Incyte Corp. CEO Discusses Q2 2011 Results - Earnings Call Transcript

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 |  Includes: INCY
by: SA Transcripts

Incyte Corp. (NASDAQ:INCY)

Q2 2011 Earnings Call

July 28, 2011 8:30 am ET

Executives

Pamela Murphy – VP, IR & Communications

Paul Friedman – President & CEO

Dave Hastings – EVP and CFO

Rick Levy – EVP, Chief Drug Development & Medical Officer

Patty Andrews – EVP and Chief Commercial Officer

Analysts

Rachel McMinn – Bank of America-Merrill Lynch

Thomas Wei – Jefferies & Co.

Lori [ph] – Collins Stewart

Cory Kasimov – JP Morgan

Tom Russo – Robert W. Baird

Brian Abrahams – Wells Fargo

Dave Friedman – Morgan Stanley

Josh Schimmer – Leerink Swann

Andrew [ph] – UBS

Ryan – Gleacher & Co.

Anton [ph] – Citigroup

Operator

Greetings, ladies and gentlemen, and welcome to the Incyte Corporation Second Quarter 2011 Financial Results. 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 begin.

Pamela Murphy

Good morning and thank you for joining us. On the call today are Paul Friedman, Incyte’s President and Chief Executive Officer; Dave Hastings, Executive Vice President, Chief Financial Officer; Rich Levy, Executive Vice President, Chief Drug Development and Medical Officer; Pat Andrews, Executive Vice President, Chief Commercial Officer. To begin, Paul will provide an overview of the second quarter and then Dave will follow with a brief discussion of the quarter’s financial results; we’ll then open up the call for Q&A.

Before beginning, we like to remind you that some of the statements made during the call today are forward-looking statements including statements regarding our plans and expectations for our drug development program, the timing of our clinical trials, regulatory submissions, anticipated product launch plans, potential safety and efficacy of our compounds as well as our expected financial results.

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 Form 10-Q for the quarter-ended March 31, 2011 and from time-to-time in our SEC documents. Paul?

Paul Friedman

So good morning, everyone. Thanks for joining us. We’ve had an eventful couple of months here. The results from our two registration trials in myelofibrosis COMFORT-I and II represented in full at ASCO and at EHA and we submitted the NDA on June the 3rd.

While we wait the official NDA acceptance letter which is due within 60 days of the filing date, the agency has verbally confirmed on multiple occasions, the latest yesterday afternoon that we have been granted priority review and that our PDUFA date is December the 3rd. Novartis continues to make progress as well. They submitted the MAA in June.

The presentations at ASCO and EHA demonstrated that treatment with ruxolitinib gives very compelling results including significant reductions in spleen size, significant improvements in symptoms and an overall improvement in quality of life measures.

In contrast, and I think this is an important point, the patients who received placebo even in a six-month period and even or even the best available therapy, their disease worsened. Market research conducted over the past several years has consistently indicated that ruxolitinib’s ability to address these negative aspects of MF were expected to position the drug as a welcomed and important new treatment for both the patients and their treating physicians.

To support the anticipated launch of ruxolitinib later this year, we’re actively hiring the rest of the sales team focusing on the recruitment of approximately 60 sales professionals with substantial prior experience in promoting Hematology-Oncology products. And I can tell you that we are well along in bringing that sales group on board.

Other high priority commercial activities are far along. We are finalizing the specifics of a distribution network that will include a hub and a limited number of specialty pharmacies to ensure that our commercialization efforts meet the needs of all patients with MF we plan to implement a comprehensive patient assistance program.

Beyond myelofibrosis we’re also evaluating ruxolitinib patients with advanced Polycythemia Vera in a global Phase III trial called RESPONSE. We’ve been monitoring patient enrolment to raise over the past few months and while Novartis has over half its size up and running recruitment remains behind schedule. Both Novartis and we have concluded that the study needs to be amended to accelerate enrolment.

