Incyte Corp (INCY) — Q4 2018 Earnings Call Transcript

Thank you, Kevin. Good morning, and welcome to Incyte's fourth quarter and full-year 2018 earnings conference call and webcast. The slides used today are available for download on the investors section of incyte.com. I am joined on the call today by Hervé, Barry, and Steven, as well as by Paul Trower, our Principal Accounting Officer, who will deliver the financial section of our prepared remarks. I am also very pleased to welcome two new members of the leadership to the call today, namely Dash Dhanak, our new Chief Scientific Officer, who joined us in December; and Christiana Stamoulis, our new CFO, who joined us earlier this week. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for 2019 guidance, the commercialization of our products and our development plans for the compounds in our pipeline, as well as the development plans of our collaboration partners. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our 10-Q for the quarter ended September 30, 2018, and from time to time, in our other SEC documents. We'll now begin the call with Hervé.

Thank you, Mike, and good morning, everyone. So 2018 was another excellent year at Incyte as we delivered 25% growth in product-related revenues over last year. All four sources of revenues have shown good growth with 22% from Jakafi, 19% from Iclusig, 28% growth in Jakavi royalties, and Olumiant now becoming a material contributor to the top line. Looking into next year, I see this revenue trajectory continuing given the guidance we have provided, therefore, Jakafi to reach 1.58 billion to 1.65 billion, and Iclusig to reach 90 million to 100 million. Adding consensus estimates for our royalty income from Jakavi and Olumiant generates an expected growth rate for product-related revenue for 2019 of approximately 20%. Slide 6 takes us beyond just revenue expectation for 2019 and outlines the most important pivotal news flow items we expect for the year. Please note that these items only include FDA decisions, FDA submissions, and pivotal trial results. A more complete summary of 2019 news flow will follow in the later slide. We continue to work with the FDA regarding the priority review of the ruxolitinib SNDA for the treatment of patients with steroid-refractory acute GVHD. We recently announced a three-month extension to the review with the revised PDUFA date being May 24. We expect to submit the NDA for pemigatinib for the treatment of patients with FGFR2-translocated cholangiocarcinoma in the second half of this year. In the second half of 2019, we also expect Novartis to submit the NDA seeking approval of capmatinib for patients with MET-mutated non-small cell lung cancer. The first Phase 3 results from the itacitinib development program in GVHD are expected later this year, and if the GRAVITAS-301 trial is successful, itacitinib has the potential to be a global commercial opportunity for Incyte. We also expect pivotal results from two trials for ruxolitinib in steroid-refractory acute and steroid-refractory chronic GVHD later this year. We are working in collaboration with Novartis in the development of ruxolitinib in GVHD. Last week, we announced the initial Phase 3 result of the broad Phase 3 development program of baricitinib in patients with moderate to severe atopic dermatitis, and we look forward to additional results from that program later this year. 2019, therefore, has the potential to be a very exciting year for Incyte. And to share more details on Jakafi's performance and outlook, I'll turn the call over to Barry.

Thank you, Hervé. Good morning, everyone. Jakafi continues its strong growth. We have seen good revenue growth in Q4, which was due to new patient growth in both the third and the fourth quarters. This gives us excellent momentum as we head into 2019. Slide 9 further emphasizes the consistency of Jakafi's performance on an annualized basis. In the fourth quarter, as shown on the left, Jakafi grew 26% over the same period last year. And for the full year 2018, Jakafi grew 22% over the full year of 2017, as shown on the right. There were no appreciable changes in the level of inventory at the end of the year compared to the beginning. Today, we have provided initial Jakafi net product revenue guidance for 2019 in the range of 1.58 billion to $1.65 billion. This range includes both approved indications for patients with myelofibrosis and with polycythemia vera, along with the potential third indication of steroid-refractory acute graft-versus-host disease. Should the FDA approve Jakafi in this third indication, we will be ready for an immediate launch and would expect good reimbursement coverage given our prior discussions with payers. I'll finish my segment by reiterating our long-term revenue guidance for Jakafi of 2.5 billion to $3 billion. As you can see from the graphical illustration on Slide 10, we are now halfway to our long-term target, and we look forward to reporting future progress over the coming quarters. Now it's over to Steven for a clinical update.

