On February 11, 2016 Incyte Corporation (Nasdaq: INCY) reported 2015 fourth-quarter and year-end financial results, highlighting strong revenue growth driven by increased Jakafi (ruxolitinib) sales in the U.S. as well as growing ex-U.S. Jakavi (ruxolitinib) royalties from Novartis. Additionally, Incyte provided financial guidance for 2016 (Press release, Incyte, FEB 11, 2016, View Source;p=RssLanding&cat=news&id=2137496 [SID:1234509039]).

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Incyte’s strong position in the field of JAK inhibition is demonstrated by the ongoing commercial success of Jakafi and by the recent submissions, by Eli Lilly and Company, seeking regulatory approval of baricitinib for the treatment of rheumatoid arthritis. Baricitinib was licensed to Lilly by Incyte, and met the primary endpoint in all four of its global Phase 3 studies. If approved, Lilly expects to launch baricitinib in early 2017. In addition, epacadostat, Incyte’s first-in-class IDO1 inhibitor, is expected to enter Phase 3 during the first half of 2016 in first-line advanced or metastatic melanoma in combination with Merck & Co’s pembrolizumab. Multiple Phase 2, tumor-specific, expansion cohorts of epacadostat in combination with anti-PD-1 and anti-PD-L1 checkpoint modulators are also underway.

"The momentum of Jakafi, now into its fifth year of commercialization, continues to be strong, and, pending regulatory approval, we look forward to a second important source of revenue from baricitinib," stated Hervé Hoppenot, Incyte’s President and Chief Executive Officer. "Despite the outcome of the JANUS program, our development portfolio remains robust, comprised of 13 candidates against 10 molecular targets, demonstrating Incyte’s commitment to innovation and the productivity of our drug discovery and development engine."

2015 Fourth-Quarter and Full-Year Financial Results

Revenues For the quarter ended December 31, 2015, net product revenues of Jakafi were $182 million as compared to $106 million for the same period in 2014, representing 72 percent growth. For the full year ended December 31, 2015, net product revenues of Jakafi were $601 million as compared to $358 million for the same period in 2014, representing 68 percent growth. For the quarter and full year ended December 31, 2015, product royalties from sales of Jakavi outside of the United States received from Novartis were $24 million and $75 million, respectively, as compared to $15 million and $49 million, respectively, for the same periods in 2014. For the quarter ended December 31, 2015, contract revenues were $38 million as compared to $3 million for the same period in 2014. The $35 million increase in contract revenues for the quarter ended December 31, 2015 compared to the same period in 2014 relates to an increase in milestone payments earned from Novartis. For the full year ended December 31, 2015, contract revenues were $78 million as compared to $105 million for the same period in 2014. The $27 million decrease in contract revenues for the full year ended December 31, 2015 compared to the same period in 2014 relates to a decrease in milestone payments earned from Novartis. For the quarter ended December 31, 2015, total revenues were $244 million as compared to $124 million for the same period in 2014. For the full year ended December 31, 2015, total revenues were $754 million as compared to $511 million for the same period in 2014.

Year Over Year Revenue Growth

Research and development expenses Research and development expenses for the quarter and full year ended December 31, 2015 were $117 million and $480 million, respectively, as compared to $99 million and $348 million, respectively, for the same periods in 2014. Included in research and development expenses for the quarter and full year ended December 31, 2015 were non-cash expenses related to equity awards to our employees of $10 million and $40 million, respectively. The increase in research and development expenses was primarily due to the expansion of the Company’s clinical portfolio, including costs related to external alliances. Also included in research and development expenses for the full year ended December 31, 2015 was the one-time upfront payment to Agenus related to our license, development and commercialization agreement and the one-time upfront payment to Jiangsu Hengrui Medicine Co., Ltd. (Hengrui) related to our global license and collaboration agreement.

Selling, general and administrative expenses Selling, general and administrative expenses for the quarter and full year ended December 31, 2015 were $52 million and $197 million, respectively, as compared to $48 million and $166 million, respectively, for the same periods in 2014. Included in selling, general and administrative expenses for the quarter and full year ended December 31, 2015 were non-cash expenses related to equity awards to our employees of $8 million and $30 million, respectively. Increased selling, general and administrative expenses are driven primarily by additional costs related to the commercialization of Jakafi.
Unrealized loss on long term investment Unrealized loss on long term investment of $0 million and $5 million, respectively, for the quarter and full year ended December 31, 2015 represents the fair market value adjustments of the Company’s investment in Agenus.

