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Incyte Corporation (NASDAQ:INCY)

Q4 2013 Earnings Conference Call

February 12, 2014 8:30 AM ET

Executives

Pamela M. Murphy – Vice President-Investor Relations and Corporate Communications

Hervé Hoppenot – President and Chief Executive Officer

Jim Daly – Executive Vice President and Chief Commercial Officer

David C. Hastings – Executive Vice President and Chief Financial Officer

Reid M. Huber – Senior Vice President-Discovery Biology

Richard S. Levy – Executive Vice President-Chief Drug Development and Medical Officer

Analysts

Liisa Bayko – JMP Securities, LLC

Matt Roden – UBS Securities LLC

Ying Huang – Barclays Capital, Inc.

Cory Kasimov – JPMorgan Securities LLC

Brian Abrahams – Wells Fargo Securities LLC

Salveen Richter – Canaccord Genuity, Inc.

Josh Schimmer – Piper Jaffray, Inc.

Navdeep Singh – Goldman Sachs & Co.

Ian Somaiya – Nomura Securities International, Inc.

Eric Schmidt – Cowen & Co. LLC

Brienne Kugler – Morgan Stanley & Co. LLC

Thomas Wei – Jefferies LLC

Bret Holley – Guggenheim Securities, LLC

Operator

Greetings ladies and gentlemen and welcome to the Incyte Corporation Fourth Quarter and Year End 2013 Earnings Call. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Pamela Murphy, Vice President, Investor Relations and Communications. Thank you, Ms. Murphy, you may now begin.

Pamela M. Murphy

Good morning and again welcome to Incyte’s fourth quarter and year end conference call. On the call today is Hervé Hoppenot who as most of you know joined Incyte last month as President and Chief Executive Officer. Also on the call today are Jim Daly, who leads our Commercial Team; Dave Hastings, our Chief Financial Officer; Rich Levy, who directs Drug Development; and Reid Huber who heads Discovery Biology.

Hervé will begin with a brief overview of the quarter and Jim will follow with an update on Jakafi, and Rich will highlight progress made in our lead clinical programs. Dave will then describe our fourth quarter financial results and 2014 financial guidance. After our formal remarks we will open up the call for Q&A.

Before beginning, we would 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 and other indications and for other compounds in our pipeline and our 2014 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, 2013 and from time to time in our SEC documents. Hervé?

Hervé Hoppenot

Thank you, Pam and thank you all for attending this call. So, first obviously I am very excited of joining the Incyte team and I want to congratulate and thank Paul Friedman for building such a company that it’s in a great position to continue to develop a broad portfolio of products to significantly improve patient outcomes.

Now looking back at 2013, we delivered a very strong and sustained sales growth for Jakafi in myelofibrosis and exceeded the revenue guidance. The big news, obviously, for patients was at ASCO when we updated our survival data and suggested that we can slow progression of disease and prolong life of patient with myelofibrosis.

We also saw data from RECAP our Phase II trial of ruxolitinib in pancreatic cancer and that this data are encouraging for patient not only with pancreatic cancer, but also with other solid tumors. And obviously we developed our pipeline of advanced number of projects and during the year we also restructured and strengthened the balance sheet which gives us the ability to invest and grow our pipeline and continue to discover and develop new drugs.

Now looking forward to the future starting obviously now in 2014. First, we believe we will see continued growth in myelofibrosis, which you can see reflected in our net product guidance for 2014 in the range of $315 million to $335 million.

Now remember myelofibrosis is just the beginning for Jakafi. We look forward for expanding to other indications, first in the PV where we expect to file sNDA in the first half of the year, and are getting our team ready for successful launch. And next, solid tumor, where we are planning two Phase III studies in pancreatic cancer and Phase II trials in breast cancer, colon cancer and non-small cell lung cancer. Our lead JAK1 inhibitor also has the potential in treating solid tumor and we’re testing it first in non-small cell lung cancer.

We are also obviously excited about the potential of our IDO program. Just last week we announced that the deal with Merck to combine our IDOl inhibitor with their anti-PD-1 immunotherapy in non-small cell lung cancer, where we would be starting studies during the year. And we intend to establish all the collaboration to show that our IDO1 inhibitor can do in various types of cancer. Another combination we are working on is when where we are combining two of our own compound PI3 kinase delta inhibitor and the JAK1 inhibitor first in B-lymphoid malignancies.

Now that is for the oncology portfolio. Now we also where we have obviously a very growing portfolio, but we are not forgetting the potential revenue streams that we have from our compound in inflammation where our alliance with Lilly could deliver significant value for baricitinib, our second JAK1, JAK2 inhibitor, and we are starting Phase II trials for our second JAK1 inhibitor in rheumatoid arthritis in the first half of the year. And you simply have an opportunity there to have an approach where we will have two different JAK1 inhibitor, one in oncology and one in inflammations just as we did with ruxolitinib and baricitinib.

Now, Jim will provide more details around our commercialization of Jakafi.

Jim Daly

Thank you Hervé and good morning everyone. Our gross strategy for Jakafi to add new patients at a healthy consistent rate while keeping patients on treatment longer yielded continued solid results in the fourth quarter as evidenced by the $72.9 million in net product revenues. I would like to thank our Incyte colleagues for their tireless efforts in educating physicians about optimal use of Jakafi to benefit patients with intermediate or high-risk myelofibrosis.

In terms of quarter-over-quarter growth net sales grew 21% with the following components of growth.

Underlying demand as measured by bottles dispensed to patients grew by 7%. Net price accounted for seven points of growth and inventory accounted for 7 points of growth. We exited the fourth quarter with inventory levels at the high end of our normal range of three to 3.5 weeks. The dollar value increase in inventory between the third and the fourth quarters was approximately $4 million, a portion of which we expect to reduce in the first quarter.

Our full year 2013 net sales of $235.4 million, reflects 73% growth over 2012 net sales of $136 million. Our fourth quarter performance was consistent with our expectations for steady growth and underlying demand which we saw throughout 2013. New patient starts remain consistent with previous quarters and the number of prescribers have continued to increase. Through the fourth quarter, nearly 60% of our target prescribers have prescribed Jakafi at least once and 36% have prescribed for two or more patients. One third of new patients come from new prescribers and two thirds come from previous prescribers, reflecting a gradual shift to existing prescribers relative to prior quarters.

