Greetings, and welcome to the Insight Fourth Quarter And Year End 2018 Financial Results Conference Call. At this time, all participants are in a listen only mode. 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 Insight. Please go ahead, Mike.
Thank you, Kevin. Good morning, and welcome to Insight's Fourth Quarter and full year 2018 earnings conference call and webcast. The slides used today are available for download on the Investors section of infot.com. I am joined on the call today by Urvi, Barry and Steven, as well as by Paul Trauer, our Principal Accounting Officer. Who will deliver the financial section of our prepared remarks.
I'm also very pleased to welcome 2 new members of the leadership to the call today. Namely Dash Danak, our new Chief Scientific Officer, who joined us in December and Cristiano Stamoulis, our new CFO, who joined us earlier this week. 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 our 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 Q for the quarter ended September 30, 2018. And from time to time in our other SEC documents. We'll now begin the call with Ernie.
Thank you, Mike, and good morning, everyone. So 2018 was another excellent year at Insight as we delivered 25% growth in product related revenues over last year. All four sources of revenue have shown good growth with 22% from Jakafi, 19% from hydrozig, 28% growth in Jakavi Royalties and Olumiant now becoming a material contributor to the top line. Looking into next year, today for Jakafi to reach $1,580,000,000 to $1,650,000,000 and Iclusig to reach $90,000,000 to $100,000,000. Adding consensus estimates for our royalty income from Jakavi and Olumiant generates an and expected growth rate for product related revenue for 2019 of approximately 20%.
Slide 6 takes us beyond just revenue expectation for 2019 and outlines the most important pivotal new flow items we expect for the year. Please note that these items only include FDA decisions, FDA submissions, and pivotal trial results. And a more complete summary of 2019 news flow will follow in the later slide. We continue to work with the FDA regarding the priority review of the ruxolitinib sNDA for the treatment of patients with steroid refractory acute GvHD. We recently announced a 3 month extension to the review and the revised PDUFA date is May 24th.
We expect to submit the NDA for pemigatinib for the treatment of patients with FGFR2 translocated cholangiocarcinoma in the second half of this year. And in the second half of twenty nineteen, we also expect Novartis to submit the NDA seeking approval of CAPmatinib for patients with MET mutated non small cell lung cancer. The first Phase III results from the ipacitinib development program in GVH HD are expected later this year. And if the Qualitat-three zero one trial is successful, itacitinib has a potential to be a global commercial opportunity for Incyte. We also expect pivotal results from 2 trials for ruxolitinib in steroid refractory acute and steroid refractory chronic GvHD later this year.
We are working in collaboration with Novartis in the development of ruxolitinib in GvHD. Last week, We announced with Zillie initial Phase III result of the broad Phase III development program of parasitinib in patients with moderate to severe atopic dermatitis and we look forward to additional results from that program later this year. 2019 therefore has the potential to be a very exciting year for Incyte and to share more details on Jakafi's performance and outlook, I'll turn the call over to Barry.
Thank you, Herve, and good morning, everyone. Jakafi continues its strong growth. We have seen good revenue growth in Q4, which was due to new patient growth in both the 3rd and the 4th quarters. This gives us excellent momentum consistency of Jakafi's performance on an annualized basis. In the fourth quarter, as shown on the left, Jakafi grew 26% over the same period last year, And for the full year 2018, Jakafi grew 22% over the full year of 2017, as shown on the right, There are no appreciable change there was no appreciable changes in the level of inventory at the end of the year compared to the beginning.
Today, we have provided initial Jakafi net product revenue guidance for 2019 as a range of 1.58 to one $650,000,000. This range includes both approved indications for patients with myelofibrosis and with polycythemia vera, as well as potential third indication of steroid refractory acute graft versus host disease. Should the FDA approve Jakafi in this third indication, we will be ready for an immediate launch and would expect good reimbursement coverage given our prior discussions with payers. I'll finish my segment by reiterating our long term As you can see from the graphical illustration on slide 10, we are now halfway to our long term target and we look forward to reporting future progress
Thanks, Barry, and good morning, everyone. Insights is currently running 6 key late stage development projects. As summarized on Slide 12. These six projects include potential in 16 different indications, and the estimated numbers of eligible patients for each project substantial potential on a standalone basis. And collectively, they represent a set of late stage projects that has the potential to transform insights into a company with multiple approved products in the United States, Europe and Japan over the next several years.
We'll focus attention today on 4 of them because these are the projects that we expect to generate important updates during this year. We are conducting 2 comprehensive programs assessing the safety and efficacy of JAK inhibition as a treatment for patients with graft versus host disease. The REACH program is investigating ruxolitinib in steroid refractory disease and the data shown in the left hand panel of the pivotal REACH1 data in steroid refractory acute graft versus host disease. These are the data that are currently being reviewed by the FDA. REACH 2 also in acute and REACH3 in chronic graft versus host disease are being run-in collaboration with Novartis and are due to report results later this year.
