Greetings, and welcome to the Incyte First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Booth, vice president of Investor Relations for instance.
Please go ahead, Mike.
Thank you, Kevin. Good morning, and welcome to Insight's 1st Quarter 2019 Earnings Conference Call and Webcast. The slides used today are available for download on the Investors section at insight.com. I am joined on the call today by Herve, Barry, Steven, and Cristiana, who will deliver our prepared remarks, and by Dash who will join us for the Q And A session. Before we begin, however, I'd like to remind you that some of the statements made during the call today are forward looking statements, including statements regarding our expectations for 2019 guidance, the commercialization of our products, and the development plans for the compounds in our pipeline, as well as the development plans of our collaboration partners.
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 K for the year ended December 31, 2018, and from time to time in our other SEC documents. We'll now begin the call with Herve.
Thank you, Mike, and good morning, everyone. So we have made excellent progress in the first quarter of 2019. Net product revenues of Jakafi continued to be strong delivering 20% growth over the first quarter of last year. And last week, Novartis reported strong sales of Jakavi, ex US, also at 20% on a constant currency basis with continued double digit growth across all regions. Including Jakavi and Alunya Priorities, sales of IQOSING and the milestones from Innovance, we reported total revenue of $498,000,000, up 30% compared to Q1 last year.
On the right side of Slide 4, You will see some of the important progress from across our development portfolio. Our GVHD development work is on track. And we recently completed recruitment into the GRADITAS 301 trial of itacitinib in patients with treatment naive acute GvHD. And we plan announce top line results from this trial before the end of 2019. We also on track to submit the NDA seeking approval of in cholangiocarcinoma in the second half of twenty nineteen.
And we expect that the data supporting the NDA will be presented at the medical meeting in the second half of the year. This morning, we announced the successful completion of the Phase II trial of ruxolitinib cream in Vitiligo patients, which represents a robust proof of concept in the second indication beyond atopic dermatitis where we are already in Phase 3 Based on the phase 2 results for accelerated cream in Vitiligo, we are also moving forward with phase 3 development in this indication, and we look forward sharing these data with you at the medical meeting in the coming weeks. Novartis continues planned for the NDA submission for CAPP Metinib in the second half of the year and updated data from the geometry trial has been attitude for oral presentation at this year's ASCO in June. Exciting data from 2 of our early test projects were presented at AACR earlier in April. The presentations of our our oral PD L1 inhibitor program as well as the L1 CD137 bispecific.
We are developing in collaboration with Mirrors. We are very well received I believe they are emblematic of the importance of discovery science for long term value creation. Today, we also announced that we will no longer participate in co funding baricitate development with living. We intend to make a reallocation of capital to late stage development program during 2019 2020, as we now believe that certain projects such as the XRA and expansion of ruxolitinib cream development and the acceleration of our opportunities in our later stage portfolio warrant increased funding. We continue to believe that VASITIVE has an important place in the treatment of rheumatoid arthritis and potentially in other autoimmune and inflammatory conditions.
But with our cumulative investment already earning us a substantial royalty rate, We believe that now is the right time to opt out and to reallocate capital to support exciting projects to help us reach our strategic goals of tighter indication and growth. With that, I'll turn the call over to Barry for an update on the USB side.
Thank you, Irvin. Good morning, everyone. Jakafi continues to perform well, and Q1 performance was in line with our expectations. And with full year 2019 guidance for net sales of $1,580,000,000 Jack PHY sales increased by 20% over q 1 of last year, driven by demand in both approved indications. We saw total MS and total PD patients grow by 8% 18%, respectively, in the first quarter, versus the same period in 2018.
Slide 7 shows the sales bridge for Q1 2018 to q1 2019. The growth of Jakafi was mostly driven by volume, and you can see that amounted to an increase of $42,000,000 compared to q 1 of last year. You'll remember that the negative effect on gross to net is highest in Q1. It is also important to note that drug manufacturers are now required tribute 78% of the of the coverage gap or donut hole as compared to 50% in previous years. I'll finish by reminding you of the May 24th PDUFA date on our sNDA for ruxolitinib and steroid refractory acute GvHD.
And that we are ready sized and structured to support the launch. Our reach development program also continues as planned. The result from both Reach 2 and Reach 3 global phase 3 trials of ruxolitinib, which were running in collaboration with Novartis and steroid refractory acute and chronic GVHD are expected by theendofthisyear. I'll now turn the call over to Steven for the clinical update.
Thanks, Barry, and good morning, everyone. Insights is currently running 6 key late stage development programs as summarized on Slide 10. These have the potential to treat a significant number of patients across numerous indications. More broadly speaking, these programs aim to transform insights into a company with multiple approved products in the United States, Europe, and Japan over the next several years. Today, we are focusing our attention on 4 of them as these are the projects that we expect to generate important updates during 2019.
Barry has already highlighted our ruxolitinib program in steroid refractory graft versus host disease, and I will touch on in patients with Vitiligo successfully reached its primary endpoint and that the plans for phase 3 development are now underway. This was a randomized dose ranging and vehicle controlled phase 2 trial in more than 150 adults with Vitiligo. And we look forward to sharing the data with you at a medical meeting soon. Vitiligo is an inflammatory disease of the skin, which results in patches of depigmentation and the potential for significant impact on patients' lives. It is estimated that there are 2 to 3000000 patients in the United States with this disorder, and there are no currently approved FDA treatments.
