Pamela Murphy – VP, IR & Corporate Communications Hervé Hoppenot – President and CEO Jim Daly – EVP, CCO David Hastings – EVP, CFO Reid Huber – EVP, CSO Richard Levy – EVP, Chief Drug Development and Medical Officer.

Thomas Wei – Jefferies & Co. Liisa Bayko – JMP Securities Matthew Roden – UBS Securities LLC Eric Schmidt – Cowen & Co.

LLC Brian Abrahams – Wells Fargo Navdeep Singh – Goldman Sachs Josh Schimmer – Piper Jaffray Michael Schmidt – Leerink Partners LLC Salveen Richter – SunTrust Robinson Humphrey Steve Byrne – Bank of America Merrill Lynch Ian Somaiya – Nomura Cory Kasimov – JP Morgan Christopher Marai – Oppenheimer & Co. Inc. .

Greetings, and welcome to the Incyte Corporation Third Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions) It is now my pleasure to introduce your host, Pamela Murphy, VP, Investor Relations and Corporate Communications. Thank you, you may begin..

Good morning and welcome to Incyte’s third quarter 2014 conference call. Hervé Hoppenot, our President and CEO will begin with a few words summarizing the quarter, and Jim Daly, who leads our commercial organization, will provide details on Jakafi’s strong momentum.

Rich Levy who is in charge of Incyte’s drug development activities will update you on our clinical portfolio, and Dave Hastings, our CFO, will describe our third quarter financial results. Then we’ll open up the call for Q&A, for which we’ll be joined by Reid Huber, who leads discovery.

Before beginning, we’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 the commercialization of Jakafi, and our development plans for Jakafi in other indications and for other compounds in our pipeline, as well as our expectations for our net product revenue, R&D expense and SG&A expense.

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 June 30, 2014 and from time-to-time in our other SEC documents.

Hervé?.

Thank you, Pam, and good morning everyone. Let me begin by speaking about our CFO transition that was just announced a few days ago. It is a transition that has been planned and organized over the past several months.

And I want to start by thanking Dave Hastings who will be leaving Incyte at the end of November, for all of his contribution to our successes over the years.

I’m sure I speak for all within the company and many outside of it when I say that he has played an integral role in driving Incyte from an early stage drug discovery company to one that has successfully commercialized its first product.

We wish Dave all the best and also thank him for agreeing to remain at Incyte until the end of the month to ensure seamless transition with David Gryska who will be joining us tomorrow. The overlap between the two of them should prevent any issues associated with the transition.

Moving now to the result of the third quarter, the performance of Jakafi in Q3 surpassed our expectation and leads us to raise our full year guidance for Jakafi net product revenues. We are making significant investments in the long-term success of both our development pipeline and our drug discovery engine.

We’re also ready pending the anticipated approval from the FDA to launch ruxolitinib in the U.S. for the treatment of patients with polycythemia vera who have had an inadequate response or are intolerant to hydroxyurea.

We believe that our pipeline of potential cancer therapies is unparalleled in a company of our size and we continue to move forward on many fronts.

We are recruiting patients into a series of studies investigating the potential of both ruxolitinib and our JAK1 inhibitor 39110 in solid tumor, as well as initiating combination study of our IDO1 inhibitor with other immuno-oncology agents.

We’re also looking forward to the results from Lilly of four Phase III trials of baricitinib in rheumatoid arthritis. I will now pass to Jim who will provide some additional details around our commercial accomplishments with Jakafi..

Thank you, Hervé, and good morning everyone. Our third quarter net product revenues of $98 million for Jakafi reflect continued strong growth in underlying demand in intermediate or high risk myelofibrosis. Year-over-year net sales grew 63% and quarter-over-quarter sales grew 16% with the following components of change relative to the prior quarter.

Underlying demand, as measured by bottles dispensed to patients, grew by 11%. The net price impact for the quarter was 1% driven by a slight improvement in gross to net. Four points came from inventory or an increase of approximately $4 million.

We believe this was driven by speculative buying from a few wholesalers at the end of the quarter in anticipation of our October 1 price increase. Inventory in the channel ended the quarter in the middle of the normal range of 3 to 3.5 weeks.

As a result of current performance trends, we’ve increased our 2014 full year net product revenue guidance from the previous range of $330 million to $340 million to an updated range of $350 million to $360 million. Our guidance assumes no meaningful contribution to revenues in 2014 from a potential FDA approval of Jakafi in PV.

We believe the strong increase in underlying demand in the third quarter reflects the continued effective execution of our strategy to grow Jakafi in MF bolstered by the expansion of our sales force early in the year and the FDA approval of the label update in late July.

The sales force expansion has resulted in a significant increase in promotional activity and educational programs as compared to the same period last year.

According to our market research, the label update which contains updated safety and dosing information as well as the Kaplan-Meier curves from COMFORT-I and COMFORT-II has already resulted in an increase in awareness and impact of the survival data on physician behavior.

Overall, we remain convinced that MF is a source of sustainable long term growth for Jakafi. Turning to our next potential new indication, we are fully prepared to launch Jakafi in polycythemia vera pending expected FDA approval. Based upon claims data, there are at least 100,000 patients in the U.S. diagnosed and treated for PV.

