Incyte Corporation (INCY) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Incyte Corporation Fourth Quarter and Year-End 2014 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Michael Booth, Vice President, Investor Relations for Incyte. Thank you, sir, you may begin.

Thank you, Kevin. Good morning and welcome to Incyte’s fourth quarter and full year 2014 results conference call. Hervé Hoppenot, our President and CEO, will begin with a few words summarizing the quarter; and Jim Daly, who leads our commercial organization, will provide a commercial update on Jakafi, which is now FDA approved for patients with intermediate or high-risk myelofibrosis and for patients with polycythemia vera who have had an inadequate response to or are intolerant of hydroxyurea. Rich Levy, who is in charge of Incyte’s drug development activities, will update you on our clinical portfolio; and Dave Hastings, our CFO, will describe our fourth quarter and full year financial results and outline our financial guidance for 2015. Then we’ll open up the call for Q&A, for which we’ll be joined by Reid Huber, our Chief Scientific Officer. Before beginning, we’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 the commercialization of Jakafi, our development plans for Jakafi in other indications and for other compounds in our pipeline, and our 2015 financial guidance. 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, 2014 and from time-to-time in our other SEC documents. Hervé? Hervé Hoppenot: Thank you, Mike, and good morning, everyone. So before we get into more details of Incyte's achievements in the last quarter and our expectation for this year of 2015, I wanted to take a short look back at what has been a very successful year of 2014. So first financially, the growth of our top line continues to outpace both our R&D and SG&A expenses. In 2014, sales of Jakafi grew over 50% in the U.S. and Novartis sales of Jakafi has grown over 70% in ex-U.S. territories when compared to 2013. We also recorded revenue of over $100 million from milestone in 2014 and ended the year with $600 million in cash. So this leaves us in a very strong financial position as we move into 2015. We have also been very successful in attracting top talents to Incyte over the last 12 months adding more than 100 positions across the company and the vast majority of this in our R&D organization managing our growing portfolio. And speaking of our R&D portfolio, firstly, our goal is to maintain and expand our leading position in JAK inhibition, and the recent FDA approval of Jakafi in PV is further evidence of that as is the initiation of pivotal studies of ruxolitinib in solid tumors. Our next generation JAK1 selective inhibitors will give us further potential to extend our competitive advantage here. The second piece is our IDO1 inhibitor which provides us with potentially exciting entrance into immuno-oncology and we are moving forward up quickly to recruit our combination studies with PD1, PDR1 inhibitors. Our global alliance with Agenus also gives us additional strategic flexibility within the immuno-oncology area. The third piece is our targeted therapies portfolio, and we have made real progress in the development of our two PI3Kδ inhibitors and we have recently disclosed two new compounds an FGFR Inhibitor and the BRD Inhibitor that I expect it to enter the clinic sooner. The first segment of our portfolio contains our two partners' compounds capmatinib with Novartis, which continues to move forward quickly the c-MET inhibitor and baricitinib with Lilly which has recently reported positive top-line result in the first of its Phase III trials in RA. So I will now pass to Jim to give some additional detail on the commercial performance in MF and the launch of Jakafi in PV. Jim?

Thank you, Hervé, and good morning, everyone. Our fourth quarter net product sales of $106 million of Jakafi reflect continued strong growth in underlying demand in myelofibrosis growing 46% over the same period last year. In terms of quarter-over-growth, net sales grew 8%. Overall, our fourth quarter performance was consistent with previous quarters with the steady increase in new patients, an increase in the breadth and depth of prescribing and a continued shift toward the use of lower dosage strengths. For the full year of 2014, we recorded net Jakafi sales of $358 million growing more than 50% over 2013. Turning to 2015, we expect full year net product sales to be in the range of $525 million to $565 million reflecting year-over-year growth between 47% and 58%. Our guidance assumes continued growth in MF sales as well as the contribution from our newly approved indication in PV. On December 4, Jakafi was approved by the FDA for the treatment of patients with polycythemia vera who had an inadequate response to or intolerant of hydroxyurea. Jakafi is the first and only FDA proved treatment for these patients with uncontrolled PV. We’re still very early in the PV launch but we can’t confirm that our initial impressions of launch progress are consistent with our prelaunch expectations. Firstly, there is a substantial unmet need for PV patients who are not well-managed on hydroxyurea. Physicians acknowledge having these uncontrolled PV patients in their practices and are open to considering new and better treatment options. We continue to estimate an addressable population of approximately 25000 patients in the U.S. Secondly, as we shared with you in the past, the urgency to identify specific patients and initiate a new treatment is less than in MF or in other more acute forms of cancer. As we expected, it will require time and education to realize the peak potential of Jakafi in PV. Importantly, and again as expected, the clinical profile of Jakafi, as represented by the product labeling and the recent publication of the response trial in the New England journal of Medicine, is being well received by physicians. This is evidenced by the rapid uptake of the 10 milligram 28-day sample starter program for PV patients that we initiated after approval in December. We look forward to providing you additional feedback on the PV launch progress on future earnings calls. So with that, I’ll turn it over to Rich to give us an update on the clinical portfolio.

