Incyte Corporation (INCY) Earnings Call Transcript & Summary

Hello. Welcome back to the Cowen Healthcare Conference. Next session is a fireside chat with Incyte. And we're really pleased to have with us CEO, Herve Hoppenot; CMO, Steven Stein; and CFO, Christiana Stamoulis. We will get to Q&A, and we do encourage the audience to participate. [Operator Instructions] But we'll start off with -- everybody is going to make a few kind of general overview comments, give a status update, and then we will get into specific questions. So Herve?

Yes. Okay. Thank you, Marc. I'll be very quick. I just will show 2 slides. One is about 2020. So you have it in front of you. And what you can see is basically, it was a year where we had 3 products approved by FDA. So it's Monjuvi, it's Pemazyre, it's Tabrecta. So it was an important year of diversification, and obviously, of growth. The top line, the revenue grew at 24% including milestone, 18% without the milestone. So the sort of run rate of growth that we have is very strong. And as you may know that it was a challenging year. In fact, specifically in the U.S. in terms of number of cancer patients being treated, et cetera, because of COVID, but we were able to go through that and to diversify our portfolio, and it was a very, very successful year. And the next slide is showing that as that was happening, we have also 7 submissions that have been done. So now it's -- for 2021, 7 possible approvals. So the chronic GVHD Phase III study that was published at the end of the year is now at the FDA for review, with a priority review and the PDUFA date in around midyear. We have tafasitamab in Europe also being reviewed. We have pemigatinib in Europe and Japan under review. And retifanlimab, our injectable PD-1 also submitted in the U.S. with also midyear PDUFA under priority review. In dermatology, it's a very important submission in atopic derm. Again, priority review, mid-year type of PDUFA date. And then for the partnered product, Olumiant baricitinib is also under review at the FDA. So that's really an exciting year coming up with a number of optionalities for, again, additional product, new sources of revenue and diversification. And what we have also announced is that during 2021, we will be submitting parsaclisib in a number of different type of non-Hodgkin's lymphoma. And we will be receiving in the first half, the vitiligo Phase III results and the submission will happen in the second half in the U.S. and that will also allow us to do the submission for our claim in vitiligo, plus or minus, atopic derm in Europe. And then there are new indication also for Tabrecta and Jakafi in GVHD. So a very exciting year for Incyte, it's a year with a lot of consolidation, addition in cancer hematology. And obviously, the launch of our new dermatology franchise in the U.S., which would be very important to continue to grow and diversify our portfolio in the next few years. So I will stop here. And if you want to go to the Q&A, we can go into more details.

Great. Thanks for that, Herve. Maybe start off from either Herve or Christiana, what's the answer to this. Just on the Q4 earnings call, of course, you issued guidance for the year, which, on the expense side, was relatively flat for R&D. But there is a significant build on the SG&A line. Of course, as you just laid out, Herve, there are a number of product launches happening either late last year or into this year and then throughout this year. Can you just speak to kind of the pace of that spending increase? And then kind of looking forward, where do we exit the year on the SG&A? And kind of -- and what's that look like in terms of building further in 2022, 2023?

Yes. Sure, I can take that. So in terms of the SG&A, I would look at it in 2 parts. The first part is the SG&A related to the base business, i.e., to support the current operations and the currently commercialized assets. And there, when you look at 2021 spend versus 2020, it's basically flat. So no increase in that part of the SG&A. And then to your point, there is SG&A related to the new program launches that we are expecting. And so the growth in SG&A, implied by the guidance that we provided is really driven by those new product launches. And primarily by the dermatology franchise, which is a new franchise for us and to support the commercialization of RUX cream starting in AD. So those that guidance reflects both the fixed costs that we have discussed in the past that we are -- we have the team in place, the commercial team in place with the sales force expected to be of -- fully in place by April. So basically, the fixed cost component of the SG&A will be a full year type of impact. And then there are the variable costs, costs associated with the prelaunch activities that would happen in the first half of the year. And then costs associated with launch -- the launch and commercialization, including BTC related costs that we expect to happen in the second half of the year. So that's how we are looking at SG&A related to derm. And again, that's the primary driver of the increase. And then there are these other product launches that we expect this year in Europe and in Japan. In Europe, we could potentially see the approval of pemigatinib and tafasitamab. Pemigatinib, obviously, it's a smaller program, no significant costs associated with that. Tafa, there would be some increase in the sales effort and associated expenses to support -- and marketing expenses to support the commercialization in Europe. And then in Japan, there is a smaller effort there -- commercial effort there to support the potential approval of pemigatinib and commercialization of pemigatinib. So these are really the drivers high G&A. In terms of the infrastructure that we are putting in place, if you want to think now beyond '21, we expect that it's an infrastructure capable to support multiple programs. So in the case of RUX cream, we wouldn't expect to see an increase in the sales force to support vitiligo. It's the same sales force that would be doing that. So we wouldn't expect really any significant increases there. Where the expense will vary is around the variable costs and marketing activities, the promotional activities to support the programs. And those would be commensurate with the opportunity that we see in the programs.

