Incyte Corp (INCY) — Q1 2020 Earnings Call Transcript

Thank you, Kevin. Good morning, and welcome to Incyte’s first 2020 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, Steven and Christiana, who will deliver our prepared remarks, and by Dash, who will join us for the Q&A session. During the question-and-answer session, I ask that you limit yourself to one question, and if needed one follow-up, as this will enable as many of you to ask questions as time allows. 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 2020 guidance, the commercialization of our products, and our development plans and expectations 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-K for the year ended December 31, 2019 and from time to time in our other SEC documents. In addition, I would like to caution everyone that the COVID-19 pandemic is an evolving situation, and as it's still relatively early to be able to assess the full impact of governmental, business and social actions and policies and overall economic conditions on our business. Accordingly, it is important to keep in mind that our statements on this webcast speak as of today. We'll now begin the call with Hervé.

Thank you, Mike, and good morning, everyone. I hope that all of you and your families are safe and healthy. During this unprecedented and uncertain time, it's evident that the COVID-19 pandemic has had a profound impact on almost every aspect of people's lives and has affected businesses all around the world. Before we begin, I want to take a moment to thank the millions of people who are at the frontline, from doctors, nurses to all other essential workers who are continuing to provide their much-needed services. With this pandemic at the forefront of everyone's mind, I want to start our earnings call by providing an update as it relates to the COVID-19 impact on four areas of our business, namely our commercial, supply, regulatory, and clinical operations. When we enacted our global business continuity plans over two months ago, our key priorities were to ensure that patients continue to receive their life-saving medicines, that we continue to provide our customers the support they need, and importantly, to do this in a manner that minimizes the health risk to our employees and our customers. I'm proud of the team here at Incyte for continuing to deliver throughout this period, and I'm extremely grateful to those working on-site to maintain our critical operations. Today, there has been no impact on our commercial business, and we saw continued strong performance in the first quarter. We have ample drug supply and our manufacturing processes are proceeding without interruption. On the regulatory front, there has been no impact to date on key timelines. We recently announced one of our three anticipated approvals in 2020, and we continue to expect an FDA decision on both capmatinib and tafasitamab in the coming months. We do not expect disruption to other key regulatory timelines, including the NDA submission of ruxolitinib cream for atopic dermatitis at the end of the year. With regards to clinical development, as of today, while our late-stage programs remain broadly on track, we anticipate that short-term effects may continue to emerge across different aspects of our global clinical trial programs, including new patient recruitment. The degree of impact may vary by disease state and by severity of disease, as well as by geography, as some regions are more adversely impacted. In terms of our effort to help address this pandemic, we have recently initiated the global Phase III RUX-COVID trial in partnership with Novartis to assess ruxolitinib in patients with COVID-19 associated cytokine storm. In the U.S., we are also starting another trial, evaluating ruxolitinib as a potential treatment for COVID-19 patients who are on mechanical ventilation. We have also opened an emergency expanded access program, which will allow eligible patients with severe COVID-19 to receive ruxolitinib. Studies are also ongoing with baricitinib where Lilly has recently entered into an agreement with the National Institute of Allergy and Infectious Diseases, which is part of the NIH, to study baricitinib as an arm in its COVID-19 clinical trial. Multiple investigator-initiated trials for both ruxolitinib and baricitinib are ongoing and planned as part of the global evaluation of whether JAK-inhibition plays a role in improving outcomes in COVID-19. Turning to our first quarter performance. The results reflect the benefit of our long-term strategy and our execution on the plans we have previously laid out. In the first quarter of the year, we continued our strong commercial execution with Jakafi achieving 22% growth over the first quarter of last year to reach $459 million and total product and royalty revenues growing by 24% year-over-year to $569 million for the quarter. Our financial position is also strong with $1.3 billion in cash at the end of Q1 2020. In the recent months, we also made significant progress on the regulatory and clinical development fronts. We recently received FDA approval of Pemazyre, which brings another inside discover molecule to market, and provides further testament to the strong R&D capabilities we have here at Incyte. By the end of 2020, with our respective collaboration partners, Novartis and MorphoSys, we could see two additional new product approvals with capmatinib as a treatment for certain patients with metastatic non-small cell lung cancer and tafasitamab for relapsed refractory DLBCL, both of which are under priority review with the FDA. In addition, we presented positive data from our TRuE-AD Phase III program at the revolutionizing atopic dermatitis conference, and we remain on track to submit an NDA for ruxolitinib cream at the end of the year. Despite the uncertainties brought down by COVID-19, I remain confident about our future prospects as we continue to execute on our goals. Slide 6 shows our ongoing revenue momentum over the last several years with four sources of revenue driving topline growth. We will be adding a fifth revenue stream following the recent approval of Pemazyre. Looking to the remainder of 2020, our key priorities are to maintain our revenue momentum and to drive continued growth of Jakafi in the U.S. We are also focused on executing a successful launch of Pemazyre, which Barry will cover shortly, and preparing for the potential FDA approval of tafasitamab. Our LIMBER development program remains a key priority, and we are working towards the planned initiation of our BET and ALK2 programs and the expected opening of the pivotal RUX plus parsaclisib trial. 2020 is shaping to be a transformational year for Incyte, and I look forward to updating you throughout the year. I'll now pass the call over to Barry who will provide more detail on both first quarter Jakafi performance as well as our commercial activities for Pemazyre.

