved FDA treatments. Many patients trial steroids or phototherapy, besides these options possess no shown important or long-lasting repigmentation of the skin. We need to commence aspect III development by the goal of this year, and we are optimistic that ruxolitinib cream will exist the first therapy approved by the FDA and will equip these patients with a meaningful improvement at their disease.

We trust that there are important opportunities within our pemigatinib program. We need to rank the NDA though second-line FGFR2 translocated cholangiocarcinoma at the second half of this year. And we are either planning to fraction the news that supports the proposed NDA at a medical meeting at the second half of 2019.

The second symptom we are pursuing though pemigatinib is FGFR3 mutated bladder cancer, and we are currently recruiting the continual dosing cohort of the pivotal aspect II trial. We need that this cohort will come complete recruitment by the goal of this year, and we are optimistic that the sNDA though this symptom could exist submitted at 2020.

The first-line aspect III trial at cholangiocarcinoma is now blank though recruitment, and plans though first-line bladder cancer learn are either at preparation. We are either opening a registration-directed aspect II learn at the tumor-agnostic setting, which could farther expand the quantity of patients eligible though the therapy, and therefore, the latent of the molecule.

Moving experience to our development efforts at graft-versus-host versus disease, and the GRAVITAS program, which is investigating itacitinib at first-line treatment. GRAVITAS-301, the aspect III trial at treatment-naive critical graft-versus-host disease, has now completed recruitment, and we need results to exist available ago the goal of this year.

In January, we launched GRAVITAS-309, which will estimate itacitinib at patients with treatment-naive chronic graft-versus-host disease. It is significant to letter that at headmaster markets globally, nearly 15,000 new graft-versus-host patients are diagnosed each year. The unmet needs here is clear, and we are encouraged by the latent of JAK inhibition to drug this always fatal disease.

I'll goal my update by mentioning 2 identical exciting opportunities at our early-stage portfolio, both of which were recently highlighted at AACR. We possess discovered a series of novel orally-available PD-L1 inhibitors, and the first molecule, 86550, is now at the clinic. Its machinery of action, which binds, dimerizes and internalizes PD-L1 is novel and could originate at a differentiated clinical profile versus injectable monoclonal antibodies. We are at the early innings, besides we see deliver to sharing clinical news though this program next year.

Through our collaboration with Merus, MCLA-145, a PD-L1 x CD137 bispecific antibody, is ready to enter clinical development, and we need to possess the first patient dosed with MCLA-145 this quarter. This is either a identical exciting machinery where the bispecific directs CD137 agonist activity to the tumor microenvironment by its selectivity though PD-L1. This can frontier systemic CD137 agonist activation but targeting 2 significant immunomodulatory pathways.

With that, I'd though to become the summon above to Christiana though a economical update.

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Christiana Stamoulis, Incyte company - Executive VP & CFO [6]

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Thanks, Steven, and good morning, everyone. The economical update this morning will include GAAP and non-GAAP numbers. ago moving to our results though the quarter, I used to though to argument a change at our methodology though non-GAAP reconciliation. backward reviewing our non-GAAP reconciliation and at the application of the SEC, beginning with the first district of 2019, we'll no longer exist adjusting our revenues or investigation and development price though upfront consideration and milestones that are separate of our collaboration agreements with new or existing partners. This new methodology is reflected at the GAAP to non-GAAP reconciliation above Slides 25 and 26 at the backup fraction of the deck and at the journal free that we issued this morning.

In addition, I'd though to farther argument our decision to goal extra co-funding of baricitinib development with Lilly. though you know, beneath our commerce with Lilly, we possess the exact to a base, tiered royalty of 11% to 20% above global net sales of Olumiant. We either possess the exact to accept a 9% incremental royalty if we co-fund 30% of the post-POC development price per baricitinib indication.

Based above the cumulative investment made to date, we possess already earned a substantial incremental royalty rate, specially at rheumatoid arthritis, and possess now reached a point, given the acceleration and latent of certain key inner projects, where we trust that the best decision is to add extra co-funding of baricitinib development and reallocate chief above the remains of 2019 and at 2020 to other projects.

Through 2018, we were entitled to accept the complete 9% incremental royalty at appendix to the 11% to 20% base-tiered royalty. With our decision to goal our co-funding effective at the goal of 2018, we need the incremental royalty evaluate though rheumatoid arthritis to get down above time. The timing and the evaluate of repel at the incremental royalty evaluate will exist based above Lilly's extra development costs at this symptom and the velocity at which those costs are incurred.

The foundation royalty evaluate is unaffected by levels of development spend, and though it is a tiered royalty structure, it is expected to become above time though global net sales of Olumiant flourish to grow.