Many patients try steroids or phototherapy, but these options have not shown significant or long lasting repigmentation of the skin. We expect to initiate Phase 3 development by the end of this year, and we are hopeful that ruxolitinib cream will be the 1st therapy approved by the FDA and will provide these patients with a meaningful improvement in their disease. We believe that there are significant opportunities within our Pemigatinib program. We expect to file the NDA for second line FGFR2 translocated cholangiocarcinoma in the second half of this year. And we are also planning to share the data that supports the proposed NDA at a medical meeting in the second half of twenty nineteen.
The second indication we are pursuing for pemigatinib is FGFR3 mutated bladder cancer, and we are currently recruiting the continuous dosing cohort of the pivotal phase 2 trial. We expect that this cohort will reach full recruitment by the end of this year, and we are hopeful that the sNDA for this indication could be submitted in 2020. The first line Phase III trial in cholangiocarcinoma is now open for equipment and plans for 1st line bladder cancer study are also in preparation. We are also opening a registration directed phase 2 study in the tumor agnostic setting, which could further expand the number of patients eligible for the therapy and therefore, the potential of the molecule. Moving back to our development efforts in graft versus host disease and the gravitas program, which is investigating itacitinib in first line treatment.
GRAVITAS-three zero one, the phase 3 trial in treatment naive acute graft versus host disease, has now completed recruitment, and we expect results to be available before the end of this year. In January, we launched Gravitas 309, which will evaluate itacitinib in patients with treatment naive, chronic graft versus host disease. It is important to note that in major markets globally, Approximately 15,000 new graft versus host disease patients are diagnosed each year. The unmet need here is clear, and we are encouraged by the potential of in our early stage portfolio, both of which were recently highlighted at AACR. We have discovered a series of novel, orally available PD L1 inhibitors, and the first molecule 86550 is now in the clinic.
Its mechanism of action, which binds diomerizes and internalizes PD L1 is novel and could result in a differentiated clinical profile versus injectable monoclonal antibodies. We are in the early innings, but we look forward to sharing clinical data for this program next year. Through our collaboration with Netmeris, MCLA-one hundred and forty five, a PD L1 CD137 bispecific antibody is ready to enter clinical development and we expect to have the first patient dosed with MCLA-one hundred and forty five this quarter. This is also a very exciting mechanism with a bispecific Rx CD137 agonist activity to the tumor microenvironment by its selectivity for PD L1. This may limit systemic CD137 agonist activation while targeting 2 important immunomarkry pathways.
With that, I'd like to turn the call over to Cristiano for a financial update.
Thanks, Steven, and good morning, everyone. The financial update this morning will include GAAP and on that numbers. Before moving to our results for the quarter, I would like to discuss a change in our methodology for non GAAP to reconciliation. After reviewing our non GAAP reconciliation and at the request of the SEC, beginning with the first quarter of 2019 will no longer be adjusting our revenues or research and development expense for upfront consideration and milestones that are part of our collaboration agreement with new or existing partners. This new methodology is reflected in the GAAP to non GAAP reconciliation on Slides 2526 in the backup section of the deck and in the press release that we issued this morning.
Decision to end additional co funding of city need development with Lily. As you know, under our agreement with Lily, we have the right to a base tier royalty of 11% to 20% on global net sales of ILUVIEN. We also have the right receive a 9% incremental royalty if we could fund 30% of the post POC development costs, thereby sitting in the indication. Based on the cumulative investment made to date, we have already earned a substantial incremental royalty rate, especially in rheumatoid arthritis, and have now reached the point given the acceleration and potential of certain key internal projects where we believe that the best decision is to add additional co funding of parasitinib development and reallocate capital over the balance of 20.19 and in 2020 to other projects. Through 2018, we were entitled to receive the full 9% incremental royalty in addition to the 11% to 20% base tier royalty.
With our decision to end our co funding effective at the end of 2018, we expect the incremental royalty rate for rheumatoid arthritis to come down over time. The timing and the rate of decline in the incremental royalty rate will be based on Lilly's additional development costs in this indication and the pace at which those costs are incurred. The base royalty rate is unaffected by levels of development spend And as it is a tier royalty structure, it is expected to grow over time as global net sales of Olumiant continue to grow. Moving on to our financial results. For the first quarter, we recorded $458,000,000 of total product related revenues.
An increase of 20% over the first quarter of 2019. This is comprised of $376,000,000 in Jakafi and $21,000,000 in Iclusig net product revenues, $46,000,000 in Jakavi royalties from Novartis, and $16,000,000 in Olumiant royalties from Lee. We also recognized $40,000,000 in contract revenues from the upfront payment we received under our collaboration agreement with Innovent, resulting in total revenues for the quarter of of $498,000,000. R and D expense for the quarter was $243,000,000 on a non GAAP basis, driven by the progress across our development programs as Stephen has outlined. And in this quarter versus last year, this expense was partially offset by the of our decision to stop co funding baricitinib development and lower costs related to the Aerocadosat program.
The net effect was a 9% decrease in ongoing R and D expense for the quarter compared to the prior year period. SG and A expense for the quarter was $111,000,000 on a non GAAP basis, relatively flat in comparison with the prior year. The increase in total revenues and decline in non GAAP costs and expenses has resulted in operating income for the quarter of $127,000,000 on a non GAAP basis as compared to an operating loss of $19,000,000 in the prior year period. Moving now to our guidance for as well as our SG and A guidance. We have received our GAAP we have revised our GAAP R and D guidance from a range of 1.185 to $1,255,000,000 to a range of 1.145 to one $195,000,000, which largely reflects our decision to discontinue co funding bacitinib development and the timing of resource reallocation.
