Greetings, ladies and gentlemen, and welcome to the Incyte Corporation fourth quarter and year end 2007 financial result. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the following presentation (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Pamela Murphy, VP, Investor Relations and Communications. Thank you. You may begin.

Good morning and thank you for joining us. With me today are Paul Friedman, Incyte's President and Chief Executive Officer and Dave Hastings, Executive Vice President and Chief Financial Officer. Rich Levy, Senior Vice President of Development is also with us. During today's call, Paul will begin with a review of the progress we have made in our clinical programs as well as key objectives for 2008. Dave will follow with the discussion of Incyte's fourth quarter and year end financial results and provide you with our 2008 financial guidance. We'll then open up the call for Q&A. Before beginning, I'd like to remind you that some of the statements made during the call today, including statements regarding our plans and expectations for our drug discovery and development programs and our financial results and guidance, as well as the potential efficacy of our compounds are forward-looking statements. 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 most recent 10-K for the period ended September 30, 2007 and from time to time in our SEC documents. Paul?

Okay. Good morning everyone. At the beginning of last year, I was optimistic about the prospects for 2007 and I shared that optimism with you on a number of calls. An optimism I think was justified based on the [rosamic] success we have had in multiple proof-of-concept trials across the broad spectrum of clinical programs. Because of this success, we expect to have as many as 15 Phase II trials underway in 2008. Some of these will complete this year and some will extend into 2009. While success in anyone of these programs has a potential to transform Incyte from a clinical stage company into a successful commercial one the JAK inhibitor program is our top priority. It not only offers the potential for a rapid development and approval path in myelofibrosis. It also affords multiple other opportunities for development in the other myeloproliferative diseases as well as other liquid and solid cancers and in chronic inflammatory conditions as well. After first reviewing the JAK program I'll then follow with updates and key objectives in our other clinical programs HSD1, HM74a, sheddase CCR5 and CCR2. Our most advanced JAK inhibitor program is in myelofibrosis, which is a life threatening disease with no effective or approved therapies and we believe this indication will qualify for expedited review and approval. Additionally because the myelofibrosis patients as well as the other myeloproliferative disease is polycythemia vera and essential thrombocythemia are treated by a well defined and highly concentrated community of physicians. These are indications that we can develop and commercialize on our own. Although many of you may know a fair amount about myelofibrosis, I want to briefly review this disease for those who may not be as familiar with the underlying biology or the needs of these patients. Recently a genetic alteration…

Thanks, Paul and good morning, everybody. I'll start with a brief overview of our year end financial results and then I'll provide financial guidance for 2008. Our ending cash at December 31, 2007 was approximately $257 million. During 2007, we use approximately $94 million in cash in line with our guidance, which was a use of $88 million to $95 million. This use of cash excludes certain items that we noted in detail in this morning's press release. From an operating perspective, our R&D expense totaled $32.6 million for the fourth quarter and a $104.9 million for the year, which reflects our continued investment in our growing and expanding clinical pipeline. As a reminder, we expect that our R&D expense will vary from quarter-to-quarter depending on the timing of our clinical development activities. Now turning to our 2008 financial guidance, in terms of cash we expect to use between $128 million and $138 million in 2008. The increased use of cash versus 2007 is the result of our expanding pipeline. This guidance includes the use of approximately $5.4 million for net lease related cost in our closed California facilities and does not include any funds we could receive from either the Pfizer collaboration or any other future partnerships. We expect our 2008 revenue to be in the range of $3 million to $3.5 million, again this guidance excludes any milestones from the Pfizer collaboration or any other revenue recognized from any other future collaboration. We expect R&D expense to range from $138 million to $145 million in 2008, including our non-cash expense of $12 million to $13 related to the impact of expense in stock options. As I previously mentioned in the cash guidance, the increased R&D expense in 2008 versus 2007, is directly related to the success of our clinical programs and a substantial increase in the number of phase II trials we planned to conduct in 2008. We expect selling, general and administrative expenses to be in the range of $16 million $17 million in 2008, including a non-cash expense of $4 million to $5 million related to the impact of expense in stock options. As a reminder the impact of expense in stock options is dependent on the level of options issued as well as the market price and other judgmental assumptions used and estimated in the fair value of such instruments. In terms of other income expenses, we expect interest income to be in the range of $8 million to $10 in 2008, while interest expense is expected to be approximately $25 million. The $25 million includes a non-cash expense of $10 million primarily related to the amortization of the original issue discount on our 3.5% convertible senior notes. So, as Paul previously mentioned we are in a strong financial position to continue investing in our expanding pipeline and we believe that this increase investment will provide a strong return to shareholder value. With that I'll turn the call back over to Paul.