Okay. And I guess, alongside that, and maybe we'll get to this a little bit later in more depth, but just presumably, with the filing in Europe, at some point, you're going to need to build a derm organization in Europe. When should we think about that being built?

So in Europe, we haven't made the decision yet of how we will proceed, how we will commercialize RUX cream. We have indicated in the past that we have a bit more time to make that decision, given that we'll wait for vitiligo approval. And therefore, we have a little bit more time. We wouldn't filing before for the second half of the year. So there is a bit more time, and we're still in the process of assessing the various alternatives to see what would be the best way to maximize the value of the asset. And there, we are assessing everything from go it alone to partnering it out to working with a partner to take it forward together. So still assessing the alternatives.

Okay. Maybe just, Herve, back with another guidance piece. A little earlier in the year, you'd updated the sales on MPN -- the peak sales for the MPN franchise to over $3 billion. Can you kind of walk us through the assumptions that underlie that guidance beyond just the chronic GVHD label update that we're going to hopefully get later this year? But what else needs to happen to achieve the $3 billion? And I guess on the upside, what would need to happen to the franchise for it to not just cross $3 billion, but get to $3.5 billion or $4 billion?

So thanks for the question. It's a little bit of a complex situation because it's not a product guidance anymore. What we were doing in the past, and we have done over 7 years is give sort of what we believe the drug, Jakafi twice a day, could be at peak. And we -- if you remember, we went from $2.5 billion. And now we are saying the guidance for the franchise is going to be north of $3 billion. If you look at the product itself and the curve that we have and the growth I have been describing, which has been -- there is a COVID impact on the number of patients or new patients, et cetera. But we have seen a growth that has been constant, and it's coming from duration of treatment in MF, new patients in PV and duration of treatment in PV and the new indication for GVHD. And that curve is going $2 billion, $3 billion-plus by itself. So if we were just in a world where Jakafi twice a day is not changing in any way. We could probably be in that range. What we are saying is that, in fact, our goal is to make Jakafi twice a day, a small share of a bigger portfolio that will be made of a number of products that will be applicable and in MF, PV and GVHD. And that includes once a day. So the XR formulation that is now in stability can be submitted next year. But ALK2 and PI3 kinase delta, where we have Phase IIIs ongoing. So what you will see over the next 6, 7, 8 years is a fragmentation of what was the 1 product kind of franchise of Incyte into a number of subgroups of patients with myofibrosis or with GVHD that could be treated with -- or PV, who could be treated with alternative solutions that we are developing now and that we expect to see approved between now and 2028, and will be contributing to this new franchise. And that obviously is going to extend the duration of treatment. It's going to expand -- beyond the expansion of the patent life for the -- some of this product. It will also expand the business between now and '28. And that's why we believe it's going to be exceeding the $3 billion mark that we have spoken about. It's a qualitative and quantitative resizing of what this franchise could be for Incyte.

Okay. And in the past -- before the acute GVHD label got added, you gave some guidance kind of around the off-label use that you'd been seeing, both in acute and chronic. And now, of course, acute is on the label, but chronic is coming. How has the chronic market kind of changed with an acute label? Is it -- was it kind of steady state? Has that grown? And implied in that is then, how much growth inflection can we really expect from the label update?