Please note that this guidance does not include any additional potential future strategic transactions the young agreements previously announced. I will now turn the call back to Erve.
Thank you, Christian Am. Our next slide outlines the key news flow event we expect during 2019, including lose from our partners. With this list of exciting late stage program, we are taking important steps to add our strategic goals of diversifying and accelerating revenue growth. We look forward to keeping you updated on our program and for now, we are happy to take your questions. Operator, that concludes our prepared remarks.
Please give your instructions and open the call for Q And A.
You.
Once again, a starter 1 if you'd like to ask a question at this time. One moment, please while we poll for questions. Our first question is coming from Mark Frab from Cowen And Company. Your line is now live.
Hi, yes. Thanks for taking my questions. Maybe first just housekeeping one for Barry. Can you disclose the gross to net in the quarter? Just how it worked out with the new rules around the that whole.
And do you still think the full year is gonna be about 15%?
Yes. The full year gross to net is gonna be about 15%. The gross to net, as you know, is highest in, the 1st quarter, the additional 20%. So going from 50% of the donut hole to 70% of the donut hole amount to about $5,000,000, we estimate.
Okay. Thank you. And then maybe just turning to the topical, ruxolitinib for Steven, one saw that there's a new maximum use trial that's on clinical trials. Like, is there anything else that needs to be done other than reading out that and reading out, obviously, the phase 3 data in atopic dermatitis for filing. And then maybe initial thoughts on, the design for a phase 3 trial in, Vitiligo.
Does it need to be as large as atopic dermatitis, or, you know, can you leverage a lot of the safety data?
Yeah. Mark, it's Steven. Thanks for your questions. So, for atopic dermatitis, for the entirety of the filing package, there'll be nothing additional that needs to be done other than obviously completing both phase threes and, the, the maximal use study done further guidance for dermatological products. And that, you know, we have high confidence in our topic dermatitis database on our very strong proof concept with the cream.
In terms of Vitiligo, obviously, we've just delivered, the proof of concept data. We're very, very encouraged by it. It'll be presented at a at a medical meeting soon. Obviously, we've been thinking about the phase 3 designs all along and and have a relatively well developed concept which will now at an end of phase 2 meeting with the FDA discuss with them and come to decisions on the endpoints and the size. And as we said, our intent is to stock does before the end
of the year. In terms of what
I think you're alluding to in a world of safety package, be able to be leveraged from atopic dermatitis for Vitiligo, we expect that would be the case, but there will be a discussion point to the regulatory authorities. Having said that, you know, the Vitiligo stage will still have to be appreciable in size. It's a different, area from oncology and you require larger studies. But we expected the safety package from from atopic dermatitis will be very helpful for the Vitiligo file.
Okay, great. And then maybe a bigger picture for Herve. In the past, with these mid stage dermatology projects, you mentioned that you'd have a decision to make ultimately about whether into right for insulate to market them and build a whole commercial infrastructure in that space versus, you know, ultimately partnering these out. And now that you kind of have randomized data in in house, at least in two indications, are are you ready to make that decision? Do you do you have an answer on that?
Yeah. So, obviously, this is and you know, our coach was in term of commercialization was driven by cancer, portfolio. And we decided to commercialize ourselves in North America, Europe, and that was like 2 2 years, 3 years ago, 4 years ago, we had build that infrastructure now. So we have a new question here is does this apply to dermatology? And the answer is it's very different.
That in terms of size of the opportunities by, you know, for each of the regions. So we are looking at it on a regional basis And from that first, review, what we see is that there is a lot of attractiveness to doing it ourselves in the US. There is certainly less of that from Japan where it's a complicated and different market from what we see in cancer. And we are basically reviewing also for Europe, what would be the best approach. And it could be either to commercialize alone fully or to find a co commercialization partner and go and book the revenue or to out license completely and book milestones and royalties.
And frankly, we are looking at each of the 3 opportunities And what will make the most sense from, from the insights standpoint financially and in term of investment and race So it's, it's completely open. We have time because of phase 3 results from atopic dermatitis are anticipated at the beginning of 20 2020. So we are planning to use the next 6 months to have an in-depth analysis of what makes sense with our board. And we will probably be already by the time we get the phase 3 data. And after the phase 3, there will be another before the commercialization is starting.
So we are basically on a good track to be able to make that decision based on very rational financial analysis.
Our next question is coming from Michael Schmidt from Guggenheim. Your line is now live.
Hey, good morning, and thanks for taking my questions. I had a couple on Penny Gatinib, specifically regarding bladder cancer, Can you just help us frame the opportunity here in context of some news recently around, you know, approval of erdafitinib from J And J And the Seattle Genetics, top line data, as well how do you think about the opportunity here and and help us understand if, if there will be any updates from your phase 2 study in in bladder cancer this year? And and then the other question was regarding Jakafi, I guess, what was the gross to net in the first quarter? How how should we think about that in in the second half? Opinion.
Thank you.
So Michael, hi, thanks for your question. It's Steven, and then Barry will answer your gross to net question. So, you know, as I said in my prepared remarks, this is the second indication we've assumed. Obviously, a very important indication and immediately bigger than FGFR 2 translocated, cholangiocarcinoma. This is the FGFR 3 mutated or fusion patients with bladder cancer.