Thanks, Barry, and good morning, everyone. Incyte is currently running six key late-stage development projects, as summarized on Slide 12. These six projects include potential in 16 different indications and the estimated numbers of eligible patients for each project are also included in the slide. Each individual project has substantial potential on a stand-alone basis. Collectively, they represent a set of late-stage projects that have the potential to transform Incyte into a company with multiple approved products in the United States, Europe, and Japan over the next several years. We'll focus attention today on four of them because these are the projects that we expect to generate important updates during this year. We are conducting two comprehensive programs assessing the safety and efficacy of JAK inhibition as a treatment for patients with graft-versus-host disease. The REACH program is investigating ruxolitinib and steroid-refractory disease. The data shown in the left-hand panel include pivotal REACH1 data and steroid-refractory acute graft-versus-host disease. These data are currently being reviewed by the FDA. Reach 2 also in acute and Reach 3 in chronic graft-versus-host disease are being run in collaboration with Novartis and are due to report results later this year. In the first-line or steroid-naive setting, the Gravitas program is investigating itacitinib in graft-versus-host disease. The data in the right-hand panel are from ASH, a couple of years ago, which led us to initiate this piece of the graft-versus-host disease development program. The Gravitas-301 trial is assessing the safety and efficacy of itacitinib in steroid-naive graft-versus-host disease and is due to report results later this year. We are excited by the potential of JAK inhibition to treat this often deadly disease, and it's important to note that the opportunity includes approximately 15,000 new graft-versus-host disease patients diagnosed each year globally. We also expect important news flow from pemigatinib this year, which we announced this morning was recently granted breakthrough designation by the FDA. The second-line cholangiocarcinoma trial is fully recruited, and we are now waiting for the data to mature before we run the updated analysis. Recall that in the initial data set we showed at ESMO last year, it took up to approximately six months for the maximum response rate to be seen. So we currently estimate that the NDA should be ready for submission to the FDA in the second half of 2019. The continuous dosing cohort within the FGFR3 bladder study is also recruiting, and we expect the bladder SNDA for pemigatinib to be submitted next year. We are also planning a pivotal study in the tumor-agnostic setting, which should start later this year, potentially expanding the number of patients eligible for the therapy and therefore, the potential of the molecule. I'll end my brief update with a slide on the ruxolitinib cream development program in atopic dermatitis and Vitiligo. The randomized Phase 2 data in atopic dermatitis was very well received at EADV last year, and we have rapidly progressed into a Phase 3 program. That program is already recruiting across two randomized vehicle-controlled trials, and we expect to be able to report data next year. We expect data from the ongoing randomized trial in patients with Vitiligo in the first half of this year. If the Phase 2 data warrants, we expect to move swiftly into a Phase 3 trial of ruxolitinib cream in the second indication. Vitiligo is a disease with significant psychosocial morbidity and is a condition where there are currently no approved treatments. Both atopic dermatitis and vitiligo, therefore, represent important and near-term opportunities while growing inflammation and autoimmunity research and development group. I'll now welcome Paul to the call to review the financials.