Okay, thanks Dave. So we've already taken a fair amount of time this morning and we covered a lot. I'm just going to move right in to the question period, please.

(Operator Instructions) First question is from Richard Smith with JP Morgan. Please go ahead with your question.

Yes, good morning and congratulations on the progress so far. Just quick question on JAK2 myelofibrosis, can you just give us a sense of how much the patient data you think you will need have when you go to the FDA with respect to the number of patients also length of treatment and any sense sort of the kind of endpoints that they might suggest you to use in a pivotal trial? Thanks.

As I may have mentioned this last time, but we've had several meetings with experts in the field and the consensus has been that endpoints either sustained and profound reductions in spleen size, which we've pretty much across the board with or without the quality of life improvements, where we've dramatic and remarkable changes are thought to be very, very important improvements in the status of these patients by our experts. So, we're coping and I'd say optimistic that when we meet with the FDA that they will agree with that general premise. The devil is always in the details and I think we already have enough patient data to safely go to them and begin to discuss in detail how we would do a registration trial.

Do you think that you might have just mentioned this reduction in splenomegaly as part of a sort of competent endpoint or do you think that's sufficient on its own?

I'll answer this and then if haven't completely answered Rich can either correct me or add to what I'm saying. I think it could well be the primary endpoint and quality of life could be secondary endpoint or that could be co-primary endpoints. What do you say Rich.

Yeah. I mean, we don't -- we're pretty comfortable that what even if what we think we're going to hear from FDA is not exactly right that any changes that they may make would be something they were equally comfortable with doing. So, if it's purely spleen that's fine, if it's spleen plus other things that should be fine too. We don't by any means expect to get into anything like a survival endpoint for initial approval. There is plenty of precedent for drugs that are having even just improvements on sell counts and nothing has reduced spleens, nothing has reduced symptoms like this drug is doing. And we believe that the FDA is likely to appreciate that and we should have more to be able to tell you after we meet with them.

Okay, thank you. And one just quick question on the two other trials in multiple myeloma and prostate cancer. Could you give us a sense of the dose that you might be using in those trials?

We're starting at the similar dose range to what we've already been shown to be safe and effective and then there is individual modifications that are allowed based on safety and tolerability in case, those patient population do anything different. But we're not looking at it from the perspective of starting from the square one and trying to adjust escalate up since we've a fair amount of data already in myelofibrosis and the drugs been well tolerated up to 25 milligram is b.i.d.

Okay, thank you very much.

Your next question is from Thomas Wei with Piper Jaffray. Please go ahead with your question.

Thanks. And also on the JAK2 inhibitor curiously if you can give us any more details on what the safety profile as look like as you enrolled more patients, followed more patients in both of those settings has there been anymore cases of myeloma suppression or any other noteworthy adverse events, any discontinuations?

Again Rich can correct me if I --I've always seen is --we've seen a few patients, a handful, I'd say patients, who have had reversible thrombocytopenia, which would be, which is not terribly surprising since thrombopoietin signals through JAK2, and myelofibrosis patients, especially advanced myelofibrosis patients have quite compromised bone marrow. So, we are actually gratified that the incidents has been as low as it's been and even in some of those patients we dose adjusted may have been able to comeback on drug, other than that we've seen nothing else, it's been quite clean except for that almost predicted side affect.

I have nothing to add to that.

And in the RA trial it sounds like you enrolled some further patients have you seen the same sort of responses as you did in the first four?

The issue there was over the holidays, we did not screen or enroll anyone in the first cohort. We only picked up again at the end of the second week in January. So, we have more patients in, but they are not -- they haven't completed the month yet.

All right thank you.

The next question is from Annabel Samimy with UBS. Please go ahead with your question.