We’ve initiated discussions with the FDA and while I am not yet in a position to describe specific changes in the protocol to you and I won’t be until we’ve completed those discussions, I can’t tell you that we propose keeping the dual endpoint phlebotomy independence in screen size reduction the same. And because a study is currently highly overpowered for the end point we’re also proposing to reduce the study size.

Beyond that we’re proposing to alter some of the entry criteria, which we made more restrictive than necessary. In a manner that in no way compromises power of the study. Assuming these changes to eligibility are acceptable with a significant portion of patients who fail screening would then become eligible to enrol in the study. Again, once we have agreement with the FDA, we’ll be in a better position to describe the changes in appropriate detail.

In addition to MF and PV and as described in today’s press release we have a number of ongoing or plans studies for further developing ruxolitinib indication where there’s evidence that inhibiting the JAK pathway could lead deposit of clinical outcomes. One of these studies are randomized Phase II trial in patients with pancreatic cancer just initiated this month.

And as I mentioned before, pancreatic cancer is particularly interesting not only because there’s a high therapeutic need given the relative lack of efficacy with existing agents, but because 424 has worked quite well in preclinical models, but in addition since there’s a high incidence of severe cachexia in this patient group, we think our positive results in myelofibrosis with respect to cachexia have the potential to be carried over to pancreatic cancer since cytokine over signaling and hypermetabolism we thought to play major roles in solid tumor cachexia as well.

The marketing go through the rest of the ruxolitinib studies now, but if there are questions regarding any of these, Rich and I can certainly respond during the Q&A.

Our second oral JAK1/2 inhibitor Incyte 28050 was partnered with Lilly. The Phase IIb trial in rheumatoid arthritis is on track and the three-month double-blind placebo-controlled phase at the trial is expected to complete in early 2012.

Our earlier stage oncology programs include the Sheddase Inhibitor 7839. We’re still working with our academic collaborators who hold the clinical data to complete the analyses on the historical tissue samples from HER2-positive breast cancer patients. We plan to use these results as well as an updated analysis of the breast cancer market to determine whether moving into Phase III development makes sense.

Our Indoleamine 2, 3-dioxygenase-1 or IDO inhibitor and our oral c-MET Inhibitor continue in their Phase I dose escalation trials in patients with solid tumors. We haven’t reached the maximum tolerated dose for either compound. Future studies for the IDO inhibitor includes at least one Phase II trial beginning in the first half of 2012 in either metastatic melanoma or advanced ovarian cancer.

For the cMET inhibitor we’ll transfer the program to Novartis, who you may recall has worldwide rights to the compound. I’ll now turn the call over to Dave.

Dave Hastings

Thanks, Paul and good morning, everybody. I’ll start my brief overview this morning by discussing our cash position. We ended the second quarter with $364 million in cash and investments excluding $28 million in restricted cash held in escrow for interest payments through October 2012 on our 4.75% convertible senior notes.

Our cash uses here has been $89 million excluding $14 million in proceeds from stock option exercises and a $15 million milestone payment received from Novartis for the cMET inhibitor program.

Our cash use so far this year is on plan and our cash use guidance for the year is unchanged at $185 million to $200 million. This guidance, as always, excludes actual and potential milestones received from partners and proceeds from stock option exercises.

Our operating expenses were also in line with our expectations and we’re not changing guidance for either our R&D or SG&A expenses. We continue to focus our investments in what we believe are high value R&D programs as well as preparing for the potential launch of ruxolitinib in the US later this year.

With that, I’ll turn the call back to Paul.

Paul Friedman

Okay, thanks Dave. Operator, we can now open the call for questions please.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question is from the line of Rachel McMinn with Bank of America-Merrill Lynch. Please proceed with your question.

Rachel McMinn – Bank of America-Merrill Lynch

Thanks very much and thanks for keeping the script short this morning. Paul, can you give us a little bit more color on the PV study? I guess, what can you say about the way the study is designed relative to the market opportunity. In other words like, do you think that the slow enrolment has a reflection of just smaller numbers of patients that can benefit from ruxolitinib, or is it just really an overly stringent enrolment criteria and maybe if you could give us a sense of the screen failure rate, that would help?