Thanks, Steven, and good morning, everyone. The financial update this morning will include GAAP and non-GAAP numbers. For a full reconciliation of GAAP to non-GAAP, please refer to Slides 26 and 27 in the backup section of the deck and to the press release we issued this morning. For the fourth quarter, we recorded 468 million of total product-related revenues, an increase of 25% over the fourth quarter of 2017. This is comprised of 380 million in Jakafi and 19 million in Iclusig net product revenues, 55 million in Jakavi royalties from Novartis, and 14 million in Olumiant royalties from Lilly. Our Jakafi gross to net adjustment was 13.4% for the quarter and 14% for the year. Our total cost and expense for the quarter on a non-GAAP basis of 391 million increased 4% from the prior-year quarter. R&D expense for the quarter was 274 million on a non-GAAP basis, which did not grow over the prior-year period, and our SG&A expense for the quarter was 97 million on a non-GAAP basis. With total product-related revenues increasing 25% and total non-GAAP costs and expenses increasing only 4%, this has driven an operating income for the quarter of 77 million on a non-GAAP basis compared to an operating loss of 4 million in the prior-year period. Looking at our full-year results, our total product-related revenues were 1.7 billion, an increase of 25% over the prior year. Our total costs and expenses on a non-GAAP basis were 1.5 billion, an increase of 21% over the prior-year period, including non-GAAP R&D expense of 1.045 billion and non-GAAP SG&A expense of 387 million. Our operating income for 2018 was 198 million on a non-GAAP basis compared to 115 million in 2017. We ended 2018 with 1.4 billion in cash and marketable securities. Moving on to 2019, I will now discuss the key components of our 2019 guidance on both a GAAP and non-GAAP basis. Please note that the guidance we provide today does not include any potential future strategic transactions beyond agreements previously announced. For the full-year 2019, on both a GAAP and non-GAAP basis, we expect net product revenues from Jakafi to be in the range of 1.58 to 1.65 billion. For Iclusig, we expect net product revenue to be in the range of 90 million to 100 million. As in the previous years, we will not be providing guidance for milestone and royalty revenues. We expect our growth to net adjustment for 2019 to be approximately 15% for Jakafi. We expect total GAAP cost of product revenues to be in the range of 112 million to 117 million and non-GAAP cost of product revenues to be in the range of 90 million to 95 million. Our non-GAAP cost of product revenues excludes 22 million of amortization of acquired product rights related to Iclusig. We expect GAAP R&D expense to be in the range of 1.185 billion to 1.255 billion and non-GAAP R&D expense to range from 1.03 billion to 1.1 billion. Our non-GAAP R&D expense guidance excludes estimated stock-based compensation expense, as well as estimated milestone expenses. We expect GAAP SG&A expense to be in the range of 471 million to 521 million and non-GAAP SG&A expense to range from 420 million to 470 million. Our non-GAAP SG&A expense guidance excludes estimated stock-based compensation. We expect the change in fair market value of the contingent consideration for the Iclusig royalty liability to be approximately 30 million on a GAAP basis and zero on a non-GAAP basis. In summary, taking our guidance for product revenue and expenses and taking account of current consensus estimates for Jakafi and Olumiant royalties, we expect this should generate non-GAAP operating income for 2019 in the range of 350 million to 450 million. I will now turn the call back to Hervé for further discussion of the year ahead.

Thank you, Paul. In our prepared remarks today, you have heard not only about the richness of our latest portfolio with many opportunities to further accelerate revenue growth, but we've also shown how top-line revenue momentum is beginning to translate into improved ratios within our P&L. So jump on Slide 22. Take the guidance that Paul just outlined, consensus estimates for 2019 royalties, and it illustrates how our P&L is evolving as revenue growth is substantially exceeding expense growth. Our last slide outlines the key news flow events we expect over the course of 2019. We're already off to a good start with the earlier-than-anticipated initiation of the Phase 3 trial of ruxolitinib cream in atopic dermatitis, as well as the initiation of the first-line chronic GVHD study for itacitinib. Operator, that concludes our prepared remarks. Please give your instructions and open the call for Q&A. Thank you.

Hey, guys. Thanks very much for taking my questions and congrats in the quarter on all the progress. Two questions for me. First off, can you talk a little bit about your expectations for volume growth versus price contribution to your 2019 Jakafi sales guidance? And also wondering if you could give us some sense of how much GVHD is baked in there. And then I have a follow-up.

Well, as you know, from our guidance, we're expecting a 14% to a 19% net sales growth in 2019 over 2018. As you know, we took a 4% price increase at the very end of 2018. We don't get all of that price, but you can see that most of that 14% to 18% is volume. Your other question was about GVHD. GVHD, we have some spontaneous use. It's a small percentage of the total use of Jakafi currently. We're anticipating once we get approval that that could double, but that's somewhere in the range, including the current spontaneous use of maybe around $80 million.

