Incyte Corporation (INCY) Earnings Call Transcript & Summary

Okay. Great. Welcome, everyone. My name is Vikram Purohit. I'm one of the biotech analysts with Morgan Stanley Research, and we are here for a fireside chat with the management team from Incyte. I have on the line with me Hervé Hoppenot and Christiana Stamoulis, CEO and CFO of Incyte. Welcome to both of you.

Thank you. Good morning.

Good morning, Vikram.

Good morning. Before we go ahead and get started with the discussion, I need to read a brief disclaimer. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

With that, we can go ahead and get started. So Hervé, Christiana, welcome again. And I thought it would be good if we could start off with some opening remarks from both of you. From -- Hervé from your side, it would be great to hear a recap of what you think are some of the key developments for Incyte this year? And from Christiana, it would be helpful if we could hear an overview of where you think the P&L stands currently and how you see it evolving over the coming years? And then after that, we can get into some more specific Q&A.

Okay. Yes. So I think if you look back at the past, what is it now 8 months, it has been a very -- somewhat unexpected with COVID, but a very great performance from any standpoint because obviously, we had continued growth of the existing portfolio, and that was reflected in the Q2 results that you have seen. But more importantly, the addition of 3 new sources of revenue with Pemazyre launch, Monjuvi launch in the U.S. and Tabrecta approval in U.S. and Japan with Novartis. So that's very important products that are adding new lines of revenue to us. And then we had 2 pivotal studies that were positive with Phase III study REACH3 in GVHD and the TRuE AD program in dermatology. In parallel, we have made a lot of good progress on the LIMBER with initiation of a Phase III study. And we have -- we are in the process of building and creating a dermatology division at Incyte for the launch of RUX cream next year. So a lot of new sources of revenue with FDA approval, 3 of them over a period of a few months. Good data on very important programs, specifically the dermatology, the TRuE AD studies and the organization getting prepared for these launches. So all of that obviously happened in fairly unusual circumstances. And I must say the team has been very successful on both sides on the research and the commercial side to be able to get these programs on track and successful and moving forward. So it was certainly odd, but it was a very successful 8 months for Incyte.

So in terms of your second question, Hervé indicated, we continue to experience strong revenue growth even in light of COVID. First half of 2020, our total product and royalties revenue grew 20% year-over-year, and we expect to continue to see growth driven by both our currently commercialized assets as well as new products that we're expecting to file for approval. In the near term like RUX cream and in the midterm as well. So this allows us to be in a position to continue to invest in future growth, both through our internal R&D activities and also through BD activities, like the tafa deal that we did at the beginning of the year. In terms of our internal R&D activities and investment there, as we have discussed in the past, our R&D investment is driven by the quality of the programs that we have. We don't superficially tie R&D spent to a percent of sales. But we're looking at the data and as programs continue to progress and show encouraging data, we will continue to invest in them and also invest in new programs that we will be bringing to our pipeline once, again, through our internal discovery efforts as well as BD activities.

Great. Maybe first, let's talk about tafasitamab or Monjuvi. It would be great to get some initial color on how the early phase of the U.S. launch has been progressing? And what the feedback has been there? And also, if you could remind us how you and MorphoSys have been splitting up commercialization responsibilities in the U.S.?

So as you know, I mean, we have this partnership that was finalized and signed in January of this year, but it's still relatively fresh. We were very happy and proud to see the FDA approval with an excellent label. It's the only second line approved product. And as you know, the efficacy data is very clear. And obviously, the safety is, comparatively to other ways of treating these patients, is very good. The market we are addressing are really these patients who are not being cured by [ R-CHOP ] in first line. So it's a second line and potentially subline for some patient setting. It is a group of patients that are approximately around 10,000 in the U.S., so it's a fairly meaningful indication. And from the data, from the study that was used for approval, you see that for many of these patients, the duration of response is very long. It goes to north of 2 years, in fact. And therefore, we see a great opportunity for this indication for Monjuvi. The way the deal is organized, we have full responsibility outside of the U.S. And in the U.S., we are sharing responsibility with MorphoSys. The 2 teams in the field are mirrored. So we have around a little less than 60 territories in the U.S. and in each of the territory, we have 2 field reps, one from Incyte and one from MorphoSys. The teams in the marketing side, the communication side and the scientific side are working together, so that at the end of the day, there is one communication to the customers and to the investigators and to the patient groups, et cetera, et cetera. So that organization was put in place virtually. It was fairly exotic and fairly interesting. Thankfully, people know each other very well because many of the team members from MorphoSys and the team member from Incyte have worked together in the past in different companies. So we were able to make it happen in a way that has been, I think, flawless and very smooth in some way. And the launch is taking place as we speak and is doing well. So it's an effort that was unusual in the form, but has been, at the end of the day, in terms of its impact and the ability to educate customers about this combination of lenalidomide with Monjuvi. It's a little complex to use. It requires a lot of explanation, the dosing is evolving with the treatment where you have different doses at the beginning and later in the treatment. So it takes education and that was done and well done over the past few months. So now I cannot give you numbers because we'll be discussing that probably in the future. It's still relatively fresh, but we are on a good track. And we see from the customers that they really have a need for these patients. Most of the patients in that setting are treating with the Rituxan plus chemotherapy type of regimen, and it makes a lot of sense for this patient to receive a different second line than what they had in the first line in terms of biologics. So switching from Rituxan to Monjuvi is very logical. And you have seen the data, the Monjuvi plus lenalidomide data in terms of efficacy and safety is very, very competitive. So there is -- it's very well received, and it's a very good launch taking place now.

