INCY 4Q / Year end CC
General impressions: A pretty straightforward conference call that focused mostly on their operational execution. Management appears satisfied about sales to date, and I think they gave a strong forward guidance for 2013. On the clinical trial front, this year may not be all that exciting. Some Phase 2 pancreatic cancer data (tough indication) and maybe some Phase 2 psoriasis / diabetic nephropathy data from Lilly's end. Otherwise the bigger trial data for polycythemia vera is likely to report early next year, and RA is a bit of a ways out. I still think this is a good holding for a diversified portfolio.
Jakafi Guidance / Product Sales:
- 2012, expect to see steady growth in treating MF population over the next couple of years... in 2013, 210-225 million net product guidance. This is driven by new starts along with more patients continuing on drug longer. This latter point suggests that they're having success in their strategy to educate physicians on titrating patients starting at low doses for the first 8-12 weeks. They also indicated that they're urging physicians who discontinued a patient to restart them at the lowest dose.
- adjusted net revenues grew by 25% if you exclude the 9 million in deferred revenue recognized in 3rd quarter
- underlying demand as measured by dispensed bottles grew 17%
- inventory grew by 4%
- price increased by 4%
- they expect data on studies in patients with low platelet counts, with the hope that this is added to the label in the second quarter
- 1/3 of prescribers having written for 2 or more patients
- 50% of subscriptions from new, 50% from repeat right now
- 16-18K patients w/ MF and they believe their addressable population is 15K
Other Jakafi indications:
- polycythemia vera: 2 phase 3 trials are ongoing:
Response trial: SPA, in partnership w/ novartis, fully recruited, expect sNDA in 1H14; treatment of patients resistant or intolerant to hydroxyurea
Relief trial: symptomatic benefit in PV (not required for efficacy, but are looking to use it to support label)
- pancreatic cancer trial: results in 2H13 from fully recruited phase 2 trial... OS is primary endpoint
- baricitinib (Lilly): RA P3 program began in Nov 2012 (triggered the 50 million milestone)
- also looking at baricitinib in psoriasis and diabetic nephropathy.. lilly in phase 2 for both
Other drugs in the pipeline:
- JAK1 inhibitors (incb39110 is the first one)... proof of concept in MF, RA and psoriasis
- cMET inhibitor (w/ Novartis)
- indolamine dioxygenase inhibitor-1 (IDO-1) testing in melanoma and ovarian cancer
General financial data:
- ended 2012 w/ 228 million, excludes 50 million milestone received in january
- 43.3 million in 4Q, 136 million full year net product revenues for jakafi; 3.7 million in jakavi royalties from NVS
- 2013 guidance: expect 210-225 net revenue for jakafi; gross-to-net adjustment 8-9%
- contract revenue: 66 million from amortization of upfront payments received from NVS and Lilly
- milestone: 60 million for EU pricing approval for Jakavi
- royalty arrangement: tiered rate ranges from high teens to mid 20s; when NVS receives pricing approval in specific EU countries, record tiered low single digit royalties payable to NVS on net jakafi sales in the US
- therefore, net cost of goods sold in 2013 will be about 2%... 4-6% when they have to make more drug (current drug being used is from lot made for approval and already expensed)
- 260 to 270 million R&D expense in 2013
- SG&A 100-110 million
- interest expense 47 million, non-cash charge of 28 million related to amortization of discount on 4.75% convertible senior notes
Question and Answer:
- 10 mg becoming most frequently dispensed dosage form
- trend toward lower discontinuation / patients staying on treatment longer
- use in intermediate-1 still exception rather than rule
- forecast includes some decline in rate of new patient starts
- high single digit growth quarter over quarter will satisfy low end of revenue range; low double digit growth in units, quarter over quarter will satisfy higher end... this explanation was prompted by a VERY WHINY question from one analyst (Thomas Wei?) who sees the guidance as low and laments the fact that new patient growths are going to stall. I sure hope, for Thomas Wei's model, that incidence of MF increases... I'd hate for him to be disappointed by a lack of new patient growth
- reasonable guesstimate at this point is that they're adding net about 90-100 new patients a month
- they don't see tablet splitting as an issue; price is the same across all dosages, so patients being titrated up and down doesn't have an asymmetric impact on revenues
- asked about what benefit a JAK1 specific would provide over JAK1/2: erythropoietin / thrombopoietin go through JAK2 exclusively... so JAK1 may retain inflammatory benefit while limiting anemia / thrombocytopenia
- most of the remaining questions were by analysts trying to divine future earnings, so if you're into that then have a listen
