On July 31, 2018 Incyte Corporation (Nasdaq:INCY) reported its 2018 second quarter financial results, highlighting strong growth in total product-related revenue and providing a status update on the Company’s development portfolio (Press release, Incyte, JUL 31, 2018, View Source [SID1234528009]).
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"With four sources of revenue driving our fast-growing top-line, and multiple opportunities in our later-stage development portfolio that may accelerate this growth in the near-term, we believe we are well-positioned for long-term success," stated Hervé Hoppenot, Chief Executive Officer, Incyte. "At Incyte, we aim to build value through developing innovative medicines, and over the next 6 months we expect to provide multiple updates from our later-stage portfolio. These include sharing data from, and submitting the supplemental New Drug Application (sNDA) for, Jakafi in steroid-refractory acute graft-versus-host disease (GVHD), as well as presenting data for ruxolitinib cream in atopic dermatitis and updated data from our FGFR program in cholangiocarcinoma. Later this year, we also plan to present data for ruxolitinib in combination with our PI3Kδ inhibitor, which is part of our initiative to maintain and expand our leadership position in the treatment of patients with myeloproliferative neoplasms."
Portfolio Update
Oncology – key highlights
As previously announced, the pivotal REACH1 trial of ruxolitinib in combination with corticosteroids for the treatment of patients with steroid-refractory acute GVHD met its primary endpoint. Based on these data, Incyte plans to file an sNDA for the approval of ruxolitinib for the treatment of steroid-refractory acute GVHD with the U.S. Food and Drug Administration (FDA) during the third quarter of 2018. The FDA previously granted ruxolitinib Breakthrough Therapy Designation in this indication, which is expected to provide an accelerated review period. Planning is already underway for the U.S. launch, if approved.
Initial data, as previously announced, from the FIGHT-202 trial evaluating pemigatinib (formerly INCB54828) show promising efficacy in advanced cholangiocarcinoma patients with FGFR2 translocations. Incyte expects to submit an NDA for pemigatinib as a treatment for patients with advanced cholangiocarcinoma in 2019.
Data from the randomized Phase 2 trial of ruxolitinib cream in adult patients with atopic dermatitis showed a significant benefit over vehicle control; these data have been accepted for oral presentation at the 27th European Academy of Dermatology and Venerology Congress, September 12-16, 2018 in Paris, France. Incyte is planning to initiate a global, pivotal Phase 3 program in this indication.
INCB54707, a JAK1 selective inhibitor, is in development in IAI. Initial development will be as a potential treatment for patients with hidradenitis suppurativa, an inflammatory skin disease.
In June 2018, the FDA approved the 2mg dose of Olumiant (baricitinib) as a once-daily oral medication for the treatment of adults with moderately-to-severely active rheumatoid arthritis (RA) who have had an inadequate response to one or more tumor necrosis factor (TNF) inhibitor therapies.
The financial measures presented in this press release for the three and six months ended June 30, 2018 and 2017 have been prepared by the Company in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), unless otherwise identified as a Non-GAAP financial measure. Management believes that Non-GAAP information is useful for investors, when considered in conjunction with Incyte’s GAAP disclosures. Management uses such information internally and externally for establishing budgets, operating goals and financial planning purposes. These metrics are also used to manage the Company’s business and monitor performance. The Company adjusts, where appropriate, for both revenues and expenses in order to reflect the Company’s core operations. The Company believes these adjustments are useful to investors by providing an enhanced understanding of the financial performance of the Company’s core operations. The metrics have been adopted to align the Company with disclosures provided by industry peers. Reconciliations of GAAP net income (loss) to Non-GAAP net income for the three and six months ended June 30, 2018 and 2017 have been included at the end of this press release.
Guidance related to research and development and selling, general and administrative expenses does not include estimates associated with any potential future strategic transactions.
Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used in conjunction with and to supplement Incyte’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in our industry.
