On October 31, 2017 Incyte Corporation (Nasdaq: INCY) reported 2017 third-quarter financial results, highlighting 38 percent year-on-year growth in product-related revenue, driven by increased sales of Jakafi (ruxolitinib) in the U.S. and Iclusig (ponatinib) in Europe, and royalties from ex-U.S. sales of Jakavi (ruxolitinib) by Novartis and Olumiant (baricitinib) by Lilly (Press release, Incyte, OCT 31, 2017, View Source [SID1234521336]).
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"We exit the third quarter of 2017 with excellent momentum across the whole business," stated Hervé Hoppenot, Incyte’s Chief Executive Officer. "Jakafi and Iclusig continue to outperform our expectations, and we are now evaluating ten different indications across our five late-stage development candidates. We are also on track to initiate the next wave of pivotal trials planned for the epacadostat development program. We are striving to build Incyte into a world-class biopharmaceutical company, and we are very pleased to report another quarter of significant progress towards that goal."
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Portfolio Update
Cancer – Targeted Therapies
The REACH1 pivotal trial studying ruxolitinib in patients with steroid-refractory acute graft-versus-host disease (GVHD) is on track to deliver results in the first half of 2018. If successful, Incyte anticipates submitting an sNDA seeking accelerated approval of ruxolitinib in this indication during 2018. Three additional pivotal trials are evaluating the role of JAK inhibition in GVHD (REACH2 and REACH3 with ruxolitinib, and GRAVITAS-301 with itacitinib).
The FIGHT and CITADEL programs evaluating INCB54828 (FGFR1/2/3) and INCB50465 (PI3Kδ), respectively, now include multiple different indications in potentially-pivotal trials.
Indication
Status Update
Ruxolitinib (JAK1/JAK2)
Steroid-refractory acute GVHD Pivotal Phase 2 (REACH1) and Phase 3 (REACH2)
Ruxolitinib (JAK1/JAK2)
Steroid-refractory chronic GVHD Phase 3 (REACH3)
Ruxolitinib (JAK1/JAK2)
Essential thrombocythemia Pivotal Phase 2 (RESET-272) open for enrollment
Itacitinib (JAK1)
Treatment-naïve acute GVHD Phase 3 (GRAVITAS-301)
Itacitinib (JAK1)
Non-small cell lung cancer Phase 1/2 in combination with osimertinib (EGFR)
INCB52793 (JAK1)
Advanced malignancies Phase 1/2 dose-escalation
INCB50465 (PI3Kδ)
Diffuse large B-cell lymphoma, follicular lymphoma, marginal zone lymphoma, mantle cell lymphoma Phase II (CITADEL-202 initiated; CITADEL-203, CITADEL-204, CITADEL-205 all open for enrollment)
INCB54828 (FGFR1/2/3)
Bladder cancer, cholangiocarcinoma; 8p11 MPNs
Phase 2 (FIGHT-201, FIGHT-202, FIGHT-203)
INCB57643 (BRD)
Advanced malignancies Phase 1/2 dose-escalation
INCB53914 (PIM)
Advanced malignancies Phase 1/2 dose-escalation
INCB59872 (LSD1)
Acute myeloid leukemia, small cell lung cancer Phase 1/2 dose-escalation
INCB62079 (FGFR4)
Hepatocellular carcinoma Phase 1/2 dose-escalation
Cancer – Immune Therapies
The pivotal Phase 3 ECHO-301 trial of epacadostat plus pembrolizumab in patients with unresectable or metastatic melanoma is now fully-recruited and data are expected in the first half of 2018.
In collaboration with Merck and Bristol-Myers Squibb, preparations for the next wave of eight pivotal Phase 3 trials of epacadostat plus PD-1 antagonists continue as planned. Initiation of these trials are expected before the end of 2017.
In October, Incyte and AstraZeneca announced an expanded clinical trial collaboration and the companies intend to initiate a Phase 3 trial of epacadostat in combination with AstraZeneca’s PD-L1 antagonist durvalumab in patients with Stage III non-small cell lung cancer.
In October, Incyte and MacroGenics announced an exclusive global collaboration and license agreement for MacroGenics’ MGA012, an investigational monoclonal antibody that inhibits PD-1. Under this agreement, Incyte will obtain exclusive worldwide rights for the development and commercialization of MGA012 in all indications.