Our addressable population will be those who are intolerant of or have had an inadequate response to hydroxyurea..

With that, I’ll turn it over to Rich..

Thanks, Jim. We have multiple trials ongoing across our portfolio in multiple indications and I’ll now give you a short progress report on our key pipeline drivers. Our near term focus remains on the FDA review of the ruxolitinib sNDA in advanced polycythemia vera.

The FDA accepted the submission for priority review in August and assigned a PDUFA date of December 5.

Turning to Jakafi in solid tumors, the two global phase III JANUS studies evaluating the use of ruxolitinib in combination with capecitabine for the second line treatment of pancreatic cancer, continue to enroll patients and we expect top-line results from these trials during 2016.

Similarly, the randomized Phase II trials of ruxolitinib in non-small cell lung cancer, breast cancer and colorectal cancer are all enrolling patients as planned. We’re also moving forward with Incyte 39110, our selective JAK1 inhibitor on several fronts.

We’re enrolling a proof-of-concept Phase II trial of 39110 in patients with EGFR wild type non-small cell lung cancer in combination with docetaxel. In the next two or three months we expect to open a second Phase II trial of 39110 in combination with our erlotinib in patients with EGFR mutated non-small cell lung cancer.

We are also making good progress with 110 in combination with gemzar and abraxane. We’ve selected a dose of 110 that can be combined with gem/abraxane and are in the planning stages to potentially begin in 2015 a fully powered randomized blinded controlled study in first-line pancreatic cancer.

We’ll provide further information in this study when our plans are finalized and are ready to begin enrollment. Lastly, we are also studying 110 with Incyte 40093, our PI3K-delta inhibitor in patients with B-lymphoid malignancies.

JAK1 and in PI3K-delta inhibition are distinct mechanisms of action and they exhibit synergy in preclinical models of lymphoma. The combination study is ongoing and we look to present at a medical conference when the data are more mature. Moving now to our IDO inhibitor 24360.

Recruitment into the trial of 24360 and Merck’s anti-PD-1 pembrolizumab in patients with non-small cell lung cancer is progressing.

This is the KEYNOTE trial - KEYNOTE-037 trial and we expect to initiate dosing in three other studies of IDO plus either PD-1 inhibitors or PD-L1 inhibitors from Bristol-Myers, AstraZeneca and Genentech within the next month..

With that I’ll now turn the call over to Dave to give us the financial highlights for the quarter.

Dave?.

Thanks, Rich. Good morning everybody. Let’s begin with Jakafi for which we recorded $97.8 million of third quarter net product revenues, and $12.1 million in product royalties from Novartis for sales of Jakavi outside the United States. Additionally, we recorded $88.2 million in contract revenue, including two milestones from Novartis.

$25 million for the approval of Jakavi in Japan and $60 million related to the reimbursement of Jakavi in Europe. Our gross and net adjustment for product revenue recognized was approximately $10.6 million, or 9.8% for the third quarter. We still expect that our full year growth to net adjustment will range from 9% to 10%.

Our cost of goods sold for the third quarter was immaterial, as we continue to benefit from the fact that our starting finished goods inventory was previously expensed as R&D prior to FDA approval. Now in terms of operating expenses for the year, we expect that our R&D expense will be on the low end of our guidance of $350 million to $370 million.

And in terms of our SG&A expense we expect that be on the high end of our guidance of $145 million to $155 million. From a cash perspective, we ended the quarter with $532 million which does not include the $60 million milestone payment that we expect to receive in Q4.

Our cash position continues to benefit from increasing product, royalty and milestone revenue which allows us to appropriately invest in our growing development pipeline.

Now on a personal note, as you know this will be my last call as CFO of Incyte and I want to thank everyone who has supported me throughout the years, particularly my team here, as well as you of course, our analysts and investors.

Personally I’ve never been more confident about the future of Incyte to become one of the leading global oncology focused companies in our industry. So with that operator that concludes our formal remarks. Please open the call for Q&A..

Thank you. (Operator Instructions). Our first question comes from Thomas Wei of Jefferies. Please proceed with your question, your line is live..

Thanks. I had a Jakafi question and a 360 question. On Jakafi just wanted to understand a little bit more about the growth and underlying demand that you had talked about.

Do you think that that’s a new patient driven phenomenon and is that just more within the current label, is it earlier stage disease, off label use in PV, or is it an attrition/compliance thing? And then on 360, just a reminder on any detail that you shared on the size of each one of these dosing cohorts in the pembrolizumab study and how long, just a reminder of how long you think it might take to do each dosing cohort before we get into the dose expansion study?.

Hi Thomas, this is Jim. In terms of the underlying strength of the business, first from a physician perspective, I think we’re seeing both breadth and depth of prescribing. We’re seeing new physicians coming on board prescribing Jakafi for the first time and we’re also seeing greater depth of prescribing with existing prescribers.

At a patient level we’re seeing strength in new patient starts and we’re also seeing continued consistent improvement in persistency over time. In terms of the primary driver I really think the expanded sales force is hitting full stride right now. I think our sales force and our commercial team overall is executing at a very high level.

I don’t think we felt the full impact of the label update in the third quarter. If you remember, the label is updated at the end of July, we had a trained sales force on how to properly communicate the new label information in August. So I think we’re just starting to feel the impact of the label update.