Yes, I think we'll see a growth inflection because we know there are 10,000 patients in the U.S. suffering from chronic GVHD, which may be coming from bone marrow transplant that was done a long time ago. So there is a prevalence of chronic GVHD that is very different from the prevalence of acute because acute is having a very short duration. So it's around 10,000. We know some of them are treated with RUX, but we also know by getting the indication, it's going to add a number of new patients to the current flows that we have. It's going to come in the second half of the year. We are anticipating anyway the second half of the year to be stronger than the first half because COVID is having an impact on all cancer care. You can look at every diagnosis of cancer going down in a way that is probably in the double-digit range, I mean, 10% to 20% overall in the U.S. And we have seen some of it in MF and PV, and we have seen some of it in bone marrow -- the number of bone marrow transplants being reduced. And therefore, the number of GVHD. So we have been growing Jakafi over the past months, in spite of situations that, frankly, we hope is going to be renormalized in the second half of the year. So the way we are looking at 2021 is where, hopefully, normalization of the diagnosis of cancer in the second half, leading to an increased flow of new patients, in addition to the chronic GVHD indication being -- hopefully coming. The PDUFA date is at the end of June.

Okay. And maybe that's -- you started to touch on the prior answer into the combination. So I think good time to bring in Steven. You are starting to run some pivotal trials in the liver program, the most advanced is parsaclisib combination. With those -- I guess, can you review the trial designs, both frontline, second line? But also do you do you feel you need to show -- establish superiority on both spleen responses and the symptom endpoints? Or is just one of those enough to support a combination approval?

Yes. Marc, it's Steven. Thanks. So just to the back end of your question, we've always assumed, and in terms of our regulatory feedback, that you would need in the first-line set in, both. So an SVR, 35% decrease plus total symptom score improvement to be both clinically and statistically significant to get an approval. So we weren't surprised by Constellation's announcement. It's how we got the first approval in MF, and it's how we've geared our first-line studies. For the RUX parsa studies, you're right, there are 2 of them. They're very different populations. So the first one is the smallest study, the -- number 304 in clinicaltrials.gov, is the suboptimal study. So these are patients, the smaller minority of patients that don't have a satisfactory response to RUX, either in terms of spleen or symptoms or both. And they have to have been on for 3 months, 8 weeks of stable dosing and then our randomized RUX versus RUX plus delta. It's about a 220-patient study. We want to enroll it this year, have data next year and then obviously, use that as a submission if it's positive in that setting. The first-line study is also up and going, like the suboptimal study. It's a standard first line study. The primary endpoint is SVR35. Key secondary endpoint is symptoms, we think you need both, just to repeat, it's about double the size of the suboptimal study, take a couple of years to enroll. And that's also up and going at the moment. So those are the 2 registration-directed efforts. Just to quickly mention, our BET program is going. It's enrolling as well. Monotherapy safety this half of '21, combo safety second half. We'll publicly present data next year. But we'll have to make big decisions, do we leapfrog, don't conduct proof-of-concept work and go straight to Phase III, for example, if we want to, with that combo. And then the L combo, extremely important, different mindset it's to alleviate the anemia of underlying myelofibrosis with hepcidin inhibition plus the RUX-induced anemia. If that works, which we think it will, you can maintain RUX dosing. Same construct, but of ahead of the BET program. Monotherapy safety this half, combo safety, second half of '21, public data next year, and then we'll make the same Phase III decisions also then. So that's the -- so those are the clinical programs.

Okay. And I guess -- so maybe the data presentations for those last 2 are going to happen next year. But would you be expecting to make statements about what's happening in the trial before then? Or do we need to wait for the presentation itself?

Yes. I mean, I'll let Herve sort of address it maybe in more detail. But it's better -- it will be better to show both the mono and combo safety as a package. But if we have something in hand and an available meeting, we could do it earlier. If we trigger, for example with RUX BET, a Phase III program, once -- and we do it pretty quickly for strategic reasons, we would announce that as well. And obviously, put it on clinicaltrials.gov.

Okay. And sorry, just clean up on the suboptimal response trial. Which endpoints do you think you need to hit on this?

Yes. That one, we've been competitively a little gray about. So the only thing we've put on clinicaltrials.gov is that it's an SVR endpoint. We haven't quantitated how much that is. And so we think for that particular entity, it may be a little easier. I'll just leave it at that.

Okay. And so everything we've just talked about is really directed at MF. In terms of life cycle management, what's happening for the PV side of things since that's going to be a large part of the franchise as well?

Yes. So we're extremely active in that space. We don't, as a rule, announce compounds that are not IND cleared. But we have an effort internally with some interesting targets in PV, hopefully be able to make one public in the next year or so internally. And then we look at the external world in terms of things that may be competitive in PV and have interest, either on their own or in combo with our products. But it's not that we're not active, we just don't have an active clinical program right now.