Paul Friedman

Yes, it’s the ladder by far. We’ve had a tremendous amount of interest in patients coming into the study and we are optimistic if our amendments are blessed relatively on SCAD that we’ll be able to go back and recruit into the study, significant number of people who failed in screening. I don’t know the exact screening failure rates. They’re relatively high, because in trying to answer more questions then in retrospect it made sense to try to answer in this study. We ask that patients have multiple parameters and you end up with a Venn diagram with a very small sweet spot. And so they’re just, there are a couple of questions that have nothing at all to do with the primary endpoint that in the redo will not be answered, or at least the power to answer that will be smaller because we won’t be making those parameters, criteria that we have to have to get into this study. It’s a relatively simple fix, but we just need a little time to talk to the FDA about it.

Rachel McMinn – Bank of America-Merrill Lynch

And just in terms of the time line I guess, this is an FDA approved study, if I remember correctly then is there any (inaudible) would make it more difficult to remember the study, I guess what are your expectations for how long these discussions will go back and forth?

Paul Friedman

So, there is no due to specify timeframe for the FDA to respond and we are revising in SPA but we’ve had discussions with them about this. We had really very good interactions with the FDA in this division in particular, and we just don’t anticipate that this would be protracted and we’ll see how it goes.

We’re also optimistic because the changes make perfect sense that FDA will accept the amendment. I’m not saying we won’t have some discussion back and forth, but we just have to wait and see. We plan within the next couple of weeks to have the amendment into the FDA, so we’ll be moving pretty quickly.

And again, without getting into specifics what we think are very reasonable changes to the protocol are accepted without a major alterations that we would not change our guidance with respect to time lines for completing the study.

Rachel McMinn – Bank of America-Merrill Lynch

Very helpful, thanks so much, appreciate it.

Operator

Thank you. Our next question is from the line of Thomas Wei with Jefferies & Co. Please proceed with your question.

Thomas Wei – Jefferies & Co.

Thanks. Just to follow-up on RESPONSE. Can you give us a sense as to what the current entry criteria or just a reminder of that? And what are the reasons why people are failing the screening process, is there a particular entry criteria, can you address that?

Paul Friedman

The inclusion criteria are listed on clintrials.gov and I don’t want to get into all the details but I’ll give you an example of one where we lost a lot of otherwise eligible patients and that is subjects had to in addition to being phlebotomy dependent and having a spleen, they had to have either or both elevated white blood cell count, elevated platelet count. It turns out that a lot of people don’t have that and yet they have big spleens, they have symptoms, and they are phlebotomy dependent, and that’s particular criteria was meant to ask an interesting question, but it wasn’t on the main path to making the co-primary endpoint. And so, if you take that out, you retrieve a lot of people who didn’t make the first cut.

Thomas Wei – Jefferies & Co.

I see, and can you address whether or not questions like that where harder the central debate with the agency when you –

Paul Friedman

No, they were put in by one of the two parts.

Thomas Wei – Jefferies & Co.

Okay. And just in terms of process here. I have never been through an amendment of an SPA, but does that require you to go through a new SPA process?

Paul Friedman

Rich?

Rick Levy

So, not exactly you send in the amendment, you often that we will supply a brief background to explain the rationale for the amendment and then the FDA reviews it, it gets back to you, they just don’t have the require time line but when we talk to them they said it’s just an amendment to a protocol, it’s not a big deal for them to look at it. So, we expect that once they receive in a couple of weeks that even that you have 45-day process for an original SPA, and there’s no official thing I would think that that’s probably a reasonable timeframe.

Thomas Wei – Jefferies & Co.

And then just back on the market opportunity it sounds like maybe some of the ways in which you’re considering amending the protocol actually would have no impact on the size of the patient population that you would have indicated on the label. Is that fair that the label indication in either trial scenario you think would be basically the same?