We continue to see increasing use of lower dosage strengths, which is driven by physicians individualizing treatment. In the fourth quarter, 5 milligram and 10 milligram strengths represented nearly 50% of dispensed bottles, up from 43% during the same period last year and slightly up from the third quarter this year. This reflects appropriate patients starting on lower dosage strengths or patients titrating downward as necessary.

Looking at 2014, we continue to believe that the total U.S. population of patients with myelofibrosis is between 16,000 and 18,500. Approximately 80% to 90% of patients diagnosed with MF are intermediate or high-risk and we believe there is significant proportion of patients who may benefit from Jakafi, still remain untreated, which provides an opportunity for future growth.

From a physician perspective, we see an opportunity to increase breadth of prescribing while also increasing depth of prescribing. Our expanded sales force will enable us to reach more physicians with greater frequency in 2014. We continue to experience a favorable reimbursement environment. The vast majority of payers manage Jakafi consistent with the label and physicians are able to successfully manage most prior authorizations that exist.

Financial assistance is provided by our IncyteCARES program or through independent foundations. Through scientific channels emerging data on overall survival are emphasizing the medical imperative to treat patients earlier in the course of the disease. We hope to have certain overall survival data reflected in the product package insert as a result of a labeling update expected in the third quarter.

Our guidance of $315 million to $335 million in net product revenues in 2014 reflects year-over-year growth between 34% and 42%, driven by new patient starts and continued improvement in persistency. Our guidance assumes no meaningful contribution to revenues in 2014 from an FDA approved indication in PV.

Based on our market research, we continue to expect, assuming FDA approval, that PV indication will make a substantial contribution in Jakafi sales in 2015. The addressable patient population for PV is larger than that of MF and the length of treatment of PV is likely to be longer than MF. Based upon claims data there are at least 100,000 PV patients diagnosed and treated in the U.S. 60% of them are currently on HU or previously on HU, but discontinued because of side effects or lack of efficacy.

We estimate that approximately 25,000 of these patients are resistant to or intolerant of HU and suffer from uncontrolled PV while on best available therapies. A primary treatment goal for PV patients to consistently reduce and maintain hematocrit levels below 45% was achieved in the Jakafi Phase II study in almost all patients who were resistant to of intolerant of HU.

Patients also experienced reductions in spleen size and improvements in debilitating symptoms. These uncontrolled PV patients have significant unmet needs and reflect a major commercial opportunity for Jakafi. We are taking all appropriate steps to help insure that we will maximize the opportunity in front of us with PV.

We’ve always said that MPNs are just the beginning. We have a deep pipeline of novel molecules and innovative programs that represent an exceptional opportunity to make a difference for patients,

To discuss this in more detail I’ll now turn it over to Rich.

Richard S. Levy

Okay. Thanks, Jim. Our development efforts with the Jakafi in myeloproliferative neoplasms continue to advance on several fronts. With respect to intermediate or high-risk myelofibrosis we submitted an sNDA early in the fourth quarter for inclusion of certain survival data in our label and we expect to have a response from the agency by the third quarter.

Additionally, our Phase III registration study for polycythemia vera, that is being conducted under an SPA will readout soon. We expect to have top line data to announce in March or April and then to submit the sNDA in June for the treatment of PV patients resistant to or intolerant of hydroxyurea. As we said in our third quarter call, the FDA granted Fast Track status for this indication and assuming six months review we would potentially have approval by year-end.

Finally, we expect to submit full results from the symptom improvement study in patients with PV, study called RELIEF for presentation at ASH, which should be around the time of our potential PV launch after which we intend to submit an sNDA labeling update for the symptomatic benefit.

I’ll turn next to development efforts focusing on JAK inhibition in solid tumors. During the last quarterly call we outlined results from RECAP, the Phase II double-blind placebo-controlled study of ruxolitinib plus capecitabine versus capecitabine alone in second line pancreatic cancer. These results showed a hazard ratio for overall survival of

0.47 favoring the ruxolitinib arm in our prospectively defined subgroup of patients harboring evidence of tumor-induced inflammation and therefore potentially more likely to benefit from JAK inhibition.

For competitive reasons we’re not disclosing the details around the subgroup at this time. However, based on these very encouraging results as well as the abundance of data supporting this potentially utility of this subgroup in defining higher risk patient population in many other solid tumor histologies, we believe that JAK inhibition represents a new treatment approach of patients suffering not only from pancreatic cancer, but also possibly many other solid tumors. It’s an important therapeutic opportunity for JAK inhibition as this subgroup can represent 30% to 75% of patients depending on the tumor type and line of therapy.

Published literature describing the biology of tumor-induced inflammation and our own preclinical data suggest that selected JAK1 inhibition maybe similarly effective relative to our dual JAK1/JAK2 inhibitor ruxolitinib when it comes to this approach to treatment. By virtue of the bone marrow sparing properties of selective JAK1 therapy this provides its own spectrum of opportunities, particularly in patients with whom myelosuppressive chemotherapy is warranted and in whom concurrent ruxolitinib therapy may therefore be less well tolerated.

We are beginning this development program with two double-blind placebo-controlled Phase II studies in patients with non-small cell lung cancer. These studies will evaluate 39110 on a background of two different chemotherapeutic regimens and we expect these data as well as emerging data with ruxolitinib to lay the ground work for our future development efforts around JAK1 inhibition in solid tumors.

Based on the results of RECAP, the first priority for ruxolitinib is pancreatic cancer. Last August, the FDA granted orphan status for ruxolitinib for the treatment of pancreatic cancer and in November we obtained an agreement on an SPA for a registration trial in second line setting evaluating ruxolitinib versus placebo on a background of capecitabine.

Importantly, as part of this SPA, the FDA agreed that enrollments in the Phase III study could be limited to the subgroup identified in RECAP. They also agreed that we did not have to pursue companion diagnostic development efforts in order to identify these patients.

While sufficiently robust results from the single SPA-approved trial could potentially support approval in order to minimize regulatory risks we’re planning a second, nearly identical Phase III trial in this population. Both of these trials will be double-blind and placebo-controlled, and are expected to enroll approximately 300 patients each beginning in the first half of this year. The primary endpoints in each trial is overall survival.