Thank you, Hervé, and good morning, everyone. Slide 8 shows strong growth of Jakafi quarter-over-quarter, mostly driven by increases in patient volume. As expected, gross to net was much higher in Q1 due to our portion of the donut hole we are responsible for under Medicare Part D and the increase in TRuE-AD out-of-pocket cost or Troop that began in 2020. The chart on the right shows the total number of patients on therapy across all three indications. The total number of patients and new patients treated with Jakafi for MF, PV, and GVHD continues to grow. In GVHD, Jakafi is rapidly becoming the standard of care in the steroid-refractory acute setting. We are very pleased to have REACH2 published in the New England Journal of Medicine, underscoring the importance of Jakafi as a treatment option for patients with steroid-refractory acute GVHD. In the 300-patient randomized REACH2 trial, ruxolitinib demonstrated a 62% overall response rate versus 39% seen with best available therapy. REACH2 was the first randomized trial to show a benefit in this hard-to-treat patient population and showed convincingly that ruxolitinib was more effective than investigators' choice of therapy from a list of nine commonly used options in patients in whom steroid therapy had failed. We also applaud the FDA for granting full approval of ruxolitinib last year based on the single-arm REACH1 trial. Results from REACH3, a study evaluating ruxolitinib in the steroid-refractory chronic GVHD, are expected in the second half of this year. Our long-term outlook for Jakafi remains positive. Patient demand remains strong, and as a result, we are reiterating our guidance for the full year. It is during this time, however, that we must stay focused and work even harder to engage our customers to provide them with continued support and to drive disease awareness. We have had much success in implementing our digital and virtual strategies, and our top priority is to ensure that patients are able to receive their medicine. Our commercial focus in the U.S. remains on the success of Jakafi, and we take these learnings and apply similar methods to our launch of Pemazyre. Pemazyre is the first treatment innovation for patients with cholangiocarcinoma in 25 years, and represents an important addition to our portfolio of oral cancer medicines. We have launched Pemazyre and are focusing on a targeted group of approximately 1,000 physicians, two-thirds of which are already prescribing Jakafi. This allows our commercial team to leverage existing relationships, helping to facilitate part of the promotional effort behind Pemazyre. We will also drive health care professional interaction through our virtual programs and digital promotional assets, building on some of the existing strategies we are already successfully utilizing with Jakafi. Our sales, market access and medical affairs teams are actively scheduling virtual appointments with our customers and are using the technology in place to share resources and materials in virtual meetings. All of these efforts complement our ongoing unbranded, educational campaign focused on cholangiocarcinoma. And of course, as more patients are treated with targeted therapies like Pemazyre, it's increasingly important to continue to educate and promote appropriate FGFR testing in order to enable the proper identifications of those patients who stand to benefit most from Pemazyre. While we appreciate that the commercial potential for cholangiocarcinoma may be relatively modest, every patient we can help matters. So we are also developing pemigatinib in other tumor types that are driven by FGFR alterations. With that, I'll turn the call over to Steven.

Thanks, Barry. And good morning, everyone. Starting with ruxolitinib cream, we were very pleased to share with you the positive results from our Phase 3 TRuE-AD program at the revolutionizing atopic dermatitis conference a few weeks ago. As you can see on the graphs on the left, ruxolitinib cream achieved clinical and statistical significance in the primary endpoint of investigator global assessment treatment success, or IGA-TS at week eight. Similarly, clinical and statistical significance was demonstrated in a 75% reduction in the eczema area and severity index score or EASI-75, and in the analysis of the four-point reduction in the itch numerical rating scale, or NRS4, which is what the FDA has defined to be a meaningful endpoint in terms of itch reduction. With the highest concentration of 1.5%, we see substantial and more importantly, a very rapid reduction of itch with RUX cream within 12 hours of initiation of therapy. The strength of these data show ruxolitinib cream has been able to demonstrate both anti-inflammatory and antipyretic activities, which together could make for a very effective therapy. As it relates to safety, there were no notable safety findings, either locally or systemically associated with treatment. We are on track with the development timelines for ruxolitinib cream. The long-term safety data have been collected, and we continue to expect to submit the NDA for ruxolitinib cream at the end of this calendar year. The vitiligo trials remain ongoing and we continue to expect data in 2021. Turning now to Pemazyre. Pemazyre was approved based on data from the FIGHT-202 study, where treatment with pemigatinib resulted in an objective response rate of 36% and a median duration of response of over nine months in patients with FGFR2 fusions or rearrangements. The most common adverse event was hyperphosphatemia, most of which was low-grade and manageable. The full data set from FIGHT-202 was recently published, and we are very proud to offer a therapy for patients living with cholangiocarcinoma, where prognosis is poor and where there have been limited treatment options to date. We continue to study pemigatinib in clinical trials for bladder cancer, 8p11 myeloproliferative neoplasm, as well as for tumor-agnostic indications. Now turning to efforts in COVID-19. Cytokine storm is a severe immune overreaction that can be triggered by a viral infection and leads to serious complications, including acute respiratory distress syndrome, which is one of the leading causes of mortality in COVID-19 patients. Patients with severe COVID-19 experience massive immune infiltration with associated pro-inflammatory cytokines, ultimately leading to damage. Many of the elevated pro-inflammatory cytokines that perpetuate the cytokine storm, exemplified by interferon gamma, IL-6, GM-CSF, and G-CSF signal either through JAK1 or JAK2. We believe that treating cytokine storm with ruxolitinib as an inhibitor of both JAK1 and JAK2 may mitigate COVID-19 associated cytokine storm and thus reduce the overall disease burden. We recently initiated our RUX-COVID program to evaluate ruxolitinib as a potential therapy for patients with COVID-19 associated cytokine storm. Our team, in collaboration with our partners at Novartis, initiated a global Phase 3 program. We anticipate recruiting approximately 400 patients with COVID-19 associated cytokine storm in RUX-COVID. We will be evaluating ruxolitinib, 5 milligrams BID plus standard of care versus standard of care alone. The composite primary endpoint is the proportion of patients who die, develop respiratory failure, require mechanical ventilation, or acquire ICU care by day 29. We are also opening a second Phase 3 trial in the United States, the 369 trial that will evaluate ruxolitinib in patients with acute respiratory distress syndrome secondary to COVID-19. ARDS is a type of respiratory failure characterized by rapid onset of widespread inflammation in the lungs. This trial will evaluate two doses of ruxolitinib, 5 milligrams BID and 15 milligrams BID and is expected to recruit around 500 patients. The key difference between RUX-COVID and the 369 trial is that patients in the former are not on ventilation, whereas those in the 369 trial are on mechanical ventilation. My last slide is our news flow summary. As you can see, we have begun the year well and have already announced several important milestones, including positive Phase 3 data from ruxolitinib cream and the recent FDA approval of Pemazyre. With that, I would like to turn the call over to Christiana for the financial update.

