Incyte Corporation (INCY) Earnings Call Transcript & Summary

Good morning, and Happy New Year. Welcome to the 39th Annual, and first and hopefully only time, Virtual JPMorgan Healthcare Conference. My name is Cory Kasimov. I'm the senior large-cap biotech analyst. And it's my pleasure to introduce Hervé Hoppenot, the Chairman and CEO of Incyte, our first company presenting today. Please note that following Hervé's presentation, we will have a Q&A session right here in the same Zoom room. [Operator Instructions] And so with that, let me turn things over to Hervé.

Thank you. Thank you, Cory. Welcome to this presentation, to everybody. Happy to speak about where we are at Incyte from -- here from Wilmington in Delaware. So I will be -- first, I need to say that I will be making forward-looking statement in the presentation, and I urge you to refer to the SEC document on our website. So we are on Slide 3, and I will be using this frame today to describe the situation of the portfolio of Incyte. So it's basically looking at the portfolio in 4 different categories -- quadrants. So one is MPN and GVHD, so the next one is about our hematology/oncology portfolio outside of MPN and GVHD, our new dermatology franchise and income coming from royalties. So on Slide 4, where we are now is basically reflecting on the strong momentum we have in term of revenue. And you can see for each of the categories that we have now 6 approved product contributing to the revenue of Incyte. It's -- 3 of them were approved this year in -- or last year in 2020. And as you can see, the growth is very dynamic for Jakafi and for the rest of the portfolio, including the launch of Pemazyre and Monjuvi doing well in the U.S. and the growing royalties in part due to increase in the indication for Olumiant and the launch of Tabrecta by Novartis. So a very good picture from the revenue standpoint, continuing to be strong in spite, obviously, of some of the difficulties related to COVID. Now on the next slide, we are speaking about the clinical progress we made in 2020. It has been a very busy and successful year. So for each of the category, as you can see, first, on the MPN and the GVHD front, we have the positive data from Jakafi in chronic GVHD with an FDA decision now planned for the second half of 2021. And we had success in our LIMBER program with the bioequivalent study of the QD formulation and proof-of-concept with parsaclisib. On the hematology/oncology part of the portfolio, obviously, the launch of Pemazyre and Monjuvi, 2 FDA-approved product this year, and we had good positive data on both retifanlimab, our injectable PD-1, and parsaclisib. I will be speaking a little bit about that. Now the emerging franchise for us is dermatology. And there, we have submitted our NDA for ruxolitinib cream in atopic dermatitis in December, as planned. And we are obviously anticipating a launch mid of 2021. And we have also fully accrued our vitiligo program that should give us results that we can see in the first half of this year. And we have a new product, 54707, that is -- also has shown positive data in HS. So a new indication, additional product in the dermatology portfolio. And regarding the royalties, as I said, Tabrecta was approved in both the U.S. and Japan in non-small cell lung cancer, and Olumiant was approved also in atopic dermatitis. So a very positive year in term of important clinical data and, obviously, in term of new products being approved. And that's what puts us in a position now where we can see how the growth of Incyte will continue in the years to come, first, obviously, in our MPN/GVHD franchise with Jakafi, QD ruxolitinib and a number of combination and new mechanisms that we are testing in this indication. For the hematology/oncology franchise, as I said, we have the launch of Pemazyre, the launch of Monjuvi. And we have these 2 products, parsaclisib and retifanlimab, with positive data, and we have a very interesting early pipeline. I will be speaking about it a little bit later. As I said, in dermatology, the growing potential in atopic dermatitis and vitiligo and new indication from the royalties stream. So when you look at the years ahead, what you can see is an expansion and diversification of our portfolio in the next few years. So Slide 7 is describing or listing the products we have for each of these quadrants. And I will start in a little bit more detail on the MPN and GVHD front. So the first program I want to speak about is chronic GVHD data. It's the first successful, large scale, randomized study in that setting. And what you can see is that ruxolitinib was superior to best available therapy across multiple efficacy end points. So obviously, the primary end point of objective response rate at 6 months but also the best overall response rate, which was 76% for ruxolitinib versus 60% on best available therapy. We have submitted the sNDA for this indication at the FDA, and we expect a decision in the second half of 2021. And obviously, if approved, it will be the first indication for Jakafi and a very good opportunity for Incyte as there are more than 10,000 patients in the U.S. suffering from chronic GVHD. The second part of this portfolio is obviously the franchise evolution over the next few years. So what we are describing here is the current situation. We have a guidance for Jakafi twice-a-day of $1.91 billion to $1.94 billion, so for 2020. And what we anticipate is that, that product will continue to grow in the short term. And in the coming years, we will observe an expansion and a fragmentation of the franchise where we will be introducing a number of products, including the QD, including some of the combination with PI3 kinase delta, BET, ALK2, if they are successful in development. We have a subgroup of patients also where we are testing itacitinib. And what you can anticipate over the next years is to see, in the short term, a continued growth of Jakafi, as we know it and, subsequently, to see a substitution of a number of products, including QD and combination, that will be both expanding and creating a diversification beyond Jakafi twice-a-day. So we have given in the past a guidance that was $2.5 billion to $3 billion for Jakafi. What we are doing today is basically moving to a guidance for the franchise, and we anticipate that franchise to be more than $3 billion by 2027. And we expect a large part of that franchise to come from some of the new products that I am describing here. So this slide is a little bit complex, but it's speaking about the situation in myelofibrosis and how the franchise could be evolving for that disease. What you see is that there are 16,000 patients more or less in the U.S. suffering from myelofibrosis. 