On February 15, 2018 Incyte Corporation (Nasdaq: INCY) today reports 2017 fourth-quarter and year-end financial results, highlighting both strong growth in total revenue and the significant progress being made across the product portfolio (Press release, Incyte, FEB 15, 2018, View Source [SID1234523989]).
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"2017 was another successful year for Incyte with a fast-growing revenue line and an expanded portfolio of later-stage development candidates that we expect to drive our future growth," stated Hervé Hoppenot, Incyte’s Chief Executive Officer. "As we begin 2018, we look forward to key newsflow events in the first half of the year, including the initial results of the ECHO-301 trial of epacadostat in melanoma and the REACH1 trial of ruxolitinib in steroid-refractory acute GVHD, as well as FDA action on the resubmission of the baricitinib NDA for rheumatoid arthritis."
Portfolio Update
Oncology — key highlights
The pivotal REACH1 trial evaluating ruxolitinib in patients with steroid-refractory acute graft-versus-host disease (GVHD) has completed enrollment and results are expected in the first half of 2018. If successful, Incyte expects to submit an sNDA seeking approval of ruxolitinib in this indication.
Initial results, based on progression-free survival, from the pivotal ECHO-301 trial of epacadostat plus pembrolizumab in patients with unresectable or metastatic melanoma are expected in the first half of 2018. In collaboration with both Merck and Bristol-Myers Squibb, we have recently opened eight new pivotal trials of epacadostat plus PD-1 antagonists.
Initial data from the trial evaluating INCB54828 in patients with cholangiocarcinoma are expected in 2018.
Status updates for Incyte’s most advanced clinical programs are provided below.
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Indication
Status Update
Ruxolitinib
(JAK1/JAK2)
Steroid-refractory acute GVHD
Pivotal Phase 2 (REACH1); Phase 3 (REACH2)
Ruxolitinib
(JAK1/JAK2)
Steroid-refractory chronic GVHD
Phase 3 (REACH3)
Ruxolitinib
(JAK1/JAK2)
Essential thrombocythemia
Phase 2 (RESET)
Itacitinib
(JAK1)
Treatment-naïve acute GVHD
Phase 3 (GRAVITAS-301)
Itacitinib
(JAK1)
NSCLC
Phase 1/2 in combination with osimertinib (EGFR)
Epacadostat
(IDO1)
Melanoma
Phase 3 (ECHO-301) in combination with pembrolizumab (PD-1)
Epacadostat
(IDO1)
Renal cancer
Phase 3 (ECHO-302) in combination with pembrolizumab (PD-1)
Epacadostat
(IDO1)
Bladder cancer
Phase 3 (ECHO-303 & ECHO-307) in combination with pembrolizumab (PD-1)
Epacadostat
(IDO1)
Head & neck cancer
Phase 3 (ECHO-304) in combination with pembrolizumab (PD-1)
Epacadostat
(IDO1)
NSCLC
Phase 3 (ECHO-305 & ECHO-306) in combination with pembrolizumab (PD-1)
Epacadostat
(IDO1)
NSCLC
Phase 3 (ECHO-309) in combination with nivolumab (PD-1)
Epacadostat
(IDO1)
Head & neck cancer
Phase 3 (ECHO-310) in combination with nivolumab (PD-1)
Epacadostat
(IDO1)
NSCLC
Phase 3 in combination with durvalumab (PD-L1) expected to begin in H1 2018
MGA012
(PD-1)(1)
Solid tumors
Phase 1 dose-escalation completed, monotherapy expansion cohorts ongoing
INCB50465
(PI3Kō)
DLBCL
Phase 2 (CITADEL-202)
INCB50465
(PI3Kō)
Follicular lymphoma
Phase 2 (CITADEL-203)
INCB50465
(PI3Kō)
Marginal zone lymphoma
Phase 2 (CITADEL-204)
INCB50465
(PI3Kō)
Mantle cell lymphoma
Phase 2 (CITADEL-205)
INCB54828
(FGFR1/2/3)
Bladder cancer
Phase 2 (FIGHT-201)
INCB54828
(FGFR1/2/3)
Cholangiocarcinoma
Phase 2 (FIGHT-202)
Notes:
(1) MGA012 licensed from MacroGenics
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A brief status update for Incyte’s earlier-stage clinical candidates is provided below.