Thanks, Jim. I’ll begin with JAK inhibition, and starting with ruxolitinib in solid tumors the two pivotal Phase III studies JANUS 1 and JANUS 2 in combination with capecitabine in second-line pancreatic cancer continue to enroll patients and we expect top-line results from these trials during 2016. Similarly, the randomized Phase II trials of ruxolitinib in non-small cell lung cancer, breast cancer and colorectal cancer are enrolling patients as planned with results expected in 2016. And we believe that JAK1 selective inhibition, sparing JAK2, may lead to equivalent efficacy but with less myelosuppression relative to inhibiting both JAK1 and JAK2. Minimizing myelosuppression may potentially enable the combination of JAK1 selective inhibitors with other more myelosuppressive therapies. The proof-of-concept Phase II trial of our lead JAK1 selective inhibitor 39110 in patients with EGFR wild type non-small cell lung cancer in combination with docetaxel is well underway as is the Phase II trial 39110 in combination with erlotinib in patients with EGFR mutated non-small cell lung cancer. Later this year, we intend to initiate a fully powered randomized blinded controlled study of 110 in combination with gemzar and abraxane in first-line pancreatic cancer. We expect data from 39110 in combination with our PI3Kδ inhibitor 40093 in patients with B-lymphoid malignancies to present at ASCO this year. This proof-of-concept combination trial was based on internal research, which revealed significant synergy between JAK1 selective and PI3Kδ inhibition in models of lymphoma. We have a second JAK1 selective inhibitor 52793. This molecule is currently in a Phase I dose-escalation study and there's severalfor more selective for JAK1 than 39110. We plan to initiate both mono and combination therapy trials with 52793 potentially in multiple myeloma. 52793 as the more JAK1 selective compound was selected to be studied in myeloma as improvements in anemia is a therapeutical in this disease. Now moving to immuno-oncology. Recruitment into all four Phase I, II studies of epacadostat, our IO1 inhibitor, and the anti-PD-1 or PD-L1 therapy is from Merck, BMS, AstraZeneca and Genentech is progressing well. Once we determine the dosage to be used in each combination we expect enrolment and the expansion towards to be quite rapid. If these trials generate positive proof-of-concept data, we would anticipate moving swiftly into potential registration studies. In the Targeted Therapy segment of our portfolio, we have two PI3Kδ inhibitors in clinical development and each of these compounds provide the potential to differentiate from the marketed PI3Kδ inhibitor that'll allow us on potency, PK and safety. 50465 a highly selective PI3Kδ inhibitor has now entered Phase I development and 40093 our first delta inhibitor is advancing in both immunotherapy, as I mentioned earlier, combination proof of concept trials. The discovery team at Incyte continues to create molecules with best-in-class potential. We've recently disclosed two new candidates an EGFR inhibitor 54828 and a BRD inhibitor 54329, both of which are expected to enter the clinic very shortly. The Fgr family of receptor tyrosine kinases can act as oncogenic drivers in a number of tumor types, most notably squamous non-small cell lung cancer, gastric and bladder cancer, and glioblastoma. Bromodomain-containing proteins or BRDs play important roles in mediating gene transcription, most notably by facilitating the expression of oncogenes such as MYC, one of the most frequently dysregulated oncogenes in all of human cancer. And lastly, a quick update on our partnered programs with Novartis and Lilly. Novartis continues to make progress in the clinical development of capmatinib, our potent and selective c-MET inhibitor. And with respect to baricitinib, the rheumatoid arthritis Phase III program being run by Lilly is ongoing. The BEACON Phase III trial of Baricitinib in RA patients with inadequate response to TNF inhibitors met its primary end point and, during 2015, we look forward to seeing data from the additional Phase II studies. With that, I'll now turn the call over to Dave to give us the financial highlights of the quarter and further outline our financial guidance for 2015.