In the first line or steroid naive setting, The Grabitas program is investigating itacitinib in graft versus host disease. The data in the right hand panel are from ASH a couple of years ago, which led us to initiate this piece of the graft versus host disease development program. The Gravitas-three zero one trial is assessing the safety and efficacy of itacitinib in steroid naive graft versus host disease and is due to report results later this year. We are excited by the potential of JAK inhibition to treat this often deadly disease, and it's important to note that the opportunity includes approximately 15,000 new graft versus host disease patients that are diagnosed each year globally. We also expect important news flow from Pemigatinib this year, which we announced this morning, was recently granted breakthrough designation by the FDA.
The second line cholangiocarcinoma trial is fully recruited and we are now waiting for the data to mature before we run the updated analysis. Recall that in the initial dataset we showed at ESMO last year, it took up to approximately 6 months for the maximal response rate to be seen. So we currently estimate that the NDA should be ready for submission to the FDA in the second half of twenty nineteen. The continuous dosing cohort within the FGFR3 bladder study is also recruiting. And we expect the bladder sNDA for pemigatinib to be submitted next year.
We are also planning a pivotal study in the tumor agnostic setting, which should start later this year and could further expand the number of patients eligible for the therapy. And therefore, the potential of the molecule. I'll end my brief update with a slide on the ruxolitinib cream development program in atopic dermatitis and Vitiligo. The randomized phase 2 data in atopic dermatitis, as shown in the left hand panel, were very well received at EADV last year, and we have rapidly progressed into a phase 3 program. That program is already recruiting across 2 randomized vehicle controlled trials, and we expect to be able to report data next year.
We expect data from the ongoing randomized trial in patients Vitiligo in the first half of this year and if the phase 2 data warranted we expect to move swiftly into a Phase III trial of ruxolitinib cream in the second indication. Vitiligo is a disease with significant psychosocial morbidity and is a condition where there are currently no approved treatments. Both atopic dermatitis and Vitiligo therefore represent important and near term opportunities for our growing inflammation and Auto Immunity Research And Development Group. I'll now welcome Paul to the call to review the financials.
Thanks, Steven, and good morning, everyone. The financial update this morning will include GAAP and non GAAP numbers. For a full reconciliation of GAAP to non GAAP, please refer to Slides 2627 in the backup section of the deck and to the press release we issued this morning. For the fourth quarter, we recorded $468,000,000 of total product related revenues, an increase of 25 percent over the fourth quarter of 2017. This is comprised of $380,000,000 in Jakafi and $19,000,000 in occlusive net product revenues, $55,000,000 in Jakavi Royalties from Novartis and $14,000,000 in Olumiant Royalties from Lilly.
Our Jakafi gross to net adjustment was 13.4% for the quarter and 14% for the year. Our total costs and expenses for R and D expense for the quarter was $274,000,000 on a non GAAP basis, which did not grow over the prior year period and our SG and A expense for the quarter was $97,000,000 on a non GAAP basis. With total product related revenues increasing 25% and total non GAAP costs and expenses increasing only 4%. This has driven an operating income for the quarter of 77,000,000 on a non GAAP Looking at our full year results, our Our total costs and expenses on a non GAAP basis were $1,500,000,000, an increase of 21% over the prior year period including non GAAP R and D expense of $1,045,000,000 and non GAAP SG and A expense of $387,000,000. Our operating income for 2018 was $198,000,000 on a non GAAP basis as compared to $115,000,000 in 20 17.
And we ended 2018 with $1,400,000,000 in cash and marketable securities. Moving on to 2019, I will now discuss the key components of our 2019 guidance on both a GAAP and non GAAP basis. Please note that the guidance we provide today does not include any potential future strategic transactions beyond agreements previously announced. For the full year 2019 on both a GAAP and non GAAP basis, we expect net product revenues from Jakafi to be in the range of $1,580,000,000 to $1,650,000,000. For Atclusig, we expect net product revenue to be in the range of $90,000,000 to 100,000,000 As in the previous years, we 18 to be approximately 15% for Jakafi.
We expect total GAAP cost of product revenues to be in the range of $112,000,000 to $117,000,000 and non GAAP cost of product revenues to be in the range of $90,000,000 to $95,000,000. Our non GAAP costs of product revenues excludes $22,000,000 of amortization of acquired product rights related to expect GAAP R and D expense to be in a range of $1,185,000,000 to $1,255,000,000 and non GAAP R and D expense to range from $1,030,000,000 to $1,100,000,000. Our non GAAP R and D expense guidance excludes estimated stock based compensation expense, as well as estimated milestone expenses. We expect GAAP SG and A expense to be in and non GAAP SG and A expense to range from $420,000,000 to $470,000,000. Our non GAAP SG and A expense guidance ludes estimated stock based compensation.