And the opportunity is large in the 15000 to 20,000 patient range. We view the the J and J, the fit and have approval very positively. It's, it's, you know, it gives us, proof of concept that the pathway is important that hitting this driver mutation is effective that, you know, we're always ahead, although we have caught up substantially. We're doing our continuous dosing now. We expect to complete, that continuous dosing cohort around the third quarter of this year, but you're only likely to see data from us next year in 2020.
And in addition, that's where we'll be filing as well, should the data supportive of filing. The Seattle, you know, conjugated monoclonal is a is a different target. Probably, you know, in some respects, mutually exclusive and you know, potentially important drug in bladder cancer as well. So it doesn't affect anything in terms of our program. At all.
And then, obviously, we have the ongoing MPN 8p11 FGFR1 driven study that's actually accruing very well after our ASH update. And then very importantly, the tumor agnostic program, which substantially expands the potential population in areas like endometrial cancer gear based photomex etcetera. This could be upwards of another 15,000 patients if we deliver efficacy in all these populations. So as you outlined, extremely important program to us, that's going very well. We view that, approval.
That's an important, proof of concept for the for the pathway. We think, you know, the safety may ultimately be something that's important. We note the J and J label, and we'll see what our data shows in terms of safety down the pike. I'll turn it over to Barry for your gross to net. Yeah, Michael.
So the gross to
net we estimate for the 1st quarter, full 1st quarter, 17%. I just can imagine, It's much higher in January and then settles down in February. And, March, generally speaking, it gets a little bit better each subsequent quarter after that. And as I said before, for the full year, we estimate the gross to net to be 15%.
Thank you. Our next question is coming from Brian Abrahams from RBC. Your line is now live.
Hi, thanks very much for taking my question. What's the right way to think about the cost savings, from the barrier restructuring? I guess, for this year and beyond, once we net out the effect of some of those accounting changes, for booking milestones. And how are you guys thinking specifically about allocating that funding, will that be for new projects, new indications for some of the late stage programs, moving other earlier stage pipeline programs forward into the late stage? What's the right way to think about that?
Hi, Brian. This is Cristiano. So in terms of, baricitinib, first of all, the revised guidance that we provided implies 40 to 60 percent, sorry, 40 to 60,000,000 re dollars reduction in R and D spend in 2019. That, as we indicated, includes the decision to opt out from baricitinib development and the partial reallocation in 2019 on of some of the funds that we had earmarked for baricitinib to other internal programs. Also as we indicated, the the decision to opt out was really driven by the opportunity that we're seeing some late stage programs and the desire to accelerate or augment the development of those programs like a rock screen.
So, in 2019, through the rest of 2019, and in 2020, we will be looking to reallocate, the capital that otherwise have been allocated to baricitinib to those late stage programs.
Got it. And then one more question from me. What's the right way to be thinking about the bar for clinical meaningfulness, in the Vitiligo setting? And the potential read throughs between vitiligo and atopic dermatitis, pathophysiologically. Do you view this as sort of an additional endorsement of the potential for ruxcream in atopic derm beyond the the phase 2 you've already reported in AD, or should we think about this is very is completely separate from a scientific standpoint?
Thanks.
Brian, it's Steven. Thanks for your question. In terms of the the what is clinically meaningful in in Belago? Obviously, there's no approved therapies, and there's actually been a dearth of of clinical work to date. This is the biggest study done ever in Vitiligo, the primary endpoint in this proof of concept study was the percentage of patients treated with ruxolitinib cream who achieved a 50% or greater improvement in the facial assessment of the Vitiligo area and severity index score.
It's called an Advassy score compared to vehicle. It, you know, it, and if that measures the activity of the compound. In addition, as, as we've said in field keeps telling us this is a disease with a large, psychosocial burden on patients, and we'll be measuring that through appropriate patient reported outcomes during the study because we'll have to document clinical benefit in that respect. The big caveat here is we need to discuss with the agency what the primary point will be for the phase 3 studies? Will it, you know, will it be Vassy?
Will it be a face Vassy? Will it be a total body Vassy? And to what what degree, would they accept as the primary endpoint in addition to measuring, you know, patient reported outcomes It's 150 patient study. You'll see the data at a major meeting in the middle of this year. And, obviously, we're very encouraged by it.
We're going to phase 3. The read through for me is, you know, in terms of, inhibiting interferon gamma signaling in Vitiligo, you know, stop in this cycle of melanocyte destruction and, and then getting the re pigmentation in important areas to patients like the face and hand and hands, which are visible externally. And, you know, it's similar mechanism to AD, but I, I don't, you know, they're just separate indications that we pursue separately there are, you know, potentially other diseases over the years we've looked at, like psoriasis, which have some overlap in terms of pathophysiology. But the current program in terms of registration direction is towards atopic dermatitis and Vitiligo.
That's really helpful. Thanks.
Thank you. Our next question is coming from Carter Gould from UBS. Your line is now live.
Thanks guys. Good morning. Wanted to, I guess, dig in a little bit more into the decision to stop the co funding. You gave some rationale for that, but I guess, you've been pretty persistent on this front that you would keep up that effort. I know you had conducted a multiple internal analysis.
So I guess sort of what changed And if there was any sort of shift either in kind of how you guys were viewing maybe the systemic market for AD or, specifically, if you mentioned some of the other assets in your pipeline, anything specifically you would call out?
Maybe I can start and, Christian, I can complement it. I think it's important to realize that this even is not about you know, the the way we see the future of Artiezib, it's about 2 other things. One is So the way the additional royalty rate is, calculated. It's based on the cumulative investments in, that we have already made in baricitinib. So you can imagine that the return on the marginal investment that we make is always lower than the return on the previous investment.
