2013 Second-Quarter Financial Results and Guidance Updates
Cash Position
As of June 30, 2013, cash, cash equivalents and marketable securities totaled $277.5 million compared to $228.4 million as of December 31, 2012.
Revenues
Total revenues for the quarter ended June 30, 2013, were $101.7 million as compared to $86.5 million for the comparable period in 2012. Total revenues for the six months ended June 30, 2013, were $172.8 million as compared to $122.7 million for the comparable period in 2012.
Jakafi net product revenues were $54.1 million for the quarter ended June 30, 2013, as compared to $29.7 million for the comparable period in 2012. For the six months ended June 30, 2013, Jakafi net product revenues were $102.4 million as compared to $49.0 million for the comparable period in 2012.
The company now expects that 2013 net product revenues from Jakafi will be in the range of $220 million to $230 million, an increase from the previous range of $210 million to $225 million. This range excludes any product royalty revenues received from Novartis on sales of Jakavi®.
Product royalties from sales of Jakavi outside the United States from Novartis for the quarter and six months ended June 30, 2013, were $5.8 million and $11.7 million, respectively; there were no product royalties earned in the comparable periods in 2012.
Also included in revenues for the second quarter of 2013 were contract revenues of $41.7 million, which included a $25.0 million milestone from Novartis for our c-MET program, as compared to $56.7 million for the comparable period in 2012, which included a $40.0 million milestone from Novartis for Jakavi. For the six months ended June 30, 2013, contract revenues were $58.5 million as compared to $73.5 million for the comparable period in 2012.
Net Income (Loss)
Net loss for the quarter ended June 30, 2013, was $2.6 million, or $0.02 per basic and diluted share, as compared to net income of $4.0 million, or $0.03 per basic and diluted share, for the same period in 2012. For the six months ended June 30, 2013, net loss was $18.2 million, or $0.13 per basic and diluted share, as compared to a net loss of $41.4 million, or $0.32 per basic and diluted share, for the same period in 2012. Included in the net loss for the quarter and six months ended June 30, 2013, was a one-time cash charge of $9.8 million, or $0.07 per basic and diluted share, related to the exchange of the Company’s 4.75% Convertible Senior Notes (4.75% Senior Notes) due 2015 described below.
Non-Cash Stock Option Expense
Non-cash expense related to employee stock options for the second quarter of 2013 was $9.9 million, of which $6.7 million was included in research and development expenses and $3.2 million was included in selling, general and administrative expenses. For the year to date, non-cash expense related to employee stock options was $19.1 million, of which $13.2 million was included in research and development expenses and $5.9 million was included in selling, general and administrative expenses.
Operating Expenses
Research and development expenses for the quarter and six months ended June 30, 2013, were $61.0 million and $113.7 million, respectively, as compared to $51.6 million and $100.5 million, respectively, for the same periods in 2012.
Selling, general and administrative expenses for the quarter and six months ended June 30, 2013, were $23.2 million and $45.5 million, respectively, as compared to $19.7 million and $41.1 million, respectively, for the same periods in 2012.
Interest Expense and 4.75% Convertible Senior Notes
Interest expense for the quarter and six months ended June 30, 2013, was $10.3 million and $22.0 million, respectively, as compared to $11.4 million and $22.7 million, respectively, for the comparable periods in 2012. Also included in interest expense for the quarter and six months ended June 30, 2013, were $6.2 million and $13.2 million, respectively, of non-cash charges to amortize the discount on the 4.75% Senior Notes, as compared to $6.7 million and $13.2 million, respectively, for the same periods in 2012.
During the second quarter the Company entered into separately negotiated agreements with certain holders of the Company’s 4.75% Senior Notes pursuant to which such holders agreed to exchange $143.7 million in aggregate principal amount of the 4.75% Senior Notes for the shares of the Company’s stock into which the 4.75% Senior Notes were convertible, aggregating 16.4 million shares, and $9.8 million in cash. The Company recorded the $9.8 million in debt exchange expense in the second quarter.
As a result of the reduction in the outstanding principal balance of the 4.75% Senior Notes, the Company now expects interest expense to be approximately $38 million for 2013, including non-cash charges of $23 million to amortize the discount on the 4.75% Senior Notes, a decrease from previous guidance of $47.0 million, which included $28.0 million of non-cash charges to amortize the discount on the 4.75% Senior Notes.