That's really helpful. And then, you didn't speak that much on updates on the life cycle strategies. So I'm wondering if you might be able to give us a status update there. Any specifics about data timing here for the PIM JAK1 combos and the SR formulation? And should we be thinking about these more along the lines of MF, solely MF extension strategies, or other concurrent PV life cycle retention strategies planned as well?

So, obviously, the patent life of RUX is through at least 2027, 2028. So it's been a very active life cycle development phase. There are three pillars to it currently. One is around new formulation work, and we showed at JP Morgan work we have done in the past with an SR formulation that we published around 2011 that is very interesting in terms of what it does to the PK curve. There's a less peak-to-trough ratio with the SR formulation and there’s the ability potentially to ameliorate some of the side effects, namely the anemia. So that work will ramp up and progress and will be in full swing to take further SR doses forward and do the required bioavailability and bioequivalence work to achieve that. The second pillar, as you mentioned, is around a combination that either enhances efficacy or improves safety or both. The one that is most advanced at the moment is the RUX plus PI3-kinase delta combination. We showed updated data on that last year in December at the American Society of Hematology. We're very encouraged by that data set. Despite patients being on at least six months of ruxolitinib, at least two months of stable dose and not coming off, and then having progressive disease with the addition of the combination, upwards of 60% of patients at 24 weeks showed some spleen volume reduction, and upwards of a third of those patients had improvement in symptoms, despite that context, which is very different from other competitors. What was very interesting with that data set is when we withdrew from daily dosing to weekly dosing, there was some rebound in the spleen response. So the second phase of that study is going this year, which is looking at continuous dosing two arms, either a 20-milligram induction for eight weeks and then five-milligram continuous, or five-milligram continuous all the way through. Should that pan out, that is our lead combination, very encouraging data. The other two you mentioned that we are running are the PIM combination and the JAK1 combinations, which will recruit this year. Hopefully, over this year, they'll recruit substantial patients, and we will aim to present data on those two combinations for which the biology is really good, probably in 2020. The JAK1 combination has two arms to it: an additive arm to RUX for patients who can't tolerate sufficient doses, and then there's a switch strategy for people who can't tolerate RUX at all. The third pillar of the life cycle is new targets. There are a number of academic collaborations that have been publicly announced, at places like Vanderbilt, Moffitt, and Penn, as well as with research groups like Syros to look for new targets. We are interested in both myelofibrosis and PVR in that space to see if we can make improvements there.

Hey, guys. Thanks for taking my question and congrats on a good quarter. One, just on topical RUX and I know in atopic dermatitis, just maybe if you can talk about the position of this asset. So we think about it more in the neighborhood of Eucrisa. Or how do you think about kind of the peak potential there? And then just a quick one on Jakafi versus myelofibrosis versus polycythemia vera, are we starting to get to the point where PV is slightly a bigger contributor? Can you characterize that as well?

So Alethia, it's Steven. I'll do the first part of your question, and Barry will address your second question. As we announced on the call, the atopic dermatitis Phase 3, both studies are up and recruiting, and will recruit over this year. The group we are after is the mild to moderate with less than 20% body surface area involvement. Currently, the program is in patients 12 years and above. So you can see the difference in overlap, for example, some of the IV products which are more targeted towards moderate and severe with different body surface area, and the target population there is enormous in the U.S. There are millions and millions of these patients primarily treated with topical corticosteroids currently. Now I'll ask Barry to address your second question.

So, MF versus PV, MF is still about 60% of the volume of the patient population for those that receive Jakafi for MF and PV. PV is about 40%, but the total growth of PV patients, for example, '19 versus '18, was 20% growth in total PV patients and 10% growth in total MF patients. So PV continues to grow at double the rate of MF patients, but it's going to take a while for PV to pass, just because MF patients stay on a drug for a very long period of time.