I think the strength in the third quarter was primarily due to the expansion in our sales force. It takes time once you realign territories to manage disruption, to get new people trained, but I think they really hit full stride in the third quarter..

Hi, Thomas, it’s Rich. So on the IDO plus pembrolizumab question, so we’re using three plus three standard designs for dose escalation starting at the 25 milligram BID dose and working up from there.

The observation period for DLTs is six weeks and then if there is one DLT within that group, then after that finishes out then we would need to add another one. So we’re estimating nine weeks per cohort, but that could either be – I mean that nine weeks per cohort that doesn’t need to get expanded and potentially another nine weeks if it does.

We are not planning to try to get up to doses of 300 milligrams for example. We think that 25 milligram BID is a dose that is likely going to be effective and we’re just trying to see whether we can get a little bit more.

But until we really have a better sense of how many dose escalations there are and whether there needs to be expansion of cohorts it’s really hard to know exactly when we would then go into the randomized phase of that study comparing our IDO inhibitor plus the PD1 inhibitor versus the PD1 alone in patients with non-small cell lung cancer.

And while there are minor differences between the studies in terms of the first part, they’re quite similar. .

Our next question comes from Liisa Bayko with JMP Securities..

Hi, thanks for taking the question. Can you first talk about Japan market size and economics I know you’ve just recently gotten approval there..

We cannot – Hervé speaking here. Ruxolitinib rights for Japan are with Novartis. We know the approval and reimbursement is now achieved and frankly I don’t want to comment on the size and the potential size of that market for Novartis. In the big picture view of what’s happening with ruxolitinib outside of the U.S.

is that there are a number of countries where recently like Japan reimbursement has been obtained. And we’re anticipating that the growth of the ruxolitinib Jakavi business outside of the U.S. will continue to be very dynamic over the next years. But I would not comment specifically about the size of the market in Japan..

Even patient numbers?.

No, no..

Okay. Okay. And just turning to PV, can you just update us on sort of what you’re thinking about timing in terms of commercial launch, I know it’s getting towards the end of the year when your PDUFA date is and market preparedness.

Can you just elaborate on that a little bit?.

Sure. Lisa, our PDUFA date is December 5. The timing could not be better as that is the kick off to our ASH meeting. We are fully prepared from a commercial perspective to launch upon receipt of the approval..

Okay, great.

And then, can you maybe talk about any potential trials in your oncology portfolio that could report out data next year?.

Yes. I would not set an expectation of any major disclosures in our oncology portfolio next year, but I won’t close the door to the possibility that something could have better than expected results, so that the results become clear to us earlier than we might have otherwise thought.

So I just would not guide either for our JAK program in solid tumors or for the IDO program also in solid tumors for any significant disclosures in 2015. I think 2016 on the other hand will end up having a lot of information come out into the public domain..

Okay, great. And then, maybe one more question for Rich. When you think about 110 and the PI3 kinase combo, where do you see that fitting in the world where you have ibrutinib and idelalisib? Where could you have an advantage from a physician perspective? Thanks..

Yes, I’ll ask Reid to actually get more into the science if that’s important to you.

But there clearly are resistance patterns with both PI3K-deltas as well as BTK inhibitors like ibrutinib that suggest that JAK inhibition could reverse in some of those patients, the inhibition, which also leaves the possibility that you may develop resistance less quickly if you were using both drugs onboard at the same time and that’s kind of the hypothesis that we’re working on.

Reid, I don’t know if you want to add anything to that?.

Yeah, I would just say that there are some B-lymphoid malignancies where ibrutinib and idelalisib have not been as important or as transformational as they have for instance in CLL, I’ll give you one example of diffused large B-cell lymphoma where we’ve spent quite a bit of time studying the interaction between the PI3K-delta and JAK-STAT pathway, so it’s biology like that and clinical opportunities such as that one that really underpin the basis for the combination study and we’ll be studying those patients as part of the expansion cohort once we get there.

.

Okay, great. Thank you very much for taking my questions..

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

Great, thanks very much for taking the question. I just want to say, Dave you’ll be missed, you’re awesome and good luck with everything in the future..

Thanks, Matt..

Really impressive Jakafi performance, I just want to get a little bit more into the number there.

Can you talk about whether or not the data at ASCO in PV and pancreatic may have driven any sort of prescriber initiated spontaneous adoption in those settings and to what extent you are seeing that there? And then also on the inventory side, you mentioned you’re still in the normal range of inventory.

Jim, should we expect that as the product is growing that inventory is going to continue to contribute to sales growth, just in sort of keeping up with the increasing level of demand, is that the way we should be thinking about that? Thanks..

Thanks, Matt. First non-MF use has been relatively consistent throughout the year, so we did not see any significant increase in non-MF use as a result of the PV data presented at ASCO. Second on the inventory, we finished the quarter at about 3.3 weeks of inventory which is a little higher than our typical inventory level.

If you look at the quarter, net sales increased by $14 million going from $84 million in the second quarter to $98 million in the third quarter. Of that increase about $4 million was inventory and that was driven, we believe by some speculation on the part of some wholesalers.

