Incyte, buoyed by former DuPonters, has rising revenues and a busy drug pipeline, but the payoff will take years, CEO says

“If you build a biotech company, where would you locate it?” asks Hervé Hoppenot, CEO of Incyte Corp., the $2 billion (yearly sales) biopharma company.

“Shanghai, Palo Alto, Boston. But they are very expensive," he says, as a warm breeze ripples the Queen Anne’s lace in the rooftop garden outside his office in Wilmington.

"Frankly, then, you end up around here.” Hoppenot gestured across the Brandywine Creek to the city’s compact center, then swept his arm up the hill, toward Philadelphia with its medical schools and gene therapists, and the drug-industry corridor that runs up Route 202 and bends into central New Jersey.

Better to save on premium space and spend it on research and development, says the boss, whose company focuses on cancer, inflammation, and autoimmune diseases. Its lead drug is Jakafi, an immune-cell therapy that treats a bone-marrow cancer. Incyte also partners with Eli Lilly and Co., Novartis, and other big firms to develop therapies for other cancers and for inflammatory disorders, such as rheumatoid arthritis.

A profitable company after what Hoppenot called its “frugal” early years — “That is in our culture now," he says — Incyte spent $1.2 billion last year on research, more than half of its $1.9 billion in sales. (Merck & Co. spent $9 billion of $42 billion in sales on research last year. Pfizer spent $7 billion of $53 billion.)

Incyte employs more than 1,300 worldwide, including 900 at this headquarters and research center, built into the hillside around a stone-and-glass-fronted former John Wanamaker store. Employees earned an average $228,000 last year -- not counting Hoppenot, who has collected $37 million in cash and stock grants over the last three years.

Incyte settled here in 2014, the year Hoppenot took the top job after leaving his post as head of oncology at Novartis, where he negotiated a landmark cell therapy production deal with Penn and the team led by Carl June.

Philly’s entrepreneurial doctors are a neighborhood attraction: “We have access to the academy — Penn, Jefferson, Fox Chase [at Temple]" up in Philly, and Johns Hopkins down in Baltimore, all within an hour by I-95 or Amtrak. “I’ve been working with Carl June and with a lot of organizations in Philadelphia. There is a cluster of biotech, it’s a real thing. A lot of cell therapy, a lot of gene therapy, a lot of cutting-edge science."

The move to the hillside above Wilmington five years ago was greased by $11 million in state grants. By then Incyte had been a Delaware start-up for a decade, since moving here from California after an abortive attempt to start a genomics business there.

The company “rebooted" and came east, as Hoppenot put it, by hiring a group of 23 scientists who left the former DuPont Pharmaceuticals (later part of Bristol-Myers Squibb) for a chance to build big molecule drugs for a small, focused research organization with little corporate overlay. Of the 23 on that ex-DuPont team, "16 are still here,” says Hoppenot. After moving to the rebuilt Wanamaker’s in 2014, they built a second lab center next door in 2017. A third is planned.

Among those veterans is Maryanne Covington, now Incyte’s director of preclinical pharmacology. “When I was at DuPont, it was so big, you would pass along a compound and never know what happened to it. Here we have ownership. I can follow my compound all the way to clinical trials,” she said.

“And then Hervé will bring the patient back. They cry. They say, ‘You saved my life.’ It’s a real incentive. At DuPont, I was just a lab rat. And here we have windows! I’ve never been in labs this nice."

They show me the robots, speeding compounds through testing. The animal testing, they add, is done off site. There’s a freezer farm in the basement.

A native of France’s Champagne region, Hoppenot moved his family to the Philadelphia area in 1991 to work at Rhône-Poulenc Rorer, now part of Sanofi. Hoppenot’s children grew up on the Main Line, attending local preps and the French International School, studied science and medicine, and excelled at varsity sports. Son Antoine, a Princeton grad, was a midfielder for the Philadelphia Union and now plays for Louisville.

Incyte is large enough that it can now “attract very good talent from California, from Boston, from Europe," Hoppenot said with his practiced booster’s persuasion. "They know we are a company driven by science. We have this discovery program, it is chemists and biologists working together. We reflect the hope that the future will be beautiful. Which is why you join any sort of venture.”

Plus armies of drug marketing people from GlaxoSmithKline, Merck, Johnson & Johnson, AstraZeneca, and other area employers, no? Hoppenot smiled. “There is also that peer dynamic, having other companies that are growing here."

Merck and other companies are developing therapies for some of the same markets. More is better, says Hoppenot: Any treatment that “reignites the immune system of people with a very bad prognosis," and provides remission without much toxic reaction, “gives us the hope we can cure cancer in a way never done before.”

“We are in the middle of that enthusiasm. We have a good pipeline with a lot of projects that are late stage.” A recent Incyte phase two study found that Ruxolitinib cream, a formulation of Jakafi, showed promise in treating vitiligo, the skin-color-changing disease that afflicted the late singer Michael Jackson.

Should this company really be public? It’s worth $18 billion at recent prices, nearly 10 times sales, almost 100 times profits. Incyte shares are worth about what they were a year after Hoppenot was hired.

“Is it right for Incyte to market [a new list of dermatology drugs] and build a whole commercial infrastructure in that space, versus partnering that out” to larger companies? asked Marc Frahm, biotech stock analyst at Cowan & Co., at Incyte’s April investor conference call.

“There is a lot of attractiveness to doing it ourselves in the U.S.” — as Incyte did with its first cancer drugs — but not so much in smaller countries, said Hoppenot.

“There has been sort of increased talk around you guys potentially [being] an acquirer in the marketplace,” noted Carter Gould, of UBS.

“Growth is important and diversification is important,” and Incyte has $1.6 billion in cash ready to use, answered Hoppenot. Strong cash flow “gives us more ammunition" for buying new products as well as building them.

Investors, the boss said later, are along for the ride: “They are sharing our vision of doing this ourselves. The only thing we have is to be patient. Many companies have killed research. ... But we have high potential in our research and our pipeline.

"We have this plan — it goes with ups and downs — but the plan is to establish a research-driven biopharma company worldwide: Asia, Europe, North America. We have enough coming though the pipeline to give us a realistic perspective of being [worth] multiples of what we are today in five to 10 years.

"But even if we are very good and very fast, the return on investment won’t be before 2030.”