Thanks, Rich, and good morning, everybody. I'll start today by discussing Q4 results and then review our 2015 guidance. We recorded $106 million of fourth quarter net product revenues and $15 million in Jakafi royalties from Novartis for sales outside of the United States. Our cost of product revenues of $2 million for the fourth quarter reflects the payment of royalties to Novartis on Jakafi sales. Both R&D and SG&A in the fourth quarter and the full year were within our expectations. For the full year 2014 R&D expense was $348 million and SG&A was $166 million. From a cash perspective, we ended the year with $600 million which includes a $60 million milestone payment that we received from Novartis in Q4. Now moving in 2015 guidance. As Jim mentioned, our net product revenue from Jakafi is expected to be in the range of $525 million to $565 million reflecting continued growth in underlying demand in MF and including revenue from the launch of PV. We do not intend to break out Jakafi sales by indication either historically or in guidance, but we do intend to provide a more comprehensive update on the PV launch after six months at our Q2 earnings call. Looking now at contract revenue expectations for 2015, we expect to recognize $13 million in contract revenue from the continued amortization of the upfront payment we received under the Lilly collaboration agreement. We do not anticipate earning any milestones under the collaboration agreement with Lilly during 2015. Under the Novartis collaboration agreement, we expect to earn up to $45 million in milestone revenue during 2015. Included in this figure is $25 million we earned with the positive opinion issued by CHMP on Jakafi and PV in late January. Novartis continues the successful global rollout of Jakafi ex-U.S. and reported over 70% sales growth in 2014 versus the previous year. We look forward to the anticipated continued growth of our royalty receipts from Jakafi. We expect that the cost of product revenue as a percent of net Jakafi sales in 2015 will be between 4% and 5% which includes our tiered low single digit royalty payments to Novartis on net sales of Jakafi in the United States. In 2015, we expect R&D expense to be in the range of $450 million to $500 million. This includes non-cash stock compensation expense of approximately $40 million to $45 million. The increase in R&D expense over 2014 includes the investments we are making across the clinical portfolio as well as upfront in some ongoing costs related to the Agenus alliance. Included in this amount is an upfront one-time payment to Agenus of $25 million. We expect SG&A expense to be in the range from $180 million to $200 million for full year 2015. This includes non-cash stock compensation of $30 million to $35 million. This moderate increase in SG&A expenses is primarily result of additional programs to support ongoing commercialization of Jakafi in MF and PV. We expect our interest expense this year to be $49 million including a non-cash charge of $36 million related primarily to the amortization of the discount on our convertible senior notes. So as we enter 2015, the company has never been in a stronger financial position than it is today to fund our expanding pipeline. Finally, I'd like to thank Pam Murphy, our VP of IR and Corporate Communications, for all that she has done for Incyte over the past 12 years. Pam has announced to intentionally retire at the end of April this year and we wish the best of luck in her retirement. As part of the planned transition within IR Group we’ve promoted Mike Booth to VP, Investor Relations, and he will now be day-to-day contact person with The Street. Operator, that concludes our formal remarks. Please open up the call for Q&A.

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question today is coming from Eric Schmidt from Cowen & Company. Please proceed with your question.

Thanks for taking the question. Pam, we’re going to miss you very much, but congrats to Mike and for that matter, Dave, on the new positions. Let’s see, question maybe for Jim on Jakafi, and the quarter-on-quarter growth you saw; you mentioned that was 8%; its down a little bit, even last quarter I think organic growth for that 11%. So was there any inventory or the fluctuations or did you just not pick anything yet from the PV launch? How do you reconcile?

Sure, Eric. Well if you look at total demand for the quarter, Eric, we grew 7% with dispense bottles and we had 5% on price for again total demand of 12%. Now that was partially offset by inventory. If you remember, we finished the third quarter with a $4 million inventory build due to price speculation in advance of the October 1 price increase. So in the fourth quarter, we essentially burned off that $4 million and we did not see an inventory build at the end of the fourth quarter. So as a result, we finished the fourth quarter at the low end, at the very low-end of our normal range of 3 to 3.5 weeks. And with respect to PV contribution, we really expected de minimis contribution from PV in December and that’s what we saw.