So there is a point that we believe we have reached where in fact, we see that there is a better, return on that investment in our internal project as we have seen a number of them that requires or give us the opportunity to accelerate and expand like we discussed about itacitinib, then he gets in need and ruxolitinib cream. So we came to that conclusion that in terms of marginal investment that we make in R&D, it would be a better allocation to do it to our internal program that has been progressing very well and are very missing. So that's really, you know, how we came to that, to that conclusion. As you know, we have told you regarding that we are reviewing all the time every quarter. We are reviewing the way R and D resources are located and that's, basically, the time came where it made, it made sense for us to reallocate these resources to internal programs.
Great. Thanks. And if I could just ask a follow-up, I appreciate all the color, Urvi. Just in terms of, I guess, it's been sort of increased talk around, you guys potentially be an acquirer in the marketplace. Just in terms of your capacity for M and A based on your current cash position future cash flow is kind of how you're viewing that?
I mean, what we what we are looking at is really the 2 strategic goals, to our growth and diversification. So growing our revenue, which is obviously it from selling into the P and L and going to the bottom line in some in some way, but growth is important and diversification is important. So that's why There is always this possibility for us to do some business development that will add to our top line over the next the next year. It's clear that we have, I think, at the end of the quarter, the cash position is 1,600,000,000 the P and L structure that you can see this quarter, you know, it's very strong in term of cash flow and that gives us more ammunition for business development opportunities. At the same time, our internal portfolio is also very strong and progressing very well.
So we are basically looking at both as potential ways to get to our strategic objectives.
Thank you. Our next question is coming from Sally and Richter from Goldman Sachs. Your line is now live.
Thank taking my questions. I'm fulfilling LIGO in terms of the commercial opportunity, are the 2 to 3,000,000 patients in the U. S. All targets And where should we expect that data
Hi, Salveen. It's, it's Steven Stein. So the incidence is around 1%. So for, you know, a one to 2% if you have, you know, a 300,000,000 population. That's how many total patients there are.
And, you know, it's just that's just the potential opportunity. The amount to seek, treatment currently is much, much smaller. You know, it's around 100 and 1000 patients we can best estimate or actually currently seek treatment. That could be for multiple reasons, as you well know, in terms of a lack of available therapies, the fact that therapies that are available are somewhat cumbersome, hard to give and require, you know, high compliance in terms of steroids and phototherapy. And also for patients who just don't feel they need treatment.
So, you know, the population that that is ultimately targeted will be for the ones that are are feel they have to treat, areas that are causing, the visual disfigurement plus the psychosocial implications of the disease. Obviously, we'll have to demonstrate the efficacy benefit in the areas that are concerning particularly as I said earlier, the ones that are visible externally like face and hands. And, you know, we, we're not that population that ultimately will need treatment from us could be in the range of, you know, 150,000 or so. It's hard to estimate currently.
Thanks. And just a housekeeping follow-up. Where did Jakafi inventory levels stand exiting the quarter?
So this is Barry. Actually, the their normal levels below 3 weeks.
Thank you.
Thank you. Our next question is coming from Alethia Young from Cantor Fitzgerald. Your line is now live.
Hey, guys. Thanks for taking my question. 2 for me actually. 1, I know the PI3 kinase program doesn't get a lot of love, but, you know, I think there are some PI to kinda just coming back on the scene, including yours or data. So I just wanted you to talk a little about how you think your your current molecule may be differentiated from others.
And then my second question maybe is asking the question another way. Obviously, you guys have a core, you know, JAC capability, and I'm just kind of wondering how long or it would take for you guys to kind of generate a return on invested capital. If you were to invest in dermatology, it seems like there's a lot you could do early in the pipeline that you have and obviously you have the topical programs which are ongoing? Thanks.
So, Alethia, Steven, I'll do your first question. So, you know, the reason I think we're quieter on path to Closip at the moment is enrolling, this is a year of enrolling the studies that are registration directed in follicular lymphoma, mantle cell lymphoma and marginal zone lymphoma. And the enrollment actually is really going well this year. It'll complete, and then we'll have data next year. And, you know, hopefully be, again, submission quality in those indications.
You know, we this is a 2nd generation, PR3 kinase inhibitor, the chemical changes that were done the degeneration of compounds seem to have dialed out the liver toxicity for the most part. So you don't see the transaminitis that you used to see with the 1st generation compounds like, like, idealistic from, from Gilead initially. But what is the concern with this degree of of PR3 kinase inhibition over the long term are safety concerns like colitis. So we made a very conscious decision a little over a year ago to try and, thread that therapeutic benefit more more cleverly. We know the compound's highly active.
It's incredibly active in B cell, diseases we've shown that data repeatedly. But to get that activity at the same time to make it more tolerable, is to look at different ways of doing dosing and scheduling. So we do the high dose upfront 20 milligrams weekly for the 8 weeks. To get to the efficacy bit while we want. And then we looked at different ways of either weekly or daily dosing at lower doses, And it looks like early days that we've been able to dial out with many caveats because of the small numbers, a lot of the longer term toxicity that collided.
So that's a pretty exciting place to be from a therapeutic benefit point of view. And now we we're executing those studies to to, in, you know, substantial numbers of patients in marginal mantle and follicular to see if we if we if it's true what we see. So have the high activity and much more tolerable profile, and then filing those indications. All of those indications remain, to date, as not curable diseases. So despite there being, you know, BTK inhibitors, Bcl-two inhibitors, CAR T therapies, there's still a lot of unmet need in, in these is, and and that's why we we're very encouraged about this program.