Recent Clinical Highlights
Jakafi® (ruxolitinib) – a JAK1 and JAK2 Inhibitor
Myelofibrosis
Three-year data from the Phase III COMFORT-II trial presented at the 18th Congress of the European Hematology Association (EHA) in Stockholm, Sweden, showed sustained spleen reductions and improved overall survival among patients treated with Jakafi as compared to best available therapy.
The U.S. Food and Drug Administration approved a supplemental New Drug Application for expanded dosing language stating that the recommended starting dose for patients with baseline platelet counts between 50-100 x 109/L is 5 mg twice daily and providing guidance for subsequent dose titrations based on safety and efficacy.
In an exploratory analysis of long-term data from an ongoing Phase I/II trial presented at the American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago, researchers found evidence that bone marrow fibrosis, a hallmark of worsening disease in MF, stabilized or reversed after 24 and 48 months of Jakafi treatment in the majority of patients. By contrast, a separate historical database analysis of hydroxyurea-treated patients showed the majority of these patients had increasing levels of fibrosis by 48 months, and none in the hydroxyurea-treated group had evidence of reversal. In a second presentation at EHA, the researchers observed a similar contrast between Jakafi-treated patients and those treated with best available therapy. Additional research is needed to understand the clinical impact of these findings.
Polycythemia Vera
RESPONSE, a Phase III study being conducted under a Special Protocol Assessment (SPA) in collaboration with Novartis, is evaluating ruxolitinib in patients with polycythemia vera (PV), and results are expected in early 2014. Completion of this pivotal trial, if positive, would allow for the filing of a supplemental new drug application submission in the first half of 2014. The FDA has granted fast track designation for ruxolitinib for the treatment of patients with PV who are resistant to or intolerant of hydroxyurea.
RELIEF is an ongoing Phase III trial measuring disease-related symptoms in patients with PV, and not being part of the SPA agreement with the FDA, it is not required for approval. Once completed, the trial results are expected to be submitted to support labeling claims regarding the symptomatic benefit of ruxolitinib in PV.
Pancreatic Cancer
A randomized Phase II trial of ruxolitinib in combination with capecitabine is ongoing with approximately 135 patients with recurrent or treatment refractory metastatic pancreatic cancer (the RECAP trial). The primary endpoint is overall survival, and top-line results are expected later in the third quarter of 2013.
Other Potential Indications
Multiple investigator-sponsored trials evaluating ruxolitinib in oncologic indications are ongoing.
Baricitinib – a JAK1 and JAK2 Inhibitor
The 52-week efficacy and safety data from the open-label, long-term extension of the Phase IIb JADA study of baricitinib in patients with active rheumatoid arthritis, conducted by the Company’s collaboration partner Eli Lilly and Company, were presented at the European League Against Rheumatism (EULAR) Annual European Congress of Rheumatology in Madrid, Spain. Among patients completing the open-label extension, the statistically significant clinical improvements in the signs and symptoms of rheumatoid arthritis observed at week 24 were sustained at the end of 52 weeks, with no new safety signals observed with longer treatment.
The Phase III clinical program to evaluate baricitinib in rheumatoid arthritis is ongoing. Two Phase II trials in patients with moderate-to-severe psoriasis and in patients with diabetic nephropathy are also underway.
INC280 (formerly INCB28060) – a c-MET Inhibitor
Under the Incyte-Novartis licensing agreement, further development of this compound is being conducted by Novartis. INC280 is currently in several clinical trials: as monotherapy in patients with advanced hepatocellular carcinoma and in patients with c-MET dependent advanced solid malignancies, as well as combination therapy with gefitinib in patients with non-small-cell lung cancer.
INCB24360 – an IDO1 Inhibitor
Final results from the Phase I clinical trial of INCB24360, which were presented at the American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago, demonstrate that this novel oral immunotherapy achieves greater than 90 percent inhibition of IDO1 at generally well-tolerated doses and may represent a new treatment option for advanced malignancies either as monotherapy or in combination with other cancer treatments.
INCB24360 is currently in Phase I/II clinical development for metastatic melanoma in combination with ipilimumab and as monotherapy for ovarian cancer.
INCB39110 – a JAK1 Inhibitor
Three proof-of-concept studies evaluating INCB39110 in patients with myelofibrosis, psoriasis and rheumatoid arthritis are underway, with results expected in the second half of 2013. The results of these studies are expected to provide information about the most appropriate indications for further development.
INCB47986 – a JAK1 Inhibitor
A second JAK1 inhibitor, INCB47986, is currently in Phase I clinical development, and future studies will focus on its use in hematology and oncology indications.