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 slide 25 and 26 in the backup section of the deck and to the press release we issued this morning. Before turning to our results for the quarter, I'd like to review the accounting treatment for collaboration with MorphoSys. As a reminder, our collaboration with MorphoSys has two components. The co-development and co-commercialization of tafacitamab by Incyte and MorphoSys in the U.S. and the exclusive development and commercialization of tafasitamab by MorphoSys outside the U.S. In terms of how we will be accounting for the collaboration, if tafacitamab is approved, MorphoSys will record all sales in the U.S. and Incyte will record wholesales outside the U.S. Our COGS will include only COGS outside of the U.S. as well as royalties payable to MorphoSys on net sales outside the U.S. Our R&D expense will include a 55% share of global and U.S.-specific development costs, as well as 100% of any development costs specific to territories outside the U.S. In addition, it will include any upfront and milestone payments that are payable prior to approval. Our SG&A expense will include only our commercialization costs for tafacitamab outside the U.S. Finally, we will record our 50% of the U.S. net commercialization profit or loss as a single line item in our financial results, as a revenue item when it constitutes net profit or as an operating expenses line item when it constitutes a net loss. COGS and all costs associated with the commercialization efforts related to tafacitamab in the U.S. will be included in this profit or loss sharing line, and not in the COGS and SG&A expense line. Now moving to our results for the first quarter. Revenue growth continued to be strong across all products, with total product and royalty revenues of $569 million, representing an increase of 24% over the first quarter of 2019. This is comprised of $459 million in Jakafi and $27 million in exclusive net product revenues, $56 million in Jakafi royalties from Novartis, and $25 million in Olumiant royalties from Lilly. Our total cost and expenses for the quarter on a non-GAAP basis of $1.2 billion include the $805 million related to the upfront consideration to MorphoSys, which consisted of a $750 million upfront payment and $55 million premium on our purchase of MorphoSys stock. Excluding our R&D upfront and milestone expenses, total COGS, ongoing R&D, and SG&A expenses for the quarter was $371 million on a non-GAAP basis. Ongoing R&D expense for the quarter was $251 million on a non-GAAP basis, representing a 3% increase from the prior year quarter. SG&A expense for the quarter was $98 million on a non-GAAP basis, representing a 12% decrease from the prior year quarter. This was primarily due to the timing of certain expenses. The collaboration loss for the quarter was $2.1 million, which represents a 50% share of the U.S. net commercialization loss for tafasitamab. Our financial position continues to be strong as we ended the quarter with $1.3 billion in cash and marketable securities. The decrease from $2.1 billion at the 2019 year-end reflects the upfront payment and stock purchase related to the MorphoSys collaboration, partially offset by the cash flow generated during the quarter. Moving on to our guidance for 2020, we are reiterating our revenue, COGS, R&D, and SG&A expense guidance for the year. While Jakafi's exclusive performance in the first quarter was strong, the COVID-19 situation presents uncertainty. Therefore, we believe it is prudent to retain the full range of the previously communicated revenue guidance of $1.88 billion to $1.95 billion for Jakafi and $100 million to $105 million for Iclusig. For R&D, we are reiterating our previous guidance of $1.21 billion to $1.28 billion. As a result of reallocating funds between programs in our portfolio, we now expect this to cover also our 55% share of tafasitamab co-development costs. For clarity, this guidance range excludes the $805 million upfront consideration recorded in Q1 related to our collaboration with MorphoSys. Finally, at this early stage, we will not be providing guidance on Pemazyre sales or on our collaboration, net profit or loss resulting from the commercialization activities for tafasitamab in the U.S. That concludes our prepared remarks. Please give your instructions and open the call for Q&A.

Yes. Thanks for taking my questions, and congratulations on the quarter. Maybe a question for Steven. It seems like we're going to be getting a decent amount of data out of the LIMBER program over the next six to nine months. Maybe if you can set the stage there. When we see PI3-kinase data in the first half, should we think of that as setting kind of the bar for all other combos to warrant advancement, or do you think the combinations are likely to be effective in different patient populations, and therefore they need to be evaluated all on their own?