We expect the change in fair market value of the contingent consideration for the Aclosing royalty liability to be approximately $30,000,000 on a GAAP basis and 0 on a non GAAP basis. In summary, taking our census estimates for Jakavi and Olumiant Royalties. We expect this should generate non GAAP operating income for 2019 in the range of $350,000,000 to $450,000,000. I will now turn the call back to Herve for further discussion of the year ahead.
Thank you, Paul. In our prepared remarks today, you have heard not only about the richness of our research portfolio with many opportunities further accelerate revenue growth, but we have also shown how top line revenue momentum is beginning to translate into improved ratios within our P and L. So chart on Slide 22, take the guidance that Paul just outlined, consensus estimates for 2019 royalties and it illustrates how our P and L is evolving as revenue growth is substantially exceeding expense growth. Our last slide outlines the key news flow events we expect over the course of 2019 We already have to a good start with the earlier than anticipated initiation of the Phase III trial of ruxolitinib cream in atopic dermatitis. As well as the initiation of the 1st line chronic GvHD study for Itacitinib.
Operator, that concludes our prepared remarks Please give your instructions and open the call
you.
You. Our first question today is coming from Brian Abrahams from RBC Capital Markets.
Guys. Thanks very much for taking my questions and congrats on the quarter and all the progress. Two questions from me. First off, talk a little bit more about your expectations for volume growth versus price contribution to your 2019 Jakafi sales guidance? And also wondering if you could give us some sense of how much GvHD is baked in there?
And then I have a follow-up. Thanks.
Well, as you know, from our guidance, we're expecting a 14% to a 19% net sales growth. 2019 over 2018. As you know, we took a 4% price increase at the very end of 2018. We don't get all of that price, but you can see that most of that 14% to 18% is volume. Other question was about GvHD.
GvHD, we have some spontaneous use. It's a small percentage of the total use of Jakafi currently. We're anticipating, once we get approval, that that could double, but that's somewhere in the range, including the current spontaneous use of maybe around $80,000,000.
That's really helpful. Thanks. And then you didn't speak that much on updates on lifecycle strategies. So I'm wondering if you might be able to give us a status update there, any specifics about data timing here for the PIM, JAK1 combos and the SR formulation. And should we be thinking about these more along the lines of MF solely MF extension strategies or are there sort of concurrent PB lifecycle extension strategies plan as well?
Thanks.
Hi, Brian, it's Steven. Thanks for the question. So the obviously, the patent life of RUX extends in the U. S. Through at least 2027, 2028.
So it's been very active, a life cycle development phase. There's sort of 3 pillars to it currently. 1 is around new formulation work, and we showed, at JP Morgan, work we had done in past with an SR formulation, that we had published in around 2011 that is very interesting in terms of what it does to the PK curve and there's less peak to trough ratio with the SR formulation and there's ability potentially to ameliorate some of the side effects, namely the anemia. So that work will ramp up and progress and will be full steam ahead to take further ASR doses forward. And do the required bioavailability and bioequivalence work to do that.
The second pillar, as you mentioned, is around a combination that either enhance efficacy or improve safety or both. The one that is most advanced at the moment is the RUX plus PR3 kinase delta combination. We showed updated data on that last year in December at the American Society of Hematology. We're very encouraged by that data set, despite patients being on at least 6 months of ruxolitinib at least 2 months of stable dose and not coming off and then having progressive disease with the addition of the combination upwards of 60% of patients at 24 weeks had some spleen volume reduction, upwards of a third of those patients had improvement in symptoms. Despite that context, which is very different from other competitors.
What was very interesting with that data set is when we withdrew from daily dosing to weekly dosing, there was some rebound in the spleen response. So the 2nd phase of that study is going this year which is looking at a continuous dosing, two arms, either a 20 milligram induction for 8 weeks and then 5 milligram continuous or 5 milligram continuous all the way through. Should that pan out, that is our lead combination, very encouraging data. The other two you mentioned that we are running or the perm combination the JAK1 combinations, they recruit this year. Hopefully, over this year, they'll recruit substantial patients, and we'll aim to present data on those 2 combinations for which the biology is really good, probably in 2020.
The JAK1 combination there has two arms to it. There's an additive arm to RUX for patients who can't tolerate sufficient doses and then there's a switch test strategy for people who can't tolerate RUX at all. And then the 3rd pillar of the lifecycle is new targets. And there are a number of academic collaborations, which have been publicly announced a place like Vanderbilt, Moffett and Penn, as well as with, research groups like Syros to look for new targets. And your last question, obviously, we're interested both in myelofibrosis as well as PVR in that space to see if we can make improvements there.
Thanks so much.