Thanks a lot.

Thank you. Our next question today is coming from Ian Somaiya from Nomura Securities. Please proceed with your question.

Thanks. And Pam, again, we are really going to miss you. Mike will do an adequate job but I think you are always going to be our favorite. Having said that, just I have maybe a follow-up question to Eric, and Eric focus on 4Q; I was really curious about 2015 guidance. Again, you are basically pointing the numbers that are higher than what most of us were looking for. I was curious if you were to just help us think about what the contribution is from myelofibrosis, continuing contribution from there versus the incremental pickup from PV just keeping in mind that historically you said expected very slow steady launch in PV.

Ian, I think the answer is almost contained within your question. Again, the low-end of the guidance still reflects a 47% year-over-year growth. It does reflect the uncertainties we have with the ramp of PV, but it does assume that we continue to grow MF and that we have a meaningful contribution from PV. And clearly the high-end of the guidance with 58% percentage growth assumes a faster ramp from PV largely and a consistent steady growth in MF. And at this point, we really can’t add much more quantitatively than that.

Okay. And just one other point I was just hoping to clarify was R&D guidance of 2015. I was hoping that or I was thinking that with the baricitinib trial including in 2015 that the R&D would start to come down. Is that just something we should expect to occur 2016?

Yes, so baricitinib, our contribution to baricitinib will be less this year than last year but not a whole lot less, but there will be a significant drop-off in the baricitinib support in 2016. And then the overall growth represents new programs that are getting more advanced Phase III programs and late Phase II programs so the overall is an increase from last year.

Okay. Thank you very much.

Thank you. Our next question today is coming from Steve Byrne from Bank of America-Merrill Lynch. Please proceed with your question.

Yes, I have -- and this was probably directed to Reid. Based on your understanding of the effects of JAK-STAT Inhibition on the tumor environment, do you see the anti-tumor effects as been primarily a direct impact on the tumor versus enabling other targeted inside of toxic therapies being more effective or the third bucket being restoring that patient's immune system? Is it all of the above or one more than other based on your understanding of the mechanism of action?

Yes, thanks for the question, Steve; it’s a good one and as you can appreciate it a difficult one to tease out in the clinic at least at the stage of development where we are right now. As you pointed out, there are data to support the role of JAKs inhibitions both in a cell intrinsic manner in terms of supporting the direct proliferation and growth of the tumor there is certainly data that supports the role for JAKs Inhibition in attenuating the effect of targeted or cytotoxic chemotherapy and that is certainly an important mechanism. And as we'll talk about more of a outline at JPMorgan and we'll present more at ACR this year in April, there is an emerging data set including data derived from our own group here that JAK-STAT inhibition can shape the intertumoral micro environment. Exactly how those three aspects of the biology play out in any one histologic setting is difficult to say. I think what's important is they all support the potential for JAK inhibition in a solid tumor settings; they help contribute to our confidence in continuing this for ruxolitinib in solid tumors and I think very much substantiates our interest in JAK1 selective inhibition in the solid tumor landscape as well.

And just regarding that last bucket or last comment, would you see potential for it to be used in combination with other immune therapies that are either driving a stronger T-cell response or the checkpoint inhibitors; do you see much opportunities for synergy in those combinations?

Sure, we think there is a potential there. Again, those will be data that we'll describe a little bit more in detail at ACR. Exactly what the development program looks like for JAK1 and how those specific combinations evolve over the course of the year is still up for discussion, but I would say that’s something that we are very interested in thinking through carefully.

Okay. And just one for Jim. How would you view the outlook in this 25,000 patient targeted market in PV is in terms of what you think is a realistic peak penetration?

Well I think our goal is always to have a 51% share of the addressable population. I think we would be disappointed if after a defensive commitment of educational resources we couldn’t get half of the patients who need this product on it. Now the question is how long that’s going to take? And as we've said, it's going to take time and its going to take education in order to increase the sense of urgency for patients to identify these patients and to identify them as appropriate candidate for Jakafi.

Our next question today is coming from Matt Roden from UBS. Please proceed with your question.