Rick Levy

Yes, we actually think that what we’re proposing to do will increase that population, not decrease it.

Thomas Wei – Jefferies & Co.

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Salveen Richter with Collins Stewart. Please proceed with your question.

Lori – Collins Stewart

Hi good morning, it’s Lori [ph] on behalf of Salveen. I guess just with regard to the NDA, are you anticipating a panel in the fourth quarter, and then I guess how are you preparing for the panel and would you anticipate the panel might focus on

Paul Friedman

So we have not been informed that there will be a panel, but we recognize it’s a novel treatment, it’s a novel class of drugs so we are preparing, and Rich is leading that preparation so I’ll let him explain as much as he wants to in that regard.

Rick Levy

Yes, I mean, so I think by either regulations or guidelines, the FDA have to give the company at least 55 days notice before Public Advisory Committee. So, we have not received any such notice. But, we would plan on putting in more than 55 days to prepare for an advisory committee. So, we’re doing work that includes creating a whole bunch of potential questions, answers, slides that could be put up for that as well as our primary presentation. If we got a warning within 55 days we probably do a one or two mock advisory committee meetings as has become the practice in the industry these days. We’re not quite 60 days into their priority review yet, so I’m not surprised that we haven’t heard anything one way or the other at this point, but hearing nothing is certainly better than the alternative, because we’d love to not doing advisory committee.

Paul Friedman

And so, when you ask what they might concentrate on, it’s kind of an open-ended question. I mean we all knew from the GETCO [ph] that the studies were not designed or could they really be designed to show statistical significance for overall survival. And so that was recognized from the beginning and so I don’t see why that should come up as a discussion point. Those studies show positive trends, and I think that’s very reassuring and that’s buttresses by data that Dr. Verstovsek showed at ASCO on the ongoing Phase II study, where there seemed to be clear survival advantages. But we don’t have it properly prospective lead control study dealing with the survival endpoint, I mean those, I just can’t see that being an issue for discussion, because it is what it is and it’s been recognized from the GETCO, I’ve actually had difficulty because it is a fairly straight forward NDA in coming up with obvious questions that could be addressed at ODAC, but we have an internal list and we’ll just work with that.

Lori – Collins Stewart

Great, thanks. And then just one more quick question. If your PDUFA is December 3rd, I guess, how quickly could you launch the drug and would you potentially be prepared to launch it by ASH, which I guess is about a week later?

Paul Friedman

Yes, absolutely. Patty Andrews can explain on this, but we have been very proactive about this, and if anything we would be ready to launch substantially before that, and then (inaudible) just to be on the safe side. What would you say, Pat?

Patty Andrews

Definitely, there is some detailed steps that we need to take in order to get the approved label on the bottles and get the bottles QC-ed and then sent to warehouse and then sent to our distribution network, and we’re very confident since we have mapped all of the steps with all the vendors on board. We have mark ups of draft labels etc., that we can do that within let’s say 10-day window.

Lori – Collins Stewart

Great, thank you.

Operator

Thank you. Our next question comes from the line of Cory Kasimov with JP Morgan. Please proceed with your question.

Cory Kasimov – JP Morgan

Hey, good morning, guys. Thanks for taking my question. One thing I’m wondering is how much guidance you’re getting from Novartis, if any, with your preparations for potential panel as well as depending US launch of ruxolitinib, then I have a couple of follow-up?

Paul Friedman

Rich, Pat.

Rick Levy

At this point, we have not been getting specific guidance from Novartis on preparation for an Advisory Committee. In that we would do that if we actually had 55 days of warning. The people who are here at Incyte all done advisory panels before. Not necessarily here at Incyte, but in their experience at other company. So we’re well experienced in this as well, and I’m sure Novartis would be directly involved in preparations, mark [ph] committee, etc., should that come to pass but at this point in time, we’re just basically focusing on preparations of questions and answers back of slides primary presentation.

Cory Kasimov – JP Morgan

And then as far as their guidance with regard to the launch itself?