Thank you. Our next question is coming from Alethia Young from Cantor Fitzgerald.
Hey guys. Thanks for taking my question and congrats on the good quarter. 1, just on topical rugs and I know in atopic dermatitis, just maybe if you can talk about kind of the position of this asset, should we think about more in the neighborhood of Eucrisa or how do you think about kind of the peak potential there. And then just a quick one on Jakafi. Versus myelofibrosis versus polysemia vera, I mean, are we starting to get to the point where PV is slightly a bigger contributor?
Characterize that as well. Thanks.
So Alicia, hi, it's Steven. I'll do the first part of your question and Barry will address your second question. The as we announced on the call, the atopic dermatitis Phase III both studies were up in recruiting, and we'll recruit over this year. The group we are after is the mild to moderates, with less than 20% body surface area involvement And currently, the program is in patients 12 years and above. So you can see the difference in overlap, for example, some of the IV products are more to moderate and severe with different body surface area.
And the target population there is enormous in the U. S. There's millions and millions of these patients largely treated with topical corticosteroids at the moment. And then I'll ask Barry to address your second question.
Sure, Alethia. So, MF versus PV MF is still about 60% of the volume of the patient population. For that are receiving Jakafi for MF and PV. PV is about 40%. But the total growth of PV patients For example, 2019 versus 2018 was 20% growth in total PV patients and 10% growth in total MF patients.
So PV continues to grow at double the rate of MF patients, but it's going to take a while for PV to pass just because and that patient stay on the drug for a very long period of time.
Thank you. Our next question is coming from Sabine Richter from Goldman Sachs. Your line is now live.
Good morning. Thanks for taking my questions. So with regard to the SG and A expense guidance for 2019, could you help us understand the uptick here are you incorporating a sales build outs ahead of expected launches?
Yes. So this is Paul. Good morning. So our guidance does include, launch preparations for, for obviously for GVHD, we have costs in there looking ahead to itacitinib as well as to pemigatinib. So that's all baked into to that guidance range.
And then just secondly on your pipeline, so outside of the pivotal stage assets, you do have some earlier programs Could you help us understand when we might see reads from these programs in 2019 as we look to AACR and other meetings?
Colvin, it's Steven. Thanks for the question. So you're right. We have 17 compounds in development. 8 of them, we consider post proof of concept assets or with very high probability of success for hopeful future regulatory approvals.
But the earlier programs are also firing very well. I think in terms of datasets, you may see at major meetings in the 1st, part of this year, will be around our oral PD L1 inhibitor. We'd like you to show you some early data for the first time at a major meeting in the first half of this year. And then towards the second half of this year, there may be more updates in terms of phase 1 data sets and data expansions across some of those earlier programs.
Thank you.
Thank you. Our next question is coming from Ying Huang from Bank of America. Your line is now live.
Hi, thanks for taking my questions as well. I have a first one on housekeeping. Can you talk about inventory levels for Jakafi in the fourth quarter, whether there's any significant change in that level? And then secondly, maybe a big picture question for Herve now we're starting to show a significant cash on the balance sheet. What do you think about the cash deployment from the balance sheet?
And then Given the industry consolidation we have seen recently, where do you think inside is positioned in that landscape? Thank you. Hi, Ying. It's Barry. I'll turn to just addressing your inventory question.
Inventory was in the normal range at the end of Q4. There wasn't any As we said at the end of Q3, I believe, is that we had a big drop off in inventory, but inventory ended normal, for the end of the year. Herve?
Yes. So regarding the cash question, obviously, one of the priorities we are pursuing is the growth of the revenue and the diversification of the top line. So you can imagine that one of the use of cash that we are always looking at and it's a it's a relatively challenging thing to do, but where we think there are some opportunities would be to add to our late stage of commercial portfolio in the next 24 months. And that's something we are that could be potentially strategically very important for corporation and would be a very good use of the cash that we have. Now regarding the consolidation in the industry, As you know, we are in the process of building a long lasting global innovative biopharma company.
And what we presented today is also reinforcing the multi the late stage internal candidates that we have and could be adding to the growth of our top line and accelerate our growth in the next few years. So that's is a priority we are pursuing. As I said, we would be looking at opportunity to acquire additional assets if there are good quality and fitting with our portfolio, and that's really the way I would describe the cash question and the consolidation question.
Thank you.
Thank you. Our next question is coming from Cory Kasimov from JP Morgan. Chase company, your line is now live.
Hey, good morning guys. Thanks for taking my questions. I just had a couple of quick ones for you on GVHD. So first of all, I'm just curious if there's any color you can provide on the ongoing GVHD review for RUX and the additional information that was submitted to the FDA. And then secondly, as you prepare for that launch in GvHD, curious how your conversations in market research have evolved and maybe better informed you to the potential ramp and more so peak sales opportunity for that indication between rux and itacitinib?