Hi, thanks for taking my call. Just on the RA again how many patients again were you expecting to enroll in that first cohort and then you get three months time point and you said that that could facilitate discussions with the FDA. Obviously we are going to have to wait until the six month, until you start any Phase III's on that, looking at the safety, right?

So, let me just clarify. We are doing a one-month study now. The first cohort total is a total of 16 patients, which I believe as of earlier in the week, 12 were on drug and there were about five or six in screening. So, we should be finished rolling that pretty soon then move on to a number of other doses as Paul said lower BID doses and once-a-day dose, all those will be done in parallel and that should all be done by in the first half of the year. Then in the second half of the year, we will plan to start Phase IIb study that six month study with a three month interim analysis. When we go to the FDA, it will be at the time when all of the patients in the study have completed, the full three months, but many of them because they don't all come in at the same time. We have completed six months of therapy. So we are hopeful that -- and then perhaps you would tend to any safety update or efficacy safety update, when the six months are done just before we start the registration study. So, finishing up IIa in the first half of the year, IIb starting second half and then we think we can go from there to registration trials.

Okay. The doses you're using in the RA trial are clearly lower than in myeloproliferative disorders. Would RA patients have a different safety or side effect reaction to these doses than an MPD patient? Could you draw any kind of links to the safety that you're seeing in the MPD patient?

Sure, so actually the drug would probably be less well tolerated in a particular dose in myelofibrosis patients. In an RA patients because their bone marrow already is sick and so you add this drug and so the reason that we are at lower doses in RA is that you don't need higher doses. I mean we started at 50 milligrams twice-a-day, saw two ACR90's out of the first four patients, for going down from there, but that's not to say that we've seen any toxicity, any bone marrow effects whatsoever in any of the patients on a 15 milligram b.i.d dose. We're trying to explore range to determine what the range should be in the IIb study. We're not trying to pick one dose the IIb study would include at least three dose levels possibly more of it we haven't made those visions until we see all the data.

Okay. And your, envision in psoriasis will be the similar just as the RA?

We envision that we would start at the same places and we'll see what the efficacy is, but it has to be higher. We think we've room to go up and maybe that it could be even lower still. We just don't know. We do know obviously with the topical where you're not getting systemic levels, but you are getting reasonably high concentrations rate in the skin, where you put it on that the drug is effective in psoriasis. So, I suspect the dose levels in psoriasis and RA will be fairly similar but we'll let the data speak for itself.

Okay. And one more question for David if I may, I mean the pipeline is looking great and it's very impressive and is rapidly expanding, but I've to ask the question is your current cash position sufficient for the next couple of years, as I remember correctly, I think in the past you would mentioned that your cash until about 2010 say for example no partnerships are available? Are you still targeting 2010 at that time, there you have enough cash or is partnership really becoming a much greater priority at this point because your pipeline is just exploding?

Well, I think that from a recapitalization perspective it's highly dependent on the partnership variable. And I think we've started looking out into '09 as well, it's get more difficult to predict in terms of what the [boundary] really look like that paying on the partnership and how the pipeline is progressing. So, I think we're actually in a pretty strong position from a cash perspective and with the partnership opportunities in front of us we do have leverage there. So, I think we're comfortable at this point as well.

Okay, thank you.

The next question is from Katherine Kim with Banc of America Securities. Please state you question.

Hi, thanks for taking my questions. On the JAK2, how many patients do you have on drug right now and how many will you have by presentation at ASCO?

We've I think between 30 to 40 patients Rich, more than that?

Yeah. I think we've about 50 on drug and we might have 60 by the end of the month. And then there is still more room for substantial increases but how many we would actually have at ASCO, I'm not exactly sure yet?

And how many centers?

This is all being done right now at two centers. I mean, and the patients are not limiting here I mean they are coming in faster than the centers that we can handle it. I mean they are coming for allover the country perhaps allover the world trying to get in on our drug, it's not an issue.

And just to continue on that vein, if as we anticipate the FDA works with us to go forward with the registration trial, we believe that trial or trials will enroll extremely quickly because we've a people waiting large numbers of people actually to get on the drug. And assuming we've reached some kind of an agreement with the FDA would probably also in parallel, we'll have one of these expanded access kind of program.

Yes, treatment. Different terms, I've used treatment, vertical treatment, IND expanded access.