So maybe I speak with the the ROI in term maturity. As I said, I mean, it's an open, it's an open field for us. So we are looking at it and making decisions based on what seems to be aligned with our goals of diversification and growth. And that's important to look at this dermatology as fairly high potential indications for, for insight. When you look at the number of patients on both atopic derm and did I go?
If you look at the therapeutic profile that we get from the topical administration where the risk benefits and the side effects that you can observe, have a very different rate than what you have with systemic treatment. We believe there is a real opportunity that could be very meaningful for insights in both indications. That being said, as we discussed, we are at the commercial cost of having infrastructure for dermatology. It looks like, specialty dermatology products the U. S.
Do not require an enormous size type of team. So that one seems to be leaning in a direction where we would be doing it ourselves. And as I said, in Japan and, and Europe and the rest of the world, it's uptime, and we will see what makes the most sense. And the ROI is certainly a very important criteria and the speed at which we can we can show, cash flow positivity coming from the dermatology franchise. If you look at it that way, it's a it's very important.
At the same time, being able to book the revenue and to diversify the top line is also very important. So that's the 2 criteria we would be looking at to make that decision.
Our next question is coming from Cory Kasimov from JP Chase. Your line is now live. Hey, good morning guys. Thanks for taking my questions. I have just a couple of earlier stage clinical ones for you.
So first of all, the Phase 2 tumor agnostic study for pemigatinib, is there agreement with regulators or any sort of minimum number of different tumor types you need to enroll in that program?
Hari, hi, it's Steven. So the the the pricing for it you know, comes from, both what other companies have done before in the setting, plus an an an FDA opinion piece that was written recently around this is a reasonable approach when you already have a drug that's approved in at least 1 or 2 indications that the pathway is validated in this case, you know, if you're for inhibition, and you can look at areas like MSI High for the checkpoint inhibitors as as sort of a proof of of principle, if you will, for doing a study this way. So we we don't have, and we won't be obtaining, you know, strict regulatory approval for the exact numbers required each time. But what you what you wanna see is in a particular disease, like, say, endometrial or glioblastoma, something where, you know, you have the selection for the for the particularly FGFR mutation of fusion, a very high degree of activity that's that's robust and durable in the setting where you already have approvals elsewhere in a validated pathway, and that's the idea behind it. And as I said, there's regulatory precedent already.
Okay. That's helpful. And then for the second question, curious about your clinical plans for MCLA-one hundred and forty five. Can you talk about the overall strategy there with the initial trials how enriched those phase 1 studies will be?
Yes, I think it's best to say we're working in collaboration with Merus here. It's early days. As I said in my prepared remarks. It's a it's a very interesting, by specific paradigm here. There's been precedent before with with mono use of CD137 and unfortunately quite a lot of toxicity in terms of liver toxicity and transaminitis.
So the idea here is to direct it with a bispecific via the PD L1 enrichment straight to the area where it's needed and try and subvert that, that toxicity and, and we'll see right. The second thing is, you know, should, these both mechanisms work together as we expect from theoretic and our preclinical data, you know, there could be a potential, plans for areas where sort of checkpoint refractory patients exist in that, but that's something we'll have to prove to you. I think it's too early just to talk about, because we're only about to start dosing, you know, whether, we'll have a lot of, activity data early on. We're not enriching early on for any particular to answer your question directly, receptor or biomarker. It's more standard phase 1 first time in man just to get to the safety principle first.
Thank you. Our next question is coming from Christopher Marai from Nomura Instinet. Your line is now live.
Hi good morning. Thank you for taking the questions. I'm just wondering if you could elaborate perhaps on on the opportunity for topical rocks, in atopic derm. You know, would you be looking at expanding the label perhaps to the pediatric setting. And then, secondarily, with respect to the cream formulation, I recall previously there was a rather breezy formulation review using, and it's may have been a problem until ago.
I was I was wondering, you know, have you remind me, have you updated or modify that formulation to make it a little bit more, patient friendly. And then, secondarily, how does this cream, differ from the ointment formulation used for you, Chris. Thank you.
Christopher, it's Steven. So, it's good to bring up the pediatric part of the population here. So so the studies that we're doing currently and we have permission to do from the regulators are in in 12 years and above. In mild to moderate atopic dermatitis, which covers the majority of the population. In terms of the population below 12, so two to twelve years of age, you know, that's something we're still working on the regulators with with with things like safety margins, etcetera.
And it's something we'll be interested in down the park, but the program at the moment is 12 years and above, and that covers the vast majority of patients who are interested in treating with mild to moderate, atopic dermatitis. In terms of the formulation question, we have not changed it. It's a cream. It's, in terms of the data we have and we've used it definitely, if you just heard, in atopic dermatitis, in Vitiligo, it's been very well received. There's no greasiness, no burning or stinging, when you allude to your CRISSA, you know, one of the things we've been told and we've seen, from real world data is that seems to be the problem with that particular agent and that it induces both burning and stinging.
And that may be why it's not used as widely as people want to to be used. Remember, we haven't had that at all a problem, with our formulation to date, and we don't expect it to be given that we've already treated hundreds of patients.
Okay. Thank you. And then with respect to perhaps, the the moderate to severe setting, for atopic derm, have you started Well, do you have any plans to explore the topical formulation there given, of course, also the potential other for safety concerns or perhaps better efficacy there. Thank you very much.