Now to your point, Matt, our inventory calculation is based upon most current sales, so if sales grow you would expect each week of inventory to increase, so, we do expect to be carrying slightly more inventory over time as our sales increases..

Okay, great. And then Rich, I wanted to ask on baricitinib.

Can you confirm whether or not the Phase III for baricitinib that has Humira as a competitor whether or not there is actually a test for superiority as the secondary endpoint there? And I guess related or maybe unrelated is what level of Phase III activity in this first study that we’re going to get would get you guys excited about the potential for this to be more like a mainstream competitor in RA as opposed to sort of a product that would be used after biologics? Thanks..

Sure. So the way the study that has Humira as one of the control arms works, is that the primary endpoint is based on comparison to [contingent] [ph] methotrexate alone, and then this is a series of tests that get done before you actually do get to test for superiority versus Humira including first testing for non-inferiority to Humira.

So there is pathway, which I have high expectations that that will get to be tested without failing on something else first. But it’s not certain to be tested depending upon how that goes.

With respect to the first study, this is in TNF inadequate responders, a population that we and Lilly did not specifically study in the JADA study, that was reported out a couple of years ago, which is all in patients who are TNF-naive Or - we had a few patients in our first Phase IIa study, who were TNF inadequate responders, and they seemed to do as well.

And additionally with tofacitinib they have clear data showing that they are superior to methotrexate alone in TNF-IRs.

I don’t want to put a number on it, I do think that one of the things we tend to look at, in addition to things like ACR20 results are this becoming more-and-more emphasis on the percentage of patients who go into a remission, which is typically defined by DAS 28 score less than 2.6 or 2.7.

And those data have been something that within the Phase II studies baricitinib showed more impressive results than a number of other drugs including tofacitinib.

So that’s one of the things that I would tend to look at, but I do think that to look at the ultimate success of baricitinib, it will include not just this first study, but the results across the board in early RA and patients with TNF-naive and TNF experienced, as well as the comparative safety databases of the two programs. .

Matthew Roden – UBS Securities LLC:.

.

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

Thanks. I just want to pass on my congratulations to Dave, thanks for all the work over the years..

Thanks Eric..

For Jim maybe on MF trends, it looks like you are at around $400 million annualized run rate, you just posted 63% year-on-year growth, you noted that you still have to have the overall survival benefit mostly on the [com] [Ph].

So, is it time to start thinking that this market is quite a bigger than we’ve been thinking and if so, how big?.

Eric, I’ll chunk your questions down into two parts, so part A, is it time to be thinking that maybe there is greater upside in MF that we originally thought? I think the answer to that probably is yes.

When we first looked at MF representing a $0.5 billion plus or minus opportunity that was two years ago and at the time that’s seemed like an aspirational assessment, based on the facts that you quoted, it now looks to be somewhat conservative.

What we would like to do is get a couple of quarters of PV under our belt and then maybe come back to you with a more updated and an informed view of the overall longer term MPN commercial potential..

Okay, fair enough. And maybe a quick one for Rich on the approaching PDUFA date for PV.

Is there anything surprising or remarkable that you’d want to tell us about your FDA discussions at this point?.

Well, no, and I consider that to be good news. So, it’s going very smoothly and you never know until it’s over but we are pretty optimistic that things are going smoothly..

Thanks a lot..

Okay. Our next question comes from Brian Abrahams with Wells Fargo..

Hi, thanks for taking my questions. Congrats on the quarter and my congrats and best of luck to Dave as well..

Thank Brian..

Just want to understand a little bit more about potential PV dynamics, once you have label expansion.

Jim, have you had any initial interactions with payers around PV at this point and how should we thinking about the pricing and reimbursement process relative to MF? And then I guess also on the commercial side, I’m just wondering how well aware or educated physicians are now ahead of the PV launch.

Is the reason that you are seeing limited off label use today really reimbursement issue or is it the fact that you don’t yet have the ability to really detail the data and inform the physicians?.

We have had extensive interactions with payers over this past year, our account team has been engaging payers, educating them on the disease burden of PV; there was a payer meeting up in Boston a couple weeks ago, the AMCP, and I had a chance to personally engage with a large number of payers.

And the feedback we’re receiving is that they will most likely what they call PA it to the label which means they will prior authorize PV to the language in the approved label. And we’re fine with that. As we’ve stated numerous times, we see a large unmet need in the one out of four patients who’re uncontrolled right now with hydroxyurea.

In terms of the absence of off-label use, our sense is that as largely driven by reimbursement. There is a growing awareness by physicians of the sub population of PV patients under their care, but until you have an approved product and more importantly you have reimbursement I think more and more of these days we’re seeing a reluctance to prescribe.

So we anticipate that with approval and with relatively hassle free reimbursement that we should see good uptake with the indication..

Got it. And then just one quick follow-up for Rich.

I’m curious, if there is other combinations of targeted therapies in solid tumors that you might be thinking about looking at with Jakafi or 110 in the future?.

Yeah, there are. We just need to decide whether we want to keep making additional investments before we get readouts on the number of trials. So, I described to you in addition to the two Phase III studies with Jakafi we are talking about a potential additional study with Jakafi in first line pancreatic cancer for 2015.