Indication
Status Update
Epacadostat (IDO1)
Unresectable or metastatic melanoma Phase 3 (ECHO-301) in combination with pembrolizumab (PD-1)
Epacadostat (IDO1)
NSCLC, renal, bladder and head & neck cancer Phase 3 in combination with pembrolizumab (PD-1) expected to begin in 2017
Epacadostat (IDO1)
NSCLC, head & neck cancer Phase 3 in combination with nivolumab (PD-1) expected to begin in 2017
Epacadostat (IDO1)
NSCLC Phase 3 in combination with durvalumab (PD-L1) expected to begin in H1 2018
Epacadostat (IDO1)
Multiple tumor types Phase 2 (ECHO-202) expansion cohorts in combination with pembrolizumab (PD-1)
Epacadostat (IDO1)
Multiple tumor types Phase 2 (ECHO-204) expansion cohorts in combination with nivolumab (PD-1)
Epacadostat (IDO1)
Multiple tumor types Phase 2 (ECHO-203) expansion cohorts in combination with durvalumab (PD-L1)
INCB01158 (ARG)1
Solid tumors Phase 1/2
INCSHR1210 (PD-1)2
Solid tumors Phase 1/2; enrollment halted
INCAGN1876 (GITR)3
Solid tumors Phase 1/2
INCAGN1949 (OX40)3
Solid tumors Phase 1/2
PD-1 platform study
Solid tumors Phase 1/2, pembrolizumab (PD-1) in combination with itacitinib (JAK1) or INCB50465 (PI3Kδ)
JAK1 platform study
Solid tumors Phase 1/2, itacitinib (JAK1) in combination with epacadostat (IDO1) or INCB50465 (PI3Kδ)
Notes:
1) INCB01158 co-developed with Calithera
2) INCSHR1210 licensed from Hengrui
3) INCAGN1876 & INCAGN1949 from discovery alliance with Agenus
Non-oncology
Indication
Status Update
Topical ruxolitinib (JAK1/JAK2)
Atopic dermatitis, vitiligo Phase 2
Partnered
In August, Lilly and Incyte announced that Lilly plans to resubmit the New Drug Application (NDA) for baricitinib to the U.S. Food & Drug Administration (FDA) before the end of January 2018. The companies anticipate the FDA will classify the application as a Class II resubmission, which would start a new six-month review cycle.
In September, Lilly and Incyte announced that baricitinib met the primary endpoint in a Phase 2 study in patients with moderate-to-severe atopic dermatitis.
Novartis has stated that it anticipates submitting an NDA for capmatinib, a potent and selective c-MET inhibitor licensed from Incyte, in 2018.
Indication
Status Update
Baricitinib (JAK1/JAK2)1
Rheumatoid arthritis Approved in Europe and Japan; CRL issued by FDA
Baricitinib (JAK1/JAK2)1
Psoriatic arthritis Lilly expects the Phase 3 program to begin in 2018
Baricitinib (JAK1/JAK2)1
Atopic dermatitis Lilly expects the Phase 3 program to begin in late 2017
Baricitinib (JAK1/JAK2)1
Systemic lupus erythematosus Phase 2
Capmatinib (c-MET)2
Non-small cell lung cancer, liver cancer Phase 2 in EGFR wild-type ALK negative NSCLC patients with c-MET amplification and mutation
Notes:
1) Baricitinib licensed to Lilly
2) Capmatinib licensed to Novartis
2017 Third-Quarter Financial Results
Revenues For the quarter ended September 30, 2017, net product revenues of Jakafi were $304 million as compared to $224 million for the same period in 2016, representing 36 percent growth. For the nine months ended September 30, 2017, net product revenues of Jakafi were $831 million as compared to $615 million for the same period in 2016, representing 35 percent growth. For the quarter ended September 30, 2017, net product revenues of Iclusig were $18 million as compared to $13 million for the same period in 2016, representing 42 percent growth. For the nine months ended September 30, 2017, net product revenues of Iclusig were $47 million as compared to $17 million for the same period in 20161.
For the quarter and nine months ended September 30, 2017, product royalties from sales of Jakavi, which has been out-licensed to Novartis outside of the United States, were $41 million and $104 million, respectively, as compared to $30 million and $77 million for the same periods in 2016. For the quarter and nine months ended September 30, 2017, product royalties from sales of Olumiant outside of the United States received from Lilly were $3 million, and $4 million, respectively.
For the quarter and nine months ended September 30, 2017, contract revenues were $15 million and $105 million, respectively, as compared to $3 million and $70 million for the same periods in 2016. The contract revenues in 2017 relate to milestone payments earned.
For the quarter ended September 30, 2017, total revenues were $382 million as compared to $269 million for the same period in 2016. For the nine months ended September 30, 2017, total revenues were $1.1 billion as compared to $779 million for the same period in 2016.
1 In June 2016, Incyte obtained an exclusive license from ARIAD to develop and commercialize Iclusig in Europe and other select ex-U.S. countries.