Yeah. So, that more people can benefit from the drug then just the end that would be in a registration trial. But we've to get -- we've to get buying from the FDA first.

So in terms of clinical responses, we all know about the dramatic spleen reduction, but just can you just let us know, what other things would let's say your experts have told you has been very important and what have you seen so far in your dataset?

So, I mean virtually every patient has very substantial decrease in their spleen size. This occurs very rapidly. Every patient has had improvements in quality of life. Paul talked about spleen pushing up on the stomach, I think actually the reasons that these people are wasting away is, actually more than that.

It's more than that, sure.

They have the cytokines that make them have no appetite just as you get in terminal cancer patients and when you give our drug that goes away in the just even if they're eating the same amount they're gaining weight. People just have no energy I mean fatigue is 85% of these patients report, severe fatigue. We've looked in an unofficial kind of way through feedback from our investigators about individual aspects of quality of life and they're all -- if you look at an 10 point scale, they are going from like 8 were -- 10 is the worst and 0 with no symptoms, they are going from like 8 to 2s in a week. Now the other aspect of the many of this many of these patients have low counts to start with and we reported at ASH that there was one patient, who required blood transfusions every two to three weeks, and now has gone five months without a blood transfusion. The other patients are not that far out yet. It maybe that one of the reasons, where we potentially looking at lower doses is that you may get all of the benefits without and also start to see some of the counts coming back faster. But we don't think that we need to improve accounts in order to get this drug approved because there are other way to dealing with that people do get blood transfusions there and so what we are offering here, we believe is something that no other drug can accomplish, which is reducing the spleens and having the marked impact on the patients quality life.

And then finally in terms of the duration of response for the spleen size reduction, what's the median duration?

Well, the spleens have a comeback.

Okay.

And so if I stay on the drug their spleen don't shrink and then come back. So, the duration is just whatever long people have been on the drug and some people have been on the drug eight months.

Okay. And then finally just a financial question I know the guidance doesn't include anything from partners potential partnership or for Pfizer, but are you expecting any milestones from Pfizer this year?

Yeah, we don't control that. So, we would never guide to assume that in our financials we would expect milestones.

Okay, thank you.

(Operator Instructions) The next question is from Sapna Srivastava with Morgan Stanley. Please go ahead with your question.

Hi it's actually Dave calling in for Sapna. Just a question, I know I think talked about warning to hold on to the JAK myelofibrosis indications as un-partnered programs. And how are you thinking about all of the other indications with JAK program. Are you going to be trying to partner out things like RA and psoriasis or do you think you are going to try and hold on to the whole sort of JAK franchise, that you're working to develop and also obviously it's a little earlier, but for the cancer indications what do you thinking about that as well?

Yeah. So, for the entire myeloproliferative disorder arena, which includes p vera and essential thrombocythemia, where the end is actually larger than myelofibrosis and as I mentioned it's a small community of physicians centralized that treat these patients. We certainly would have no intention of looking for any partner for that. I guess it's conceivable that it maybe a benefit to us to have a commercial partner in the rest of the world but even that with a small community may will be one that, we -- we think it's one that we can handle ourselves. With respect to multiple myeloma, I think again, since we've said that what we would envision for ourselves, when we grow up is that we would be fully integrated or semifully integrated in oncology inflammation something like multiple myeloma would also be a malignancy that we could certainly handle ourselves. Prostate cancer maybe a different story, but it's not clear that we couldn't. With respect to the other -- other oncology -- so beyond that when you talk about -- you talk about sheddase I think it's too early to know what we'd do with sheddase or the two earlier programs. But it's kind of the direction in which we want to mature. So, we don't -- we're not looking to spin those therapeutic indications off to someone else at this point. I mean, I think there are a lot of moving parts here and we've to see how it plays out. But that's where we -- that's our thinking right now. In inflammation and JAK for topical sclerosis at the moment we again have no intention of looking for partner there let's say, I mean, we're way ahead their. We're seeing pretty dramatic responses with no toxicity whatsoever and there is a fairly clear development path there. With respect to RA, it's conceivable that beyond the Phase IIb study or during the Phase IIb study it may make sense for us to look for a partner. At this point, we're not planning to do that. But we certainly would -- we continually revaluate where we're like everybody else and at this point it's not clear to us that with appropriate market cap appreciation and income from myelofibrosis and the other myeloproliferative diseases that we'd not be in a position to grow to a point that we could not handle the inflamm in the JAK program ourselves. On the other hand, the other programs that I described progress on today are ones, where especially for the metabolism programs there is no that we're looking for partnerships. And for CCR5 and CCR2, we probably, I mean, we'd prefer that if the right kind of deal was available to us.