Hey, guys, it's actually Andrew Peters in for Matt; I wanted to add my congratulations and say that we'll miss Pam as well. First question for Jim, I guess. You mentioned kind of the uncontrolled PV patients currently in practice. I just wanted to understand I guess a little bit more on the dynamics there and why is there a little bit less urgency to get those patients treated and why you wouldn’t expect a bolus from kind of the need to treat patients? And then the second one for Rich, just looking at kind of the Jakafi solid tumor trials that are ongoing, given kind of the unfortunate kind of short outcomes for the colorectal patients, just want to understand if there is any potential for earlier than expected readouts from the data maybe by the end of 2015 just from a timing perspective? Thanks.

Yes. I'll take the uncontrolled PV question first. Question, why wouldn't you expect to see a bolus patients or more rapid initial uptake? I think there are several parts for the answer. I think the first is just the nature of the disease. It's viewed as a chronic, less severe disease with less of an urgent need to intervene on the part of physicians. Number two, I think there's still a lot of need for education in terms of disease burden and, specifically, which patients are at greatest risk for complications of uncontrolled PV. Add then, finally, the patients who are most acute, most obvious are already on the drug for PV due to the commercial availability. So that's why we didn't see a bolus of patients going on the product at time of approval, unlike MF where you simply do not have commercial availability. Now, if you think about why it takes time for physicians to work through that progression, our reps have to go in and it takes multiple calls for them to educate physicians on the data themselves on the response trial. Then they have to translate that to the indication statement, which is patients' who are inadequate -- who have inadequate response to or intolerant of, that's a relatively abstract indication and our reps have to work closely with the physicians to translate that into specific patients. And they are doing that right now, but again, that takes time. And the good news is that the challenges in the PV marketplace are all addressable and we are making good progress in addressing them.

So this is Rich on your question about the colorectal study. So we certainly took into account the relatively short survival in these last-line patients when we came up with original estimates of data in 2016. The study is enrolling well, but that remains the great limiting step to when we have enough patients and enough unfortunately depth to analyze the study. So I would still guide to data in '16 and think that data in 2015 is almost impossible.

Thank you. Our next question today is coming from Salveen Richter from the SunTrust Robinson Humphrey. Please proceed with your question.

Thanks for taking my question. Pam we will miss you, and Mike, congrats. A two pipeline question. Firstly, so how did your second PI3Kδ differ from the first? And are you looking for combinations with JAK molecules and with IDO here? And then secondly, on baricitinib, any details on the nephropathy data, when we might see that? And then how we should think about the alopecia opportunity?

Yes. So first starting with the delta inhibitors. The second of the delta inhibitors, I said in my prepared remarks was more potent, also has absolutely no liver toxicity in preclinical models. And with 40093, at the doses that we are studying, it's clean but it limits how high you might be able to go. So 50465 has the potential to go to even higher levels of inhibition. We don't know whether that would be clinically relevant or not. Secondly, we do intend to look at combinations with JAK1 with the combination but at this point in time, we are still in the dose finding portion as monotherapy and the combinations will start relatively soon. And with respect to the Lilly diabetic nephropathy data, we expect data to be in the public domain in the first half of the year, including presentation at a scientific meeting if accepted our abstracts that are going to be submitted are accepted to the intended meetings.

Okay. Great. How we should think about alopecia [indiscernible] --

Okay. Can you repeat that question?

How we should think about alopecia and what you might do there going forward?

Yes. So as was reported, publicly the oral ruxolitinib which was used by investigators at Columbia University showed very dramatic responses in terms of alopecia. And we have the exclusive rights to our topical ruxolitinib product. And we are planning to start a study later this year in patients with alopecia areata to determine whether a topical formulation can be as or nearly as effective as the oral formulation seem to be. So we might be able to provide greater details on that specifies of that study, should we -- at the time when that's posted on clinicaltrials.gov and we'd hope that there would be data also next year.

Okay. Thank you.

Thank you. Our next question today is coming from Brian Abrahams from Wells Fargo Securities. Please proceed with your question.

Hi. Thanks for taking my questions. And my congratulations to Pam as well on your retirement and to Mike for new position. There was an interesting article published in the Journal yesterday about order of JAK2 and Type 2 mutations determining clinical manifestations and sensitivity to ruxolitinib. So I'm just wondering if this finding might have any practical, commercial implications in terms of what it might mean, could this get physicians to intervene earlier in the course of the disease. And then separately on the earlier stage pipeline, wonder if you can talk a little bit about the FGF inhibitor and sort of what differentiates that from some of the other small molecules in development perhaps in terms of its selectivity profile and [indiscernible], thanks.