Revenues For the quarter ended June 30, 2018, GAAP net product revenues of Jakafi were $346 million as compared to $276 million for the same period in 2017, representing 25 percent growth. For the six months ended June 30, 2018, GAAP net product revenues of Jakafi were $659 million as compared to $527 million for the same period in 2017, representing 25 percent growth. For the three months ended June 30, 2018, GAAP net product revenues of Iclusig (ponatinib) were $20 million as compared to $16 million for the same period in 2017. For the six months ended June 30, 2018, GAAP net product revenues of Iclusig were $41 million as compared to $29 million for the same period in 2017.
For the quarter and six months ended June 30, 2018, GAAP product royalties from sales of Jakavi (ruxolitinib), which has been out-licensed to Novartis outside of the United States, were $47 million and $88 million, respectively, as compared to $34 million and $63 million, respectively, for the same periods in 2017. For the quarter and six months ended June 30, 2018, GAAP product royalties from sales of Olumiant, which has been out-licensed to Lilly globally, were $9 million and $15 million, respectively, as compared to $1 million for the same periods in 2017.
For the quarter and six months ended June 30, 2018, GAAP milestone revenues were $100 million, as compared to $0 million and $90 million, respectively, for the same periods in 2017. GAAP milestone revenues in 2018 and 2017 related to milestones earned from our collaborative partners. Non-GAAP revenues exclude milestone revenues.
For the quarter and six months ended June 30, 2018, total GAAP revenues were $522 million and $904 million, respectively, as compared to $326 million and $711 million, respectively, for the same periods in 2017. Total Non-GAAP revenues for the quarter and six months ended June 30, 2018 were $422 million and $804 million, respectively, as compared to $326 million and $621 million, respectively, for the same periods in 2017.
Cost of product revenues GAAP cost of product revenues for the quarter and six months ended June 30, 2018 was $25 million and $43 million, respectively, as compared to $20 million and $35 million, respectively, for the same periods in 2017. Non-GAAP cost of product revenues for the quarter and six months ended June 30, 2018 was $19 million and $32 million, respectively, as compared to $15 million and $24 million, respectively, for the same periods in 2017. Non-GAAP cost of product revenues excludes the amortization of licensed intellectual property for Iclusig relating to the acquisition of the European business of ARIAD Pharmaceuticals, Inc.
Research and development expenses GAAP research and development expenses for the quarter and six months ended June 30, 2018 were $298 million and $601 million, respectively, as compared to $202 million and $610 million, respectively, for the same periods in 2017. The increase in GAAP research and development expenses over the prior year quarter was driven primarily by $15 million in upfront expense related to our collaboration agreement with Bristol-Myers Squibb, $5 million in milestone expense related to our collaboration agreement with Agenus and an overall increase in development costs to advance our clinical pipeline.
The decrease in GAAP research and development expenses from the prior year six month period was driven primarily by upfront and milestone expenses of $209 million related to our collaborative agreements recorded in 2017 partially offset by $32 million in upfront and milestone expenses in 2018 and an overall increase in development costs to advance our clinical pipeline. For the six months ended June 30, 2018, GAAP research and development expenses also included $12 million in upfront expense related to our collaboration agreement with Syros Pharmaceuticals, Inc.
Non-GAAP research and development expenses for the quarter and six months ended June 30, 2018 were $253 million and $520 million, respectively, as compared to $179 million and $356 million, respectively, for the same periods in 2017. Non-GAAP research and development expenses for the quarter and six months ended June 30, 2018 exclude the cost of stock-based compensation of $25 million and $49 million, respectively, and upfront consideration and milestones paid to our collaborative partners of $20 million and $32 million, respectively. Non-GAAP research and development expenses for the quarter and six months ended June 30, 2017 exclude the cost of stock-based compensation of $23 million and $44 million, respectively, and upfront consideration and milestones paid to our collaborative partners of $0 million and $209 million, respectively.