Thank you.

The next question is from Richard Smith with JPMorgan. Please state your question.

Thank you. Just a quick follow-up on the HM74a program, do you just give us a sense of the design of the Phase IIa trial? And on the CCR2 is there possibility that Pfizer would take the additional indication that you've been working on?

Okay. I'd say I'll answer the latter and I'll let Rich answer the form. I'd say no for multiples sclerosis they are not in the area and it would be like a one-off which is not something I think they probably would not be interested in that. We've to find someone else for partnership there.

So, in terms of the Phase IIa for the HM74a program again the fear here is and well established area that if you lower free fatty acids, the glucoses will comedown. Now patients with diabetes have alleviated free fatty acids relative to the healthy volunteers that we've been studying so far. So, it's really a two part study. The first part is we study a number of doses to make sure that the dose ranges that are having the really nice effects on free fatty acids that we're seeing in healthy volunteers are still the right doses to be reducing the free fatty acids to where we want in diabetic patients. And then probably, we'll go down from about four doses to probably about two doses and then expand with a significant number of additional patients at one of the -- those two doses with the emphasis in the second part being to lower fasting plasma glucose, which will be the primary thing that you're looking at in the second part of the study. We're not going to be dong clamps this time, and again, hemoglobin A1C is way too slow to change to be able to look at within one month. But as Paul indicated, you can see profound decreases in diabetic if you normalize the free fatty acids within a short period of time. So, this time a month should be fine to see that whereas we put in the clamp in the HSD1 program because we didn't know, whether there will be a mechanism, where we could see effects in a month or not.

So, the one month portion you are talking about the second part of the trial, when you expand the patients that maybe two doses?

Yes, but -- what we expect to do the whole thing this year.

Okay, I understood. All right, thank you.

The next question is from Thomas Wei with Piper Jaffray. Please go ahead with your question.

Thanks for taking the follow-up. And also on the HM74a program, can you help quantify for us what you mean by a dramatic reduction in free fatty acid levels? And also the correlation between that and fasting plasma glucose, what sort of relative reductions do you need to see to achieve I guess relative to what you're seeing in the healthy volunteers, where would that translate into in terms of an AlC or fasting plasma glucose reduction in diabetics?

Well, the experiments that we described out of Einstein, where you infused niacin because of the short half life. What you're trying to do there as you're not trying to bottom out the free fatty acids, which you can do with our drug because then you will bring what the patient will then perceive, is starvation. And you'll kind of regulatory mechanisms come into play, which work against what you're trying to achieve. So, what you are trying to do in diabetics, and it's hard because the normals that we're looking at now have normal levels of free fatty acid. So, what you're going to try to do in the diabetics is to simply bring their free fatty acid levels back into the normal range, which is what was done at Einstein over a 16 hour infusion period. And in that short, a timeframe there was a fairly dramatic improvement in glycemic control. And I can't calculate for you now what you'd expect vis-a-vis hemoglobin A1C. But I think if this maybe right -- this maybe right, I don't want to say the wrong thing, but I think if you can decrease fasting plasma glucose by 20 to 30 mg/dL you get something like 1.5% improvement hemoglobin in A1C or 1% improvement in hemoglobin A1C something like that. And so, we've to do the experiments in the diabetics to know. There is nothing we've in the normals vis-a-vis those correlations, which would allow us to answer your question with precision.

Okay, thanks.

The next question is from Annabel Samimy with UBS. Please go ahead with your question.

(inaudible) 5045 just have another question on the HM74a. What are the specific processes does this pathway target or set rather?

I mean, this is the same -- this is what everyone believes is the receptor for niacin. And so, whereas our focus is on diabetes niacin and Niaspan are used to increase HDL as Paul said. They also reduce LDL perhaps by itself not as much as the statins, but they add to the effect of the statin. So, whereas our preliminary focus is on diabetes, these drugs also have the potential to be used in the hyperlipidemia especially patients with low HDL.