Thanks.
Sorry, hi, Steven. I'll do your first question. The RUX sNDA for the steroid refractory acute graft versus host disease indication is to our knowledge the first time that the FDA has reviewed an application for this indication which is obviously a complex disease with a very complex treatment path. The FDA extended the action date to allow time to review additional data that we recently submitted due for goal date by 3 months to May 24, 2019. Extensions, as you know, are not uncommon in the FDA approved process.
And although we obviously disappointed with this delay, we remain very confident in our data set, and that's the update I can give you on that at this point in time.
So Corey, this is Barry. So just getting ready for the launch for acute surgery refractory GvHD, we think of this really as being the 1st launch of insight into treating more patients and helping more patients who have graft versus host disease, whether in the acute or chronic setting. So while, reach 1 is for the acute steroid refractory setting, which we're fully prepared and we believe we fully understand that disease. The opportunities there are You have about 3500 patients with acute GvHD in the United States, maybe an equal number with chronic GvHD. About half of those have steroid refractory disease, but the real opportunity after that is, of course, with itacitinib with gravitas-three zero one and gravitas-three zero nine Worldwide, there's about 21,000 patients that suffer with GvHD after a stem cell or bone marrow transplant.
And we think that itacitinib in the steroid naive setting, we'll actually be able to benefit them a great deal. Our team has really learned a great deal about graft versus host disease. We've learned a great deal about double marrow transplants and the devastating effects that you get deep delays on Pink's lives by talking to health care professionals through advisory boards through one on one meetings And I think they're very excited about ruxolitinib and itacitinib and moving it into the earlier stage settings, if in fact, we've proved successful. In the current ongoing, trials that we have.
Great. Thank you very much.
Thank you. Our next question today is coming from Matthew Harrison from Morgan Stanley.
Hi. This is ishmael on for Matthew. For Vitiligo, what would you consider to be clinically meaningful data from the phase 2? And What is your hurdle to move this into the phase 3? Thank you.
Shneur, it's Steven. Thank you for your question. As I said in the prepared remarks, This is a condition for which there are no approved treatments. There's many, many sufferers around the world and a very underappreciated psychosocial morbidity. Having said that, you need an objective endpoint to conduct a study and deliver data.
And the way it's measured is to quantify the amount of repigmentation in various areas. There scales that are used for the whole body. They call Vassy scales and their scales that are used for the face, which is one of the areas that is obviously most visible causes a lot of the psychosocial morbidity. And it's percentage improvements in those face Vassy scores and total body scores that then give you the outcomes you need. You can get 100% improvement.
You can get 75%, 50%. You need to quantify those and present them. We obviously still in discussion and will be when we complete our phase 2 regulatory agencies around what is the appropriate end point and what is the right number to hit. So having said that, there's very little to no spontaneous remission of this disease. So anything, is important in terms of the actual number achieved.
Once we have the date in hand, which going to be in the first half of this year. We'll find an appropriate place to present that. I will tell you in a very small data set, which gave us our proof of concept was investigated initiated work in 11 patients. 6 of those patients had very meaningful more than 50% improvements in face, repigmentation scores. So that's the sort of territory we've achieved with the drug to date.
Thank you.
Helpful. Thank you.
Thank you. Our next question is coming from Geoff Meacham from Barclays. Your line is now live.
Hey guys, good morning. Thanks a lot for the question. Just have a couple, to follow on an earlier question. In GVHD, it sounds like commercially your ready in the U. S.
For RUX, but looking beyond that, how would you characterize the incremental OUS commercial investment for itacitinib? How do you maximize the value of that asset? And then I have a follow-up.
Yes, I think if Okay. So the first step is Roxolitinib. As you heard, we are ready to go. We have deployed our teams. We are so that part is basically including included in the P and L and the guidance that you have seen.
I think for itacitinib, we would have obviously to look at the timing of when it's going to be approved both for the U. S. For Europe and Japan. And as Paul said, I mean, we have included some potential prep costs in the guidance that you have seen for the U. S.
Where we anticipate it will be the first to launch. And then in 2020, we will be deploying additional resources for Europe and Japan.
Okay, makes sense. And for Pemigatinib, I wanted to get you guys view of how much if it's changed at all, how much do you view the cholangial data as a leading indicator for bladder? And obviously urothelial looks is looking more competitive with erdafitinib and EV201 from Seattle. So maybe just talk through the hurdles that you kind of see clinical hurdles and urothelial cancer? Maybe what would be differentiated?
Thank you.