We’ve also planned three double-blind placebo-controlled Phase II trials of ruxolitinib in non-small cell lung cancer, breast cancer and colon cancer, all expected to start in the first half of this year. Each study will focus on the subgroup identified in RECAP and will combine ruxolitinib disparities that exhibit low to moderate myelosuppressive effect. Again, overall survival will be the primary endpoints in each of these studies.

Looking at our development pipeline beyond JAK inhibition, I'll turn to our IDO1 inhibitor, INCB24360. We're excited about the potential for this mechanism to provide a meaningful and complimentary therapeutic approach in immuno-oncology, a field which is grounded in the scientific literature and well supported by our preclinical data, as well as by early clinical data in combination with the approved anti-CTLA4 in ipilimumab in melanoma.

The results of a dose finding portion of the Phase I/II study have been submitted for presentation at ASCO later this year. Even though that IDO1 inhibitors can provide antitumor fact in clinically relevant preclinical models as monotherapy that it is in combination with checkpoint inhibitors such as anti-CTLA4 and anti-PD-1 or anti-PD-L1 were significant synergies has been achieved. Based on these preclinical data needs it’s in our goal to evaluate INCB24360 in multiple combination regimens across various solid tumors.

Therefore we are pleased to have just announced for our first combination study with this novel and particularly exciting checkpoint inhibitor, Merck’s anti-PD-1 immunotherapy, MK-3475. Under the terms of this agreement, Incyte and Merck will collaborate and co-fund the Phase I/II study in patients of previously treated metastatic and non-recurrent non-small cell lung cancer as well as other metastatic cancers.

The trial should begin in relevant patients in the first half of this year. The Phase I portion is expected to be an open label dose escalation study to define a recommended regimen of the two combined agents. And the Phase II portion plans to evaluate efficacy and safety of that recommended regimen in a randomized population where all patients receive MK-3475, combining with either 24360 or placebo. Incyte will conduct the study, though the design and analysis of the study will be done in close collaboration with Merck.

We will continue to let the emerging science drive our development program for 24360 and we anticipate expanding our IDO1 program further this year. Focusing on indications and combinations where we believe 24360 is able to achieve important benefits for patients.

Our broaden hematology and oncology portfolio also gives us opportunities to combine our drugs when preclinical data suggest the combination we’ll have additional clinical benefits. The first such target competition being evaluated is with our JAK1 inhibitor, 39110 and our PI3K-delta inhibitor, 40093 two distinct mechanisms that exhibit synergy in preclinical studies in lymphoma.

Last month we initiated a safety and efficacy study of this combination in patients with lymphoid malignancies. Now our Discovery group has new programs that are designed to expand and synergize with our clinical development pipeline and we just prepared to share details around these new oncology programs and their strategic importance to us as they reach clinical development.

With that, I’ll now turn the call over to Dave will explain why we very well positioned to fund our expanding discovery and development programs.

David C. Hastings

Thanks Rich. Good morning everybody. I’ll start today by discussing Q4 results and then review our 2014 guidance. We ended the year with approximately $509 million in cash and investments. The cash balance reflects the completion of our offerings of $750 million of convertible senior notes in the fourth quarter. We use a portion of net proceeds from this offering to repurchase a total of $117 million aggregate principle amount of our outstanding 2015 convertible senior notes for $500 million in cash. This repurchase resulted in a one time charge of $17.9 million recorded in the fourth quarter.

Now importantly because of the difference in the conversion price of our 2015 notes compared to the new notes the resulting net proceeds of the Company of $229 million were minimally diluted, about 1 million shares are fully diluted basis per share.

Now moving to Jakifi we recorded $72.9 million of fourth quarter and $235.4 million of full year 2000 net product revenues. Additionally we recorded $8.4 million in Jakafi product royalties from Novartis for sales outside the United States in the fourth quarter and $28.3 million for the year.

Our growth to net adjustment for product revenue recognized was $6.5 million or about 8.2% for the fourth quarter and $22.1 million for 8.6% for the full year 2013. Our gross and net adjustment includes fees to especially pharmacies, rebates to government payers, our share of the donut hole for Medicare Part D patients, co-pay assistance to eligible privately insured patients and any product returns.

We are still using a portion of our pre-launch inventory and therefore our cost of goods sold for both the fourth quarter and full year 2013 was immaterial as this starting inventory was previously expenses R&D prior to FDA approval. In terms of our operating expenses both R&D and SG&A were within our expectations.

Now moving to 2014 guidance, as Hervé mentioned our Jakafi net revenue is expected to be in the range of $315 million to $335 million. In terms of our growth to net adjustment we expected the range from 9% to 10% in 2014.

Now because of our portion of the Medicare donut hole the first quarter growth and adjustment is historically higher than the rest of the year. In terms of 2014 contract revenues we expect $13 million in revenue from the amortization of the upfront payment received under the Lilly collaborative agreement.

For milestones, we expect to receive $60 million under the Novartis collaboration once they receive price and approval for Jakafi in the third major European country. We expect the total cost of good sold as a percentage of net Jakafi sales in 2014 would be about 2%. Our product gross margins in 2014 will still benefit from the use of previously expense inventory.

Now steady state when we are using inventory that has not been previously expense, we expect cost of goods to be in the range of 4% to 6%, which includes our tiered low single-digit royalty payments in Novartis, our net sales of Jakafi in the U.S. We’ll begin to pay those once Novartis receives pricing approval for Jakafi in a third major European country.

Now, I’ll turn to 2014 R&D expense. We expected a range from $350 million to $370 million. This includes non-cash stock compensation expense of approximately $30 million to $35 million. Our increase in R&D expense from 2013 is primarily due to increased development activities related to the expansion of our pipeline, including the advancement of the ruxolitinib in pancreatic cancer and other solid tumors. The advancement of our JAK1 inhibitor in solid tumors, and the development of our IDO1 inhibitor in multiple oncologic indications in combination with checkpoint inhibitors.

In terms of SG&A expense, we expect it to range from $145 million to $155 million, this includes non-cash stock compensation expense of $28 million to $30 million. The increase is primarily due to increased sales and marketing investment in support of Jakafi in MF and our pre-launch activities for PV.

We expect our interest expense this year to be $48 million, including a non-cash charge of $37 million, primarily related to the amortization of a discount on our convertible senior notes. So, we entered 2014 in a strong financial position to fund our expanding pipeline, $509 million in cash as well as multiple and increasing sources of the cash flow that include net product sales, milestones and royalties.