Rick Levy

So just to remind every one that U.S. market is Incyte and the rest of the world is with Novartis, because approval in the rest of the world takes longer. We’re actually ahead of them on these preparations, all the standard things and when would do associated with market research and branding and positioning and concept and then the distribution processing are different because we’re in the US, and there are ex-US, so there is not really that much overlap and they do have their own focus on their primary responsibility. That being said we have committees in place, we do talk to them all the time, it’s in a very supportive and interactive and continuously engaged relationship, so we get some information from them, they get some information from us.

Cory Kasimov – JP Morgan

Okay, and then on 050 with the three-month portion expected to wrap up in early 2012, do you know Lilly’s plan for releasing the data, is this something that would be press released or would they hold it for a medical meeting?

Paul Friedman

We don’t know the answer to that, and I think you have to ask them. I mean we certainly if we are programmed we would give something top-line while we waited for one of the arthritis meetings larger company they may wait for one of the meetings but you’d have to ask them. I mean it’s conceivable they would be in Phase III before they actually presented Phase IIb data, if they wait for one of those meetings.

Cory Kasimov – JP Morgan

And last question is for, Dave on the model, and how we should think about as the SG&A line in the second half of the year as you ramp up the sales force?

Dave Hastings

Yes, so we’re not changing guidance, Cory is though as you look at the first two quarters, the spending is a little bit less than we’re anticipating, and as Paul mentioned, we’re well underway of hiring the sales force putting the infrastructure in place, so again we’ll spend within the 50 million to 55 million, but you’ll see that ramp up in Q3 and Q4 in particular.

Cory Kasimov – JP Morgan

Okay, great, thank you.

Operator

Thank you. Our next question comes from the line of Tom Russo with Robert W. Baird. Please proceed with your question.

Tom Russo – Robert W. Baird

Yes, good morning. Thank you. And some of might have been asked, but just circling back real quick to the PV trial, are you fully committed and fully expect to still emerge under SPA after these discussions with FDA?

Paul Friedman

We’re optimistic they’ll accept the amendment that may require some discussion. You would rather do this under SPA if you could. We’ll have to see what the timing implications are and how they get back to us. But is that a fair answer, Rich?

Rick Levy

I think that it depends on exactly if they don’t agree with exactly what we propose it would depend to a certain extent on what the areas of disagreement might be. How long we thought that they would take your results? So, we’re just going to say that it’s nothing absolute, but our intent to stay with the SPA, and we’ll make a final decision when we’ll have more information.

Tom Russo – Robert W. Baird

And then on Sheddase, I noticed that I think this might be new that you’re now highlighting a kind of the commercial analysis as part of the go/no go criteria. If that is new element, can you give any additional color there, and maybe including if anything is change and how you look at the opportunity?

Paul Friedman

While there’s certainly have been other agents, which have appeared on the scene like the TM1 is one and what’s the other?

Rick Levy

(inaudible)

Paul Friedman

Yes, and so, we have to make sure that the niche that we believe is there, is in fact there.

Rick Levy

The other agent is the one that prevents the dimerization of the receptors.

Paul Friedman

So monoclonal.

Rick Levy

Antibody, right.

Paul Friedman

Begins with P. Right. And so the data at ASCO with both of those agents we thought was were impressive and we just have to make sure that our return on investment should we go into Phase III with the Sheddase inhibitor is the best place to put our money since we can’t do everything.

Tom Russo – Robert W. Baird

And just something else that I think I had a bit of air time at ASCO and was kind of a theme was the inadequacy of the current IWG criteria for transfusion independence and preference for something more like the Gale [ph] criteria, I know it’s only been a couple of months but curious if you are seeing any signs of activity kind of in the guidelines community on that front? That’s my last question.

Paul Friedman

I think there was a plan and then the initial meeting may have occurred for the IWG to meet and have further discussion on that, but that’s the last I heard about it. I think it would make a lot of sense because the transfusion independent criteria currently in the guidelines is, as you know, not a very challenging hurdle.