And we have the three Phase IIs going on and for 39110 we just prescribed two non-small cell lung cancer studies plus the study in combination with the delta inhibitor. So clearly there are other opportunities out there. We just need to make a decision as a company as to what is the trigger for starting some of these things.

But as a whole I don’t see any reason why our targeted therapies wouldn’t be just as good combinations where they exist as for other more classical chemotherapies. It just depends upon the opportunity..

Thanks very much..

Our next question comes from Navdeep Singh of Goldman Sachs..

Hey, good morning guys and thanks for taking my question, and congrats on the strong quarter. A quick question for Jim. Jim what do you think was the larger driver of Jakafi growth in Q3.

Was it an increased penetration or was it longer duration of use, and then a couple of follow-ups?.

Nav, I think it’s difficult to quantify. I hate to say that it was multi-factorial but I think we saw both contributing to the underlying demand. I think we had a very robust increase in new patients combined with a continued increase in persistency over time. So I think both factors contributed meaningful to the quarter..

And Jim just a follow-up to that, do you still think you’re in the early innings of the MF launch or are we in the middle – mid innings or do you know where we are?.

Well, we’re seeing no indications of a slowdown. If you take a look at new patient starts month-over-month, we’re not seeing any indications of slowdown. So now that the World Series is over, we may have to find a different analogy but underlying growth continues to look very robust..

Okay, that’s helpful. And then given the strong quarter and the strong go forward commentary, your guidance for Jakafi seems pretty conservative and requires only a single-digit growth or low single digit growth quarter-over-quarter to hit the bottom end of your guidance of $350 million to $360 million.

Are you expecting any like any headwinds in Q4?.

No, we have a very strong third quarter, but I think we need to remain sober. We did have $4 million in inventory build that we have to burn. If you re-base the third quarter for that $4 million, the low end of guidance $350 million requires a 9% quarter-over-quarter growth, the high-end requires a 16% quarter-over-quarter growth.

So, we think that range $350 million to $360 million is both ambitious and achievable..

Okay, thanks a lot. .

Our next question comes from Josh Schimmer with Piper Jaffray. .

Thanks for taking my question. My sentiments as well to Dave, it’s been a pleasure working with you over the past many years. .

Thanks Josh. .

And one question for you Dave before we let you go. On the last call, you mentioned that with on a fully diluted basis we should expect share count in the range of 205 million to 210 million. It looks like you have come in well below that.

I’m wondering if you could help clarify kind of where – what that represents and why the difference? And then maybe just one other question to get them all in. As we think about the strategy with the PV launch, the revenue should probably reflect considerably next year.

How is the Group thinking about managing the P&L? Is it going to be towards profitability and earnings growth or is it going to be more towards reinvestment in R&D? And when do you think you should be making that transition to a sustainable earnings positive trajectory? Thank you. .

So just on the EPS count, so the difference there really is the 2018 and 2020 notes, which in this calculation are anti-dilutive Josh, because the add back interest does not impact, like the 2015 notes, so that’s the difference between fully diluted that we’re reporting and the fully diluted shares for the company..

Thank you..

Hervé here, on the second question, I think you have to look at it - we agree with you.

I mean there is a chance for a number of years growing top line and the question becomes how do we allocate our spending and the way we think about it is based on two dimensions – one is to be prudent with our spending, so that we don’t spend the money before we make it, so that’s one aspect of the philosophy, but the second one is to maximize the potential of our pipeline and to look at opportunities to obviously maximize the long term of the organization.

So, you know from our development program, on the early stage we are really maximizing the funding of the programs that are going to go into the clinic over the next few months and on the clinical stage as Rich was describing, we have very important information on ruxolitinib in solid tumors in 2016 with the three phase II studies and the two phase III studies in pancreatic cancer.

We have the 39110 program that has been increased in size over the past few weeks and months and now has a number of important questions that are being asked and obviously depending on the result of this question it will lead us to a fairly large program in Phase III or not and we have the IDO question that have been also asked at this point that will lead us to potentially what could be a very significant Phase III program.

So, frankly that’s the way we look at it, so the result on profitability will be coming out of this clinical result. If these clinical results are promising enough we would invest in our own pipeline and maximize the value over the long term..

Got it. Thank you..

Our next question comes from Michael Schmidt with Leerink. Please proceed..

Good morning. Thanks for taking my questions.

How does the Genentech acquisition of the new link, IDO inhibitor affect your relationship with them for your program?.

Sure. So this is Rick. So, we are still going ahead with our planned study with the combination of Genentech’s PD-L1 inhibitor and our IDO as planned. And while I can’t talk about the specifics of the collaboration agreement with them we remain confident that the proposal protects our interest in doing this study..

Great.

And I guess, you mentioned in order to maximize the value for the IDO inhibitor you are looking at immuno-oncology combinations more broadly and I was wondering outside PD-1, PD-L1 whether you are looking at other potential combination partners at this point and what your plans are in that regard?.

Yeah. So we’re not ready to talk specifically about any combinations whether it be with our own internal products or with further collaborations. We do think that the PD-1, PD-L1s are kind of being - and continue to be an important component of combinations here.

And so we think that our focus this year on demonstrating the safety and activity in combination with PD-1s or PD-L1s is central to our strategy.

Reid do you want to add anything to that?.

Yeah.