25% are not yet on Jakafi, 55% are on Jakafi and 20% are not on Jakafi but were previously treated with Jakafi. And what you can see for each of these projects that we are developing is the opportunity for improvement that we could be bringing to these patients with this set of new product and where, obviously, you can see the QD could be applicable to all of the patients who are treated with ruxolitinib in MF. And then for the patients who are newly diagnosed or are already on Jakafi, you could imagine using PI3 kinase delta or BET as a combination partner with Jakafi. And that would -- with QD Jakafi, and that would help. In terms of efficacy, you could -- we know that there are 50% of patients who have a suboptimal response to Jakafi where using a more efficacious combination could be beneficial for them. It could be with delta -- PI3 kinase delta, BET or some of the novel molecule. Approximately, 25% of patients have anemia, either coming from the treatment or from the disease itself and where using an ALK2 to help in that setting or some of the novel molecules could also benefit. So overall, it's a picture of improving our Jakafi twice-a-day. And obviously, as you can see, in this disease, it could have a fairly large part of the portfolio moving to these new products, if they are successful in the clinical setting. And there are a number of patients, 20%, who have been treated with Jakafi where, you can imagine, that having new mechanism and improved efficacy could be also very beneficial. One of the example on Slide 12 of this new mechanism is an agreement we did just a few weeks ago with Cellenkos. It's a novel molecule. It's an allogeneic cell therapy product. It's available off-the-shelf, and it's enriched to enable targeting of the bone marrow in myelofibrosis patients. So it's very early data to say the least. There was a publication at ASH, you can see here on the right of the screen, showing that for patients who have been heavily pretreated, including a number of years on Jakafi, using this product can lead to a reduction in allele burden and also a reduction in the size of the spleen. So it's an interesting technology. We have an agreement with Cellenkos where we will be funding the proof-of-concept study, and it gives us an option to license the program in the future with milestones and royalties, as you would expect. On the next slide, what we are showing here is that we have a number of programs that will have data available before 2027, 2028. And I'll try to give you a little bit of an idea of the time line and the number of programs that we are running in that setting, in the clinic today. So it does not include -- it includes Cellenkos, but it doesn't include some of the new mechanism. And obviously, what it is showing is that there are a number of opportunities -- optionalities that we have to do what I was describing, which is this fragmentation and substitution of the new, more effective or with a better safety profile combination of products in the field of myelofibrosis, PV and GVHD. So I will now move to the second segment, which is hematology/oncology portfolio. So the first project is obviously the launch of Monjuvi with MorphoSys in the U.S. We have the rights outside of the U.S., and we have a co-commercialization in the U.S. together with MorphoSys. So obviously, Monjuvi is a product that is very attractive for DLBCL because of the very high response rate -- the very high complete response rate and the duration of response that we are observing in the study we have done there. And it has also a very acceptable safety profile and can be given outpatient. It is today the only FDA-approved product in second-line DLBCL. And what you can see from the chart on the screen is that this profile is, in fact, very competitive compared to the existing treatment that physicians are using today in that setting. And on the right chart, you see that the vast majority of physicians are seeing Monjuvi as a product that would fit very well with the medical needs they are seeing in second-line DLBCL. And what we are hearing in the field as we are conducting the launch is very similar to what you see here on the screen from a market research. And we are observing an increase in market share in the second- and third-line DLBCL as we are conducting the launch of this product. So it's a good addition to our portfolio. It's very synergistic with what our team does, and it's doing well. And I think it's helping a number of patients with a very good option and opportunity for them. On next slide is the clinical development for tafasitamab. So it's basically based on the strength of the efficacy and safety that makes it a very good combination partner. So we are exploring a number of strategies in DLBCL -- in first-line DLBCL, in follicular lymphoma and other type of non-Hodgkin's lymphoma. Interestingly, there are trials assessing tafa in combination with R-squared and with our PI3 kinase delta, parsaclisib, and we are also doing a study with plamotamab, which is a Xencor CD20 x CD3 bispecific. So we are very excited about this opportunity. It's moving forward very well, and it has been certainly a good success for Incyte this year, and we see a lot of potential in the future. So next product I wanted to speak about is parsaclisib. Parsaclisib is a PI3 kinase delta, but it's clearly very distinct from the first-generation PI3 kinase delta that have been introduced in the past. It's highly selective and potent. It was designed to avoid hepatotoxicity, which was a problem with the first-generation product. And we worked on the regimen to make it such that we can avoid in some part of the on-target toxicities that you observe with PI3 kinase delta. So you can see on the right the results that we have published at ASH. I think it's important to see that it was independently reviewed response rate. And obviously, the long durability of response is very important, and that's what leads us to believe that there is a real potential for this product. We will be submitting an NDA around the middle of -- or in the second half of next year -- second half of this year, of 2021. And as you can see, there are a number of patients who would benefit from this product. The next product -- or a series of product I wanted to speak about is our oral PD-L1 small molecule, oral PD-L1 inhibitor. 