And of course with niacin and Niaspan one of the things that limits their uses risk of problematic flushing response that people get. We're not seeing that. So, although again our emphasis here is on type II diabetes and it's parallel and potential will be interesting program would be to look at it for raising HDL. One of the issues with the Pfizer compound was to believe that the HDL was being created was abnormal and I think, it's fairly well known that with niacin now you're simply increasing the production of normal HDL.

Okay. I was just asking to see if with this pathway, if there was any potential side effect that you may -- that may come out of this aren't expected or could be expected?

Well, I mean so what you've here is a long track record of Niaspan and niacin and what they do is they have two issues, which what I've described. They have the cutaneous flushing, which is due to a release of prostaglandin simulated by agonism of the receptor because of probably the short half-life and the rebound. And we don't get that with this agent so we've gotten rid of that issue, at least we haven't seen it and we don't expect to see it. And the other is the free fatty acid rebound, which in and of itself in people without diabetes is probably not a lot of relevance, but it precludes being able to treat diabetics because in fact when the free fatty acids rebound because of the short half-lives of niacin and Niaspan you actually get worsening of glycemic control. So, we have designed our molecules to eliminate the two known side effects of agonism of this niacin receptor. So, we may get an off target toxicity because of the structure of the compound none of which we've seen so far, and in fact the doses that we anticipate from what we have done with this so far are very low-single digit milligram doses. So, off target effects are usually seen or more frequently seen we are into the hundred of milligrams a day and we are not going to be any where near that. So the potential for this being a very clean compound is very high.

Okay. Great, thank you. That was very helpful.

The next question is from Soham Pandya with ThinkEquity. Please state your question.

Great, thank you. Just one quick question on the JAK2 program, just curious, do you see a reversion away from the mutant allele back to the wild-type upon therapy, and at what point do you see that occurring?

If you look in either of the peripheral blood or in the bone marrow of the person, you can get an estimate of percentage of the cells that are expressing the mutant versus expressing the wild-type JAK. And in many of these patients that percent of the cells that come from the mutated JAK is very high greater than 95% in many cases. And we see reductions, but we don't see it just go from virtually a 100% to anywhere close to 0% overnight and frankly I don't think you would want to because if all your red cells or whatever being made from cells that have its mutation, you wouldn't want to knock it out altogether. So the percentages are coming down. No one is completely eliminated that we seen so far and we don't know how low it would go we're not looking at this drug as a cure for a disease we're looking at it as a drug that will control the disease and all the data that we have suggest that we're doing really well with that.

Just remind me does it compound have activity towards the wild type receptor or..?

Blood type enzyme, yes. It works against -- it has effectively as the 617 mutant.

Okay, thank you.

At this time, I'm showing no further questions in queue. I'd like to turn the call back over to management for closing remarks.

Hey well, thank you for your attention today. We are quite excited about the opportunities we have created for ourselves and as I've said we are going to make sure that we do not miss a beat on the JAK2 program in particular so that we can get into the registration trial with myelofibrosis and moving along and get the positive endpoints that I'm actually pretty confident we're going to get. We'll tell you that at this stage of (inaudible) development I knew we had great efficacy but I was concerned about the CNS toxicity, I thought, if we get pass that we get approved. This is kind of an analogy. Here since we're out passed six months in a fair number of patients the only thing we've seen is thrombocytopenia along with this tremendous efficacy. I can't say, I'm supremely confident but I'm pretty optimistic that this is a drug and if we have a good meeting with the FDA, which we are anticipating, we'll be back on the horn to talk to everybody soon after that to let you know that. In the meantime the other programs are also very interesting and we've worked deciduously to optimize moving these things along in parallel and trying to do it in a most cost effective way, we can. Our spend is going to go up this year, I think it's wanted for the value that we believe, we can create by doing that and we think it would be a mistake to not take advantage in parallel of everything we've on our plate because of the competitive nature of the drug development business. So, we look forward with a lot of optimism to describing what happens over the next few months with these programs and with that I'll end the call. And thank you again for your time this morning.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.