So, with that I’ll turn the call back over to Hervé.

Hervé Hoppenot

Thank you, Dave. So, just – you can see the growing number of products into the pipelines, the growing number of indications that we are pursuing and the strength of the team in managing the growth of the organization. And what I see is that, we have an opportunity here, obviously to improve and stabilize the people who are relying on us to develop new products for them, and also to create and build what could be in the future a very successful high quality, high growth biopharmaceutical company.

So I think that concludes our formal remarks, and operator please open the call for Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Liisa Bayko with JMP Securities. Please proceed with your questions.

Liisa Bayko – JMP Securities, LLC

Hi, congratulations on a great quarter. Welcome, Hervé.

Hervé Hoppenot

Thank you.

Liisa Bayko – JMP Securities, LLC

A couple of questions, for the SPA, can you maybe talk a little bit or actually for the trial I mean, can you maybe talk a little bit about timing of when we might gain some more visibility on the subset that you’re going to be focusing on, and then in terms of – just a follow-up on that, when you talk about the competitive position, and not wanting to sort of tip-off competitors, can you maybe talk about, are you – speaking about just JAK inhibitors or other mechanisms as well, thank you.

Richard S. Levy

This is Rich. Hi, just in terms of the timing, I think the key for us now is really having the best forum to be able to present the whole story, to be able to not just speak to the data but to be actually able to show slides with data and really put that whole story together. And we really think that that best opportunity will be an analyst investor meeting, probably done in Chicago around the time of ASCO probably, the night or some day around the time when we actually present the data.

And what we are speaking about is what is the subset of patients that are going to be included or versus those not included in our trials for both JAK1 and ruxolitinib in the solid tumors. We’ve said that this is related to tumor induced inflammation and we’ll put that whole story together in a full way.

I think most of the ideas are already out there, it really comes down to describing what is the specific parameter that we’re using. And also with respect to the SPAs, we said the SPAs that we can focus on that group in the Phase III trial, as well as confirmed what we’ve been saying from the beginning that we have no expectation or the need to develop a companion diagnostic, and that’s been confirmed in writing in the SPA.

Liisa Bayko – JMP Securities, LLC

Okay, great. Thanks, that’s helpful. And then for IDO, strategically are you thinking of this – your strategy to leave this open that you’d have the IDO inhibitor that could be partnered with multiple compounds or are you thinking more about picking a particular immunotherapy to partner with?

Richard S. Levy

Our IDO should be a preferred partner for a whole range of immunotherapies including PD1s and PDL1s and potentially other targets, emerging target as well. But at the same time, if one – one collaborative module ends up being a much better combination, we’ll let the data drive the decisions after that.

Liisa Bayko – JMP Securities, LLC

And then just a technical question, for PV should we be expecting a milestone this year? And maybe what would trigger that?

Richard S. Levy

Well, so the guidance we’ve given for milestones, we’ve said – just reflect the approval of pricing for Jakafi in Europe.

Liisa Bayko – JMP Securities, LLC

Okay.

Operator

Our next question comes from the line of Matt Roden with UBS. Please proceed with your question.

Matt Roden – UBS Securities LLC

Great, good morning. Thanks very much for taking the questions, and congrats to Hervé for the new role. On IDO with respect to the Ipi combo trial, can you give us the sense, Rich, which what end points you think would best illustrate the added benefit you get with IDO relative to historical controls? There has been a lot of talk about response rates which does make sense. I just wonder if you think that we should be also focused on PFS and OS.

Richard S. Levy

Sure, so what we’re going to be reporting at ASCO is basically the Phase I component of this Phase I2 trial. And so everyone is receiving 24360 and ipilimumab. So the comparison is to [start up our] [ph] controls. And so when you look at ipilimumab and monotherapy, you know that response rates have traditionally been in the 10% to 15% range. We know that progression free survival with monotherapy, and that indication was in the order of three months or 100 days, something around those lines.

And survival is – for reasons I’ll get into in a second something that’s much harder to compare. So we do look – I think the focus will be on response rates and progression free survival. The issue with survival is that you really can’t compare one year to the next. In the case of patients who are coming on to this therapy who have not previously received their PD-1or PD-L1 inhibitor if they progress they will often go on to PD-1 inhibitor and have a prolong survival as a result of that compared to what was available to patients when the initial ipilimumab studies were done. So we really we can report what the survival is but in terms of a fair comparison it’s really limited to response rates and progression free survival

Matt Roden – UBS Securities LLC

Okay, that’s helpful, and in terms of 110 and Jakafi in these solid tumors, can you just maybe speak to how these two can co-exist? Is it simply a matter of being able to dose patients where there are myelosuppressive chemotherapy backbones, or is there something more there that maybe from the wider therapeutic window with 110 do you think that there might be a way to get greater JAK inhibition therefore maybe a differentiated efficacy advantage there with 110, is that on the table at all?

Richard S. Levy

So I mean that’s always a theoretical possibility, but the doses of ruxolitinib that were used in the RECAP study were in the order of 15 milligram twice a day where we saw in the subgroup a hazard ratio of less than 0.5. So I don’t really know that there is room for improvement over what you can do with that sort of dose range of ruxolitinib. What we get concerned about is when you get into highly myelosuppressive chemotherapy that you wouldn’t even be able to provide those levels of ruxolitinib and therefore the comparable levels of JAK inhibition.

So, it’s conceivable that you could go higher with a JAK1 inhibitor in terms of level of JAK1 inhibition than you did with rux in the RECAP study. But that’s not really the rationale for what we’re doing. Right now we have clinical proof-of-concept with ruxolitinib, we have a lot of models and preclinical data to suggest the JAK1 inhibitors will do the same, but until we actually demonstrate clinical proof-of-concept with the JAK1s we are not giving up on studying ruxolitinib particularly in those indications where we believe the drug should be able to be dosed at comparable levels to where it was in RECAP.

Matt Roden – UBS Securities LLC

That’s great. Thanks very much, Rich for the clarity and congrats on all the progress.

Richard S. Levy

Thanks

Operator

Our next question comes from the line of Ying Huang with Barclays. Please proceed with your question.

Ying Huang – Barclays Capital, Inc.