Yes, sure so I think the FGFR question first and then we'll discuss briefly the first question. So FGFR, it’s a competitive space; we recognize that and the field has evolved quite a lot over the last few years now with a number of VEGFR sparing FGFR selective inhibitors. And those are showing a very interesting clinical profile and they've shown the first objective responses in patients with FGFR mutated solid tumors those have been seen in squamous cell lung, bladder cancer and ever in glioblastoma. As we look at the programs that are ahead of us and we study those molecules carefully, we think that the best in class molecule has not yet been made, and our effort internally over the last year and a half was to try to develop, discover and develop that compound. So we like the preclinical profile of 54828 both in terms of potency, selectivity, PK and safety and what the challenge is now in the development side is to try to leverage the learnings from the competitors in this space to make much more efficient expeditious Phase I proof of concept clinical program. We have a companion diagnostic effort that’s well underway in parallel with this program and if the drug lives up to its preclinical billing we're going to look to try to move that molecule and that companion diagnostic forward as rapidly as we can. In terms of the paper you mentioned, I'm not aware of the paper, so I don’t want to comment on it. I might see if Jim wants to say anything about earlier use in MF as to how physicians get comfortable with the drug. But I certainly don’t want to comment on a publication I haven't read.

The only journal I read yesterday was The Wall Street Journal not the -- not the New England Journal so I don’t think I can make an informed comment either.

Okay. That's fair enough, and then may be just quick follow up for Jim. I think in response to one of the earlier questions you sort of suggested that the patients with PV at that grade need or may already have been on Jakafi, given it was commercially available. Can you give us any sense of just the proportion of patients on Jakafi who had PV I guess prior to the launch just sort of can may be tour up a little bit better how to think about what the existing kind of unmet need that remains in the second patient and how to think about the ramp going forward? Thank you.

Sure, Brian. Brian, we don’t want to get into specific numbers, but what I can tell you is that we did not see any increase in the non-MF usage leading up to the approval. Now there is two ways that a PV patient could be on Jakafi. One is if the physician wrote for the product, coded the patient as PV and the patient received it as a non-MF reimbursement. The other is that the patient was quite frankly continuing between PV and MF and the patient was coated with MF and receive the product. So it's very hard to lineate with precision how much PV business did we have prior to the formal approval. But again, we did not see any increase in non-MF use as based on coding prior to the approval.

That’s very helpful. Thanks again.

Thank you. Our next question today is coming from Cory Kasimov from JPMorgan Chase. Please proceed with your question.

Hi, good morning, everyone. This is Whitney on for Cory. I'd like to add my congratulations to Pam as well. You will be missed. I guess question that might sort of go to an earlier one but earlier this year you guys talked about synergies between JAK inhibition and IDO specifically. Any color you can give there in terms of how should we be thinking about the pass forward there; is that kind of the AACR data that we should be looking for for more clarity?

Yes, so that’s exactly why we'll be presenting the data at AACR and have a pretty full discussion of the potential impact of the date on our own clinical development efforts there. A little bit of tour say exactly what the next steps are but I would say that that combination, potentially the combinations are certainly on the table to consider.

Great, and then not sure you'll comment but I'll ask. Can you give any color on where you are in terms of dose escalation in the IDO pembro study with an eye towards the when the expansion phase cold get going?

Yes, so because of our established relationships with each of these companies who don’t want company number two to get information from company numbers one on where the doses are. We really can’t comment, but things are going very well. The Merck study has been underway since last summer, and basically the design is that you enroll three patients, you wait two months and everything goes well, you move up to the next if you needed to, enroll another cohort because of any events you would do that again. So things are progressing well, but I can’t be quantitative as to where the data are. But we are optimistic that we will be well into the expansion Phases this year not only with the Merck compound but most likely with others as well.

Great, thanks for the taking the questions.

Thank you. Our next question today is coming from Josh Schimmer from Piper Jaffray. Please proceed with your question.

Great, thanks for taking the question. My congrats as well to Pam and Mike, and also my congrats to the topical JAK inhibitor, which I think Pam will appreciate. A quick question for Reid actually. There's a myriad of targets in oncology to choose from. Maybe you can help us understand the theme that links the clinical stage programs BRD PI3-Kinase, FGFR 3 and it's tough to understand the prioritization process and why this is the right fit for in the Incyte portfolio? Thanks.