Hi, Marc, it's Steven. Thanks for the question. So, obviously, as Hervé alluded to upfront, this remains of critical importance to us and a major focus for us. Thankfully, despite the pandemic, we remain on track as well. In terms of this year's execution, there are three aspects beyond everything else going on in LIMBER. One is to get the monotherapy safety components of ALK2 and the BET program done and moved to the combinations of RUX plus ALK2 and RUX plus BET. And then as you alluded to, is to start the pivotal Phase 3 of RUX plus PI3-kinase delta. They are slightly different. We don’t have a biomarker selection per se, but they have different intents behind the program. If you look at ALK2, the combination there, it's important to both focus on enhancing efficacy, which we expect, and also safety in terms of anemia there and hopefully ameliorate the anemia through hepcidin inhibition, which then would translate to being able to maintain ruxolitinib dosing and hopefully also enhance efficacy. In terms of BET BRD inhibition, we’ve watched the consolidation data evolve both in the first-line and later settings, and we have to ensure that there are apple-to-apple comparisons as much as possible in terms of patients treated, but the idea is to do the same thing there in terms of enhancing the efficacy of ruxolitinib in those settings, particularly in the second line and potentially in the first line as well. And obviously, we will just see where the data leads us in terms of getting that combination done as efficiently as possible. For delta, we very carefully built that data set. We've done different experiments with scheduling and dosing, and we've now come down to constant dosing being the way to go in terms of delta. In terms of the magnitude of the dose, we think we've woven the therapeutic ratio correctly in terms of getting the efficacy we need from delta inhibition, but not the enhanced toxicity from it, and that's why we're initiating the Phase 3 studies. The bars may end up being somewhat different in first line versus later lines. As we speak today, the first-line bar in terms of spleen volume response, which we set with ruxolitinib years ago, remains a 35% measured reduction plus associated symptom reduction. In later line settings, we'll see as we work with regulators whether a lower bar may be acceptable, for example, something like a 20% spleen volume reduction with associated clinical benefit in other endpoints like symptoms, and that remains to be worked out with regulators. So the programs are full steam ahead as much as possible given COVID-19, and we're confident that they are in a good place and have slightly different intents to all three programs.

Okay. And if I can do a follow-up based on that. You mentioned one of the big things is the BET inhibitor getting eventually into a combination. In the press release, it says you're preparing a Phase 2. Does that mean you started combination dosing already, or is that Phase 2 the beginning of combination dosing?

So Marc, just to remind you, we had numerous BET inhibitors in the clinic over the last few years. We put ourselves on hold due to on-target thrombocytopenia a little over a year ago and then sort of resurrected that second BET inhibitor to go into the clinic now. What I'm saying is we know that compound pretty well. Obviously, now we're dosing at a much smaller absolute dose in terms of about a 20% to 30% dose range versus what we were in the clinic before, and expected on-target toxicity should obviously be much less. We just need to prove that to ourselves hopefully relatively efficiently with monotherapy and then start the combination as soon as possible. So that will be the Phase 2 component, if you will, will be when we move into the combination part. But I think the semantics aren’t that important, what you call it here because it's about just getting sufficient safety and then go into combination as efficiently as possible.

Hey. Good morning, guys. Thank you for taking my questions. I wanted to ask you about your work that you're doing in COVID-19. And I guess, first, do you have much insight into the timelines for RUX in the COVID-19 studies, especially CRS? And when you're thinking about standard-of-care, do you think you're going to have to build remdesivir into your protocols? And then secondly, I recognize this isn't the primary purpose of this work, but can you discuss any general thoughts you have about the potential market opportunity if RUX were to ultimately be approved here? Thanks.

So Cory, it’s Steven. I'll start off and then hand it over to Herve for your second question. So again, there are two studies. There's RUX-COVID, the global study with Novartis in patients who are sick in hospital with evidence of elevated cytokines but not ventilated yet, hopefully not. The second protocol, the 369 protocol, is in ventilated patients, and we're testing two dose levels there. We knew that the standard-of-care would likely evolve and would evolve relatively rapidly, so we routed in allowing standard-of-care in combination with the treatment arm, in this case, ruxolitinib, as well as the standard-of-care arm to be as dictated on the day. So it's open to whatever would have evolved and very much had prepared for remdesivir being the potential standard-of-care, which it looks like it is now. So there's no issue related to that. What we will have to watch from a statistical point of view, obviously, is that the arms are full with appropriate numbers of both patients. But given where we're conducting the studies in Europe with Novartis and here in the United States with us and the sites that are involved, we expect that to be the case, and remdesivir would be rapidly adopted as a standard-of-care and wouldn't be a problem. There's no interaction to worry about in terms of drug-drug interaction with that particular antiviral and ruxolitinib. So we're ready to do that. And then for the market opportunity part, I'll hand it over to Hervé.

Yeah. Thank you. So first, I mean, obviously, we hope that it would be a relatively short-lived phenomenon. So frankly, we don't see COVID-19 as a commercial opportunity of any magnitude for ruxolitinib. We moved very fast. I mean, there is a very strong preclinical rationale. There is a lot of work that was done already with JAK inhibition in CRS from CAR-T treatment. So there is very good science. We had the certainties, both at Novartis and Incyte, work together to put the program in place. Frankly, it was very interesting to see the speed at which we were able to work on this with Novartis, where we made the decision to go into the protocol on the phone with Velcea in a few minutes. We had the team's work over the weekend to get the protocol prepared so that it could be submitted. The speed at which everything moved was really driven by the emergency of trying to find a solution for this pandemic and the COVID-19 situation around the world. We think over time – and then we put in place an already access program in the US that will ease up already and will be providing the opportunity for all patients to receive ruxolitinib as part of this protocol free of charge. So that's where we are. The Phase 3 studies are starting. We will have the results, I assume, in Q3 and then we will work with the FDA to see what we do from there. But from our side, we don't see it as a meaningful market opportunity. Over time, I think it's really trying to deal with the situation that we are all facing.

Alright. Great. Thanks so much for taking the question.