Thank you for taking my question and congratulations on all the pipeline advancements. First of all, you guys announced your collaboration with Merck PD-1, MK-3475 last year, I am just wondering if you could provide any color on what you have supplied to Merck in terms of pre-clinical data and does that also include some data you preened from the IDO plus ipilimumab trial. And then secondly when are you going to plan to start Phase II portion of the Yervoy plus your [Ipi] [ph] trials here. And lastly just housekeeping question, when should we expect that AACR this year on IDO inhibitor? Thank you.

Jim Daly

Let me start, so Merk as well as some of the other companies that we are speaking, you mush have seen both our pre-clinical data and our merging clinical data that is not to say that we can define the basis up on which Merk and potentially other companies have decided to move forward with us. So in terms of the Phase II portion of the combination with Yervoy, I think we are getting probably to the point where we begin to study one more cohort and then probably we’ll be ready or in a position to start the combination regimen following that.

Because of the onset of some of the ipilimumab side effects, usually take two to three months to come to fruition. We study patients for a good eight to nine weeks before we actually evaluate the safety and cohort. The cohorts are currently enrolling now it’s not fully enrolled, so I would say it will be a minimum of another three months probably four before we might be in a position to start a randomized portion. And with respect to AACR, let me turn that over to Reid. What do we think AACR on IDO1 inhibition?

Reid M. Huber

Yes, I don’t think we are going to have we previously presented some data prior, meaning we’ll have an update on our companion diagnostic efforts that are being conducted with Ventana to put ourselves in a position to have a means to potentially select the patients, it’s not clear if we are going to need that in the clinic or it’s going to enable the clinical development in anyway. But we want to make sure that we are in a position to leverage that.

They will also be I think pending here soon a publication from Tom Gajewski from the University of Chicago that will describe a lot of his effort that have been done in collaboration with us exploring the combinatorial activity of IDO inhibition with checkpoint antagonism that includes with multiple checkpoint inhibitors, that we’ll look for those data as well in the coming year.

Ying Huang – Barclays Capital, Inc.

Great. Thank you.

Operator

Our next question comes from the line of Cory Kasimov for JPMorgan. Please proceed with your question.

Cory Kasimov – JPMorgan Securities LLC

Hey good morning guys, thanks for taking the questions. I have two more for you on the IDO inhibitor. So if the initial novel combo data weren’t advancement, does your agreement with Merck dictate how you will proceed with later stage trials and then I have one other one.

Hervé Hoppenot

The agreement is largely around the single trial and does not go into detail about further development depending upon any particular results. Jim is actually were involved, if he has anything to add to that.

Jim Daly

I agree with that.

Hervé Hoppenot

At this point we really don’t want to get into the agreement in much detail.

Cory Kasimov – JPMorgan Securities LLC

Okay, I understand, well, and then much like Merck, it sounds like your interest in casting a pretty wide net from a collaborative standpoint, so when thinking about different combinations with your IDO inhibitor, how much preclinical evidence do you need that you’re getting an appropriate balance in immune response before pushing ahead into placebo studies.

Richard S. Levy

I mean I would say that there are times when those data can be important just advancing our own understanding and creating the confidence that we need to move forward, and I think a good example of that is the work that we have done with Dr. Gajewski in collaboration to study IDO1 inhibition with checkpoint inhibitors.

I think the more that we understand the basic biology of IDO preclinically even in the setting like that we can gain incremental comfort in exploring IDO1 inhibition with other technologies that maybe distinct from checkpoint inhibition, and that necessarily require preclinical gating studies for those. So I would say that part of this depends on the strength of the preclinical data and its internal consistency as well as our emerging clinical data and the changes in all therapeutic landscape.

So, for example, speaking about technologies like vaccine approaches or immune stimulatory agents or even chemo our targeted therapies our confidence in all of those modalities I think is increasing as the immune oncology space is itself developing and we certainly want to be opportunistic and thoughtful as to how we enter into those spaces.

Cory Kasimov – JPMorgan Securities LLC

Thank you.

Operator

Our next question comes from Brian Abrahams with Wells Fargo Securities. Please proceed with your questions.

Brian Abrahams – Wells Fargo Securities LLC

Hi. Thanks for taking my question. Congrats on the progress and welcome to Hervé. Can you talk about the rationale for conducting two studies in Jakafi and pancreatic cancer, two Phase III given that you have an SPA? Maybe talk about the differences between the studies that beyond just, I guess timing and geography, can those be pooled to augment powering?

Richard S. Levy

So when you look at an SPA, an SPA is based on one trial. An SPA is specific to our particular trial, but an SPA is looked at within the context of the Phase III development plan. And so, the SPA basically says the design of the first study which we call in Janus 1 is acceptable, which basically means that if the efficacy results are there and there are no safety or benefit risk surprises that could be the basis of approval.

The traditional guidelines are that it requires two studies to get approval for new indication or for a new drug. But if one study, particularly on survival, is robust can be sufficient and that's clearly been acknowledged by FDA, but they did reiterate to us that that study would really need to be robust, and we believe it has an excellent chance of being robust based on the recap data. But it wasn’t a difficult thing for us to do, a second trial, and just diminish our regulatory risk because why would we take more risk than we need to.

Brian Abrahams – Wells Fargo Securities LLC

In terms of differences?

Richard S. Levy

Yes, so just second and perhaps there, I didn't forget the second part of your question. So both studies are going to have an overall endpoint of survival. They're going to enroll the same patient operation. The second trial called Janus 2. The main difference is that it will have a few less patients in it. They are both around 300, but it is a little bit less and second that we are adding more patient report outcome measures to that study.

Now those are not going to be an alpha controlled endpoint. So we do not expect to get labeling for symptomatic benefit based on that study, but we are developing and generating a tool that could potentially be used in a subsequent study to demonstrate symptomatic benefit in that study. That measure was not ready for prime time, at the time we submitted the SPA for Janus 1, but it's been finalized to incorporate those tools. That's essentially an exploratory endpoint to that study. It's a minor difference.

Brian Abrahams – Wells Fargo Securities LLC

Great. That's very helpful. Then one just quick follow-up. I know in talking about exploring Jakafi in other solid tumors beyond, pancreatic, I think you’ve mentioned the idea of possibly exploring beyond the subgroup tested in RECAP. Is that something that you're still considering, are you going to be primarily focused on the subgroup only?

