Incyte Corporation (INCY) Earnings Call Transcript & Summary

Hi, my name is Matt Phipps. I'm a Research Analyst here at William Blair covering Incyte. And just before we get things kicked off, I do have to say, please visit williamblair.com for a list of any disclosures or conflicts of interest. And I'm happy to have with us Christiana Stamoulis, the Chief Financial Officer; and Steve -- Steven Stein, Chief Medical Officer to talk about kind of the growth of Jakafi and the expanding business at Incyte. And since we only have 30 minutes here, I'm going to jump right into questions and talking about the company.

So Christiana, I wonder if you could start us off, talk about Jakafi, a bit of a lighter first quarter, but still maintaining full year guidance. So how do you feel now about the COVID-19 impact and being able to hit that guidance? Obviously, a lot of us -- like things are opening up a little bit more here around the country.

So Q1 was actually, broadly, in line with our internal expectations. We were expecting the first quarter of the year and even the first half of the year to be lighter compared to the second half of the year. And that's for a couple of reasons. First of all, there are factors that impact the first quarter of the year every year. And this has to do with gross to net. We tend to see a higher gross to net in the first quarter or in the -- a bit higher also in the second quarter than the rest of the year and that's because of -- at the beginning of the year, there is a coverage of the donut hole. And then also forward purchasing that happens in the fourth quarter of each year, primarily in anticipation of the reset of out of pocket for patients. So patients tend to try to push out when they have to fill in the first prescription for the year. And therefore, they're paid out of pocket. And so they try to do some forward purchasing at the end of the year. So these are 2 factors that we see every year. We saw it again in the first quarter. In addition to that, this year, we had the COVID impact, the continuing impact from the pandemic and the slowdown in the new patient starts that we saw during 2020 during the Q2 to Q4 2020, they impacted Q1 because those patients that were not new patients in 2020 did not become subsequent users of Jakafi in Q1. And we have said all along that we expect the COVID situation to impact results in the first half of the year, but we would expect recovery in the second half of the year. And that's what we are already seeing. Already, at the end of Q1, we saw some recovery in new patient starts, starting to get to levels that we had seen pre-pandemic, which was very encouraging and in line with our expectations. And as the country continues to reopen, we would expect this to continue. And as we said during the Q1 call, we remain confident with the guidance that we had provided for full year.

Do you think the number of new patient starts for the year gets back to a pre-pandemic type of growth rate? Or is there a potential for some catch-up as patients just weren't diagnosed over the past year?

So both -- the patients that were not diagnosed over the past year, obviously, will -- these were lost patients last year, but now we would expect that as things reopen, patients would be going and visit their doctors, get diagnosed properly and get on therapy. And that's where we would see the new patient starts. And then the new patients that will start getting on therapy, they will hopefully continue with therapy that -- so we'll see the repeat impact of them getting added to therapy.

Okay. Great. At the beginning of this year, you all increased your long-term guidance for kind of the ruxolitinib franchise, this oral ruxolitinib franchise for the first time, say now expect over $3 billion from the previous $2.5 billion to $3 billion. I know you don't want to get too granular on the pushes and pulls there, but maybe you can just talk about what gave you confidence in doing that? And maybe a couple of the components that got added in as part of this kind of maybe LIMBER program or however you want to classify it?