Tom Russo – Robert W. Baird

Okay, thanks Paul.

Operator

Thank you. Our next question comes from the line of Brian Abrahams with Wells Fargo. Please proceed with your question.

Brian Abrahams – Wells Fargo

Hi, thanks for taking my question. I’m just wondering if you’re getting ready for a potential panel and the launch of ruxolitinib. What are you thinking with respect to what post approval requirement might be required. Do you think that you’ll need to have some sort of study monitoring outcomes potentially leukemia-free survival and/or both Hematology changes?

Paul Friedman

Yes so I guess it could be us to follow any of those that you said. It could be us to look at durability; it could be us to follow leukemia-free survival. I don’t know how easy that is with the crossover rules, Rich.

Rick Levy

Yes, I mean, you can look at durability’ in the arm, let me demonstrate it clear superiority that we’ll see both in a number of things as well as best available therapy –

Brian Abrahams – Wells Fargo

Right.

Rick Levy

Instead a 351 or couple one that US study patients that potentially all crossover and the intent is the COMFORT-II patients who cross over since. So, it’s really more of what you can get out of those places while it’s 3251 [ph] which has already been going on for four years. So get more durability to look at things, but not so in a comparative way.

We did not believe that there is really much chance at all that after FDA agreed that we didn’t need to show anything around survival. At the time we’ve set up these SPAs that they would come in now, so we think it would probably more likely just be a run rate, durability, greater exposure around the things that we’ve already and are in the patients that we already have, but we haven’t had this discussions with FDA yet.

Brian Abrahams – Wells Fargo

Okay, that’s fair, that makes sense. And then a question for Pat, just wondering what kind of may be preliminary pay or fee back you guys are getting with respect to ruxolitinib profile, just considering that dramatic symptomatic and quality life benefits, the fact that there is really nothing else effective for the MS indication, but not quite having a disease modification date at this point? And then can you remind us what are the potential payer mix in the MS population, how that might influence your pricing decision? Thanks.

Patty Andrews

Sure. We’ve actually completed our pricing work and so we now have significant feedback from payors in the US, and as expected, it’s very favorable because of the profile of the product. And as you know in the United States it’s really about what tiers they place your product on, it’s not whether they will cover it if you are an oncology product because they are covered. And the tiers are second, third, fourth and the first two are generally co-pays, the third is a co-insurance and usually it’s the practice of the organization and some of ours more than it is the results from the study, so we’d expect we will have a mixture across those three tiers.

And see, the second question was on the mix, which about 60% of the patients are over 65, so theoretically could be covered by Medicare, some portion of those are still covered by private insurance through retiree benefits or other things. So, it ends up being around, let’s say 40% are covered by Medicare, and 12% covered by self-pay and 5% Medicaid and the rest commercial pay. And that’s how we are looking at it and as you also know there’s different things that we can do to support patients in those different buckets to ensure that the script is written they are able to afford the medications.

Brian Abrahams – Wells Fargo

Got it. That’s very helpful. So then now that you have completed your pricing work, is it fair to say that you’re still guiding towards upper end of the $40,000 to $60,000 for your list price range?

Patty Andrews

We’re actually not going to be setting the price until right at approvals, and you’ll hear a word, but there’s has been our Phase III data isn’t very positive, there’s been higher priced works coming to the market and so those are all things that factor in what that final decision would be?

Brian Abrahams – Wells Fargo

Thanks, again.

Operator

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

Dave Friedman – Morgan Stanley

Hi, thanks for taking my question. Just two really quick ones; one is on clinical trials, our goal for the PV study, a lot of sites are listed is not recruiting, are all the sites have been recruiting and it’s more the criteria or is it also a question of finishing out getting all the sites up and running and then maybe (inaudible)?

Patty Andrews

It’s a combination of both. This recruiting study has been frustrating for some of the sites because of some of the things we’ve talked about and they’re aware that we’re planning an amendment. And so, some of the sites have not been rushing to get up and running until the amendment goes through at the same time.