550 described here is first of a series of products that we have in the clinic. You can see the data that was presented at SITC. And what it shows is that the level of PD-L1 inhibition observed with 550 is very similar to what you see with monoclonal antibodies. And on the right, again, it's a 1-patient vignette, but you can see that there is, at least for this patient, a clinical effect in term of tumor shrinkage. So we have not only 550 but we have a number of products now move in the clinic for -- with this type of mechanism. And obviously, we need to continue to work on assessing the safety profile at different dose level. And we are entering into the phase where we would be evaluating efficacy in defined patient group to benchmark in some way the response rate we are observing with other type of PD-1 inhibitors like antibodies. So all of that is ongoing and moving relatively well. On the early pipeline, on the next slide, I just wanted to speak about 3 of the products that we have in the clinic in immuno-oncology. MCLA-145 is coming from our Merus collaboration. It's a PD-L1 x CD137, so 4-1BB inhibitor. It's in dose escalation, and we should have data in the second half of this year. AXL/MER is a small molecule, very specific, Tyro-sparing AXL/MER inhibitor coming from our own research. It's also in dose escalation. And today, we are introducing a new product, A2A/A2B. It's adenosine-targeted agent that is also in the clinic, in dose escalation that we plan to combine with an anti-CD73 monocular antibody that we'll be also filing for an IND in the coming months. So the potential to have a combination of CD73 antibody with a small molecule, A2A/A2B, that is also -- has a very unique profile in term of specificity. So promising pipeline, early stage, later stage, and we are also launching a number of products today. So a very dynamic situation in there. Now moving to dermatology. It's obviously a new franchise for us that has been coming from the activity we have seen with JAK inhibitors in a number of indications. So the first one we have is rux cream in atopic dermatitis. You can see here the result of the Phase III study that was published, the one that has been used also for submission at the FDA in December. And what it shows is that the type of efficacy that we are observing with rux cream is very high, very different from what you see usually with this type of topical product, and that opens a very clear opportunity for us. When you look at these numbers on -- which are like vehicle-adjusted basis compared to placebo vehicle, you can see that rux cream is very much superior to what people have been seeing in the past with this type of product. And it's not far from what you see in a very different population of more severe patients, but it's not far of the type of benefit you can see with Dupixent. So it's certainly a level of efficacy and safety that leads us to believe that it could be a very important product in this setting. I mean on the next slide, we are trying to describe the atopic dermatitis market in the U.S. and gives you some data from a market research. What you see is that out of the 10 million patients diagnosed, most of them are mild or moderate. So they're the ones that would be fitting the profile of ruxolitinib cream. And from the research we have done, what we see is that the number of patients eager to have topical new opportunities that will have a higher efficacy and the number of physicians, the vast majority of them, are seeing the potential benefit of having a product with a profile of rux cream. So we are fairly optimistic for atopic dermatitis with ruxolitinib cream. We are building the team that will be launching in the U.S. And you can see we have been able to assemble a group of people with a lot of experience in dermatology and a lot of knowledge on how to be successful in this market. We are anticipating around 150 people in the field-based organization, and that will allow us to be targeting approximately 11,000 medical specialists. So it's a team being put in place now in the field where we have already in the headquarter in term of access and marketing and medical affair team in place. The next step, obviously, would be the FDA decision at the end -- at mid-2021. We anticipate in mid-2021. So next indication for rux cream is vitiligo. You can see here the result of the Phase II randomized study that was done. It's a unique profile with the ability to restore pigmentation. You can see on the case of this patient that we had in the study that over a period of 12 months you have a continuous improvement of pigmentation with treatment with rux cream. The Phase III result are expected in the first half of 2021, which should lead us to being able to have an sNDA in the second half of this year. So another very important indication for rux cream and what I believe will be an important product for Incyte. The next product we have in dermatology is 707. It's a selective JAK1. And what you see here is the data that we have published recently showing that, in HS, you can, in fact, benefit in term of AN count and in term of symptoms, quality of life. And so we are moving this product now after this proof-of-concept to a randomized Phase II studies that we are initiating also this year. So in term of what to expect in 2021, you can see here on the screen the different milestones that we have with, obviously, a number of potential approvals in dermatology for atopic dermatitis and very important submissions with parsaclisib and data that will be also available for a number of our products. So I will stop here, and obviously, very happy with my colleagues, Steven and Christiana, here to take questions that you may have.