Hi, it's Steven O' Crowns. So your question So if you just look at first at intrahepatic cholangiocarcinoma that's FGFR2 translocated and driven by that, obviously, we showed updated data at ESMO last year, independently confirmed 40% response rate with the PFS that was a little north of 9 months. And you saw those responses improve over time, which in my prepared remarks, we're saying we're waiting for that data to mature this year and form part of our NDA submission. The testing for it, it seems to have increased globally as usually happens when people realize there's a drug that may benefit them, places are starting to do molecular profiling certainly with the United States, Western Europe, in places like Japan and Korea, etcetera. We think they're about, approximately 3000 patients available globally to the set in second line cholangio that's FGFR2 translocated.
And we we're pretty sure we clearly the leader there. And as we announced this morning, the FDA just recently gave us breakthrough designation with our data set. So it's a very encouraging arena. The read through to bladder. It's interesting.
So bladder is different. It's FGFR3 driven either mutated or translocated. J and J is clearly ahead. And as you said, there's a competitive milieu in bladder cancer in general, but not necessarily targeted to the particular mutation. The J and J data sets initially, they used intermittent dosing as well and then switched to continuous dosing regimens and so an uptick in the response rate the mid-twenty percent range also to 40%.
So we did the same. Last year, we switched from our intermittent data set to continuous dosing and we're doing it now. We think we have a really good compound. We understand the PK. We're able to manage it well, and we think we have a best in class compound.
So we think we'll be very competitive And we will complete enrollment this year, analyze it and hopefully submit an sNDA in bladder next year. The opportunity is obviously much, much larger given the amount of metastatic bladder cancer patients there are for the FGFR3 mutations, it could be upwards of 12000 to 15000 patients globally, obviously with a much more competitive Malue. And then thirdly, as I said, now that you have validated clinically for FGFR2, FGFR3 in bladder and more recently the milder proliferative neoplasm we presented ASH that's FGFR1, we think it's the right time to do a tumor agnostic study which we're busy opening and doing now. And there are various entities there that are also land up being appreciable in terms of the amount of patients that may be involved. So for example, endometrial cancer, the FGFR2 mutations, 10% prevalence gleoplastoma squamous lung, rectal head and neck.
If you add those all up, you get potentially to another 15,000 patients. So We think their read through is across the board and potentially tumor agnostic as well.
Got you. Thank you.
Thank you. Our next question is coming from Carter Gould from UBS. Your line is now live.
Good morning. Thanks for taking the question. I guess one real quick one just in terms of a clarification on an earlier answer around the PDUFA delay and any impact that might have to to reach to regulatory strategy there or anything in sort of data preparation? And then separately, we saw you move to your arginase inhibitor into a combination study DARZALEX. Just trying to see if there's any, if that has any sort of implications for what I guess you saw from the earlier phase 1two studies you were advancing there and when we might see that some
of that data? Thank you.
Carter, hi, it's Steven. In terms of, read throughs in regulatory read throughs to reach 23, there are none. Those are stand alone studies. They're yet to complete and deliver their data set and there should be no effect on any regulatory read throughs, in terms of Reach 2 and Reach 3. The Arginase question is an interesting one.
One of the areas where you see myeloid derived suppressor cells that express arginase is in multiple myeloma. So it's a good disease to study it in daratumumab, the CD38 antibody is obviously an extremely active compound here. And we work we have worked with J and J Janssen to set this up as a randomized study to try and discern the additive effect of arginase in this area And that study is just about to begin, as you saw, it just appeared on ct.gov. It's not from a learning in any other part of the program currently.
Thank you. Our next question is coming from Mark Fran from Cowen and Company. Your line is now live.
Hi, yes. Maybe one question for Barry. With the guidance on the gross to net adjustments that you it does seem to be creeping up year over year the last couple of years. Can you just talk about what's driving that? Is that across the whole franchise?
Is it one sector that's really growing the Grissenet or is patient mix thing? What's going on there?
Well, it's always the government rebates that we're requiring to do. So 340V, it's DoD, it's VA, it's Medicaid. So you can imagine Medicaid is growing a little bit because of the expansion of the Medicaid program by states under the Affordable Care Act. We have more use in hospitals drives up 340B usage. And then VA And Department of Defense is growing nicely, but we have to obviously give give government rebates there.
So that's the entire increase in gross to net.
Okay. And then maybe following up, Steven, on your comment a couple of questions ago, the 15,000 patients that you think might be amenable to the tumor agnostic approach. Can you break that down between translocations and mutations? Because we've seen in this space translocations translate very well, to efficacy mutations, it's a little less clear.
Hey, Mark, I just was just Barry, again, to clarify. And remember, the gross to net for Q1 is affected by the additional amount that we have to pay through the doughnut hole. So it went from 50% to 70%. So I forgot to mention that, but now pharma is picking up 70% of the donut hole from Medicare Part D patients. And now I'll pass it over to Steven for your other question.
Hey, Mark. Hi, it's Steven. So backtrack a little bit second. You're absolutely right. The FGFR field's been going for a long time initially companies at FGFR inhibitors targeted amplifications.
