Two months after raising more than $500 million in a pair of transactions, Incyte garnered another big pay day Nov. 25 as Novartis agreed to pay $210 million for ex-U.S. development and commercialization rights to INCB18424, a JAK1/JAK2 inhibitor that recently entered Phase III development in myelofibrosis.

The deal, which also brings Novartis worldwide rights to a preclinical cMET inhibitor (INCB28060) with potential in multiple cancer types, includes a $150 million upfront payment plus a retroactive $60 million milestone payment for the beginning of Phase III work on '424 in July. It's also a bio-bucks-heavy transaction, as Incyte says potential regulatory and commercialization milestones could total $1.1 billion, along with tiered, double-digit royalties on ex-U.S. sales.

According to data compiled by the Campbell Alliance for the recent Windhover Therapeutic Area Partnering conference, the transaction was the 12 this year in which an oncology asset brought an upfront payment of $100 million or more. If the retroactive milestone is considered part of the upfront payment, the deal is one of only six this year carrying a $200 million upfront price tag in oncology.

The deal met with strong approval from both investors and market analysts, as Incyte's stock price rose by nearly 10 percent during trading Nov. 25. Analysts, meanwhile, were uniformly bullish on the deal, with both Leerink Swann and Robert W. Baird & Co. giving the Wilmington, Del., biotech's stock an "outperform" rating.

Leerink Swann analyst Joshua Schimmer wrote Nov. 25 that he had expected '424 would yield an upfront payment in the $75 million range. "The deal easily surpasses our expectations and, in our view, is far more validating than most partnerships," he said, adding that Novartis is the best possible partner for Incyte given its success with blockbuster Gleevec in chronic myelogenous leukemia.

While myelofibrosis is a niche indication, Incyte believes '424 has significant promise in hematologic oncology and expects that Novartis will follow suit in pursuing additional indications for the orally available small molecule. Under the deal, Incyte retains U.S. development and commercialization rights to '424, while Novartis takes rest-of-world development responsibility for the drug, along with all commercial rights ex-U.S.

"One of the attractions for doing the deal with Novartis is their philosophy of casting a net very broadly," Incyte CEO Paul Friedman said in an interview. "I can't imagine that they're not going to want to look at other potential oncologic indications."

A niche indication with serious growth potential

Friedman estimates the U.S. population for myelofibrosis at about 20,000 patients, with another 30,000 in Europe. However, adding in patients suffering from related myeloproliferative diseases such as polycythemia vera and essential thrombocythenia increases the overall MPD market by a factor of five or six, he added.

"If [MPD] is anything like CML, where there turned out to be a lot more people with CML around ... once Gleevec came around, you could argue that 20,000 [U.S. patients] is a conservative number, Friedman asserted.

Still, Incyte is looking well beyond MPD in its development plans for '424. Last year, it investigated the compound in rheumatoid arthritis, producing impressive results, according to Friedman, but the company will go forward with several oncology indications instead (Also see "Incyte Will First Seek Myelofibrosis, Rheumatoid Arthritis Indications For Lead JAK Compound" - Pink Sheet, 9 January, 2008.). In RA, Incyte now is developing another JAK inhibitor, INCB20850, which it says is about four times as potent as '424 with a longer half-life that should allow for daily dosing.

In addition to MPD, Friedman said the biotech is also testing '424 in acute myelogenous leukemia, and he anticipates testing '424 in acute lymphocytic leukemia and multiple myeloma as well. "Certainly [we'll investigate] in that significant subset of ALL patients who have JAK-activating mutations, the same kind of thing that we're treating in the myeloproliferative diseases," he said. "Those particular ALL patients tend to have poorer prognoses than patients who don't have JAK-activating mutations."

U.S. , EU Phase III trials ongoing

Currently, there are no therapies indicated to treat myelofibrosis or related MPD conditions. Incyte will continue funding a U.S. Phase III trial (COMFORT-I) testing '424 against placebo, while Novartis will take over a European trial (COMFORT-II) in which '424 will be tested in an open-label setting against the physician's choice of therapy.

Incyte plans to file an NDA for '424 based on COMFORT-I results in late 2010 or early 2011, while Novartis will file with the European Medicines Agency about six months later, because the former trial runs 24 weeks, and the latter 48 weeks, Friedman explained.

Incyte already is conducting market research and talking with opinion leaders in hematology to prepare for the launch of '424 in the U.S. Friedman estimates the drug could be detailed with a specialty sales and marketing force of between 50 and 60 representatives.

Meantime, the cMET inhibitor is about to enter Phase I, with Incyte responsible for advancing it to proof-of-concept. Novartis then will pick up all development and potential commercialization costs beginning with Phase II, although Incyte will retain an option to co-commercialize the drug.

That decision is a long ways off, CFO David Hastings said, but co-commercializing in the U.S. might make sense as a way to further leverage an oncology sales force the firm should have in place by then.

The $210 million realized so far from Novartis leaves Incyte in what appears to be a strong cash position. The company reported cash and equivalents totaling $395.2 million at the end of the third quarter, bolstered by a September follow-on public offering that netted $133 million ([See Deal]). At the same time, Incyte raised $400 million through the sale of 4.75 percent convertible notes due in 2015, although much of that money has been used to help retire debt that comes due in the next two years.

-Joseph Haas (j.haas@elsevier.com)

Two-Compound Partnership With Novartis Brings Incyte $210 Million Immediately

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