Good morning. Thanks for taking my question. The first one maybe for Hervé. How are you thinking about capital allocation and BD strategy in the context of your launch outlook? You've got three this year and potentially three to four next year. And then given the pipeline outlook as well? And then a second question here with Pemazyre. Can you discuss how the groundwork around the launch in cholangiocarcinomas will set you up for bladder cancer? Thank you.

Yeah. So I'll let Barry speak about Pemazyre. On the capital allocation and the BD strategy, I think we are very much in a mode that has been demonstrated by what we have done over the past few months. I mean, we are trying to continue to build a portfolio that will grow our revenue line, continue to grow the revenue line at a fast pace over the next five to six years, so that we have a diversified portfolio in that window of 2025 to 2030. I think the agreement with MorphoSys is a good example of that. It's synergistic from the commercial standpoint. It's dealing with the customer base that we know very well in hematology. It's adding a new product to our hematology portfolio and it has a large potential to contribute to our revenue growth. So we will continue to look for that type of opportunity. There is a dermatology field that is also now the second division that we are building. So it could be another place where if there are good opportunities in that field, we could also invest. We have a strong cash position now. We also have a very strong cash flow. So that's really the drive for our capital allocation and strategy is to continue to grow the revenue and diversify the portfolio with a target in the years 2025 to 2030 as sort of where we want to see the impact of these new products and these investments.

So the second part of your question, Salveen. So Pemazyre launch is going very well. We are very proud of the company that we got approved on a Friday night by the FDA, and we had the drug in our distribution center. By Sunday, we shipped out the drug on Monday. So prescriptions are coming in for Pemazyre. And to date, we have no indication that there's been any problem with market access or payers not paying for it. So in our sense, it's actually going very well despite the fact that we're doing a virtual launch. We've learned lots of things. We've been doing virtual activities, digital activities for Jakafi for a while now, and we're getting even better on it for Pemazyre. So that's going very well. For bladder cancer, the most important thing for cholangiocarcinoma and then for bladder cancer is that physicians are, in fact, testing for FGFR alterations. We think that as we continue to work to educate healthcare professionals on making sure they're testing in a cholangiocarcinoma situation for FGFR2 fusions or rearrangements, that will set us up very well for moving to bladder cancer because the most important thing is to identify the most appropriate patients that could benefit from Pemazyre in bladder cancer when we have the data available.

Hi. Thanks very much for taking my question. I guess a question on the commercial side for Barry. Just wondering if you're seeing any changes in prescription patterns for Jakafi exiting first quarter and maybe early in second quarter as a result of COVID-19, things like accelerations of refills or fills, longer duration scripts, any impact on compliance in either direction? And I'm wondering also if you're starting to see any impact to GVHD as transplant practices evolve. Thanks.

Sure, Brian. So for the first part of your question is have we seen any changes in the amount of drug that patients are getting? The answer is no. Generally speaking, all of our patients on Jakafi get a 30-day supply, particularly for MF or PV, and there was only about 3% of patients that actually might receive a prescription for more than 30-day supply, and that hasn't changed. At least in the first quarter and now moving into the second quarter, we haven't seen any changes for that. As opposed to new patient starts, again, the first quarter, we had a very good first quarter. New patient starts were very good. In fact, that should be able to carry us through for the next couple of quarters until we get back to a more normal state. So we're very confident in that sense. You know, there might be some indications in those high-impact areas, whether it's for GVHD, MF, or PV. So places like New York City, for example, you might see a slowdown in new patient starts. But in fact, because we are on oral therapy that's well-known, has been on the market for GVHD and, of course, for MF and PV for a long period of time, those refills and those patients are coming back, and that’s why we are still confident in our guidance that we provided today.

Hi. Thanks. Good morning. I had another question on RUX for COVID-19. I guess, recently had a call with Palm Nages, who is the Head of an ICU COVID-19 taskforce, and she was discussing the history of immunomodulators and respiratory distress syndrome. Clearly, CRS here manifesting a respiratory distress is a little different than CRS that you see with cell therapy. She mentioned that immunomodulators historically have failed in every single trial in respiratory distress syndrome. I guess I want to ask you guys why maybe that history is not relevant here and why COVID-19 is different?

Yes, Tyler, it's Steven. Thanks for your question. It's always good to have these learnings from prior studies invoked. You know, I think the central difference here, and I have to be careful about just catching semantic labels to things that then apply to other things. If you biologically and pathophysiologically at what’s going on, on the information we have out of China and now other places, in these patients there is elevation of moderate elevations of cytokines that have been documented like IL-6. There is evidence of acute phase reactants going up like C-reactive protein and ferritin as well. We have evidence that with drugs like ruxolitinib, you can use appropriately suppressive doses. The question is whether they will translate to a clinical improvement in that setting. Just to be clear, it's not across the board for every single patient with this entity. These RUX-COVID studies are for sick patients in the hospital, who are pre-ventilation but have biochemical evidence of cytokine storm or cytokine elevation and acute phase reactants being positive and then are randomized to ask the question very clearly. In this setting induced by COVID-19 does cytokine elevation and those elevated pro-inflammatory cytokines result in the clinical improvement? It's different from ARDS due to other entities that in the past may have caused it. That's why I think your word of caution is good, but this is a different entity, and we have to be careful of some of the semantics.

That's helpful. And maybe just a brief follow-up. As we think about JAK’s inhibition in comparison to IL-6, is there any reason to believe that JAK inhibition will be better?