Selling, general and administrative expenses GAAP selling, general and administrative expenses for the quarter and six months ended June 30, 2018 were $108 million and $230 million, respectively, as compared to $90 million and $177 million, respectively, for the same periods in 2017. Increased GAAP selling, general and administrative expenses were driven by an increase in donations to independent non-profit patient assistance organizations in the United States and additional costs related to the commercialization of Jakafi.
Non-GAAP selling, general and administrative expenses for the quarter and six months ended June 30, 2018 were $96 million and $206 million, respectively, as compared to $79 million and $157 million, respectively, for the same periods in 2017. Non-GAAP selling, general and administrative expenses exclude the cost of stock-based compensation.
Change in fair value of acquisition-related contingent consideration GAAP change in fair value of acquisition-related contingent consideration for the quarter and six months ended June 30, 2018 and 2017 was $7 million and $14 million, respectively.
Unrealized loss on long term investments GAAP unrealized loss on long term investments for the quarter and six months ended June 30, 2018 was $35 million and $12 million, respectively, as compared to $20 million and $25 million, respectively, for the same periods in 2017. The unrealized loss on long term investments for the quarter and six months ended June 30, 2018 represents the fair market value adjustments of the Company’s investments in Agenus, Calithera, Merus, and Syros.
Expense related to senior note conversions GAAP expense related to senior note conversions for the quarter and six months ended June 30, 2017 was $1 million and $55 million, respectively, related to the conversions of certain of our 2018 and 2020 convertible senior notes.
Net income (loss) GAAP net income for the quarter ended June 30, 2018 was $52 million, or $0.25 per basic and $0.24 per diluted share, as compared to a net loss of $12 million, or $0.06 per basic and diluted share for the same period in 2017. GAAP net income for the six months ended June 30, 2018 was $11 million, or $0.05 per basic and diluted share, as compared to a net loss of $200 million, or $1.00 per basic and diluted share for the same period in 2017.
Non-GAAP net income for the quarter ended June 30, 2018 and 2017 was $57 million. Non-GAAP net income per share for the quarter ended June 30, 2018 was $0.27 per basic and $0.26 per diluted share, as compared to Non-GAAP net income per share of $0.28 per basic and $0.27 per diluted share for the same period in 2017. Non-GAAP net income for the six months ended June 30, 2018 was $54 million, as compared to Non-GAAP net income of $86 million for the same period in 2017. Non-GAAP net income per share for the six months ended June 30, 2018 was $0.26 per basic and $0.25 per diluted share, as compared to Non-GAAP net income per share of $0.43 per basic and $0.42 per diluted share for the same period in 2017.
Cash, cash equivalents and marketable securities position As of June 30, 2018 and December 31, 2017, cash, cash equivalents and marketable securities totaled $1.2 billion.
Adjusted to exclude the amortization of licensed intellectual property for Iclusig relating to the acquisition of the European business of ARIAD Pharmaceuticals, Inc
Adjusted to exclude the estimated cost of stock-based compensation, upfront consideration of approximately $12 million related to the Syros collaboration, upfront consideration of $15 million related to the BMS license agreement and milestone payment of $5 million related to the Agenus collaboration.
Adjusted to exclude the estimated cost of stock-based compensation.
Adjusted to exclude the change in fair value of estimated future royalties relating to sales of Iclusig in the licensed territory relating to the acquisition of the European business of ARIAD Pharmaceuticals, Inc.
Future Non-GAAP financial measures may also exclude upfront and ongoing milestones relating to third-party collaboration partners, impairment of goodwill or other assets, changes in the fair value of equity investments in our collaboration partners, non-cash interest expense related to the amortization of the initial discount on our 2018 and 2020 Senior Notes and the impact on our tax provision of discrete changes in our valuation allowance position on deferred tax assets.
Conference Call and Webcast Information
Incyte will hold its 2018 second-quarter financial results conference call and webcast this morning at 8:00 a.m. EDT. 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, 13681303.
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, 13681303.
The conference call will also be webcast live and can be accessed at www.incyte.com in the Investors section under "Events and Presentations".