Incyte's strategy is to focus on diseases we know well where we can apply our expertise and resources to generate new molecules with the potential to be the best in their therapeutic class.  Our integrated teams of experienced biologists and chemists select drug target with strong genetic, preclinical or clinical validation in areas where we have the potential to generate either first-in-class molecules or compounds that are highly differentiated from existing treatments.  This approach has led us to concentrate our efforts on two disease areas where we believe we can be most successful - inflammation and cancer.

Clinical Development and Regulatory Strategy

Once our compounds reach clinical development, our objective, whenever possible, is to advance the lead candidate rapidly into a proof-of-concept clinical trial prior to initiating larger definitive Phase IIb clinical trials to quickly assess the therapeutic potential of the clinical candidate and its underlying mechanism.

Our development teams are responsible for ensuring that our clinical candidates advance expeditiously from preclinical development and IND-enabling studies into Phase I and Phase II development. To keep in place with the growth of our clinical pipeline, we have added new members to the development teams by internal transfers and by recruiting new employees with expertise in drug development including clinical trial design, statistics, regulatory affairs and project management. We have also built core internal process chemistry and formulation teams using this same strategy. Our internal multi-discipinary project teams also work with experienced external CROs with expertise in managing clinical trials, process chemistry, product formulation, and the manufacture of clinical trial supplies to support our drug development efforts.

Commercial Strategy

Our strategy is to develop and commercialize our compounds independently in selected markets where we believe a company of our size can successfully compete, such as in myelofibrosis, other myeloproliferative neoplasms, other oncology indications and certain inflammatory conditions. In November 2011, the U.S. Food and Drug Administration (FDA) granted marketing approval for Jakafi™ (ruxolitinib) for the treatment of patients with intermediate or high-risk myelofibrosis (MF), including primary MF, post-polycythemia vera MF and post-essential thrombocythemia MF. Jakafi is now available through a number of specialty pharmacies. The marketing, medical and operational teams have focused efforts on the commercialization of Jakafi, and we have 60 field-based territory business managers supporting the launch. For patients, we have established IncyteCARES (Connecting to Access, Reimbursement, Education and Support), a comprehensive program that provides reimbursement support and educational resources.

For rights outside the United States to ruxolitinib as well as for pipeline compounds that are outside of our core expertise or would require expensive clinical studies, we have established or are seeking to establish collaborations or strategic relationships to support development and commercialization. We established a collaboration with Novartis in 2009 for rights in oncology and hematology indications outside of the United States to our JAK oncology program with ruxolitinib and specified back-up compounds, as well as worldwide rights to our c-MET inhibitor compound INCB28060. We also established a collaboration with Eli Lilly in 2009 for our JAK inflammation and autoimmune program including LY3009104 (INCB28050) and specified back-up compounds, and with Pfizer in 2005 to advance our CCR2 antagonist program. We believe the key benefits to entering into strategic relationships include the potential to receive upfront payments and future milestones and royalties in exchange for certain rights to our compounds, as well as the potential to expedite the development and commercialization of certain of our compounds.

Collaborative Research and License Agreements

Novartis

In November 2009, we entered into a Collaboration and License Agreement with Novartis. Under the terms of the agreement, Novartis received exclusive development and commercialization rights outside of the United States to ruxolitinib (INCB18424) and certain back-up compounds for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases. We retained exclusive development and commercialization rights to ruxolitinib in the United States for hematologic and oncology indications, including all hematological malignancies, solid tumors and myeloproliferative diseases and in certain other indications. Novartis also received worldwide exclusive development and commercialization rights to our c-MET inhibitor compound INCB28060 and certain back-up compounds in all indications. We retained options to co-develop and to co-promote INCB28060 in the United States.

We received an upfront payment of $150 million in December 2009 plus an immediate $60 million milestone payment in January 2010 earned for the start of the Phase III study of ruxolitinib in myelofibrosis in Europe. In November of 2010, our initiation of the joint, global Phase III trial evaluating ruxolitinib in a second indication, polycythemia vera, triggered the achievement of $50 million in milestone payments. We may be eligible to receive future additional payments if defined development and commercialization milestones are achieved and could receive tiered, double digit royalties on future ruxolitinib sales outside of the United States. Each company is responsible for costs relating to the development and commercialization of the JAK inhibitor compound in its respective territories, with costs of collaborative studies shared equally. Novartis is responsible for all costs relating to the development and commercialization of the c-MET inhibitor compound after the initial Phase I clinical trial.

The Novartis agreement will continue on a program-by-program basis until Novartis has no royalty payment obligations with respect to such program or, if earlier, the termination of the agreement or any program in accordance with the terms of the agreement. The agreement may be terminated in its entirety or on a program-by-program basis by Novartis for convenience. The agreement may also be terminated by either party under certain other circumstances, including material breach.

Lilly

In December 2009, we entered into a License, Development and Commercialization Agreement with Lilly. Under the terms of the Lilly agreement, Lilly received exclusive worldwide development and commercialization rights to INCB28050 and certain back-up compounds for inflammatory and autoimmune diseases. We received an initial payment of $90 million, and in 2010 we received $49 million in milestone payments with the successful completion of a Phase IIa trial and initiation, by Lilly, of a Phase IIb trial in rheumatoid arthritis (RA).  We may be eligible to receive future additional payments based on the achievement of defined development, regulatory and commercialization milestones. We could also receive tiered, double-digit royalty payments on future global sales with rates ranging up to 20% if the product is successfully commercialized.

We retained options to co-develop our JAK1 and JAK2 inhibitors with Lilly on a compound-by-compound and indication-by-indication basis. Lilly will be responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications. If we elect to co-develop any compounds and/or indications, we would be responsible for funding 30% of the associated future global development costs from the initiation of a Phase IIb trial through regulatory approval. We would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging from 20% up to the high twenties on potential future global sales for compounds and/or indications that we elect to co-develop. We also retained an option to co-promote products in the United States. In July 2010, we elected to co-develop LY3009104 (INCB28050) with Lilly in RA. The Lilly agreement will continue until Lilly no longer has any royalty payment obligations or, if earlier, the termination of the agreement in accordance with its terms. The agreement may be terminated by Lilly for convenience, and may also be terminated under certain other circumstances, including material breach.

Pfizer

In November 2005, we entered a collaborative research and license agreement with Pfizer Inc. (“Pfizer”) for the pursuit of our CCR2 antagonist program. Pfizer gained worldwide development and commercialization rights to our portfolio of CCR2 antagonist compounds. Pfizer’s rights extend to the full scope of potential indications, with the exception of multiple sclerosis and autoimmune nephritides, where we retained worldwide rights, along with certain compounds. We do not have obligations to Pfizer on the development candidates we select for pursuit in these indications.