I’d just say that we have fairly robust internal effort to understand places where IDO inhibition can add value even beyond the PD-1, PD-L1 and as Rich said that’s clearly the most important task at hand is to demonstrate that benefit first, but even beyond that there is efforts to evaluate the drug in combination with internal assets in our pipeline and of course the immuno-oncology landscape is changing pretty dynamically quarter-over-quarter.

We now have immuno-agonists entering into the clinic.

We have other antagonists, we have vaccines that are starting to emerge and have a placement treatment landscape and even other therapies like bi-specifics and CAR T cell, all these things are on our radar screen and we’ll be as thoughtful and opportunistic as we can going forward, but always based on what we think the science tells us to do..

Great, thanks.

And one more, can you remind me of the overlap in the PV and MF prescriber base?.

Yes, it’s a very high overlap. Today, we have a target audience of about 6,500 physicians for MF. We see that expanding to about 8,000 physicians for PV. So the overlap is very high..

Okay, great. Thank you..

Our next question comes from Salveen Richter with SunTrust..

Thanks for taking my question. Davre, firstly congratulations on a great job at Incyte, and it really has been a pleasure working with you..

Thank you Salveen..

So with regards to the IDO, just wondering, any decisions on tumor choice that’s going to be driven by upcoming data readouts like liquid tumor data at ASH and then when would we see data from the 75 milligram dose group in the study with Yervoy?.

Yeah. So we’re - with our partners even though we have certain indications that are picked for different studies, we are actively in discussion with some of the collaborators about potentially adding in additional tumor types at some point. So we’re constantly looking at the data and updating our plans.

And in terms of the additional data from the ipilimumab study, we do anticipate presenting this at an upcoming scientific meeting. But we’re not a 100% sure at this point in time, exactly which one that will be..

Great. And then just in terms of just the outlook for strategy for pipeline growth here, you have been focused on in-house R&D to date for – in house R&D in terms of pipeline growth and just wondering what your strategy here going forward might be as you look at M&A and in licensing..

I think what you’ve to – you have to look at potential external growth, as what it is adding to what we have. And the reality of our current flow of products in the pipeline is that it’s very rich both on the clinical side and the pre-clinical side. So the plan A is to maximize our internal pipeline and that is really what we are working on.

At the same time, and it’s not ‘or’ it’s really ‘and’, we are also looking at what would be complementary to what we have, like I think it’s really a diligence obligation that we have. And it could happen that something would be complementary and good enough to justify doing external growth.

But I want to say, I mean the internal pipeline as it is, when you develop it over the next 5 or 10 years is really providing, already a very good base plan for the corporation.

So that is really the thinking; we want to maximize internally and we are looking, because also looking around is giving us a lot of information on what is happening in the world of onco and immuno oncology..

Thanks, Hervé..

Our next question comes from Steve Byrne of Bank of America.

Does the reduction of tumor induced inflammation with your anti-Jak strategy have any impact on expression levels of checkpoint inhibitors?.

So I don’t think we have any data that really speaks to that. What we do know is that PD-L1 expression is governed by a host of cytokines, most importantly interferon gamma and so its expression level clearly is at least in part, dictated by what that local immune environment is.

How Jak1, Jak2 or selective Jak1I inhibition may alter that is still an open question I think at this point, but it is probably a very complex question and much more complex in just interferon-gamma and PDL-1 as the ultimate governors of iner-tumoral immunity ore multi factorial and Jak inhibition itself is a very pleiotropic mechanism.

So, this requires some pretty careful work and probably also will require some clinical translational studies to know for sure what governs these dynamics in man..

And Reid, do you see other drugs in development that essentially affirm or potentially compete with this strategy of yours to address tumor induced inflammation?.

Well, there have been efforts over the years as you know to study anti-inflammatory agents in cancer, probably most notably the anti-TNFs and even some work early on with anti L6.

Those studies were generally unremarkable in terms of the data they produced, but they also were relatively unfocused in terms of the kinds of patients they enrolled certainly categorizing patients in terms of inflammatory status and focusing on specific histologies where perhaps this biology is most operative. We know that Gilead is in the area.

Of course, we follow their work very closely. We study their compound very closely. I don’t think that’s going to be the end of the entrants into the space if the data we have with RECAP are confirmed in the JANUS studies.

If we see activity with ruxolitinib or 110 and other solid tumor scenarios, I think that’s very likely to open up an entire new area of thinking about how to treat patients with oncology, with cancers and treating the host as much as you’re treating the tumor. So we’re kind of on the leading edge here.

There is some competition, but if we’re successful we can be sure there is going to be other competition. We’re committed to staying at the front edge of that space as long as we can..

And then I have one quick one for Jim and that is with respect to the ex-U.S. market opportunity for Jakavi, it seems as if your revenue trends in Jakafi have really accelerated more so than the ex-U.S. market. Do you see the ex-U.S. opportunity to be meaningfully different than the U.S.

or do you just think it is going to chunkier?.

I think chunkier or lumpier is what we’re seeing right now Steve. And given the rollout in various European markets, given some of the issues with for instance price accruals, inventory, I think they are simply more susceptible to one offs. So I think you have to take a step back and look at the overall trend for rest of the world.

And it remains very robust and our Novartis colleagues I think are very sanguine on the long-term commercial upside in rest of the world..