Yes. So our program is mild to moderate. The moderate to severe particularly more on the severe range have been reserved, for oral therapies. And as you know, baricitinib has a program there and others, and then other targets that that are, maybe have a different safety margin and are more acceptable for severe. So that's not a population we target There is some overlap in terms of the moderates, and we got we'll expect, you know, the clinical data will dictate how how physicians and patients then use the therapies there.
In terms of degree of disease they have and what they're trying to achieve in terms of the clinical result. One very important endpoint we saw, which was a good surprise, was relief of itch, was our product, was traumatic and occurred very, very quickly within 2 days And that's something that really, is important to patients. So we think, you know, if that's a particular goal of physicians and patients and we document that in our clinical trials, there will be an important endpoint. But for the most part, we don't think there's overlap. And again, we target in mild to moderates only with the cream.
Great. Thank you.
Thank you. Our next question is coming from Geoff Meacham from Barclays. Your line is now live. Thank you so much. This is Jason on
for Jeff. Just real quickly on Jakafi, if you could give us a sense of your expectations for the mix of price and volume moving forward, especially considering the gross to net hit in first quarter? And then I have a quick follow-up.
Hey, Jason. It's Barry. We continue to grow volume mostly And, and as you can see from this quarter, in fact, or this year, Q1 2019 over q11 2018. Most of our growth, in terms of net sales was for volume, and we can we see that continuing in the future.
Got it. And in terms of duration of therapy and in terms of moving up, earlier up line, is that factoring in as well, or do you expect to see that more kind of as a longer term influence?
Well, we always try to improve duration of therapy. We want patients to stay on as long as they continue a benefit from Jakafi, and that's true in both PD and MF. You know, when we talk about duration of therapy, we really go back to the clinical trials. We look at, the comfort trials, for example, where at least 50% of the patients were still on at 3 years. And at the, 5 year follow-up to response, you had 66% of patients, still on therapy at 5 years.
So, you know, the duration of therapy, we always want to try to improve on and work together with our health care professionals so that they don't suggest those those down based on increased efficacy or decreased toxicity. And, again, we want them to stay on therapy as long as they continue to benefit from it.
Gotcha. Thank thank you for the color. And then with regards to to reach 1, now that we're in the homestretch here and, you know, can the extent that you can. Can you provide some color on on, you know, how those discussions with FDA, are are moving and and kind of what are your expectations for read through to reach to and reach when we get to that point?
Jason, it's Steven. So you're right. The PDUFA date, as Barry said, is May 24th. We still extremely confident in our data and we look forward to the PDUFA date. We don't give granular details on back and forth discussions with the FDA, but we are in a, in a place where we're confident in our data and look forward to the PDUFA date.
Of course, because of what I just said, you know, we vector read through to Reach 2, which is the same population steroid refractory acute acute. Graph versus host disease to be similarly positive. It's a randomized study against best available therapy. And then in terms of chronic graft versus host disease, reach 3 against randomized, against VAT, you know, the we have strong proof of concept in that area, and we will have, you know, data by the end of this year in both Reach 2 and Reach and similarly confident in it and wait for the data. Thanks.
Thank you. Our next question is coming from Tyler Van Buren from Piper Jaffray. Your line is now live.
Good morning guys. Thanks for the updates and the reallocation of baricit and funding mix a ton of sense. I guess the my question is related to the long term, Jack, if I guidance that you guys provided in February year of $2,500,000,000 to $3,000,000,000 by 2027. Are you guys, can you re can you reiterate your confidence in that based upon what you're seeing in FMS? And PV and the development GVHD programs.
And also with respect to ET, how should we think about that program that's ongoing and and when that indication could come to market?
So, yes, we're fully confident in 2 and a half, 1,000,000,000 to 3,000,000,000. And that, as we've said before, includes MFPV and GVHD indications we really didn't estimate for for ET. We're, we're fully confident. We have have almost 10 years actually left on on the patent. And you can see the growth year over year and the contribution that we give to the top line, I think we can, we can make it there.
I don't know if Steven wants to comment on, ET.
Yeah. You know, obviously, that's the remaining of neoplasm after you have myelofibrosis and polycythemovirus that's not, BC or Abel driven. And because of the path theology again, you know, every expectation that Jack Innovation should work there. And we know we have some spontaneous use there. The issue with the with the the with the the study there is it's very difficult to enroll.
Dominant first line use is hydroxyurea, and the study required as continue on clinicaltrials dotgov for patients to have high white blood cell counts at initiation of the study and then to be randomized the approved therapy for essential thrombocythemia, which is Inegralide. So both the high white count and the Inegralide randomization, that's continue to make this study difficult to accrue, and and we'll continue to examine ways to try and improve that of, recruitment it may end up being, you know, an entity that we end up doing a publication on before completing the entire recruitment, but, an important disease for JAK inhibition and, obviously, one we're trying to address with a formal study.
Thank you. Our next question is coming from Ying Huang from Bank of America Merrill Lynch. Your line is now live.
Hey, guys. This is Alec
on for Yang. Thanks for taking our questions. I guess I just have one, on the differences between the various REACH studies, You elude you elude to the the SBNA for, for Jakafi and steroid factory acute CHT was based on the single arm, Reach 1 study, do you see any risks in Reach 2 and 3, comparing Jakafi to best available therapy in terms of superiority since some patients do actually respond to the AP, and where the study is powered, but this in mind. Thanks.
