Heading into eventful May We are optimistic INCY shares will trade higher on upcoming events in May/June, which should provide greater confidence in INCY’s core oncology and inflamm. programs: (1) first full quarterly sales for the company’s recently launched oncology drug Jakafi (early May), which should handily beat consensus; (2) FDA feedback on PFE’s tofacitinib for rheumatoid arthritis (May 9), which will provide regulatory visibility for INCY/LLY’s second in class drug (LY3009104) heading into Phase 3 late 2012; (3) detailed LY3009104 Phase 2b results should provide greater clarity on its competitive profile (abstracts mid May, EULAR June 6-9). Jakafi launch expectations are low, room for upside Consensus Jakafi 1Q and 2012 sales are projected to be $8M (range $4-11M) and $70M (range $51-$89M). We estimate 300 new patients were started on Jakafi in December, a month heavy with holidays and a medical meeting that limits prescription writing. We also note that there were zero clinical trial or compassionate use patients driving the launch. In order to meet 1Q consensus, demand would have to fall to 60-65 patients per month (i.e. -80% from December), which seems unrealistic to us. To meet our Street high estimates, demand has to fall by 50%; if demand was steady, we estimate 1Q and 2012 sales would be ~2x consensus. INCY’s RA value follows tofacitinib INCY and LLY have a second in class oral Jak inhibitor an estimated three years behind PFE’s tofacitinib. The May 9 FDA advisory panel for tofacitinib should provide greater insight into any potential approval issues for the drug specifically, but any potential drug class related concerns should also be discussed. Earlier Phase 2 data for LY3009104 suggest that INCY/LLY’s drug should have similar efficacy to tofacitinib, and has potential dosing advantages (once/day vs 2x/day) and fewer potential drug-drug interactions.
Additional RA background information INCY partnered its second generation Jak1/2 inhibitor (originally called INCB028050) with LLY in 2009. The drug candidate was subsequently renamed LY3009104. Following results of a small Phase 2 study, LLY designed a larger study focused on refining and lowering the dose (Table 1). The 270 patient study completed late 2011/early 2012 and data are expected at the EULAR meeting in June (6-9). The companies have already announced plans to advance ‘104 into Phase 3 studies; we expect more details on the design to follow in the coming months, and enrollment to initiate towards YE. Brief conclusions ‘104 is slated to start Phase 3 towards year end, which suggests it could come to market in 2015 Efficacy appears similar for both drugs, but Phase 2b data at EULAR should help support this assumption ‘104 appears to be effective once/daily, an advantage over tofacitinib (2x/day); again Phase 2b data should support initial Phase 2a results ‘104 may have fewer drug-drug interactions than tofacitinib Whether safety/tolerability differences exist between ‘104 and tofacitinib will need to be clarified with longer term data for ‘104 We expect the upcoming FDA panel to recommend tofacitinib approval based on the strong efficacy