All right. Great. Well, thank you, Hervé. Obviously, you have quite a bit going on. So we'll get into the Q&A part of it now. We have about 15 minutes left for this. [Operator Instructions] But I'll get started right now. And I guess, Hervé, or for anyone on the team, maybe Christiana, I wanted to start with the key driver here behind increasing long-term guidance for Jakafi to greater than $3 billion from $2.5 billion to $3 billion. It's obviously been a very strong commercial track record for the products. So I don't think people are going to be overly surprised. But is it the kind of the strong launch and outlook for GVHD? Or is it more about the evolving view for MPNs or maybe a little bit of both?

I would say -- and Christiana can add. I mean, I will say it's a little bit of both because, first, we had the result of the chronic GVHD Phase III study showing positive results submission at the FDA. So now we are anticipating having chronic GVHD part of the label somewhere in the second half of this year. So that's adding a new layer in terms of revenue. The second piece is the opportunity to expand and diversify the franchise, not in 2021 but in the years coming after that with the QD formulation. And we have also proof-of-concept with PI3 kinase delta, and we are working on BET and ALK2. So what we see is that the franchise has a potential, not only to diversify but also to expand in the years between '24, '25, '26. So that's what we are speaking about here is, on one hand, we have now approval in chronic GVHD, which is obviously something that we didn't have a year ago for all. We have the positive Phase III study and we are also looking at the potential for diversifying the franchise in the next year.

Yes. So in the near term, think about the growth coming from Jakafi with growth across all indications, including GVHD and the expansion, hopefully, of the GVHD label; and then in the midterm, coming from being able to also address underserved patient populations through the combinations that we have now in development.

Okay. And can you remind us of the opportunity in chronic GVHD relative to acute?

So acute GVHD, what we used in the past was -- in the steroid-refractory population, we said there is around 1,500 patients in the U.S. -- new patients in the U.S. Now the new patient flow and the total patient pool in acute are not very dissimilar. What's happening in chronic GVHD is that there is probably the same number, maybe a little more, of new patient every year, but there is a pool of patient that is far larger. And that's why I was speaking of 10,000 patients or more in the U.S. Many of them are well controlled. So they would be okay without Jakafi. But what we think is that out of these 10,000 patients, there is a large proportion of them who would benefit from a new product. So there will be, in chronic GVHD, 2 things happening different from acute. The pool of patient is far larger and the duration of treatment is far longer. So we see it as a very, very different opportunity compared to acute.