And as you know, that didn't really pan out. There's no approved FGFR inhibitor and that doesn't seem to be a driver that if you hit it in the amplification setting that you get the efficacy needed. But with the switch now with us and others to For example, in cholangios and FGFR2 translocation in bladder, it's an FGFR3 mutation of fusion, in the NPM AP11 as an FGFR1 translocation, you now see these efficacy bumps that should translate hopefully to approved products. In the tumor agnostic setting, again, it's not amplifications. You're right.
I can try and break it down for you, but I'll give you some examples because it gets a little busy, but endometrial carcinomas and FGFR2 mutation of fusion, that's 10% of those patients, glios, is an FGFR3 mutation of fusion that's 10%. I'll give you one other example, which is a pretty well known one is squamous non small cell lung cancer. And that could be either FGFR1, 2 or 3 in mutations or fusions. The main point to make is it's moved completely away from amplifications to the mutation translocation fusion setting where you're likely to see those as the oncogenic driver. And if you aggregate that part where you get the efficacy you need.
Okay, great. And then one last one, just on the Pemegatinib timelines. Is the gating to the to the filing purely the more follow-up on patients or is there some nonclinical stuff that needs to be completed in parallel?
Yes, it's railing around the maturity of the data set follow-up. We saw this very encouraging sign when with more mature follow-up, the response rate over time went up. And remember, this was an independently confirmed response rate. So when we first presented the data, we were sitting in the mid-twenty percent response rate range and then the ESMO update you saw a 40% independently confirmed response rate with really a long duration of response and long PFS. So in that particular tumor type, it's around maturity and needing about 6 months of follow-up to get the maturity you need.
There's nothing else that's on critical path here in terms of our, NDA submission. There's no CMC issue or anything else.
Okay. Thank you.
Thank you. Our next question is coming from Peter Lawson from SunTrust Robinson Humphrey. Your line is now live.
Hi, thanks for taking my questions. I'm just wondering if you can make any comments around any of the off label use you could be seeing for RUX if you're already seeing in GvHD? And then I guess the follow-up question is around pacing of data for GvHD in 2019? When would we see reach 2, 3 versus gravitas? Thank you.
So this is Barry. So, Peter, so I'll try to answer. So we have some some spontaneous use and we've said it before, I think, of the total amount of, Jakafi used maybe 2% to 3% of that is spontaneous use of Jack PHY in acute end chronic GVHD. And the second part of your question was
It's just on the timing of around the data for GVHD in 2019. So for Reach 2, 3, Grafitas, etcetera.
Yes. Peter, hi, it's Steven. It's hard to give you exact timing. Obviously, it's event driven, but reach 2 steroid refractory acute and reach 3 steroid refractory chronic done in combination with Novartis, our partner global studies enrolled really well. And we fully expect data in the second half of this year for both of those studies.
Ravitas-three zero one, itacitinib, steroid naive acute. Our global study has enrolled also superbly well And again, data driven, in terms of the endpoints, but we also expect data in the latter half of twenty nineteen. For all three of those studies.
Thank you. Our next question is coming from Jay Olson from Oppenheimer And Company. Your line is now live.
Hey guys, congrats on the progress and thanks for taking my questions. I'm curious about the decision to move into continuous dosing in the phase 3 cholangiocarcinoma study for pemigatinib. And Steve, you mentioned earlier your observations from J And J's bladder study. I was just curious if you could share with us your expectations around how the move to continuous dosing might, potentially impact efficacy And then also, tolerability. And then I have a follow-up question.
Jay, hi, Steven. Very good questions. I think both J and J and we've demonstrated that you do get a bump in efficacy with switching from intermittent, which was 2 weeks on 1 week off to continuous dosing. Clearly, you also pay a price in terms of tolerability. So the J and J published data set went from a 10 discontinuation rate to a 20% discontinuation rate.
That happens across drug development. You have to thread the therapeutic ratio there. We felt that for our first line cholangiocarcinoma study that's FGFR2 driven, that it's head to head against chemotherapy doublet in terms of gemcitabine and cisplatin. And that has appreciable response rate that we're going to have to beat in that study. We clearly think we'll beat them on durability, which is why we're doing the study.
In the end though, it's about individual patient titration, right? So you'll be able to, the protocol will be written and allow people to dose tract rate based on tolerability, either up or down or even take treatment break is needed because you make a population decision on dosing, but it becomes down to an individual decision on on tolerability. And so we elected to obviously do that in the cholangio first line study for the reasons I mentioned. And then the bladder work we were largely driven for what J and J showed in terms of the uptick in response rate. We had done appreciable work with a with intermittent dosing in bladder already, and we were in the same territory as them with our intermittent dosing, which is why we did the switch there.