Moving above to our economical results. though the first quarter, we recorded $458 million of full product-related revenues, an expand of 20% above the first district of 2019. This is comprised of $376 million at Jakafi and $21 million at Iclusig net produce revenues, $46 million at Jakavi royalty from Novartis and $16 million at Olumiant royalties from Lilly. We either recognized $40 million at harmony revenues from the upfront payment received beneath our collaboration commerce with Innovent, resulting at full revenues though the district of $498 million.

R&D price though the district was $243 million above a non-GAAP foundation driven by the progress across our development programs though Steven has outlined. And at this district versus final year, this price was partially offset by the shock of our decision to pause co-funding baricitinib development and lower costs related to the epacadostat program.

The net result was a 9% lessen at ongoing R&D price though the district compared to the prior year period. SG&A price though the district was $111 million above a non-GAAP basis, relatively even at comparison with the prior year.

The expand at full revenues and repel at non-GAAP costs and expenses has resulted at operating revenue though the district of $127 million above a non-GAAP foundation though compared to an operating loss of $19 million at the prior year period.

Moving now to our guidance though 2019. We are reiterating our revenue guidance though the complete year either though our SG&A guidance. We possess received our GAAP -- we possess revised our GAAP R&D guidance from a sumit of $1.185 billion to $1.255 billion to a sumit of $1.145 billion to $1.195 billion, which chiefly reflects our decision to discontinue co-funding baricitinib development and the timing of resource reallocation. interest letter that this guidance does no include any extra latent future strategic transactions beyond agreements previously announced.

I will now become the summon experience to Hervé.

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Hervé Hoppenot, Incyte company - Chairman, headmaster & CEO [7]

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Thank you, Christiana.

Our next glide outlines the key news race events we need during 2019, including news from our partners. With this rotate of exciting late-stage program, we are taking significant steps toward our strategic goals of diversifying and accelerating revenue growth. We see deliver to keeping you updated above our program.

And though now, we are favourable to acknowledge your questions. Operator, that concludes our prepared remarks. interest grant your instructions and blank the summon though Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first puzzle is coming from Marc Frahm from Cowen and Company.

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Marc Alan Frahm, Cowen and Company, LLC, investigation part - VP [2]

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Maybe first, just class of housekeeping one though Barry. can you uncover the gross-to-net at the quarter, just how it worked out with the new rules almost the donut hole? And fulfill you still ponder the complete year's going to exist almost 15%?

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Barry P. Flannelly, Incyte company - Executive VP & common Manager of U.S. [3]

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Yes. The complete year gross-to-net is going to exist almost 15%. The gross-to-net, though you know, is highest at the first quarter. The extra 20%, so going from 50% of the donut hole is 70% of the donut hole, amounted to almost $5 million, we estimate.

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Marc Alan Frahm, Cowen and Company, LLC, investigation part - VP [4]

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Okay. And then maybe just turning to the topical ruxolitinib, so though Steven. One, so there's a new maximal use trial that's above clinicaltrials.gov. Is there anything else that needs to exist done other than reading out that and reading out absolute aspect III news at atopic dermatitis though a filing? And then maybe initial thoughts above the compose though a aspect III trial at vitiligo? Does it need to exist though great though atopic dermatitis? Or can you leverage a destiny of the safety data?

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Steven H. Stein, Incyte company - Executive VP & chief Medical officer [5]

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Yes, Marc. It's Steven. Thanks though your question. so though atopic dermatitis though the entirety of the filing package, there will exist nothing extra that needs to exist done other than obviously completing both aspect IIIs and the maximal use learn that's done though the guidance though dermatological products and that -- we possess tall belief at our atopic dermatitis database above our identical vigorous proof-of-concept with the cream.

In condition of vitiligo, obviously we've just delivered the proof-of-concept data. We're very, identical encouraged by it. It'll exist presented at a medical meeting soon. Obviously, we've been thinking almost the aspect III designs sum across and possess relatively well-developed concepts, which we'll now, at an goal of aspect II meeting with the FDA, argument with them and get to decisions above the goal point and the size. And though we said, our enthusiastic is to commence those ago the goal of the year.

In condition of what I ponder you're alluding to, will the safety package exist able to leveraged from atopic dermatitis though vitiligo, we need that used to exist the case. besides there will exist a discussion point to the regulatory authorities. Having said that, the vitiligo space will still possess to exist appreciable at size. It's a different district from oncology, and you demand larger studies. besides we need that the safety package from atopic dermatitis will exist identical helpful though the vitiligo file.

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Marc Alan Frahm, Cowen and Company, LLC, investigation part - VP [6]

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Okay. Great. And then maybe a bigger cinema though Hervé. at the past, with these mid-stage dermatology projects, you mentioned that you'd possess a decision to pattern ultimately almost if it's exact though Incyte to impartial them and manifest a complete commercial infrastructure at that space versus ultimately partnering these out. Now that you class of possess randomized news in-house at least at two indications? Are you ready to pattern that decision? fulf