So, with regard to the SG&A expense guidance for '19, could you help us understand the uptick here? Are you incorporating sales build outs ahead of expected launches?

Yes. So, this is Paul. Our guidance does include launch preparations for, obviously, for GVHD. We have costs in there looking ahead to itacitinib, as well as pacritinib, so that's all baked into that guidance range.

And then just secondly, on your pipeline. So outside of the pivotal stage assets, you do have some earlier programs. Could you help us understand when we might see results from these programs in 2019, as we look to ACR and other meetings?

Salveen, it's Steven, thanks for the question. You're right. We have 17 compounds in development, eight of which we consider post-proof-of-concept assets, all with very high probability of successful and hopeful future regulatory approvals, but the earlier programs are also firing very well. I think in terms of data sets, you may see at major meetings in the first part of this year, it will be around our oral PD-L1 inhibitor. We'd like to show you some early data for the first time at a major meeting in the first half of this year. Toward the second half of this year, it may be more updates in terms of Phase 1 data sets and data expansions across some of those earlier programs.

Hi. Thanks for taking my questions as well. I have a first one on housekeeping. Can you talk about the inventory levels for Jakafi in the fourth quarter? Whether there's a significant change in that level? And then secondly, maybe a big picture question for Hervé. Now you're starting to show significant cash on the balance sheet, what do you think about the cash deployment from the balance sheet? Given the industry consolidation we have seen recently, where do you think Incyte is positioned in that landscape?

Ying, it's Barry. Regarding your question about inventory, it was within the normal range at the end of Q4. As we mentioned at the end of Q3, there was a significant drop in inventory, but it returned to normal by the year's end.

Yes. Regarding the cash question, our priority is to pursue the growth of revenue and the diversification of the top line. You can imagine that one of the uses of cash that we are always looking at, and it's a relatively challenging thing to do, is identifying opportunities to add to our late-stage or commercial portfolio in the next 24 months. This is something we are pursuing that could be strategically very important for the corporation and would be a very good use of the cash we have now. Regarding consolidation in the industry, as you know, we are building a long-lasting global innovative biopharma company, and what we presented today is also refocusing the multitude of late-stage internal candidates that we have that could add to the growth of our top line and accelerate our growth in the next few years. So that's really the priority we are pursuing. As I said, we would be looking at opportunities to acquire additional assets, if they are good quality and fit with our portfolio. That's how I would describe the cash question and the consolidation question.

I just had a couple of quick ones for you on GVHD. So, first, I'm just curious if there's any more color you can provide on the ongoing GVHD review for RUX and the additional information that was submitted to the FDA? And then secondly, as you prepare for that launch in GVHD, curious how your conversations in market research have evolved? Maybe better informed due to the potential ramp and more so peak sales opportunity for that indication between RUX and itacitinib?

Cory, it's Steven. I'll do your first question. The RUX SNDA for the steroid-refractory acute graft-versus-host disease indication is, to our knowledge, the first time that the FDA has reviewed an application for this indication, which is a complex disease with a complex treatment part. The FDA extended the action date to allow time to review additional data that we recently submitted in response to an FDA information request. This submission of additional information resulted in the extension of the PDUFA goal date by three months to May 24, 2019. Extensions, as you know, are not uncommon in the FDA approval process. Although we're obviously disappointed with this delay, we remain very confident in our data set. That's the update I can give you on that at this point in time.

So, Cory, it's Barry. We're preparing for the launch of acute refractory GVHD. We see this as our initial entry into treating more patients with graft-versus-host disease, in both acute and chronic forms. Each treatment specifically targets the acute refractory setting, which we are well-prepared for, and we believe we have a solid understanding of the disease. There are about 3,500 patients in the United States with acute GVHD, and a similar number with chronic GVHD; around half of those have steroid-refractory disease. Importantly, we also see significant potential with itacitinib, especially with Gravitas-301 and Gravitas-309, which could benefit approximately 21,000 patients globally suffering from GVHD post-stem cell or bone marrow transplant. We anticipate that itacitinib will offer substantial benefits in the steroid-naive population. Our team has gained extensive knowledge about graft-versus-host disease and the harmful effects it has on patients' lives. We've engaged with healthcare professionals through advisory boards and individual meetings, and there is genuine excitement about ruxolitinib and itacitinib as we aim to expand into earlier-stage settings, contingent on the success of our ongoing trials.