Yeah. Like, it's Steven again. Obviously whenever you conduct the study, there's there's risk attached in that, you know, that you may have a negative outcome as you're due to the fact that best available therapies, and there's a different list for Reach 2 and Reach 3 are active therapies, and that can have upwards of 30, 40% response rate, It can though not to be durable. And so we have confident in the data we've seen to date in our proof of concept work. That we can differentiate both in terms of the upfront activity and then the durability of response, but the outcome will be on how the studies report out obviously there's always some risk with randomized studies.
Thank you. Our next question is coming from Jay Olson from Oppenheimer and Company. Your line is now live. Oh, hey, guys. Thanks for taking the question.
I was curious if there's any update on Jakafi Life Cycle Management. I know in the past you've talked about extended release formulations and, potential fix those combinations. So any update there would be great. Thank you.
Jay, hi. It's Steven again. Yeah. As Barry said, you know, despite there being, you know, 10 approximate years of paclitide left, it's a it's an extremely important compound to us with a very large team working on active life cycle management currently, there's 3 pillars to that. There's the formulation side as as you alluded to, and we've already published data with one strength of ruxolitinib XR, and we're busy developing other strengths to go forward in that arena that may, be a long know, bioavailable bioequivalence root plus minus a, a, a safety play because it may have a different profile in terms of anemia induction So you'll have to just wait on that, but it's very active and it's underway as we speak in terms of the XR formulation.
In terms of combinations, both us Novartis and external world are investigating multiple combinations in the second line setting and beyond for which there's you know, theoretic and sometimes very strong preclinical evidence and some clinical evidence. The combinations that we are investigating are rux plus kind of delta. We presented the 1st set of that data at ASH last year, and we're doing that experiment further this year with, with continuous dosing rather than than the weekly dosing. And we, you know, we were encouraged by the activity we saw in patients that had been on rux for a long time hadn't withdrawn from it and then had, you know, splenic responses as well as symptom improvement that there was some withdrawal of that when we went to weekly dosing. So we we want to do that a continuous experiment this year.
The 2 other combinations we do in our our our RUX plus perm, which is a very strong preclinical rationale and then ruxolitinib plus our JAK1 inhibitor. It's a synonym in patients who can't tolerate sufficient doses of rugs or can't tolerate it at all and then are switched to itacitinib. So those are all ongoing. Nevartis have combinations that are ongoing in the external world as well. But, so, combination's very important, and it's both an efficacy play and a safety play.
And then the 3rd arm of that is is more, and Dash can speak to this, is around, the research arena and targets. So we have a very important collaboration with Syros in terms of looking for further targets here. And then internally ourselves, obviously, it's an area we know extremely well. And are there better ways of, of potentially tackling, the drivers of these conditions? I don't know dash, do you want me to add anything here?
Thanks, Steven. So that's really right. There are a number of, approaches one can think about going further than what we've already done in terms of as Steven was talking about the first two, aspects of the pillars. And we have a number of discovery programs ongoing, both internally and in collaboration with academic institutions as well as biotechs, nationally and internationally, around probing reef fundamental underlying mechanisms in addition to a JAK inhibition that one could go after.
Our next question is coming from Pete Lawson from SunTrust Robinson Humphrey. Your line is now live.
Hi. Thanks for taking the question.
Just on the oral PD-one, what's meant to read out is next year, what could we see and would you be positioning that drug, which indications?
Yeah. Peter, hi, it's Steven. You know, we we filed the IND in October. We went into patients in December, last year. It's it's going really well.
There's a lot of, interest and excitement in the compound being that it's oral with this potentially very interesting mechanism of action in internalization of the receptor and will that translate to vehicle differentiator. But this US execution of the phase 1, get into a recommended phase 2 dose, and it's going well in that regard. Looking at benchmark areas of, like, lung cancer and melanoma to see what kind of activity there to see if this is efficacy differentiator. And we that'll take the most better part of this year, and we would love to show you some clinical data next year. As soon as we have a safe dosing schedule, we'll also be pursuing combinations that are relevant in terms of having an oral PD L1 inhibitor, but you will not see data until 2020.
Thank you. Our next question is coming from Renee Benjamin from Raymond James. Your line is now live. Hi guys. Thanks for taking the questions.
I guess just regarding GVHD, the way I kind of look at it is it said they're coming on board after rux, which will likely be off label quite a bit. Do you guys envision a launch where Rux is kind of laying the groundwork in GvHD? And when itacitinib comes on board, it just takes over both at the steroid refractory and steroid naive, or can you keep the 2 indications quite separate to the to each individual drug? How are you thinking about the commercial? Commercialization?
Well, we think we
have an advantage because we're able to launch, we will be able to launch ruxolitinib Jakafi in GvHD. So we're standing that market very well right now. So we've gotten to know the BMT treaters. We've gotten to under stand exactly what drugs they're currently using. But then, itacitinib, when it gets approved, it really does, in fact, should have a better profile, at least in terms of, cytopenias.
So we really think that we could continue to, develop rux or, people who will use rux in that setting, but ultimately, itacitinib, should be the drug of choice in, steroid refractory and acute TBHP.
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.
Okay. Thank you all for your time today and for your questions. We look forward to seeing you at the upcoming investor and medical conferences, but and I will thank you again for your participation in the call today. Thank you, and goodbye.
Thank you. That does conclude today's teleconference. At your line at this time, and have a wonderful day. We thank you for your participation today.