Yes, thanks, Josh, good question. I think one of the luxuries that we have as a discovery organization now that is different, let's say, from the situation seven or eight years ago is that we have a growing pipeline now that we can consider as sort of tools in the toolbox and look differently at new potential programs as to how they may fit in synergistic ways with other agents in our pipeline. The delta program, as you know, was really advanced in very large part because of the reason and synergies that we've observed with JAK1 and potentials that we thought we could bring the bear in terms of combination regimens in lymphoma disease. It’s a similar line of thinking as we look at programs like the bromodomain inhibitor program, which is a very novel mechanism, but one that has shown a very broad activity in hemalignancies[ph] and even has the potential in some solid tumor settings. So there is a lot more we don’t know about BRD inhibition than we do know. But the internal data shows quite nicely synergies with JAK1 inhibition even with PI3Kδ inhibition and some of those data will be presented with the AACR. So I think that's one underlying theme of the early discovery portfolio is trying to leverage in club or ways the existing clinical portfolio to come up with novel, novel combination and to believe that those sorts of regiments will put us in a much more advantageous competitive position going forward. A program like FGFR while its sort of doesn't follow that same exact rule in terms of combinations, although it could, really gives us an accelerated path to approval. And so those kind of opportunities will always look very careful at, and when we can be opportunistic to have a very, very rapid Phase I to proof of concept to registration program those kinds of efforts will really have a targeted population, as you can appreciate, rise up to the top of the list pretty quickly.

Okay. Thank you.

[Operator Instructions]. Our next question today is coming from Thomas Wei from Jefferies. Please proceed with your question.

Thanks. Just wanted to get a little bit more detail on how the original IDO FBE[ph] trial has matured and what exactly we should be expecting to see at ASCO in terms of patients and doses? And then also just on this PV launch initially, I know you are still early in it and there isn't much to share. But what have you -- have you learned anything from some of the early feedback here that's different, more positive, negative, the higher end of the guidance here, maybe a signal that you've seen some things that have surprised you positively in this market? Any help would be great.

So I'll answer your first question. So with respect to the IDO [indiscernible] remember that this is not a combination that we are pursuing at this time. We do plan to give an update on the data. In collaboration with the investigators it was decided that we will have a more robust data set for presentation at ASMO rather than ASCO, so that is the current plan. But in terms of what to expect, we have about somewhere close to 40 patients that are now included in that data set, was a little bit less in 20 I think at the ASCO presentation in 2014. So not only will you have a larger number of patients but you also have longer-term follow-up not only on the patients that were talked about last year but even with waiting for the data for ASMO longer-term follow-up on the patients who have been enrolled in the past year.

And Thomas, in terms of PV it is extremely early. So I think the only thing we can share with you are preliminary impressions. But I'll give you a few impressions. First one, including the patients that are there, having been out with the representatives, these patients who are poorly managed on hydrea they are definitely there. Now it requires multiple representative visits in order to identify them. As we talked about in the past, docs tend to be lumpers; when you ask them about their PV patients, they tend to generalize and say they're doing fine. It isn't [indiscernible] focus on the minority of patients, but it's an important minority who are either experiencing tolerability issues with hydrea. Hematocrit is above 45. It isn't until you are able to focus on those patients that you really get traction. And that takes multiple visits. From an access and reimbursement perspective, I think things are going according to plan. Prior authorizations are consistent with the label and patient out-of-pocket costs have been reasonable and very manageable. But again it's very early. I think it's too early to call victory on access and reimbursement. We have been pleasantly surprised by the uptick of samples. I think there is a good rationale to use samples in PV. It's a symptomatic disease with a measurable treatment target. The benefits of Jakafi are manifest pretty early. So it really is an ideal situation to use samples to create risk free trial, generate positive experience and create an autocatalytic process. So the sample uptick has been robust. Now it's going to take time to see how that translates into patients on pain drug, how long it takes and what type of pull through we get, but the initial sample uptake has been positive. So as we look at all the puts and takes I'd say we remain pretty balanced and realistic in our view of the commercial potential in PV, but again our conviction is high that it represents a major opportunity to improve care for patients and a major opportunity for our business.

Thank you. Our next question today is coming from Ian Somaiya from Nomura Securities. Please proceed with your question.

Hi, thanks for the follow up. Just wanted to figure out or confirm timing for the baricitinib diabetic nephropathy trial. According to clinic trials that trial finished in the fourth quarter. And just a question for Reid. Just was wondering if you have any programs or any development activities related to CDK4/6 inhibitors?