But we’re quite confident that once the amendment goes through, the sites that we have will be enrolling patients and a number of the patients that did not meet the screening criteria originally, will come back in and enroll in the study. So I think looking at the past, clearly says that changes needed to be made which is why we’re taking steps to make the changes but we’re confident that that will work.

Dave Friedman – Morgan Stanley

And then just quickly on pricing. Is there a good or what do you think is the best comp in terms of other drug on the market that is sort of the most relevant to think about pricing for ruxolitinib ?

Patty Andrews

In our research we did ask both payors and physicians what they thought would be a comparable product and actually they named many. So within that group there is pretty much the obvious comparisons with others CML product, which are chronic to sigma, sprysil [ph], gluvit [ph] or some other products that are newly or not new now, but new were to the market, affinatore [ph], futent [ph] some people name products like permectaso [ph] it really, it’s a wide range that they name and we would be aware of that in choosing what price we have, but really, earlier Brian had asked the question, I was still in the 46,000 range or we see the high end of that, and so if we’re in that range we’re at the high end of that range, but we maybe out of that range.

Dave Friedman – Morgan Stanley

Great, thank you.

Operator

Thank you. Our next question comes from the line of Josh Schimmer with Leerink Swann. Please proceed with your question.

Josh Schimmer – Leerink Swann

Great, thanks for taking the questions. On R&D, should we look at this as kind of a new floor on the quarterly spend, going forward how should we look at that? And then a question for Pat maybe you can give us a little bit of color on what your expectations for the speed of uptake approximately and then (inaudible) oncology drugs, is it more slow and steady between the two? Thanks.

Rick Levy

Josh, for the rest of the year, we see a little bit of uptrend in the R&D expense, but again they’ll be within the guidance we’ve previously given, which is 175 or 185?

Patty Andrews

And on uptake, there are a couple of things as we were interviewing these reps that Paul had mentioned, a lot of them have actually commented to us that they’ve spoken to some of their physicians to see if this is a company they should join what they thought as a product and the physician says “Yeah, it’s a great product, I have patients waiting.” So I think there are a certain number of patients out there who are following this, who are active and engaged, physicians who have these patients and they’re waiting for this product. And so there will be a certain amount of that at the beginning. At the same time physicians often cautious, they’re more likely to put their more severely ill patients those who clearly match the exact criteria in the study, those who have very large spleen, and those who have a lot of symptoms and put those patients on the drug first and see how they respond to it.

We believe based on everything we’ve seen in earlier studies that majority of those patients, the vast majority will get some benefit, many will do extremely well. It’ll be restoring their lives in a lot of ways that will be encouraging to the physicians, they will then put other patients on the drug, maybe those who are more moderate and spleen enlargement were moderate incentive. So, that takes a while. So if I were characterizing the launch, I will probably do it more slow and steady than enormously fast and then flat.

Josh Schimmer – Leerink Swann

What does your market research tell you in terms of the prevalence numbers you’ve identified, what number of patients are severely affected? What numbers are moderate versus the mild case?

Paul Friedman

So, there is about 16,000 to 18,500 in MF patient in the United States, about a third of them are severe, about a third are moderate, and about a third are mild.

Josh Schimmer – Leerink Swann

Okay, great, thanks very much.

Operator

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

Andrew – UBS

Hi, thanks. This is Andrew [ph] filling in for Matt. Couple of questions on PV, you mentioned kind of the screening failure rates, is one of the causes the requirement for the hydroxyurea resistance or intolerance, is that something that you’re looking at potentially dispensing with?

Paul Friedman

As I said a couple of times, I don’t mean to be evasive, but we’re not going to get into the details. What that those issues were until we’ve had a chance to talk with the FDA. I gave you one example. Sure, there have been some people who have not might be strict definition of hydroxyurea resistance or intolerance, that percentage for example, is significantly lower than the white count, platelet count thing I told you about. So that alone would not matter that much and I just would rather not get into the details of what it is we’re addressing both because our partner would not be happy about that and it could balance up our discussions with the FDA.