It’s a very traditional way of building the rest the world business versus the U.S. where it will go a little slower at the beginning because reimbursement issues are sort of slowing down the ramp up and you see it in Europe. And then, you have the rest of the world catching up like Japan recently.

So overall the way we see it is that it is potential that is at least as large as what we have in the U.S..

Thank you..

Our next question comes from Ian Somaiya with Nomura..

Thank you for taking my question. And I guess I want to echo the sentiment on the call. David, you are going to be missed and we all hope to have an opportunity to work with you again..

Thanks, Ian..

And just in terms of the question, I mean just maybe starting off with the Bristol’s data this morning, there is a study that they were evaluating with nivolumab in every pre-treated events of squamous cell non-small cell lung cancer patients, that results were disappointing.

Just wondering if you had any plans to evaluate that population in combo with IDO?.

I’m sorry. I had trouble hearing the question. I’m not certain what came out this morning.

You’re saying they had disappoint data where?.

In heavily pretreated advanced squamous cell non-small cell lung cancer patients..

Yes, I mean, we’re certainly looking at non-small cell with a number of other companies including BMS. With respect to the specific subpopulation of heavily treated squamous, I have no real comment. I don’t think we’ve had that level of specific discussion.

But in general where we tend to look at things is where there are imperfect data from monotherapy with the PD-1.

So you don’t necessarily want to focus all your efforts on someplace that’s going to be hard to beat the results that they’re seeing and we are continuing to do studies in melanoma, but that’s an example of something where the response rates are quite high and the durability of either stable disease or responses are quite good.

On the other hand, we don’t tend to focus on things where they show no activity at all. So we’d have to look at the specifics of this dataset to determine whether that is an area that’s kind of in the middle where the bump could help..

Okay. And just another question, maybe on the c-MET program I guess that was one of the other surprise datasets at the ASCO.

Can you just remind us of your agreement with Novartis, to sort of the financial terms? And then whether the deal precludes you from at some point in the future pursuing your own product in the space?.

We licensed globally the rights to Novartis, but we do a very healthy royalties, tiered double-digit. So, we are very pleased with our progress and pleased with the economics we have and obviously there is a separate milestone slate for c-MET as well..

Okay. And just a last question, maybe just following up on several questions that have been asked on, related to your strategy with IDO.

Is there - at this point, are you able to say that the next potential combination will be with another checkpoint inhibitor versus potentially a cancer vaccine? Maybe as a follow-up, have you from a business development standpoint maybe evaluated a lot of the cancer vaccines that have been put to the wayside over the years which potentially could benefits from a in combination with IDO?.

Yeah, we have nothing specific to announce at this point. I will say that there are some investigator sponsored trials that where we reached agreements in the past to look at a small number of vaccines but vaccine technology and some of the approaches to vaccines have changed since some of those things were created.

So, there may be new opportunities there but in terms of specifics, we don’t have anything to share at this time..

When would you be able to – when will we see data from those efforts?.

Well, the data on that combinations of the PD-1s and PD-L1s as we said our base case expectation would be sometime in 2016, not ruling out the possibility of seeing something in 2015.

In terms of our plans to do other combinations we probably would not talk about them until we had a firm specific announcement either an agreement or a trial that was about to start..

Yeah.

I guess I was specifically asking about the investigator sponsored studies you mentioned and whether they might be large or small in combinations with vaccines, when could we see data from those?.

I am not one who tends to make predictions about how fast the academic investigators will move with ISTs. A lot of the times the most difficult step is actually going from the agreement to do a study to initiating them and that can take quite a bit time.

I think some but not all of them have actually started and both because I don’t really trust external numbers as well as my own and also because I just haven’t had those discussions lately I just don’t know..

Okay. That is fair enough. Thank you so much for your help. .

Our next question comes from Cory Kasimov with JP Morgan..

Hi, good morning guys. Thank you of taking the questions and let me just add on top of all the other prior comments and say best of luck to you, Dave. And it really has been great working with you and you’ll most definitely be missed..

Thanks Cory, I’ll take that well from a Buffalo Bill’s then..

So first for another Bill’s fan, Jim, I am really – I am also interested in then really impressive Jakafi growth, I know there have already been a lot of questions on this call around demand and persistence in inventory and such.

But I am wondering if you are still also confident in the initial epidemiology around MF or there are also potentially more patients than you previously anticipated..

Cory, I think there could very well be more patients that we anticipated; all along we view the addressable patient population is 15,000, that was based on our best epi work, when you don’t have an effective treatment there is a phenomenon where physicians will code patients as having something else, in this case possibly MDS and when you do have an effective treatment you will see the diagnosis of myelofibrosis go up.

So that phenomenon could very well be taking place where when physicians are confident in a new tool, they actually look for opportunities to use it and we could be seeing that happen right now..

Okay.

And then for either I guess Rich or Reid, I am wondering how much visibility you have into the emerging competitive landscape for IDO inhibitors, how much do you know about other molecules that are out there?.

Cory, this is Reid. We take a pretty careful look at the patent landscape as well as the scientific presentation landscape to stay on top of the competition for all the programs, IDO is no different.

We’ve certainly spent a lot of time carefully studying what’s come out - the NewLink program for example, it’s not appropriate for me I don’t think to comment on any of those specifics around those data.