Yes. So you're absolutely right. This guidance now includes programs beyond Jakafi. So in the past, we were giving guidance for Jakafi BID, the current version of Jakafi, and we were saying how we expect peak sales to reach $2.5 billion to $3 billion. What we did this year, we gave guidance for the broader MPN GVHD franchise, and we indicated that we expect peak sales to be over $3 billion. And the reason that we switched is that we are pursuing a number of programs that will eventually replace Jakafi. So that's part of our strategy. And these are programs that would provide, hopefully, even better options for patients. And they also will tend to have longer pipeline lives going into the '30s, 2030s versus Jakafi, where we will be looking at the potential experience, the '28 timeframe. So we felt that it's more appropriate to be thinking about the broad franchise, especially even that we will be looking to shift patients from Jakafi to the other therapies. And then the way that we are thinking about the growth in the other therapies is, in the near term, we have growth in -- remaining growth, significant growth in Jakafi BID. But then, in the midterm, we're looking, first of all, to introduce Jakafi, once a day, that would provide a more convenient option for patients and hopefully also allow for even better compliance. And so we will be looking to shift patients from Jakafi twice a day to Jakafi once a day. And then Jakafi once a day will also become a great combination partner for other molecules that we are developing in combination with RUX. And so we'll be looking then, as a next step, to introduce those other combination therapies. And we have a number of those in development starting with RUX in combination with parsaclisib, that is currently in Phase III of development. And then we have RUX in combination with our BET inhibitor and RUX in combination with ALK2, and these are also in clinical development. So we'll be looking to shift patients to those combination therapies and not only address patients that are currently addressed with Jakafi and improve the options for them, but also better address suboptimal responders. So that's how we are thinking about the overall portfolio. Then there are other programs that we have in earlier stages of discovery and that we would be looking to eventually introduce into the franchise as well.

That's a good transition to talking a little bit more about those. I mean, I think the liver programs are a real key aspect of this. And some of the investors are looking at -- a lot at right now. Just recently, the EHA abstract came out for the QD RUX. And Steven, I wonder, if we could just touch on that. It met the criteria, according to the abstract, for bioequivalence of the area under the curve, but not for Cmax over the concentration over 24 hours. And just looking at kind of the Xeljanz extended-release formulation as a proxy, that met both AUC and Cmax. So my question we just did the initial dose escalation data for ruxolitinib show that the strongest correlation for pharmacokinetics was the AUC and clinical outcomes as opposed to Cmax.

Yes. So there's some sort of several parts to your question. But just to step back, going into the bioequivalent study with our once-daily formulation, it was our expectation that we'd only achieve bioequivalent for the area under the curve with the XR formulation. So that wasn't a surprise to us. The average plasma concentrations, which is another way of expressing area under the curve, are a good predictor of both efficacy and safety outcomes with RUX XR. And in general, correlations, Cmax and AUC are generally correlated with one another. From an FDA approval point of view, we believe that the area under the curve equivalence demonstrated within that range of 0.8 to 1.25 is most critical and that's sufficient to get approval with the area under the curve BE. And that the filing thereof will be based on dose proportionality across the different strengths, the bioequivalence for area under the curve, plus an exposure response analysis to support it. For generics, you're absolutely right that the feeling is, in general, that you need both area under the curve and Cmax to show BE. But when you're going from an IR to an XR only demonstrating AUC is adequate. And we feel that, that will be -- obviously, we've leaned into this that it will be sufficient from an FDA point of view. We've completed the BA and BE, as you saw the 2 abstracts. The different strengths on stability testing now that takes -- you need 12 months of that. So early next year, we get that back, we file, and we expect a 10-month review. So we said we expect to get once-daily approved end of '22, early '23 sort of timeframe.

Great. Thanks for clarifying that. And I think it's interesting, obviously, to hit AUC and not Cmax because there's obviously a hypothesis that Cmax might be driving some of the side effects such as anemia with -- that seems with ruxolitinib. So I think there's rationale that showing a similar AUC without that Cmax could provide some benefit to patients. But I imagine that's something that's not going to be sought in the initial label. Is it worth doing a subsequent study to show that? And would that be just something that you broadly disseminate to make doctors aware? Would you actually be able to try to get that in the label?

No, again, you're absolutely spot on. So the 505(b) route that we're doing right now is very clear. It's a BA/BE demonstration. You meet the criteria, as I just alluded to and you get the approval, there's no clinical claim therein. But you're right, we have evidence -- and the field generally feels that the -- some of the side effects, particularly the cytopenias, anemia and thrombocytopenia, are potentially related to that Cmax. So if we are blunt and you can see the curves we published, and a lower Cmax, we could potentially have less anemia and thrombocytopenia, which would be very useful in an MF population because it's one of the main reasons for discontinuation. That work, we would only do sort of after the fact. So later on, and then we'd have to decide would it be just a publication route, as you said, or we try more formally to get it into label it. But it would not be part of any of the initial claims. You're right.