That's very helpful. And congrats again on getting the breakthrough designation. I had one follow-up on your small molecule oral PD-one inhibitor, you mentioned earlier that you might have some data earlier this year. And I was wondering if you could share with us any initial thoughts you might have around what sort of clinical development options you might be considering such as adjuvant therapy or other settings where a small oral molecule might have significant dosing advantages over an antibody?
Sure. Thank you. It's Steven. I'll take the question again. So, you know, we went into the clinic at the end of last year in December.
We announced that at JP Morgan, it's an oral PD L1 inhibitor with what we think looks like a very in mechanism of action in terms of binding PD L1 and then internalizing, which we showed work around that preclinically. Just to end your expectations, and I should have been clear earlier, the major meeting data set for the oral PD L1 compound will be preclinical data obviously initially because we've just been in the clinic and we're just dosing now and getting PK and PD. In terms of the compound itself, it's in So the mechanism of action I alluded to, what will that translate to? Obviously, I hope that there'll be an efficacy differentiator based on that because of its unique mechanism of action. We're going to have show that clinically.
Should that be the case that will drive very different development than from a PD L1 inhibitor alone if there's an efficacy differentiator based on the mechanism of action, and we'll work that out. In terms of its oral nature, it may potentially give us some advantages. 1 is in the safety realm You know, when you run into trouble with checkpoint blockade, can be quite devastating complications like colitis obviously with an IV, it's going to be on board for a long time. With an oral, you can immediately stop dosing and potentially ameliorate safety there. The other areas are for oral combinations.
It'll be very useful. Maintenance settings, particularly the adjuvant setting when patients don't want to come into IV the clinic to get IVs and just take an oral long term. So you can think of areas, adjuvant like in melanoma, potentially adjuvant like in non small cell lung cancer, Obviously, AstraZeneca with Durva has already shown that there is a benefit to checkpoint blockade in an adjuvant setting in lung cancer there. Those are areas we're really thinking about and we'll work on internal combinations will be important. Obviously, we have FGFR in bladder now and that may land itself a very good internal combination, but there may be external combinations that'll be really important, for example, with VEGF inhibitors in renal carcinoma, etcetera.
It's really too early to tell you what the totality of the clinical development program will look like till we know a little bit more about what we have in the clinic.
Great. That's super helpful. Thanks for taking the questions.
My Q And A froze. What just happened?
Kevin, the next question from Piper Jaffray, please.
Hello, can you hear me?
Yes. Kevin, we can hear you.
Yes. I'm sorry. I do apologize. I had a microphone issue. Next question is from Tyler Van Buren from Piper Jaffray.
I'm obviously experiencing technical difficulties. I do apologize. Please hold.
Adam, are you familiar with me?
Yes, we can hear you. Why don't you ask your question?
Okay, good morning. Thanks for taking the questions. I just want to follow-up on a comment you made earlier about adding late stage commercial revenue. Specifically, could you speak about what therapeutic areas you guys are interested in? And also your capacity to do a deal and what size of deal you guys could potentially do?
Clearly, you have cash growing to $1,400,000,000 and improved profitability. Would you also be willing to take on some, leverage and what that may look like.
You know, there are always like 2 types of products, we are our products, franchisees we are interested in. I mean, one would be like Early, like we have done historically, like early technology and the phase 1 type of product because there would be complementary to what we have. So you can think of life cycle management in the field of MF and TV. So you can think of that, I mean, of what could be early products that are helping us manage the portfolio and from the early stage. The other part is what I spoke about earlier is saying if we can identify opportunities to diversify our revenue line in the short term.
We know from the 6 projects we have in our own portfolio, that that diversification would be happening. But if there is a way to add to that with external growth, that's something we would be doing the targets, obviously, in the field of oncology and hematology because as you can see, the late stage portfolio from the internal pipeline, it's clearly where we will be very active in the next few years.
Great. Thanks so much.
Our next question is coming from Catherine Chu from William Blair. Your line is now live.
Are you
on mute?
Hello, Catherine. Sure. Your line is now live.
Kevin, let's move to the next one and we
can come back to Catherine.
I do apologize. Please bear with me one moment, please. I do apologize. We are experiencing technical difficulties. Please standby.
Ladies and gentlemen, please continue to standby. Ladies and gentlemen, we are experiencing technical difficulties. Turn the floor back over to management at this time.
Hey, Kevin, will we be able to take any additional questions or should we close the call at this time? I think we should in that case, I think we should close the call. Apologies those analysts who weren't able to ask will follow-up with you immediately after the call and are there. Would you like to make any closing remarks?
Thank you for sorry for technical difficulties. Thank you for your time today for your question, and we look forward to seeing you at upcoming investor medical conferences. But for now, we thank you again for your participation in the call today. So thank you and good bye.