Okay. And then with regard to once-daily rux or Jakafi, I'm curious, how much of an impediment is the current BID administration? Obviously, the product is doing quite well as a twice-a-day pill and has been for some time. And I get that all else being equal, QD is preferred to BID. But do you believe this can meaningfully -- could be a meaningful way to protect the franchise into the 2030s? Or is it -- will it capture a part of that segment you alluded to in your slides that you haven't captured yet?

Yes. There are 2 things. I mean, maybe Steven can speak about the PK profile being different and having a potential benefit there. But from the practical standpoint, twice-a-day is fine. In cancer treatment, we have known that for a number of years. If you have a single-agent type of product, you can take it once or twice-a-day. It doesn't make a big difference. What makes a big difference is when you start to combine because if you have a once-a-day combination partner, then -- we all know the compliance and the risk of a mistake in the dosing are far higher if you have a twice-a-day combined with a once-a-day. So having a once-a-day, once-a-day combination is far better. And for what we have in our own portfolio, PI3 kinase delta and BET and ALK2, we are all in the once-a-day kind of a mode. And then it gives us the opportunity to develop fixed-dose combination because you have a once-a-day with a once-a-day. And that could be very important from the commercial standpoint because when you have that available, it gives you a lot of flexibility. So we see the benefit of QD to be by itself replacing a twice-a-day not -- it's something, but it's not the most important part of it. I think the most important part is the ability to combine with our own portfolio and with other products, right, in a once-a-day, once-a-day type of a formulation.

Okay. And then regarding tafa or Monjuvi, it sounds like feedback from the field and your market research continues to be very encouraging in these early days of the launch. When you think a little longer-term though, investors appear to be a little taken aback by your initial peak guidance. Can you just provide a little more perspective around the early trends and how they may or may not inform the longer-term outlook for the product?

I think the -- I mean, the guidance we gave was related to the second-line setting in DLBCL in the U.S. So that's a sort of -- a very sort of a defined part of the tafasitamab potential. I mean, we have, obviously, for Incyte, all the ex U.S. territories that will add to that. And then you have all of the work we are doing to expand in B-cell malignancies, in general, the potential of the product. It's a product that has a fairly unique profile in term of safety, efficacy, convenience. It's in that field, including -- even if you look at the future and some potential new competitors, I think it has a very competitive profile. And obviously, the first step is to establish it in second-line DLBCL, but it will have a lot of opportunities to expand beyond that. The first-line study is being initiated. We have a program in follicular lymphoma. And we think there could be a very good opportunity to combine it with PI3 kinase delta where you have seen the response rate I was quoting in my presentation, where there could be a lot of ways where it could create a very efficacious type of combination for patients with lymphoma. So we are fairly optimistic about the long-term potential for tafasitamab. The guidance we gave a few weeks ago or months ago was really related to the U.S. second-line DLBCL indication.

Okay. Makes sense. And when we think about the front-line setting, so I'm curious on the key gating factors for your so-called frontline trial in terms of getting the trial up and off the ground and then also when it comes to recruitment, obviously, in this environment we're in. And maybe just speak to the pace you're anticipating or the duration it might take to complete the study because it's an important one.

Yes. Cory, it's Steven. Thanks for the question. I think you allude indirectly to the COVID impact on clinical trials in general. I think this is slightly different in that patients with diffuse large B-cell lymphoma first-line need treatment sometimes urgently. This is a first-line study. So we don't expect a massive impact, if at all, in terms of COVID to recruitment. In addition, MorphoSys before us, and now us combined together, have actually overachieved in -- at least in the lymphoma space in terms of recruitment. So although, as you alluded, it's a large study, upwards of 900 patients. It's first-line patients who require therapy. It's add on to standard of care, so there's no issue in terms of randomization, and we expect it to go pretty well given all those factors.

Okay. I want to work in a question from our audience, and it's what's the path forward for the oral PD-1?