Understood. And could you remind us where the filing stands in the EU for Monjuvi? And what work you have underway to establish confirm -- commercial infrastructure, excuse me, in Europe?

So in Europe, we have a commercial infrastructure. So that's one of the reasons this partnership is very good, is that we have a team in place. The team has been working on ponatinib for the past years. And in fact, has been successful growing that brand. It's a relatively modest sales, it's around EUR 100 million per year for this year, but it's a team that has been very well organized, implanted, working with hematologists and these hematologists are the same who will be using Monjuvi. So from that standpoint, we are very well prepared in terms of infrastructure, and it's part of the existing deployment that we have there. For the submission in Europe, we have submitted, the file was accepted. It's under review. And obviously, as you know, it's a process. I would say, we know from experience that single-arm studies in Europe are somewhat more difficult to get through than it is in the U.S. that's what's happening in general. But again, with the profile of the products that we have and the medical need, we are reasonably optimistic that it will go through. So...

Okay. Understood. Maybe we can switch over now to the LIMBER program. So as part of LIMBER, you have a once-daily Jakafi under development. What needs to happen for the company to be able to file an sNDA for the once-daily Jakafi?

So as you know, the LIMBER program is an overall program, and it includes research. It includes clinical development, and the goal is to improve on the existing twice-a-day Jakafi that we have today. And to do that in such a way where it will be basically helping replace Jakafi over the next years before the end of the decade. So we have in that program a number of fairly advanced projects now. The once-a-day formulation should be submitted next year. So that will give us an opportunity to have it on the market. If everything goes well, the following year, let's say. So that gives us an ample amount of time before patent expiration of Jakafi. And in parallel, we are doing a number of combination of Jakafi with new mechanisms that could improve on efficacy and safety. The most advanced is the PI3 kinase delta combination, where we announced the initiation of a Phase III, which is ongoing as we speak. And we have 2 other programs, one in combination with a BET inhibitor and you know there has been interesting data recently about BET plus JAK in the treatment of myelofibrosis. So we have our own BET inhibitor that we are combining. We are now in the phase where we are testing it as a single agent, and then it will be combined with Jakafi with the same idea of improving efficacy. And we have a program with an ALK2 inhibitor. And that one is really looking at something else. It's a hypothesis that you could, in fact, reduce the rate of anemia by combining an ALK2 with a JAK inhibitor. And it's coming from some observations that we have done with momelotinib in the past. Momelotinib being a molecule that has -- is hitting a lot of different targets, including ALK2 and where it was observed that through the hepcidin pathway, you could potentially improve the rate of anemia for patients who are treated with a good JAK inhibitor like Jakafi. So all of these programs are moving forward, and we anticipate the once-a-day to be the first potentially, to be available and then hopefully, to have some of the combination being successful. And as we have a once-a-day formulation of Jakafi, as we have a once-a-day BET inhibitor, once-a-day PI3 kinase delta and ALK2, obviously, it could lead to the optionality of doing fixed-dose combination, which would be obviously very important from the commercial standpoint. So that's sort of the picture. On top of it, we have early stage discovery program aimed at myelofibrosis and PV. And there is progress being made there also, and that could add another layer of new mechanism that could be complementing what we have from this 3 combination plus the once-a-day. So we are in a process now of late-stage development for once-a-day and delta, we are still in the early stage for BET and the ALK2, and we have obviously a number of preclinical programs. So it's a program that is obviously very important to us, to the corporation. And I think we are in a relatively good track to be able to deliver on it.

Understood and appreciate the overview of the entire program. For the once-a-day formulation, have you disclosed how much longer the patent life is versus the currently approved twice-a-day regimen?

I think what we have said is that we have different patents related to the once-a-day, and it will go well into the studies.