Jim Daly

So, one of the programs that we're doing and I'll tell you that it's colon cancer with ruxolitinib is a very less line of therapy where there are really very limited options. And that study is being designed so that if the results are quite robust that study in large space to compared to the others might potentially be a basis of a group without having to go back and do a Phase III, and so therefore since – we have pretty clear data in pancreatic cancer that this basis of restricting enrollment, it’s true in pancreatic cancer, we don’t have that data yet in colon cancer. We expect to find it. So we’re actually doing in that Phase II study is we are enrolling two groups one; to meet the criteria and the group that don’t, but the primary endpoint of the study is still based on the patients that do meet that group.

So, in that sense that study is also based on that influence, so we are enrolling the other patient population there. With our studies in non-small cell and breast cancer, we don’t expect that those Phase II studies have the potential to be the basis of registration. So there we are focusing exclusively and only enrolling patients to meet that criterion.

Once we demonstrate – assuming that we do demonstrate this is colon cancer and the second solid tumor that this a credited market for us, with therapeutic success I don’t think we will ever need to do that again in any solid tumor.

Brian Abrahams – Wells Fargo Securities LLC

Got it. That’s very helpful. Thanks again.

Operator

Our next question comes from the line of Salveen Richter with Canaccord Genuity. Please proceed with your question.

Salveen Richter – Canaccord Genuity, Inc.

Thanks for taking my question. Just wondering if you could just give us some color on why chose non-small cell lung cancer for the IDO PD-1 combo trial and what tumors might be up next. And then as well as the JAK1, are you not doing the pancreatic trial anymore, I just curious on that as well.

Richard S. Levy

Okay, so non-small cell is a focus of the Merck study. We are going to enroll some patients with other things but the current intend is that the Phase II portion would be focused on non-small cell that potentially could still change. I think that in general without getting specific discussions between companies this evidence that in non-small cell lung cancer PD-1 inhibition is active, but not as active as it is for example, in melanoma. And so therefore the concept was we want to focus in areas where we already know that PD-1 has some activity, but it’s suboptimal we want to try to add to it.

And it is our hope both with Merck and potentially with some of the other collaborations that we are not really prepared to speak to that we’d look at other tumor types as well. But we really can’t get into that until we move forward.

With respect to not doing a JAK1 inhibitor in pancreatic cancer, we’re still potentially looking at JAK1 in first-line pancreatic cancer where the combination is Abraxane and capecitabine which is a more highly myelosuppressive chemotherapy where there is a better chance of activity would be done with JAK1 and ruxolitinib but we’re just still going through dose finding there not prepared to announce anything yet.

For us, we didn’t think in the end it was a good idea for us to do JAK1 inhibition in second-line pancreatic cancer in combination with something like capecitabine again, since we already have that covered, and doing the study there would not directly lead to a new indication, so we’ve been focusing in non-small cell which will be a larger opportunity should those results be positive.

Salveen Richter – Canaccord Genuity, Inc.

Thanks guys.

Hervé Hoppenot

Welcome.

Operator

Our next question comes from the line of Josh Schimmer with Piper Jaffray. Please proceed with your question.

Josh Schimmer – Piper Jaffray, Inc.

Hey, thanks for taking the questions. Which for the IDO1 inhibitor melanoma study with ipilimumab, can you summarize how many patients have been enrolled so far across the various doses explored. And coming back to Matt’s first question, the speculation amongst investors regarding the response rate for that combination has reached very high-level for now. Are you comfortable with those investor expectations? Thanks.

Jim Daly

So I don't know what’s the investor expectations are. Can you tell me what they are?

Josh Schimmer – Piper Jaffray, Inc.

We hear now it's 30%, 40% there or higher.

Jim Daly

Yes. So I mean, I'm not going to say what the numbers are. All I would say is it’s based on a relatively small ends. So there's a lot of uncertainty as for the precision of whatever that number is. So, it was 30% to 40% based on, let's say, 10%, that's given 30% or 40% based on 100%. So, I think the thing that I would ask people to remember is that the numbers are not big, but they are enough for us to believe that this is clearly different in terms of at least response rates and we haven’t really spoken about the time to progression – the progression free survival compared to Ipi alone.

I don't remember the exact number of patients that are included here. I do believe in the abstract I do believe that there will probably be more data in the actual ASCO presentation than are actually in the abstract, but I would say that in the abstract it’s something less than 20, I believe.

Josh Schimmer – Piper Jaffray, Inc.

Got it. And should we focus on response rate as well as depth of response or is it really response rate overall that’s gotten you excited?

Jim Daly

So, I really don't want to try to get into details around depth of response. We know that's been a big topic of presentation particularly with the PD-1 combination, that data is impressive, but what, our comparison here is really it’s the ipilimumab monotherapy. We are not trying to make any statements about comparison to the combination of Ipi

PD-1s.

Josh Schimmer – Piper Jaffray, Inc.

Got it. Thanks so much.

Operator

Our next question comes from the line of Navdeep Singh with Goldman Sachs. Please proceed with your question.

Navdeep Singh – Goldman Sachs & Co.

Hey, guys, thanks for taking my questions. Maybe a question for Hervé. I understand that you’ve only been in Incyte for a pretty short time, but can you discuss any opportunities you see to improve the business? Are you expecting to make any immediate changes? And then I have a quick follow-up. Thanks.

Hervé Hoppenot

Immediate changes, no. No, I must say, I mean – I’ve been here for a month now and the first comment, first view about this organization is about depths and strengths because these are companies that have an ease discovering new products with very good for productivity. So that's what is basis of success and value creation in oncology and that's what Incyte is doing everyday, and it’s a teams that has a track record of getting things done in very effective way and I think the approval of Jakavi, the entire process of developing a first-in-class, getting it approved by FDA and commercializing it successfully now, with some saying that he is giving the organization a lot of confidence that it can be done again and again.

The second piece is the number of short-term goals that we have. We have a very large portfolio of products in the clinic today and we are planning to continue to discover new products for the next two months and that gives us a very good chance to develop a company that will be one of the leading biotech in the future and that's what I'm really excited about.

Navdeep Singh – Goldman Sachs & Co.

Okay, thanks. And then, a question for Rich. Rich, can you please discuss how your IDO1 inhibitor is essentially differentiated from new links IDO1 inhibitor?