Yes. As -- so thanks for the question again. As Hervé said, there's a suite of compounds now. We're first-in-class. We think based on the fact that it's a small molecule, there is potential -- at least theoretic potential for it to reach the tumor microenvironment to a better degree than antibodies potentially. The mechanism of action is slightly different. You get binding of the receptor dimerization and then internalization and disappearance, which we demonstrated at AACR last year, at least in a preclinical model. So the question now is to work out -- and we've done well in terms of dose and scheduling work, and we're now in the efficacy phase of the compound, but to work out what populations it's best served in. So obviously, the traditional mindset in terms of checkpoint inhibitors and hot tumors. And then beyond that, are there other areas where, because of its different MoA and potential different utility in getting to the macro environment where it may be better. And that's what's basically going on now in terms of what we call efficacy benchmarking across various entities, and then we'll ascertain. I think because it's an oral therapy, there are other ways you can think about it. Obviously, upfront, patients getting cancer treatment get IV-based therapies. But often, in the maintenance settings or in adjuvant settings, they get ongoing therapy sometimes for a year or 2, if you look at different paradigms in lung cancer, in breast cancer, for example. And there, it may lend itself very well to that sort of setting in terms of oral maintenance therapy. So those are the areas we're thinking about for the moment. It's a little early to tell you exactly where we'll be heading from a registration path point of view.

Okay. And with regard to rux cream and the TRuE-V vitiligo data that's coming up in the first half of the year, what's a win there? What's clinically meaningful for that program that would get you excited?

No, I think the efficacy data we've already seen in the Phase II that was in Hervé's formal presentation was, I would say, wanting to use, almost eye-popping, right, in terms of the ability to get re-pigmentation over time that actually improves over time, if you look at the 24 versus 52 week data. And we think clinical meaningfulness based on what discussions with investigators and then surveying patients is around the facial VASI 75% improvement. I think people want to see some degree of quite substantial re-pigmentation that's then maintained over time. And obviously, there will be other aspects to proving clinical benefit, including the psychosocial aspects and different scoring system. So I think it's a combination of quite substantial re-pigmentation with the attendant psychosocial aspects that improve as well. And then it will be up to us to then prove in a larger Phase III setting if that's the case and then prove that to regulators as well.

Okay. And then with -- also sticking with rux cream for a minute, by moving to the commercial side of things, how should we think about launch dynamics here for AD? I mean, could you just speak to the amount of heavy lifting that's going to be involved in the early days? Or is it possible to get, relatively speaking, material market share pretty early on given the data and the mode of administration?

I don't know exactly the answer to that question because a lot of it has to do with our pricing decision that we will make, and we have not decided yet. So it's a little bit of a case where what we know is that the curve of adoption that you can see for atopic dermatitis will be dependent on access and our ability to gain quickly full reimbursement in a way that will be practical for patients and physicians. So -- and that will depend in part to what the level of pricing we decide to go with. So we are working on that, as we speak. We have a team in place already that is doing the -- working with payers on how to do that. And frankly, I think the medical need for this type of product is very high. And frankly, that's what has been creating this excitement internally is every time we were speaking with patients or physicians, we had the same type of answer, of saying having a topical, highly effective way of treating this patient is something that would be very valuable, and we will be implementing that in the second half of this year. So for the 6 months of 2021, we are going to see -- I don't have a good view on how quick and how large it could be. What I see is that in '22, '23, we will certainly have a new contributor to our revenue that will be meaningful. That certainly is the case.

And then, Hervé, just that we have about 30 seconds to answer this question, but it's another audience question. So I want to work it in. Are there any -- what's Incyte's interest plans regarding international markets? Tough to answer in 30 questions (sic) [ seconds ] but please do your best.

International market, so you know we have teams in place in Europe, in Canada, in Japan. So these are teams from Incyte doing all the work of development and commercialization for our products. Outside of that footprint, we are planning to do partnership like we did in China with Zai Lab and with Innovent where we have an interest in the program, where we are sharing our research capabilities and where we will not have teams from Incyte in the short term in place for hematology and oncology. In term of dermatology, we are going in the U.S., as I described it, and we are still looking at optionalities we have in Europe, Japan and other countries.

Terrific. We'll have to stop there. Thank you guys very much, Hervé, Steven, Christiana, Mike, everyone. I really appreciate your time today and very helpful discussion. So thank you, guys.

Thank you.