Net income / (loss) Net income for the quarter ended December 31, 2015 was $55 million, or $0.30 per basic and $0.29 per diluted share, as compared to net loss of $37 million, or $0.22 per basic and diluted share, respectively, for the same period in 2014. Net income for the full year ended December 31, 2015 was $7 million, or $0.04 per basic and $0.03 per diluted share as compared to a net loss of $48 million, or $0.29 per basic and diluted share, for the same period in 2014.

Cash, cash equivalents and marketable securities position As of December 31, 2015, cash, cash equivalents and marketable securities totaled $708 million, as compared to $600 million as of December 31, 2014.

2016 Financial Guidance

Portfolio Update

JAK Inhibitors
A New Drug Application (NDA) and a Marketing Authorization Application (MAA) have been submitted by Lilly to the U.S. Food and Drug Administration and the European Medicines Agency, respectively, for baricitinib, a JAK1 / JAK2 inhibitor licensed by Incyte to Lilly. These submissions triggered $35 million (NDA, as previously disclosed) and $20 million (MAA) in milestone payment obligations from Lilly to Incyte. Incyte expects to recognize both in full in the first quarter of 2016. Incyte expects to earn global regulatory milestones and will also be eligible for royalties on global net sales of baricitinib.
As previously announced, the clinical development program investigating the hypothesis that JAK inhibition may benefit patients with solid tumors and high levels of systemic inflammation has been discontinued. All commercial activities with Jakafi, and all investigational activities of JAK inhibition outside this hypothesis, are unaffected.
Ongoing studies of ruxolitinib and selective JAK1 inhibitors in hematology indications will continue. Ongoing studies of selective JAK1 inhibition in solid tumor indications that are based on different hypotheses will also continue. These include a series of combination studies evaluating INCB39110, a selective JAK1 inhibitor, with either pembrolizumab (anti-PD-1 antibody), epacadostat (Incyte’s IDO1 inhibitor), or INCB50465 (Incyte’s PI3Kδ inhibitor) that will assess the therapeutic utility of JAK1 inhibition based on its effects on the tumor microenvironment. Additionally, the potential for JAK1 inhibition to improve the benefit of targeted therapies will be investigated via a Phase 1/2 study of INCB39110 plus osimertinib, AstraZeneca’s next generation EGFR inhibitor.
INCB39110 is also in a proof-of-concept trial for the treatment of patients with graft versus host disease.
Incyte’s second selective JAK1 inhibitor, INCB52793, is in a dose escalation study in patients with advanced malignancies. INCB52793 has shown synergistic efficacy in combination with standard of care in preclinical models of multiple myeloma.

IDO1 Inhibitor
The ECHO (Epacadostat Clinical development in Hematology and Oncology) program has been designed to investigate combinations of Incyte’s IDO1 inhibitor, epacadostat, across the full cycle of anti-tumor immunity, including with checkpoint blockade, vaccines and other modulators of the tumor immune response.
The Phase 3 ECHO-301 study evaluating the combination of epacadostat with the anti-PD-1 antibody pembrolizumab for the first-line treatment of patients with advanced or metastatic melanoma is expected to begin in the first half of 2016.
During 2016, Incyte expects to have recruited over 600 patients into Phase 2 expansion cohorts investigating the safety and efficacy of epacadostat in combination with anti-PD-1 and anti-PD-L1 agents.

Additional Programs
With two of our new programs expected to enter the clinic in the coming months, Incyte will have a total of 13 development molecules in pivotal and proof-of-concept trials across a variety of oncology and non-oncology indications. Below is a portfolio summary, in addition to Incyte’s JAK inhibitor franchise and its IDO1 inhibitor epacadostat.

About Jakafi (ruxolitinib)
Jakafi is a first-in-class JAK1/JAK2 inhibitor approved by the U.S. Food and Drug Administration for treatment of people with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea. Jakafi is also indicated for treatment of people with intermediate or high-risk myelofibrosis (MF), including primary MF, post–polycythemia vera MF, and post–essential thrombocythemia MF.

Jakafi is marketed by Incyte in the United States and by Novartis as Jakavi (ruxolitinib) outside the United States.