Andrew – UBS

And then secondly, when we look at the Phase II PV data, it looks like two-thirds of the patients were at like a tight credit those below the 10 milligrams BID. Is this your expectation for the achieved dose in the Phase III and what potential impact did that have on pricing versus what you expect in MF?

Rick Levy

The starting dose in this study is 10 milligrams BID that’s not something that causing to faint and everybody still continues to get titrated and 10 milligrams (inaudible) is about where people end up around and I’ll turn it over to Pat to talk about pricing.

Patty Andrews

So, as I said earlier, we’re going to set the price at launch, but we’ve certainly been speaking about flat pricing, so it doesn’t matter what strength patient is on. So that would obviously effect if the PV does include were different, the pricing would still be the same per patient so to speak than per dose, so, that’s how we’ve been looking at it.

Andrew – UBS

Okay, thank you very much.

Operator

Thank you. Our next question comes from the line of Ying Huang with Gleacher & Co. Please proceed with your question.

Ryan – Gleacher & Co.

Hi guys, this is Ryan in for Ying, thanks for taking my question. I guess going back to the pricing issue. Since you said you have about 40% of patients on Medicare, have you communicated or do you plan on communicating with CMS with pricing discussions?

Patty Andrews

It’s something that we think about and we talk internally about whether we’ll do or not. It’s more critical with your in infused product than if you are in oral Oncology because of the way that’s coverage work been so I think many biotech companies coming forward with monoclonal antibody something they think of probably more strongly then we will think of doing it.

Ryan – Gleacher & Co.

And then one more question, ruxolitinib. So you guys are initiating the Phase II trial on pancreatic cancer. Do you guys have any clinical or pre-clinical evidence of activity in pancreatic?

Paul Friedman

Yes, not that I would bet the ranch on any of those pre-clinical models, but we have very good activity in ____44:24 which should help you by those experiments. But seriously, there have been so many, you don’t want a negative experiment there, but a positive, I don’t think tells you that margin till you get into people.

Ryan – Gleacher & Co.

Great, thanks a lot.

Operator

Thank you. Our next question comes from the line of Lucy Lu with Citigroup. Please proceed with your question.

Anton – Citigroup

Hi, thank you for taking my question. It’s actually, Anton [ph] on behalf of Lucy. I just have two quick questions. One is when do you think we will see some of the Phase I to-date on ruxolitinib other hematology malignancies. And the second question is can you please confirm for us fully diluted share account? Thank you.

Paul Friedman

What was the second question? Fully diluted share account. Okay, why don’t you do that one?

Dave Hastings

Sure. So, if you take into account all employee stock options and the convertible note, about $190 million.

Paul Friedman

Rich, do you want to answer the other?

Rick Levy

We don’t expect to have any results from the Phase II type of new indications. This year or early next year, we’re in a early stages of getting those studies started, we don’t yet know what the recruitment rates are going to be, so I wouldn’t anticipate anything probably at a medical meeting until earlier than maybe after 2012, but I just don’t have enough information to really answer the question.

Anton – Citigroup

Okay, thank you.

Operator

Thank you. Dr. Friedman, there are no further questions at this time I’d like to turn the floor back over to you for closing comments.

Paul Friedman

Okay, thanks very much. So, thanks for dialing in today. We will keep you updated as we interact with the FDA as it’s appropriate, we’ll let you know when we get the actual written confirmation to what we’ve assured of verbally multiple times and I suspect that would be within week, 10 days because that’s when the 60 days run out.

The things, everything else is moving along, I’m hoping that we have assured you that we are really focused in on top preparing for a successful launch and that we left no stone unturned in doing that, and again we will keep you informed as to how that progresses. Thanks again and with that say good bye.

Operator

This concludes today’s teleconference. Thank for your participation. You may disconnect your lines at this time.

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