Reid M. Huber

We don’t really know all that much about the new link IDO1 inhibitors except that on a milligram per milligram basis it’s considerably less potent, and that doesn’t necessarily translate into a difference in safety or efficacy, but it has the potential that with more milligrams you may run into some sort of safety things before you can get to the potency. But that truly remains to be seen. I think the main difference is how far ahead we are in development at this point in time. They are not ready to do this sort of collaborations that we’re doing until they generate more data and so it’s probably pretty good molecule, but we are ahead and we are not really in a position to comment on it beyond that.

Operator

Our next question comes from the line of Ian Somaiya with Nomura. Please proceed with your question.

Ian Somaiya – Nomura Securities International, Inc.

Thanks just had a couple of questions. There's been decades of research pointing to the role of CRP or the prognostic value of CRP in solid tumor. I was hoping to maybe get your thoughts on that front. And more specifically, is CRP the sort of the end target based on the results in the literature; or is it more of a generalized immune effect? And maybe just to follow up that thought, or finish that thought, maybe you could speak to the role of JAK-STAT and its potential ability to maybe regulate CRP or just more broadly the inflammatory cascade in cancer.

Jim Daly

So let me start and them I’m a going to turn it over to Reid, so we created CRP is a marker of certain elements of tumor induced inflammation, and that’s the topic that we are talking about, in terms of what we said tumor induced inflammation. But we are not saying at this point in time as what is the subgroup I’m going to do that. With respect to whether CRP is actually playing a direct role in the cancer or is a marker of systemic inflammation, we know there is literature, and fairly limited compared to the prognostic literature on CRP, suggesting that might have a direct role in terms of leading to optimization, complement activation and things like that.

But we don’t think that you need to hypothesize that CRP is having a direct effect to explain that they are probably our other cytokines and inflammatory mediators that are important in terms of both the effect on the tumor, growth survival, proliferation as well is on the patient as a whole weak out than it is a single mechanism. And with respect to JAK-STAT activation I think there is some data – there is more data on some tumor types around JAK-STAT activation than on others, but no we are not saying that that is the marker either and Reid you want to…

Reid M. Huber

Yes, I would just add to that but as we think about tumor induced inflammation, it’s really drives to fundamental processes, so one is a local inflammation and the tumor in its micro environment and that has been demonstrated across our numerous studies to facilitate tumor growth, it can drive resistance to apoptosis and even can define human resistance in some settings, but that’s related but I think distinct from systemic inflammation which is even proposed underlying many of the hallmark features of cancer including the hypercatabolic state and poor performance status things like that, each of these factors have been shown to how a negative impact on survival.

And that probably each related over a time with a progressing malignancy, where local inflammation can reshape and have a dysregulated host response. And so I think how you characterize these is an interesting concept. CRP is a way to characterize inflammation, but there are numerous other ways that you can characterize inflammation too. I think you can look at the published literature and just see how many cytokines, the majority of which interestingly send the signal through JAK1 can reshape both the local and the systemic inflammatory response.

Ian Somaiya – Nomura Securities International, Inc.

As you get ready for the ASCO Conference and the revelations during analyst meetings, should we assume that given the lack of a companion diagnostic that it is a fairly simple test for a physician to administer? And that is something that you will be able to readily apply in the marketplace?

Jim Daly

Are you asking about CRP is a fairly simple test, I’m not sure I understand your question.

Ian Somaiya – Nomura Securities International, Inc.

Well, whatever this marker is that you are using, whether it is CRP or let's say a cytokine, a specific cytokine, can you give us a sense of how easy it is to characterize it for the average oncologist? Since you mentioned that there's no need for a companion diagnostic.

Jim Daly

Yes, I mean I would say that the tests are readily available through any lab and well established.

Ian Somaiya – Nomura Securities International, Inc.

Okay. Maybe a last question on the IDO program. Maybe a very simple way of thinking about this, but as you look at the data with the PD-1 CTLA-4 combination, we saw fairly high response rates: over 40% if not close to 50%. And I was just curious how should

we think about the data set for a IDO plus CTLA-4 combo given the targets or similarities in terms of where the hits on the immune calculated. Maybe the question

really is, is IDO more similar to CTLA-4? Or is it more similar to PD-1, PD-L1? And how should we think about potential synergies when you look at different combinations?

Reid M. Huber

So Ian, this is Reid. I think it’s very difficult to theorize that based on pre-clinical data. Certainly the mechanism of CTLA-4 as you well know is quite different than PD-1, PD-L1, and I think that is evidenced not only by differential response rate, but also by differential immuno rate of adverse events, where CTLA-4 tend to have a much more deleterious if you will, inflamm related side effects profile.

To the extent we can tell you these things pre-clinically our data both with pharmacologic inhibition and genetic knock-out of IDO1, all support the potential for synergy with these mechanisms irrespective of what the intervention is. And we’ll ultimately have to rely on the clinical data to point us in the right direction. And I think it’s an important aspect of the program to study IDO1 with PD-1s and PD-L1s given they are merging benefit risk profile in a lot of different histologies. And I think that is why we prioritize that and why we are particularly excited about the Merck collaboration that we just announced.

Ian Somaiya – Nomura Securities International, Inc.

Okay, thanks for taking my questions and congratulations on a great quarter.

Hervé Hoppenot

Thank you.

Operator

Our next question comes from the line of Eric Schmidt with Cowen & Company. Please proceed with your question.

Eric Schmidt – Cowen & Co. LLC

Thanks for taking my question. Rich, if my friend Josh Schimmer is wrong, and the expectation out there is for 20% to 30% response rates, are you more comfortable with that? I'm just kidding. Question on the Merck collaboration, I know you don't want to get into too much detail, but I think it is important for us to understand just going to how exclusive this is. In other words, if Merck were to go and develop its own IDO inhibitor internally or find another one out there in the marketplace, would there be anything that prevents them from taking this initial data set and swapping out your IDO inhibitor and moving forward with a combination?

Richard S. Levy

So I’m not going to get into details around the contract, but no one is tied. Just as we’re not tied from only working with Merck, they are not tied from working with other molecules. It could potentially include. But in terms of the data from the study there are confidentiality agreements around the data from the study and the use there. But I cannot go into any further detail than that.

Eric Schmidt - Cowen & Co. LLC

Okay. Then, Rich, going back to the question about the Phase III studies on ruxo in pancreatic cancer, Brian’s question. I guess you’re doing this a little bit differently, doing two smaller Phase IIIs versus what some of your competitors in the pancreatic cancer space have done, one larger Phase III. Could you speak specifically to whether there’s a rationale or bias on your part for going in that direction?