Hi, this is Ishmael on for Matthew. For Vitiligo, what would you consider to be clinically meaningful data from the Phase 2? And what is your hurdle to move this into the Phase 3?

Ishmael, it's Steven. Thank you for your question. As I said in my prepared remarks, this is a condition for which there are no approved treatments, and there are many sufferers around the world. It presents significant psychosocial morbidity. Having said that, you need an objective endpoint to conduct a study and deliver data. The way it's measured is to quantify the amount of repigmentation in various areas; there are scales used for the whole body, the co-waxy scales, and the scales that are used for the face, which is one of the areas that is obviously most visible and causes a lot of the psychosocial morbidity. Its percentage improvements in those face waxy scores and total body scores that then give you the outcomes you need. You can get a 100% improvement, you can get 75%, 50%. You need to quantify those and present them. We're obviously still in discussion and will be when we complete our Phase 2 regulatory agency around what the appropriate endpoint and the right number to hit is. Having said that, there's very little to no spontaneous remission of this disease. So anything is important in terms of the actual number achieved. Once we have the data in hand, which we expect to have in the first half of this year, we will find an appropriate place to present that. I will tell you in a very small data set, which gave us our proof of concept, we initiated work in 11 patients, six of those patients had meaningful, more than 50% improvements in Phase 3 repigmentation scores. So that's the sort of territory we've achieved with our drug to date.

I just had a couple. To follow up on an earlier question. In GVHD, it sounds like commercially you're already in the U.S. for RUX, but looking beyond that, how would you characterize the incremental OUS commercial investment for itacitinib? How do you maximize the value of that asset? Then I have a follow-up.

The first step is ruxolitinib, as you heard, we are ready to go. We have deployed our teams. So that part is included in the P&L and the guidance that you have seen. I think for itacitinib, we will have to look at the timing of when it's going to be approved, both for the U.S., Europe, and Japan. As Paul said, we have included some potential prep costs in the guidance that you have seen for the U.S., where we anticipate it will be the first to launch. In 2020, we will be deploying additional resources for Europe and Japan.

Can you talk about pemigatinib time lines and if there’s any gating to the filing purely based on the maturity of the data or anything else?

Yes, it's railing around the maturity of the data set and follow-up. We saw this very encouraging sign when the follow-up matured, the response rate over time went up. When we first presented the data, we were sitting in the mid-20% response rate range, and then the ESMO update showed a 40% independently confirmed response rate with really long duration of response in lung PFS. So in that particular tumor type, that's around maturity and needing about six months of follow-up to get the maturity you need. There's nothing else that's on the critical path here in terms of our NDA submission. There's no CMC issue or anything else.

Hi, thanks for taking my questions. Just wondering about any off-label use you could be seeing for RUX, if you are already seeing in GVHD? And then, the timing for the REACH GVHD studies?

So, we have some spontaneous use, and we've said it before, I think of the total amount of Jakafi used, maybe 2% to 3% of that is spontaneous use of Jakafi in acute and chronic GVHD. Your second question was the timing?

Yes, Peter, it's Steven. It's hard to give you exact timing. Obviously, it's event-driven, but Reach 2 is steroid-refractory acute and Reach 3 is steroid-refractory chronic, done in combination with Novartis, our partner. Global studies enrolled really well, and we fully expect data in the second half of this year for both of those studies. GRAVITAS-301, itacitinib steroid-naive acute, our global study is also fully enrolled. Again, data-driven in terms of the endpoints, but we also expect data in the latter half of '19 for all three of those studies.

Congrats on the progress and thanks for taking my question. I'm curious about the decision to move into continuous dosing in the Phase 3 cholangiocarcinoma study for pemigatinib. Can you share with us your expectations around how this move might affect efficacy and tolerability? And then, I have a follow-up question.