Yes. This is Dash. I will take that question. So, yes, in principle, as Steven mentioned, with something like an IL-6 antibody, you're only really blocking the one cytokine that's led to be involved in the disease process. With something like JAK inhibition, you're now targeting multiple cytokines, which all signal downstream through the JAK-STAT pathway. In principle, we would argue, and I think there's data out there to support this, that by going further downstream and targeting multiple cytokines, you should have a much bigger effect than targeting a single protein that we know is involved in the process.

Great. Thanks for taking my question.

Hi. Good morning. Thanks for taking my question. So I had a couple on tafacitamab. And so first, I wanted to see if the MAA submission is still on track for mid-2020 in the EU? And secondly, I wanted to see if COVID-19 related disruption is having any impact on your build-out of the team and infrastructure you'll eventually need to be commercializing tafacitamab in Europe. Lastly, for the initial Phase-I data I believe we're expecting, in first-line DLBCL by the end of the year, what can we expect to see there? And how should we frame our expectations for what the benchmark should be there?

So Vikram, it's Steven. I'll do your first and third question. Then someone else will take your commercial question. So just to cut to the chase, in terms of the MAA filing, yeah, it's completely on track. We have had no problems getting that together and getting ready to submit it appropriately. In terms of first-line diffuse large B-cell lymphoma, the Phase I looks at the regimen of tafasitamab the Care Standard, R-CHOP. It's safety profile versus tafa plus R-CHOP alone without the LIM addition. That is ongoing, and we should have data by the end of the year to then enable a decision on which of those two regimens should potentially be used against R-CHOP in a larger randomized Phase III first-line study. So that remains on track to be done by the end of the year.

And maybe I can speak about Europe, and Barry can speak about the U.S., which is coming sooner. In Europe, we are at the stage of the submission. We are sort of targeting next year. As you know, we have in place a team in hematology today already. We will be expanding that team, and we hope and we expect that the expansion will take place after the confinement has been lifted in that case. If it's not the case, obviously, it will lead us to a different direction. Regarding the U.S. and the prep for the U.S., maybe Barry can say a word more.

Sure. Obviously, we're co-promoting with MorphoSys. So MorphoSys has their team fully in place already, sales, medical, market access, and so forth. We actually have our medical affairs and market access team in place. In fact, they're actively bringing on our salespeople. As far as COVID-19 goes, in our current situation, it's a very good time actually for them to train and become experts in diffuse large B-cell lymphoma and tafasitamab if they're not already there. So training continues to go on in action with healthcare professionals, as we continue to prepare for this launch. We don't think it will interfere with it, and even if we have to do a lot of our launch of tafasitamab virtually. We're fully prepared to do that as well.

Good morning. Thanks for taking my questions. Two quick ones on the I-O programs. Just the decision to not start a stage three non-small cell lung cancer trial, I think that's probably prudent. But how do you think you get a return on investment with your PD-1 antibody? And then as a follow-up for the oral compound, when you see data late this year, is there a potential to kind of quickly advance this to later stage trials, if you hit a pharmacodynamic and safety profile? Are we going to just move to a kind of mid-stage expansion indications going more?

Yeah. Maybe I can take the first question on the antibody on the PD-1 antibody 012, and Steven can speak about the perspective on the project for the rest of the portfolio of the oral products. I think if you remember, the rationale at the beginning is still totally true that it is very useful as a portfolio to have a PD-1 antibody that you can combine with other products that would be potentially used in the same patient population. The typical example would be FGFR in bladder cancer, but there are many other combinations being done, and I think that rationale is absolutely true. On top of it, we have the so-called niche indication program where we could have in the relatively short term potential for an approval of the product. So this is ongoing and doing well. We had this program in lung cancer, and we have one of the two Phase 3 studies in lung cancer in first-line non-small cell lung cancer. We decided not to do the other one, mainly because the design of the study was such that it would be problematic to gain FDA approval without doing a study that was extraordinarily large or very risky. We're in a situation where we believe there is a clear rationale to have an anti-PD-1 antibody in our portfolio, where we have a short-term opportunity with some of the niche indications. We have to take a little bit more time with the potential to have that product approved in the first-line treatment of non-small cell lung cancer, and that would give us an overall ROI that would be very satisfying on top of a strategic opportunity also to have a springboard for our oral PD-1 program. I will let Steven speak about the oral program.

Thanks, Hervé. In terms of the oral PD-L1 inhibitor, the number we call 550 has been in the clinic for a little over a year now. It obviously started off with the first-in-human dose escalation to get to a recommended Phase 2 dose. That we know is in the pharmacologically active range in terms of PD-L1 inhibition and what we want to see in the tumor microenvironment as well. Then move on to treating tumors, which in broadly speaking, we call benchmarking. Looking at areas that are potentially I-O naive settings like lung, melanoma, where we can treat those patients in that part of the world, and that's going on now to get that data to see the efficacy bars, the efficacy signals that we get from the drug in those various entities. Once we're able to look at that this year, internally, we would then decide if we have proof of concept, where it exists and where to go. The way we approach it, which is the meat of your question, is what are the rapid registration approaches then once we have internal proof-of-concept and where we want to go and chase those various entities, and then look more broadly, given that it's an oral therapy, given that it lends itself to maintenance and adjuvant settings, again, once we've achieved proof of concept, have the efficacy we've seen, look at those bigger Phase 3s in those sort of settings, and then include potentially large tumor types as well. The program continues to progress well, and we're enrolling patients as we speak in the benchmarking setting to work as quickly as we can to proof-of-concept. We've demonstrated that once we hit that and once we're comfortable internally, we could move to later trials very quickly.

Thank you.