Richard S. Levy

Well, so we have over 90% power assuming a more conservative hazard ratio than we thought in the Phase III study in the subgroup that we’re going to continue to study. For us to do a 900 or whatever the size of the ABRAXANE study was, I mean that would be powered to demonstrate a trivial change in survival or the hazard ratio and that’s not what we expect.

So we believe that Janus1, the study that is under the SPA is sufficiently powered to give not only a p-value of 0.05, but the lower types of p-values that are needed to potentially support approval based on one study. And in the second study is about the same size in the off chance or a possibility that the results are not as robust as we expect based on phase II, then having two studies demonstrating more modest benefits could be sufficient.

Eric Schmidt - Cowen & Co. LLC

Thank you.

Operator

Our next question comes from the line of David Friedman with Morgan Stanley. Please proceed with your question.

Brienne Kugler – Morgan Stanley & Co. LLC

Hi, this is Brienne Kugler calling in for Dave. Thanks for taking my question. Just a few questions around timing. Could you provide a little more detail around the enrollment timelines for the pancreatic Phase IIIs? And also, when will we start to see the next solid tumor data points for Jakafi and the JAK1?

Hervé Hoppenot

Okay. I’m not going to get specific yet, because we really like to see who all the final sites are, how long they take to come up and then how fast they actually enroll compared to the expectations that we have.

So with respect to the times of final data in the Janus1 and Janus2 studies, I mean at this point I don’t want to be anymore predictive than some time in 2016, which it’s a pretty wide spectrum from early 2016 to very late 2016 and of course that’s just my current estimate. So, and those are fully blinded studies. So it should be no expectation that there would be interim data before that timeframe.

In terms of the Phase II studies although one of those Phase II studies has a run in to establish the dose of either ruxolitinib or 39110 in combination with the combinations we’re seeing and we don’t know whether it will have to do one dose level to three dose levels and that makes it hard to predict when we would actually start the randomized portions of the studies. There is one study where we feel that the dose has already been established. We're moving directly into the randomized portion and that would most likely be the first study to start to read out.

Now of course they are as we go into other tumors besides pancreatic cancer we're talking about survival as long as in pancreatic cancer. And so you might enroll the studies quickly, but until you’ve had a requisite number of deaths, the results wouldn’t really readout. So on the Phase IIs, I’m really going to reserve any comments on timing of the data other than one of them unless the survival is actually quite long in both arms, should be ahead of the others.

Brienne Kugler – Morgan Stanley & Co. LLC

Thank you.

Operator

Our next question comes from the line of Thomas Wei with Jefferies. Please proceed with your question.

Thomas Wei – Jefferies LLC

Thanks for sneaking me in. I wanted to ask a couple on IDO and Ipi. Just a reminder of the design of the trial, how many patients are being enrolled per dose cohort? Is it the standard three? Also, if you remember or just a reminder of how Ipi alone stacks up on something like duration of response. And then for the JAK1 program, just the rationale for the initial tumor selection here?

Jim Daly

Okay. Let me just make notes here. So with respect to the ongoing portion of the Ipi study, we’re more than three patients per cohort, because we know that with Ipi alone you are going to get potentially dose limiting toxicities just from that therapy alone. So if you just did three patients and found one DLT you might get a false sense. So we are doing, I think it's six plus six. So you do six originally and if you have more than a certain number of DLTs you expand to 12. And I'm not going to get into exactly how many patients and how many times you had to increase doses, but that’s just a general design.

In terms of Ipi duration of response, my recollection in melanoma, because it's in the order of about 100 days and that is something that we will compare within the ASCO abstract and at the presentation.

In terms of the JAK1 tumor selection, I mean we use several factors here in terms of tumor selection, both the ruxolitinib and the JAK1 inhibitor. Non-small cell lung cancer is a place where the same subgroup clearly differentiates prognosis and we believe that as a result it will lead to differences in the effective our drug, just as it has in pancreatic cancer. It's obviously a large unmet medical need, and there are combinations there that make sense to us. They were plenty of other options. We just have to make some choices here as to how many different studies are we going to do at once and we think we’re taking moderately aggressive approach towards looking at a number of Phase II plans here both with rux and JAK1 in various tumor types.

Thomas Wei – Jefferies & Company, Inc.

Is that a signal there that lung cancer might be like the next most likely tumor in which this particular selection criteria would be protected?

Jim Daly

No. We believe that other than pancreatic cancer where we have actually a clinical result. The potential here goes across a wide variety of tumor types. So it’s in the group of many things that we think to have that sort of benefit. And then in terms of choosing between them the size of the potential market, the unmet need, all those things came into, plays in terms of picking the first place that we would look.

Thomas Wei – Jefferies & Company, Inc.

Great. Thanks.

Operator

Thank you. Our final question comes from the line Bret Holley with Guggenheim Securities. Please proceed with your question. Bret Holley, your line is live.

Bret Holley – Guggenheim Securities, LLC

Sorry, can you hear me?

Hervé Hoppenot

Yes. Yes, we can, Bret.

Bret Holley – Guggenheim Securities, LLC

Sorry about that. I've got a question for Jim. There's been a lot of questions in the pipeline. Jim, you mentioned that 60% of your target prescribers are currently prescribing and I'm wondering how you can drive that up. I guess the current prescribers for Jakafi are both potential myelofibrosis and polycythemia vera prescribers, and obviously that's important to have the polycythemia vera data.

Jim Daly

Yes, Bret, with respect to MF, I think we’re going to keep advancing the ball day-by-day. The next probably major catalyst for us would be getting some overall survival data reflected in the package insert. There is a cohort of physicians, quite frankly, who are reluctant to use a product unless they see an overall survival benefit and I think if we’re able to get certain OS data reflected in the label that should help us expand breadth of prescribing. With respect to PV, our targeted audience for PV is about 10,000 physicians and I think that is going to dramatically increase our overall prescribing base for Jakafi.

Bret Holley – Guggenheim

Okay, thank you.

Hervé Hoppenot

Okay.

Pamela M. Murphy

Thank you very much for joining us this morning and now we’ll conclude the call.

Operator

Ladies and gentlemen, thank you for joining us today. This concludes your teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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