Year Over Year Revenue Growth
(in thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2017 2016 Change 2017 2016 Change
Revenues:
Jakafi net product revenues $ 303,929 $ 223,892
36%
$ 831,044 $ 615,285
35%
Iclusig net product revenues
18,100 12,731
42%
47,459 16,721 -
Product royalty revenues 44,487 29,626
50%
108,477 77,486
40%
Product-related revenues 366,516 266,249
38%
986,980 709,492
39%
Contract revenues 15,000 3,214 - 105,000 69,643 -
Other revenues
18 6 - 80 86 -
Total revenues $ 381,534 $ 269,469
42%
$ 1,092,060 $ 779,221
40%
Research and development expenses Research and development expenses for the quarter and nine months ended September 30, 2017 were $270 million and $879 million, respectively, as compared to $143 million and $420 million for the same periods in 2016. The increase in research and development expenses was primarily due to the expansion of the Company’s clinical portfolio as well as upfront and milestone expenses of $209 million related to our collaboration and license agreements with Agenus, Calithera and Merus. Included in research and development expenses for the quarter and nine months ended September 30, 2017 were non-cash expenses related to equity awards to our employees of $23 million and $68 million, respectively.
Selling, general and administrative expenses Selling, general and administrative expenses for the quarter and nine months ended September 30, 2017 were $91 million and $269 million, respectively, as compared to $76 million and $207 million for the same periods in 2016. Increased selling, general and administrative expenses were driven primarily by additional costs related to the commercialization of Jakafi and the geographic expansion in Europe. Included in selling, general and administrative expenses for the quarter and nine months ended September 30, 2017 were non-cash expenses related to equity awards to our employees of $12 million and $31 million, respectively.
Change in fair value of acquisition-related contingent consideration The change in fair value of acquisition-related contingent consideration for the quarter and nine months ended September 30, 2017 was a benefit of $16 million and $2 million, respectively, as compared to expense of $8 million and $10 million for the same periods in 2016. The change in fair value of acquisition-related contingent consideration represents the fair market value adjustments of the Company’s contingent liability related to the acquisition of the European business of ARIAD Pharmaceuticals, Inc.
Unrealized gain (loss) on long term investments Unrealized gain on long term investments for the quarter ended September 30, 2017 was $23 million as compared to $24 million for the same period in 2016. The unrealized loss on long term investments for the nine months ended September 30, 2017 was $2 million as compared to an unrealized gain of $20 million for the same period in 2016. The unrealized gain or loss on long term investments for the quarter and nine months ended September 30, 2017 represents the fair market value adjustments of the Company’s investments in Agenus and Merus.
Expense related to senior note conversions Expense related to senior note conversions for the nine months ended September 30, 2017 was $55 million related to the conversions of certain of our 2018 and 2020 convertible senior notes.
Net income (loss) Net income for the quarter ended September 30, 2017 was $36 million, or $0.17 per basic and diluted share, as compared to net income of $37 million, or $0.20 per basic and $0.19 per diluted share for the same period in 2016. Net loss for the nine months ended September 30, 2017 was $164 million, or $0.81 per basic and diluted share, as compared to net income of $95 million, or $0.51 per basic and $0.49 per diluted share for the same period in 2016.
Cash, cash equivalents and marketable securities position As of September 30, 2017, cash, cash equivalents and marketable securities totaled $1.3 billion as compared to $809 million as of December 31, 2016. The increase in cash, cash equivalents and marketable securities from December 31, 2016 to September 30, 2017 is primarily due to the recent public offering of 4,945,000 shares of our common stock resulting in net proceeds of $649 million.
2017 Financial Guidance
The Company has updated its full year 2017 financial guidance, as detailed below.
Current
Previous
Jakafi net product revenues $1,125-$1,135 million $1,090-$1,120 million
Iclusig net product revenues $60-$65 million Unchanged
Research and development expenses* $1,250-$1,300 million $1,050-$1,150 million
Selling, general and administrative expenses $340-$360 million Unchanged
Change in fair value of acquisition-related contingent consideration $5-$7 million $30-$35 million
* Includes upfront and milestone expenses of $359 million related to the amended Agenus collaboration, and the Merus, Calithera, and MacroGenics collaborations
Conference Call and Webcast Information
Incyte will hold its 2017 third-quarter financial results conference call and webcast this morning at 10:00 a.m. ET. To access the conference call, please dial 877-407-3042 for domestic callers or 201-389-0864 for international callers. When prompted, provide the conference identification number, 13672268.
If you are unable to participate, a replay of the conference call will be available for 30 days. The replay dial-in number for the United States is 877-660-6853 and the dial-in number for international callers is 201-612-7415. To access the replay you will need the conference identification number, 13672268.
The conference call will also be webcast live and can be accessed at www.incyte.com in the Investors section under "Events and Presentations".