Do you want to take the first one, Rich?

So the diabetic nephropathy study, as I said, I think intense to submit the data to a scientific meeting and one possibility for example would be the ADA meetings in June, but they're not willing to comment on exactly what the likelihood of that is in terms of being presented. So I think that’s when the data will come out. It's not something that I think they feel like they need to top line immediately as was the case with their Phase III registration studies in RA.

Yes, and with respect to the CDK4/6, it’s an interesting mechanism, but it’s not one that we are pursuing internally although we certainly keep our eyes on it and may be an important point of combination with some other agents in the emerging pipeline.

Thank you. Our next question today is coming from Liisa Bayko from JMP Securities. Please proceed with your question.

Hi, thanks for taking the question. Just to ask a little bit more about the alopecia. Do you think this was something specific to ruxolitinib, is it a JAK1/2 phenomenon? I mean the results in a couple of people look pretty spectacular, what's driving this? Have you seen that as a kind of side effect benefit for other patients in MF? Trying to understand the magnitude.

Yes, so we believe the JAK1s would probably work as well as JAK1/2s, but we don't have models and we haven’t done the experiments to be able to prove that, but we do know that ruxolitinib has a JAK1/2 works incredibly well as an oral and we believe that we can get drug into the hair follicle topically and, therefore, it may have benefit there as well. But in terms of what may emerge over the years as other potential therapies and what their profiles might be I can’t really say.

The results that we are seeing what doses where they using there?

I think they were generally starting at around 20 mg BID, but I don’t remember whether they set at those patients needed any dose adjustment so they just stated at 20. But that doesn’t mean that a dose of 5, 10 or 15 and I wouldn’t -- I would suspect 5 is going to be less effective but for most things we see with ruxolitinib 10 mg BID is a very good dose, so and may very well have worked similarly at lower doses as well, but they just don’t have that data either.

And your vision for the topical, would that be like a cream or some sort of solution? I’m just trying to understand what the --

So the only formulation that we’ve developed is the cream. If the proof of concept study in alopecia is positive, then either us alone or us with a partner or potential licensee and all those things are possible, might then decide to develop other formulations. For the long term might be a better option for some people in certain circumstances, but the cream is a very nice formulation and can certainly not only be used to do the study but we think it could be a successful commercial product on its own should the results be positive.

And is there any anecdotal evidence just kind of commercial setting where you’ve had obviously a lot of patients with MF and PV I guess?

I’m not aware of that per see, it maybe and we were never told. But I think if I remember correctly, I think that tofacitinib, which is the Pfizer drug, might have had an on label use of the drug and the patient that happened to also have alopecia, and that might have been what led to the clinical study at Columbia. But I also think that the Columbia group is very focused in the biology and believe that JAK inhibition should work, and that was not based on anecdotal report but based on the science and then proven in the clinic. And I don’t know what their plans are to potentially give any updates on the clinical data that was reported I think in Nature Medicine last year.

Okay, fair enough, enough on that. For FGFR, have you said which R you're targeting?

I think we have, Liisa, at FGFR 1, 2 and 3

Okay. And then you said there was a PV some up level usage singling on for a while can you maybe characterize and someway like how many patients or percentage-wise to get a sense of that?

Liisa, I think it will be false precision; we really don’t want to get into a specific quantitative assessment of that. It’s been relative small portion of our overall business and again we’ve not seen an increase prior to the approval.

Okay. And then final question, you kind of commented that you had moved swiftly forward with IDO, some of the combinations look promising. Could that be a '15 event or is that a '16 event? That’s my last question. Thank you.

You mean in terms of a data with IDO in terms of in combination with the PD-1s or PD-L1s?

Exactly. Moving you said sort of expressly moving toward -- that would be next year

Yes, we still think that the data is most likely to come out in '16. For the data to be clear enough to talk about in ‘15 things would need to move very rapidly in the results in a small number of patients would need to be very clear. So, nothing is impossible but I think the expectation should be ’15 -- ’16 data presentation of IDO information.

Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over Mr. Hoppenot for any further or closing comments. Hervé Hoppenot: Okay. Thank you all for your time today for you question. As we discussed with you we are looking forward to a series of important and exciting value driver to the next year. And with that, I thank you again for your time and look forward to talking to you again at our first quarter conference call in April and at ASCO. Thank you.