Status Update
INCB57643
(BRD)
First-in-man data presented at ASH (Free ASH Whitepaper) 2017, showing optimized PK profile for combination therapy
INCB53914
(PIM)
First-in-man data at ASH (Free ASH Whitepaper) 2017; development expected to focus on combination therapy, including with JAK and PI3Kδ inhibition in hematological malignancies
INCB52793
(JAK1)
150x greater selectivity for JAK1 over JAK2 in preclinical studies; evaluating combination cohorts with azacitadine in AML
INCB59872
(LSD1)
Epigenetic mechanism targeting cell differentiation; evaluating both oncology indications and sickle-cell disease
INCB62079
(FGFR4)
250x greater selectivity for FGFR4 over FGFR1/2/3; initial development expected to focus on hepatocellular carcinoma
INCB81776
(AXL/MER)
Expected to enter clinical trials in 2018
INCB01158
(ARG)(1)
Novel mechanism targeting myeloid cells; development expected to focus on combination therapy, including IDO1, PD-1 and chemotherapy combinations
INCAGN1876
(GITR)(2)
Dose escalation completed; development expected to focus on combination therapy, including IDO1, PD-1 and CTLA-4 combinations
INCAGN1949
(OX40)(2)
Dose escalation completed; development expected to focus on combination therapy, including PD-1 and CTLA-4 combinations
INCAGN2390
(TIM-3)(2)
Expected to enter clinical trials in 2018
INCAGN2385
(LAG-3)(2)
Expected to enter clinical trials in 2018
Notes:
(1) INCB01158 co-developed with Calithera
(2) INCAGN1876, INCAGN1949, INCAGN2390 and INCAGN2385 from discovery alliance with Agenus
Non-oncology
Indication
Status Update
Topical ruxolitinib
(JAK1/JAK2)
Atopic dermatitis, vitiligo
Phase 2
Partnered — key highlights
In December, Lilly announced that it had resubmitted the New Drug Application (NDA) for baricitinib to the U.S. Food & Drug Administration (FDA). This was classified as a Class II resubmission, which began a new six-month review cycle. Lilly also announced that it has initiated a pivotal trial of baricitinib in patients with moderate-to-severe atopic dermatitis.
Novartis has stated that it now anticipates submitting an NDA for capmatinib, a potent and selective MET inhibitor licensed from Incyte, in 2019.
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Indication
Status Update
Baricitinib (JAK1/JAK2)(1)
Rheumatoid arthritis
Approved in Europe and Japan; NDA resubmitted to FDA
Baricitinib (JAK1/JAK2)(1)
Atopic dermatitis
Phase 3
Baricitinib (JAK1/JAK2)(1)
Psoriatic arthritis
Lilly expects the Phase 3 program to begin in 2018
Baricitinib (JAK1/JAK2)(1)
Systemic lupus erythematosus
Phase 2
Capmatinib (MET)(2)
Non-small cell lung cancer, liver cancer
Phase 2 in EGFR wild-type, ALK negative NSCLC patients with MET amplification and mutation
Notes:
(1) Baricitinib licensed to Lilly
(2) Capmatinib licensed to Novartis
2017 Fourth-Quarter and Year-End Financial Results (GAAP)
Revenues For the quarter ended December 31, 2017, net product revenues of Jakafi were $302 million as compared to $238 million for the same period in 2016, representing 27 percent growth. For the twelve months ended December 31, 2017, net product revenues of Jakafi were $1.1 billion as compared to $853 million for the same period in 2016, representing 33 percent growth. For the quarter ended December 31, 2017, net product revenues of Iclusig were $19 million as compared to $13 million for the same period in 2016. For the twelve months ended December 31, 2017, net product revenues of Iclusig were $67 million as compared to $30 million for the same period in 2016(1).
For the quarter and twelve months ended December 31, 2017, product royalties from sales of Jakavi, which has been out-licensed to Novartis outside of the United States, were $48 million and $152 million, respectively, as compared to $33 million and $111 million for the same periods in 2016. For the quarter and twelve months ended December 31, 2017, product royalties from sales of Olumiant outside of the United States from Lilly were $5 million and $9 million, respectively.
For the quarter and twelve months ended December 31, 2017, milestone and contract revenues were $70 million and $175 million, respectively, as compared to $43 million and $113 million for the same periods in 2016. The milestone and contract revenues in 2017 relate to milestones earned from our collaborative partners.
For the quarter ended December 31, 2017, total revenues were $444 million as compared to $326 million for the same period in 2016. For the twelve months ended December 31, 2017, total revenues were $1.5 billion as compared to $1.1 billion 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.
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Year Over Year Revenue Growth
(in thousands, unaudited)
Three Months Ended
Twelve Months Ended
December 31,
%
December 31,
%
2017
2016
Change
2017
2016
Change
Revenues:
Jakafi net product revenues
$
302,348
$
237,531
27
%
$
1,133,392
$
852,816
33
%
Iclusig net product revenues
19,461
12,867
—
66,920
29,588
—
Product royalty revenues
52,314
33,225
57
%
160,791
110,711
45
%
Product-related revenues
374,123
283,623
32
%
1,361,103
993,115
37
%
Milestone and contract revenues
70,000
42,869
—
175,000
112,512
—
Other revenues
33
6
—
113
92
—
Total revenues
$
444,156
$
326,498
36
%
$
1,536,216
$
1,105,719
39
%
Research and development expenses Research and development expenses for the quarter ended December 31, 2017 were $447 million as compared to $162 million for the same period in 2016. For the quarter ended December 31, 2017, research and development expenses were comprised of $150 million related to our collaboration and license agreement with MacroGenics and $297 million of ongoing expenses.