Okay. Maybe turning to oncology, Herve, to broader -- outside of Jakafi, but staying in oncology. You brought in Monjuvi last year. At the time, a big part of the rationale was the longer-term prospects of this program and combinations. You started a little bit of those trials, should we be expecting many more combo trials to start this year? And then related to that, when could we start to see some of your own combination data start coming out from that program?

Yes. Thanks for bringing that up. I mean, CD19 is expressed early B cells right through mature B cells. It's well retained throughout malignancies, maybe even more so than so than CD20, so it may have potentially more opportunities. So obviously, the first indication is in the second-line setting with lenalidomide with the L-MIND data. The B-MIND study is ongoing with bendamustine Rituxan and but this year, the first-line study, Front-MIND, and the follicular marginal zone study, inMIND, are starting Phase III programs, directed. The study that enabled the first line study, the Front-MIND study was called First-MIND, presented late last year. It was a Phase I safety study, and we've got sufficient safety to enable the tafa and LEN R-CHOP regimen. But we also looked at efficacy with all the caveats, and there was a 90 -- north of 90% response rate there, which we publicly disclosed, which is absolutely what you want to enable that first-line endeavor in diffuse large B-cell lymphoma. You have to beat R-CHOP. We've enriched the study for slightly worse prognostic patients, IPI 3 and above in terms of the international prognostic index. And it will have upwards of 800, 900 patients. The low-grade study, inMIND, is in combination with -- so it's tafa in combination with -- versus R-squared, and very important endeavor there as well. But what you allude to, and 1 of the key reasons we did the deal is to look at our internal combination work with parsaclisib. So remember, MorphoSys had already done work in a study called COSMOS, with both idelalisib and venetoclax in post-Rituxan, low-grade lymphoma, particularly CLL, has shown in both settings, extremely high response rates. So we are starting now, as we speak, to do, instead of dated tafa idelalisib, we'll do tafa parsaclisib. And we expect we'll see the same, very high activity and hopefully, safety as well. And then pursue -- that will be a very interesting doublet to pursue again across B-cell malignancies, potentially something like CLL would be in scope there. And then we also, with Morphosys, are starting a combination with CD3, CD20, initially with a Xencor antibody -- I don't know, [ XmAb ], I think is how you pronounce it, and maybe other combinations down the pike there as well. So it's across the spectrum of B-cell malignancies. The entire spectrum of diffuse large B cell, initial indication with tafa and LEN, second-line setting and bendamustine, Rituxan and first-line with R-CHOP, indolent lymphomas on an R-squared backbone and then progress into the tafa parsaclisib combination. We'll see how that goes from a safety perspective and then decide where to go.

Okay. And using that enrichment strategy on that First-MIND -- sorry, in Front-MIND, what would be your expectations with that population for a response rate? And then ultimately, PFS, which would be the primary end point rate?

Yes, they're not benign, as you know, to do their long studies. Broadly speaking, R-CHOP probably cures 50%, 60% of patients, maybe a little bit less than that number when you use the worst prognostic index patients. So we do that to enrich for events, basically, to make a little more efficient study to do. Plus that's a population that we know did well with tafa and LEN anyway. So you'll have to improve that cure rate. That's the bottom line. So whatever the control arm hits, if you want to ballpark it at 50%, you'll have to have a delta improvement in cure rate to get there. And in total, translate to a disease-free, DFS number and overall survival number attached to that. I don't have the exact numbers in front of me, but you have to improve that cure rate.

Okay. And maybe turning back to the commercial side for that program for Herve. You exited the year at about a $70 million run rate, which is certainly good for a first few months ago launch. I guess, what aspect of the regimen is resonating with physicians the most relative to what else is out there, things like Polivy?

Well, I think what's resonating is the fact that it's a chemo-free regimen with a very high rate of complete response and with a very long duration of these complete responses. So basically, it's an opportunity to give patients a number of years without having to be exposed to chemotherapy. Most people start, obviously, with R-CHOP. And today, many of these patients are treated again with Rituxan chemo-type of regimen. And what we are basically bringing to them is a way to avoid that and to do it with a simpler and a far better tolerated type of treatment. And we have seen in that setting of second-line plus that now we are a head of Polivy. We -- and there is a near-constant growth of our market share in spite of the difficulties of launching in the middle of COVID. But it has been fairly clear from every data point we get that the complete response rate, the duration of response and the safety profile is what's driving the adoption.