Okay. So given the news yesterday, I think it was yesterday, I kind of have to ask about the combinations and the different pathways being looked at here. Christiana, you mentioned what you guys are currently studying. I guess, Steven, looking at across 3 different things, just from a pure potential of the mechanism, is there some combination that maybe excites you the most or you're most interested in as providing benefit on top of ruxolitinib?

Yes. So in addition to the formulation work, the next pillar is very much our combination work. So internally, there are 3 programs. There's RUX combined with PI3-kinase delta inhibition. We published that a few times. We're in registration studies now, 2 separate ones. One first-line MF; and the second one in suboptimal myelofibrosis for patients who've been on RUX for at least 3 months, 8 weeks of stable dosing, but are not having benefit in terms of either spleen reduction or symptoms of both, and then are randomized to RUX or RUX plus delta. Those registration studies are open and ongoing as we speak. The earlier programs, our BET program, which you indirectly referred to the Constellation deal yesterday. And then our L2 program earlier, they're in Phase I type setting at the moment. The aim for both of those are to get monotherapy safety, now as we speak, this half of the year and then do the combos with RUX in the second half of the year. We would publish that data in 2022, but we would have to make decisions on where to go. So for RUX BET, we very much expect to get a safe dosing schedule because we had BET in the clinic a few years ago. We know our compound. We understand it. We're dosing it at multiples below where it was a few years ago. And then we decide how aggressive to be at the end of this year, early next year, should we sort of go into the chase straight away in terms of a first-line study, that's 1 potential route. We'll think about it. ALK2 is a different play. It felt to be -- well, it is a hepcidin inhibitor. Mechanistically, we've shown that, that elevates hemoglobin in a myelofibrosis model and potentially drug-induced anemia as well. So once we have the safety for that, the play would be to ameliorate the anemia, but then also because it's one of the main reasons for discontinuation of RUX, you'll probably get an efficacy effect out of it as well. So it's an exciting combination should it work. So I think all of the above are all just the deltas ahead, but we like all 3 for obvious reasons. And just to round it out, the other sort of interesting endeavor going on extraneous to us is ruxolitinib combined with BCL2 inhibition, mostly out of AbbVie. I think those are the dominant combinations being tested now. It's a competitive operational space, and everybody is trying to get their studies done.

Not going to pick a favorite child. Okay. Moving just -- don't have too much time, so we got to move on to topical RUX. Since this is obviously an important aspect of kind of that midterm outlook for the company. I guess just getting the necessary question out of the way around just the safety concerns from the FDA around JAK inhibition and atopic dermatitis now with multiple delays, all for the oral systemically administered formulations. But Steven, can you just remind us, I guess, maybe what level of systemic exposure you guys have seen and just confidence in the safety profile?

Yes. So you're right. The oral JAKs, all 3, the Lilly baricitinib drug, we know well, the Pfizer and the AbbVie compounds have had 3-month delays on their PDUFA, principally around the safety concern from the Xeljanz report. We obviously had RUX ourselves in the clinic now for 10-years plus in the U.S. in MF, PV and graft-versus-host disease are huge safety experience on the clinical trials, plus marketing experience. No black box on their compound used in thrombotic settings. The cream, 2 publications have shown about 4% to 7% bioavailability. So you want to average it at around 5% bioavailability. And a very clean -- very good efficacy, obviously, in AD and vitiligo and a very clean safety profile, not unexpected given that 5% bioavailability. The best way -- just a clean way of thinking about it, maybe not the best way, is if you have a 60-gram tube, which is the tube we used in the clinical trials in which if we approved will be launched with and using it twice a day in an average month, you put in on 1 gram twice a day at a 1.5% strength, should that be the approved strength, you put in on 15 milligrams of RUX twice a day, which is about the average dose used in MF. And if you have 5% bioavailability, you had about 0.75 milligrams. So you can see why in a very low systemic exposure, we're very confident in the safety profile. But we'll see what plays out with the oral JAKs, what sort of potential class labeling is imposed, there's just many moving factors here. But for RUX itself and for RUX cream, we're very confident in the profile.