Research and development expenses for the twelve months ended December 31, 2017 were $1.3 billion as compared to $582 million for the same period in 2016. For the twelve months ended December 31, 2017, research and development expenses were comprised of $359 million of upfront consideration and milestone expense related to our collaboration and license agreements with Agenus, Calithera, MacroGenics and Merus, $12 million related to in-process research and development asset impairment and $955 million of ongoing expenses.
Included in ongoing research and development expenses for the quarter and twelve months ended December 31, 2017 were non-cash expenses related to equity awards to our employees of $23 million and $90 million, respectively.
Selling, general and administrative expenses Selling, general and administrative expenses for the quarter and twelve months ended December 31, 2017 were $98 million and $366 million, respectively, as compared to $96 million and $303 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 twelve months ended December 31, 2017 were non-cash expenses related to equity awards to our employees of $11 million and $43 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 twelve months ended December 31, 2017 was $10 million and $8 million, respectively, as compared to $7 million and $17 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.
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Unrealized loss on long term investments Unrealized loss on long term investments for the quarter ended December 31, 2017 was $22 million as compared to $24 million for the same period in 2016. The unrealized loss on long term investments for the twelve months ended December 31, 2017 was $24 million as compared to $3 million for the same period in 2016. The unrealized loss on long term investments for the quarter and twelve months ended December 31, 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 twelve months ended December 31, 2017 was $55 million related to the conversions of certain of our 2018 and 2020 convertible senior notes.
Net income (loss) Net loss for the quarter ended December 31, 2017 was $150 million, or $0.71 per basic and diluted share, as compared to net income of $9 million, or $0.05 per basic and diluted share for the same period in 2016. Net loss for the twelve months ended December 31, 2017 was $313 million, or $1.53 per basic and diluted share, as compared to net income of $104 million, or $0.55 per basic and $0.54 per diluted share for the same period in 2016.
As described below, in 2018 Incyte will begin reporting certain Non-GAAP financial measures, which should be considered in conjunction with Incyte’s GAAP reporting. Under Incyte’s definition of Non-GAAP measures, Non-GAAP net income for the quarter and twelve months ended December 31, 2017 was $4 million and $131 million, respectively.
Cash, cash equivalents and marketable securities position As of December 31, 2017, cash, cash equivalents and marketable securities totaled $1.2 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 December 31, 2017 is primarily due to the public offering of 4,945,000 shares of our common stock resulting in net proceeds of $649 million.
Non-GAAP Information
The financial measures other than Non-GAAP net income presented in this press release for the three and twelve months ended December 31, 2017 have been prepared by the Company in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management has chosen to present Non-GAAP net income for the three and twelve months ended December 31, 2017 and to release both GAAP and Non-GAAP financial guidance for the year ending December 31, 2018 in belief that this Non-GAAP information is useful for investors, when considered in conjunction with Incyte’s GAAP financial guidance. 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. A reconciliation of GAAP net loss to Non-GAAP net income for the three and twelve months ended December 31, 2017 has 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.
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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.
2018 Financial Guidance
The Company has provided full year 2018 financial guidance, as detailed below.
GAAP and Non-GAAP Jakafi net product revenues
$1,350 – $1,400 million
GAAP and Non-GAAP Iclusig net product revenues
$80 – $85 million
GAAP Cost of product revenues
$85 – $95 million
Non-GAAP Cost of product revenues(1)
$64 – $74 million
GAAP Research and development expenses
$1,200 – $1,300 million
Non-GAAP Research and development expenses(2)
$1,077 – $1,172 million
GAAP Selling, general and administrative expenses
$515 – $535 million
Non-GAAP Selling, general and administrative expenses(3)
$465 – $480 million
GAAP Change in fair value of acquisition-related contingent consideration
$30 million
Non-GAAP Change in fair value of acquisition-related contingent consideration(4)
$0 million
(1) Adjusted to exclude the amortization of licensed intellectual property for Iclusig relating to the acquisition of the European business of ARIAD Pharmaceuticals, Inc.
(2) Adjusted to exclude the estimated cost of stock-based compensation and upfront consideration of approximately $13 million relating to the Syros Pharmaceuticals, Inc. collaboration.
(3) Adjusted to exclude the estimated cost of stock-based compensation.
(4) 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.
The selling, general and administrative expense guidance includes approximately $125 million in epacadostat GAAP and Non-GAAP pre-launch expenses which we expect to incur in the second half of the year.
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 2017 fourth-quarter and year-end financial results conference call and webcast this morning at 8:00 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, 13675376.
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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, 13675376.
The conference call will also be webcast live and can be accessed at www.incyte.com in the Investors section under "Events and Presentations".