Thank you for your questions. Both J&J and our findings indicate that switching from intermittent dosing, where treatment is administered for two weeks followed by one week off, to continuous dosing can improve efficacy. However, this change comes with a trade-off in tolerability, as evidenced by J&J's published data showing an increase in the discontinuation rate from 10% to 20%. This is a common occurrence in drug development where achieving a suitable therapeutic balance is crucial. In our first-line cholangiocarcinoma study focused on FGFR2-driven cases, we are comparing against the established chemotherapy combination of gemcitabine and cisplatin, which has significant response rates that we aim to surpass. We believe we will excel in terms of durability, which is one of the reasons we are conducting this study. Ultimately, the approach we take will be tailored to individual patients; the study protocol will allow for dose adjustments based on tolerability, providing the option to increase or decrease dosage or even take breaks from treatment when necessary. While dosing decisions can be made at the population level, the real focus is on individual tolerability. We chose this continuous approach for the cholangiocarcinoma study for the reasons outlined earlier. In our bladder studies, our decision was largely influenced by J&J's observed increase in response rates. We had already conducted considerable research using intermittent dosing for bladder cancer and found ourselves in a similar range as J&J, which prompted our transition to continuous dosing in that area.

That was very helpful. And congrats again on getting the breakthrough designation. I had one follow-up on your small molecule oral PD-1 inhibitor. You mentioned earlier that you might have some data earlier this year. What sorts of clinical development options might you be considering?

Sure, thank you. It's Steven. I'll take the question again. As you know, we went into the clinic at the end of last year in December; we announced that at JP Morgan. It's an oral PD-L1 inhibitor, which we think looks like a very interesting mechanism of action in terms of bonding PD-L1 and then internalizing, which we showed works around that preclinically. Just to manage expectations though, the major meeting data set for the oral PD-L1 compound will be preclinical data, obviously, initially because we've just been in the clinic and are getting PK and PD data. In terms of compounded cells, that's interesting. The mechanism of action alluded to might translate. Our hope is that there will be an efficacy differentiate based on that because of its unique mechanism of action. We're going to have to show that clinically. Should that be the case, it will drive a different development than from a PD-L1 inhibitor alone. The oral nature may give us some advantages. One is in safety realm; when you run into trouble with checkpoint blockade, it can be quite devastating, especially with IV administration which is on board for a long time. With an oral, you can immediately stop dosing and potentially ameliorate safety. Maintenance settings particularly, adjuvant settings could be important where patients don't want to come into the clinic for IV and opt for an oral solution long-term. Those can include adjuvant like in melanoma, or potentially in renal carcinoma with external combinations. It’s still too early to define what the totality of the clinical development program will look like as we learn more about what we have in the clinic.

I want to follow-up on a comment you made earlier about adding late-stage commercial revenue. Specifically, could you speak about what therapeutic areas you're most interested in? What's your capacity to do a deal? And what size deal could you potentially do? Would you be willing to take on some leverage? What might that look like?

We are focused on two types of products that interest us. The first type includes early-stage technologies and Phase 1 products, which can complement our existing offerings. This relates to life cycle management in the fields of MF and PV, and how early products can assist in managing our portfolio. The second area involves opportunities for short-term revenue diversification. Our experience with our current six projects indicates that this diversification is achievable, and we will look for ways to enhance it through external growth. We are particularly targeting opportunities in oncology and hematology, as our internal pipeline's late-stage portfolio will be a primary focus for us in the coming years.

Are you on mute?

Hey, Kevin, will we be able to take any additional questions or should we close the call at this time? I think we should. In that case, I think we should close the call. Apologies to those analysts who weren't able to ask. We'll follow-up with you immediately after the call. And Hervé, would you like to make any closing remarks?

Yes. Thank you for your time today, for your questions, and we look forward to seeing you at upcoming investor and medical conferences. Thank you again for your participation in this call today. Goodbye.