Good morning. A couple of questions. Going back to Jakafi estimates for the year. On reiterating your guidance, I just wanted to get a little bit of color on your thoughts maybe about mix. Can you give us an idea of what percent of sales right now are coming from Medicaid? And what part of maintaining guidance assumes that, that proportion stays the same? I'm asking this question because the unemployment rate that we temporarily has picked up higher. How does that come into your calculations about revenue streams from Jakafi for the rest of the year? And then a pipeline question, if I might also ask, what have you been able to learn from the launch of BALVERSA? The reason for this question is more to get a sense of how you're thinking about the HEMI second indication in urothelial and if there's any learnings you've gotten from that? Thank you.

Sure, Tazeen. So as far as our mix of patients, in this situation, we're fortunate that most of our patients are covered by other government programs, Medicare Part D, VA, DOD, Tricare, and so forth. Our commercial patient population is about 30% to 35% that makes up. Yes, Medicaid is really only about 4% of our payer mix right now. Could it go up? Sure. But again, if it's like 30%, it's going to go up 10%. We really don't think it's a big factor at all. As we go forward with our forecasting for the rest of the year and the guidance, that we provided today, we'll have to see. Obviously, there's uncertainty there, but nevertheless, we think we're okay with reinforcing our current guidance. As what we learned from BALVERSA, I don't know what we've learned. We haven't heard a lot from Janssen, or at least I haven't heard left from Janssen; they don't seem to be releasing their sales on BALVERSA themselves. The most important thing perhaps is that they're continuing to educate on testing for FGFR alterations that could help us in the future.

Hi. Thanks for taking the question. Curious about your work in dermatology. What are the gating factors to filing your topical RUX NDA for atopic dermatitis? And then what are your plans to build your dermatology commercial infrastructure? And for vitiligo, how is that study enrolling? And how has it been impacted by COVID-19? Thank you.

Jay, Steven. Again, I will do your first and third question and someone will take your middle one. In terms of the atopic dermatitis studies, they have completed enrollment. Obviously, we've presented the data now, and we alluded to it in the prepared remarks. We are moving full steam ahead to get that file in place. We were slightly worried about the impact of COVID-19 on the ability to go to sites, monitor, and grab the data. But we haven’t had any problems to date, and that’s why we said on the prepared remarks we remain on track to do that submission by the end of this year. That remains the plan, and it's full steam ahead on that. It's why the end of the year, it's to wait for the safety follow-up. So we need that adequate range of safety follow-up from the last patient to make the complete submission and get it in by the end of the year. In terms of the vitiligo studies, they were enrolled really well. There's a minor impact from COVID-19. But as Hervé said in his remarks, which I think are really important to remind you, different parts of the world have impacted at different times. Our studies remain on track, and we remain on track to deliver those studies in 2021 as planned.

On the commercial plan, we have already an excellent clinical development team that is in place. We are looking at all the other components of what will be a commercial group that is of high quality with a lot of experience in the field with market access, with medical affairs and with the commercial group. So all of that is ongoing. You heard the timeline. The submission is planned for the end of this year. You can expect the end of next year as being the potential launch date, so we are on track to do that. Outside of the U.S., frankly, we are looking at many different optionalities, which could be going alone in Europe or having a partner, and both options are still open, and we have discussions ongoing to identify what would be the best way to do it. I can tell you following the excellent data we had in atopic dermatitis, it certainly stimulated a lot of interest. I would say for the rest of the world, we are more certain that we will need a partnership instead of building, and we are also looking at the right timing for putting these partnerships in place for Asia and some other regions of the year. The plan is really being executed now, and it's in good shape. For the U.S., as we said, the build-up of the commercial team is already starting with the first component with market access and some marketing people.

Thank you for taking my questions. Could you provide an overview of the profile of competitors in bladder cancer and how you believe it compares to Balversa and other recently launched therapies like durvalumab and avelumab? Additionally, regarding tafacitamab and its launch in the U.S., I've noticed some recent FDA developments. I'm curious about the potential for overlap in marketing with your existing Jakafi target market and whether your current sales force will be utilized for the tafacitamab launch in the U.S.

So Michael, it's Steven. I'll take your first question and thank you for it. So again, in terms of bladder cancer and FGFR3 being the driver there, we have the monotherapy data, both with intermittent dosing and continuous dosing coming in and looking at it. We already spoke on a call a couple of weeks ago that there has been some COVID-19 impact and our ability to gather that data internally and present it. So it’s more likely in early 2021 that we'll have that monotherapy data for you. We have an ongoing first-line study in combination with a PD-1 inhibitor with pembro. Obviously, you alluded to how does it fit in, in terms of the Seattle drug. We'll have to see. There may be evolving cash standards, and we'll have to watch carefully. We may have to change the first-line study as that market evolves and that profile of treating patients evolves. But we're on track in terms of getting that bladder data early next year. What's very important to us, though, is the tumor-agnostic program, given the potential ability to impact multiple different cancers with multiple different histologies is enrolling incredibly well, and we’ve seen a little to no COVID-19 impact there. We're able to find those patients and get them into that study, and that's going to be important to our overall life cycle management of the drug. For your next question, I'll hand it over to Barry.

Yes, Michael. Your comment about the FDA and approvals. We're prepared anytime between now and the PDUFA date to launch tafacitamab, and yes, actually, the nice thing about tafacitamab and diffuse large B-cell lymphoma overlaps completely with our current target population for myelofibrosis, polycythemia vera, and GVHD.

Great. Thanks for taking the question. I appreciate it. Just on GVHD and Jakafi, do you have a sense of how the duration of treatment has evolved at this point? And then, I just had a question on the LIMBER program. When you look at the totality of that program, do you see it enhancing the overall number of patients that can be brought into the MF population?