But I will say that based on everything that we know, we remain very confident in the emerging profile of 24360 and continue to feel that we have an opportunity here with this drug to not only have a first but also a potentially best in class IDO1 inhibitor. We’ve learned nothing over the subsequent or the previous few months to change that view..

Okay. Great. And then lastly for Rich, on baricitinib, can you just lay out your expectations or views regarding the relative importance of the different Phase 3 studies in terms of their potential clinical impact..

Yeah.

So, what Lilly and we have done is devised a program that looks at all the different phases of rheumatoid arthritis treatment from early RA where patients are being randomized to get either baricitinib alone, baricitinib plus methotrexate or just methotrexate alone to two studies in the TNF-naïve but methotrexate or DMARD inadequate responders and then one in the TNF-IR.

I think they are all important to the overall picture, but if I had to pick one I would say that it is the study that goes head-to-head with Humira for a couple of reasons.

One, that’s also the structure study, and we think that Lilly has learned from some of the mistakes that in retrospect that were made with tofacitinib, in terms of how do design that structure that study pick the appropriate population, et cetera.

And so that study in itself has the potential to both get a structure claim for them as well as show possibly superiority to Humira but I would be very surprised if it didn’t show at least non-inferiority. It’s also a study of over 1,200 patients followed for the longest period of time.

And so where there are going to be over 3,000 patients in the safety database this study will contribute more than that third of those. So and that one is – the one that because it’s a 52 week end point on structure will be one of the last ones to report out.

But I think each one will add to the growing picture and the growing safety picture as each ones comes out over the course of late this year and in through next year..

Okay, that’s helpful. That’s it from me. I appreciate you taking the question..

Our next question comes from Chris Marai with Oppenheimer..

Good morning, guys. Thanks for taking the questions, and congrats on the great quarter. Just regarding the PI3-Kinase and JAK combination, I was wondering if you can comment on how you’re looking at potential toxicities, particularly liver tox, and then also if you are looking at any of the BTK inhibitors in combination there.

And then maybe remind us when we will see data from some of those combinations? Thanks..

So first of all, we recognize that the existing PI3-K delta, do have some degree of reversible liver toxicity. But the JAK inhibitors generally do not – I mean at least our JAK inhibitors generally do not. So in terms of combination of risk, I don’t see that as enhanced risk of liver toxicity, because you’re using two drugs in combination.

And in terms of other combinations, we have nothing to announce at this time, but we are always looking for opportunities to use our drugs not only in combination with things that we own, but we’re as you’ve seen very amenable to doing collaborative studies with other companies, but again have nothing to add at this time, and Reid, I don’t know if you want to say anything..

Okay, great. Thanks for taking the question..

Our last question comes from Matt Roden with UBS..

Great, thanks very much for taking the follow-up. I would normally have taken this question offline but I’ve gotten a number of incoming e-mails on this just to clarify if we could. Just Jim to better understand your comments on squaring the inventory and the guidance and a couple other of these moving parts.

So if I look at the results here so you did $98 million the normal range of inventory should be about according to my calculations here $22.5 million to $26.5 million, you say you are at about 3.3 weeks inventory now and then you said that you might have to burn off as much as $4 million of the inventory in the fourth quarter.

So I’m just trying to square that because that’s looks me like you make be at about 24.5% or so, obviously really $2 million down to the bottom end of the normal range. So is there as you think about guiding, is there a reason to think that you’re going to go down to the lower end of normal for inventory in the fourth quarter.

Because I see you took price at the end of the third quarter. So that’s behind us maybe there is buying ahead of the price increase..

Yeah, Matt your estimate of what our baseline inventory is is a little low, probably a good estimate of our baseline inventory is about $28 million, I think you really need to look at the $4 million as being a real incremental inventory build that we will have to burn off over the course of the quarter.

Now you raise the fair point which is, should we anticipate an inventory build at the end of the fourth quarter? Matt, that is a reasonable assumption and I think reasonable assumption would be an absolute inventory build comparable to the one we saw at the end of last year, which was about $4 million.

Now that is something that is highly variable; you never know what’s your distributors are going to do on the last day of the year..

Okay, great..

So we cannot give you specific guidance as to what will happen with inventory at the end of the year..

But you would think that it would probably stay within the range which is a relatively tight range, so just trying to….

We would expect it would stay within the range of 3 to 3.5 weeks..

Okay, great. Thanks for clarifying..

Sure..

And really it’s important to keep in mind I mean that the success of Q3 is really driven by demand and volume growth which is sort of building the stage for the future of the brand in myelofibrosis, I mean that’s really what the….

I would underscore that if you negate inventory underlying demand grew at 12% and generally the third quarter as you all know tends to be a soft quarter. So we’re very pleased with 12% underlying demand growth and as quarter-over-quarter in the third quarter and we think it bodes very well for the fourth quarter..

I think we will turn the call now Hervé to close..

Okay. So that was the last question. So with that we will thank you again for your time on the call today, and we look forward to talking to you again at our first quarter conference call in February. Thank you to all for attending today..

Thank, you. Ladies and gentlemen this conclude today’s program. You may disconnect your lines at this time. Thank you all for your participation..