Okay. Great. And then maybe the last few minutes, we'll go to dermatology. The new arm that's going to come into the business, that's going to come in this year...

A new leg for the corporation.

Yes. Maybe just first off, for the labeling. It's a bit of a discussion point on the investor side, of just the JAK class, in general, getting thrombosis risk. Obviously, those have all been systemic agents. This is supposed to be topical. But I guess, what makes you confident the level of exposures that are seen since we don't really know the mechanism, right, but that those are going to be considered well enough that the FDA gives you a different label?

Yes. I'll just talk relatively quickly. So it's a sort of a 3-step argument. Number 1 is, from a PK point of view, we've published 2 papers now, 1 in atopic derm, 1 in vitiligo. The mean bioavailability of the cream versus oral RUX is about 5%, 4% to 6%, 4% to 7%, with some outliers granted, but it's about 5% bioavailability. Translate that to a 60-gram, 1.5% tube that's given twice a day for a month, you've given, on the skin, about 15 milligrams of RUX, but what you're getting bioavailable is about 0.75 milligram. So it's a very, very low dose in terms of the equivalent to oral RUX. Second part of the argument is, from the safety perspective, with topical RUX, the whole true AD program, it's clean as far as MACE malignancies and thromboembolism. In addition, in the third part, the most powerful thing of all is the parent compound. RUX has been on the market 10 years. The safety follow-up from the pivotal programs in MF and PV have 5 years of published data now, showing, if anything, actually are lower. For example, thrombosis rate in PVO, it's a prothrombotic condition. We ask on a yearly basis to examine safety for oral RUX. We update that all the time. It doesn't have a black box, and there's no signal in that regard. So that's the argument. Very low bioavailability, no safety seen in the actual AD program that's worrying. And then the parent compound safety is very clean with no black box. We feel that should suffice in terms of the argument. I'll just remind you, to end my comments, that there are 3 oral JAKs being reviewed by the derm division over the 6 months prior to the cream PDUFA date. So we'll see how that evolves pretty actively soon.

Okay. And then as we think about launching in atopic derm, I mean who are the -- who's the low-hanging fruit? Should we expect this to be a rapid -- rapidly penetrating in some of these populations? Or is this really going to be a slow-and-steady type of launch really? How do you view it, Herve?

Yes. If you give me a chance, I'll take the rapid one. But I mean, the population, the target population is relatively clear. We are not competing with steroids. So steroids will stay, they will be used. And then for people who are not satisfied by the effect of steroids is where we commit -- we come in. We are not competing with Dupixent because it's a different patient population with a different type of disease that is more extended in the body, where using topical would not be justified. And therefore, we are exactly between the 2, where there is a clear medical need and where we think the effect we have in terms of efficacy that is Dupixent-like when you look at the improvement and the -- each effect can be provided to the mild to moderate population in a safe way as it is topical treatment. So that sort of where this is going. We will have the PDUFA date in June. We are already working with payers to discuss how to gain access quickly on their formularies. And that's probably related to your question of is there a trade-off between the way we are pricing the product and the speed at which we can see the uptake, and we are trying to make sure that the product will be available and reimbursed as quickly as possible. And frankly, I think it has a very unique clinical profile that has never been seen in -- because the creams that have been introduced in the past didn't have the same speed of itch relief that we are seeing with RUX cream. And that's a key criteria to stop the cycle of itching and scratching and infection that is leading to the disease not improving very quickly. So that's where it's going to happen. I anticipate that there will be a quick update because we know patients are giving feedback to their physician and the feedback they get is that the soothing effect of RUX cream is something very -- that they perceive very quickly after the first application.

Okay. I know we're running up on time, so I'll give you 1 theory you can answer in 1 word. In 5 years, topical RUX, is there more sales from atopic dermatitis or vitiligo?

In 5 years? I think it's probably going to be a tie in 5 years. Because both of them, there is more product to be used in vitiligo per patient, but there are more patients in atopic dermatitis. So we see them as like equal potential. And frankly, internally, we see both of them are very meaningful in terms of what we are trying to do, which is add a new franchise to our onco-hematology franchise.

All right. Great. Thanks a lot for all the time. Great conversation.

Thank you.

Thank you, bye.