I will take it for part and hand it over to Steven for the second part. So, the duration of therapy, it's a little bit harder to get the duration of therapy for GVHD than it is for MF and PV for example. We just go by the clinical trials, and approximately six months is what we believe for the duration of therapy for acute steroid-refractory GVHD.

Regarding your second question about the LIMBER program and its potential to reach more patients with MF, the straightforward answer is yes. For instance, ALK2 has a small number of patients who discontinue therapy primarily due to the development of unmanageable anemia. If ALK2 effectively inhibits hepcidin and manages that issue, it would allow patients to remain on the drug and gain additional benefits. Furthermore, it could also enable treatment for patients who are currently unable to take the medication. This is one valid example. Additionally, our XR formulation, which is taken once daily, offers potential convenience for patients, even though this has not been a significant issue so far. If the drug also results in a flatter pharmacokinetic profile and induces less anemia, it may lead to increased usage among MF patients. Ultimately, if we achieve the desired enhanced efficacy, physicians will be more inclined to use our product in these situations. In summary, the response is clear: if we reach our goals, we should see an increase in patient access.

Hi. Good morning. Thanks for taking my questions. Wondering, Hervé, if you can comment a bit more on the PD-1 strategy. What are your commercial expectations in first-line lung cancer and can you elaborate at all on any more of the niche indications that you had mentioned?

Yes, as we said, the niche indications are relatively small in terms of the number of patients for each of them. There are a potential way to have to product approved, which could be very important for many other aspects of the program and the combination with some of our pipeline products. The typical example would be FGFR in bladder cancer, but there are many other combination that are being done, and I think that rationale is absolutely true. On top of it, we have the so-called niche indication program that could provide us a relatively short-term opportunity for an approval of the product. This is ongoing and doing well. And for first-line non-small cell lung cancer, as you know, the approach we have is a mid- to late-stage approach where we have one of the two Phase 3 studies in lung cancer in first line. We decided not to do the other one mainly because the design of the study was such that it would be problematic to gain FDA approval without doing a study that was extraordinarily large or very risky. We are in a situation where we believe there is a clear rationale to have an antibody anti-PD-1 in our portfolio, where we have a short-term opportunity with some of the niche indications. We have to take a little bit more time with the potential to have that product approved in the first-line treatment of non-small cell lung cancer, and that would give us an overall ROI that would be very satisfying on top of a strategic opportunity also to have a springboard for our oral PD-1 program. So I will let Steven speak about the oral program.

Good morning. Thank you for the questions and congratulations on the quarter. Steven, can you elaborate on the data collection and validation disruptions at site 201? Is this issue specific to that study, or could it affect other studies as well? If there's potential for impact on other studies, what measures do you have in place to mitigate that risk? Additionally, Barry, I continue to be impressed by the growth in MF. Every time I think progress has plateaued, you manage to find more patients. I see the numbers are around 8,000 patients for MF, 4,500 for PV, and 1,500 for GVHD. Can you provide more insight on the potential growth in MF and where these patients are coming from? Thank you.

So Ren, it's Steven. I'll start. There has obviously been a COVID impact on the program. In particularly, obviously, in places like New York City in terms of the ability to get studies done there and access sites to get data. For fit 201, the particular issue was to try to get it ready to present it in a median in the second half of this year in time to meet those median timelines. We realized from a site access point of view in terms of getting it in, we're just not going to be able to do that in a timely manner. So that's the issue peculiar to that related to the particular median and nothing more than that.

The number of patients with GVHD is around 1,000. There is also spontaneous use of Jakafi in chronic GVHD, which is reflected in that number. We believe the upcoming chronic indication, contingent on data from the REACH 3 trial expected by the end of the year, is crucial for the ongoing growth of this patient population. Jakafi is quickly becoming the standard of care for acute steroid-refractory GVHD. While there are other studies and drugs in development for acute and chronic GVHD, we have not seen any pivotal or compelling data that would disrupt the current use of Jakafi in these conditions.

Hi. Good morning. Thanks for taking my questions. Wondering, Hervé, if you can comment a bit more on the PD-1 strategy. What are your commercial expectations in front-line lung cancer, and can you elaborate at all on any more of the niche indications that you had mentioned?

Yes, as we said, the niche indications are relatively small in terms of the number of patients for each of them. They are a potential way to have to product approved, which could be very important for many other aspects of the program and the combination with some of our pipeline products. The typical example would be FGFR in bladder cancer, but there are many other combinations being done, and I think that rationale is absolutely true. On top of it, we have the so-called niche indication program that could provide us with a relatively short-term opportunity for approval of the product. This is ongoing and doing well. For first-line non-small cell lung cancer, as you know, the approach we have is a mid- to late-stage approach where we have one of the two Phase 3 studies in lung cancer in the first line. We decided not to do the other one mainly because the design of the study was such that it would be problematic to gain FDA approval without doing a study that was extraordinarily large or very risky. We are in a situation where we believe there is a clear rationale to have an anti-PD-1 antibody in our portfolio, where we have a short-term opportunity with some of the niche indications. We have to take a little bit more time with the potential to have that product approved in the first-line treatment of non-small cell lung cancer, and that would give us an overall ROI that would be very satisfying on top of a strategic opportunity also to have a springboard for our oral PD-1 program. I will let Steven speak about the oral program.

Thank you all for your time today and for your questions. Of course, the IR team will be available throughout the day for any follow-up questions you may have. We look forward to talking to you at our investor conferences in the coming weeks. But for now, we thank you again for your participation in the call today. Stay safe and have a good day.