Incyte Corporation (INCY) Earnings Call Transcript & Summary

Okay. Thank you, everyone, for joining. Let's go ahead and get started. My name is Vikram Purohit. I'm one of the biotech analysts with the Morgan Stanley research team here. And I'm very happy to have with me the team from Incyte for a 30-minute fireside chat. Before we get started, I need to read a brief disclosure statement. So for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your sales representative. So with that, joining me virtually, I have Herve Hoppenot, CEO; Christiana Stamoulis, CFO; and Steven Stein, CMO, from Incyte. Thank you all for joining.

Thank you for inviting us. Good morning.

Of course. Of course. So Herve, I thought the best place to start would just be some opening remarks from you, if you could just kind of touch on the current state of the business and what you think have been some of the key milestones that the company has hit over the past year.

Yes. So I can do that in relatively quickly. I mean we obviously have had a very exciting past 1.5 years. I mean we got out of 2020 with a very successful year. We had a growth rate of revenue of 24%. We have around like $2.7 billion in revenue in 2020. And as you know, I mean, it was a chaotic year, and it was very successful. In 2021, as you saw from the Q2 call that we did, we continue on the same momentum. So we had 17% growth of revenue in Q2, reaching around $700 million for the quarter. So it's a new milestone. We saw the new patient start on Jakafi coming back to some pre-COVID level, which is a good thing, obviously, and the growing -- Jakafi growing at around 12%. And I would say, more importantly, we had a number of new product approvals in the U.S. with Pemazyre and Monjuvi. In Canada, same thing recently. And now in Europe, we also have both Pemazyre and Monjuvi being approved by EMA, and the approval of Pemazyre in Japan. So that was something that was part of the long-term plan of the organization. And it has been doing very well. Monjuvi started relatively slowly in the U.S., but we are seeing signs of improvement there. So it's really good. And on the Pemazyre, it was the opposite, where in fact we exceeded expectations with the launch of Pemazyre, our own expectation, and it continues to do very well. So now we are in a situation where we have like 6 different sources of revenue coming from different geographies, different products with early stage of launch. And obviously, it will help us continue to grow at a very fast pace and diversify our portfolio. And then obviously, we have 2 reviews ongoing at the FDA, as we speak. One is for chronic GVHD for Jakafi and the other one for atopic dermatitis for rux cream with relatively short outcome being expected from the PDUFA date by the end of this month. Now there is more to come, which is another aspect of this continued delivery of the pipeline is that we have announced positive data in -- with rux cream in vitiligo. And that's a submission that should be taking place, obviously, before the end of the year. And the parsaclisib submission is also planned and is happening in the U.S. And that would be 2 new relatively substantial potential products that could be coming next year in 2022 after this series of approvals that we had this year. In terms of the earlier pipeline, we had obviously a very positive clinical success with the vitiligo Phase III program. I think it will be disclosed publicly relatively soon. We had also parsaclisib data in autoimmune hemolytic anemia, and it's a disease where there is today medical needs. There are limited treatment option and where we have shown that we have a product that will be potentially very important in that disease. And on the LIMBER standpoint, we had the QD, the once-a-day rux bioequivalence that also was demonstrated over the past few months. So a number of positive milestone, approvals, launches are taking place, and it's a very exciting time for Incyte knowing that we have these 2 ongoing reviews that will be probably giving us an answer in the next few weeks. So exciting times is there at Incyte.

Great. So maybe that's a good segue into our first discussion topic. Why don't we start with dermatology. So there's obviously been a lot of regulatory focus on JAK inhibitors and JAK inhibitor safety, and that's translated to a fair amount of investor interest in the implications for topical ruxolitinib and what that could mean for an eventual label for that product assuming approval. So to start off with, what is your sense of what you think the commercial impact could be on rux cream if the product were to receive JAK class labeling based on your discussions with KOLs, clinicians and even the patient population at large?

Yes. What we did -- obviously, I cannot comment on the review ongoing because that's -- but in terms of the way the prescribers are looking at this, is 2 things. It's first, there is an efficacy aspect that is extremely attractive to dermatologists who are treating atopic dermatitis. It has to do with the itch and the overall healing effect of the product. You can see recently there was data showing over a longer period of time with intermittent treatment, we have north of 60% of patients who are considering that their disease is under control. And that is giving this product a very specific position in the treatment of atopic derm or it would be after using like TCI, TCS type of products, topical and before, obviously, using systemic products. And that population is very large, and the medical need is there, it's very clear. And what physicians are telling us is that they are dermatologists. From the beginning, we intended to launch this product as specialty products for dermatologists to initiate the prescriptions. And they are obviously very familiar with the difference between a topical product and a systemic product in terms of systemic exposure. So that aspect of the product profile has not changed. After that, the labeling will say same thing. But the way the product is behaving, the safety profile we have from our randomized studies has been published and is very clear about extremely lower risk of systemic side effects, if any. And I think the community can see that. I mean they are certainly well aware that by using it topically, they will have the benefit of the efficacy coming from that type of product without having the systemic exposure. So our view is that there is always an impact on the label and we cannot say it will have 0 impact whatever it is. But in this case, I think it's so obvious that you don't have the same level of exposure and risk when you use it topically that it's clearly something that people will understand and take into account in their prescription pattern.

Understood. And then on that topic, which patient segments specifically within atopic dermatitis and also in vitiligo do you think would be best suited for rux cream?

So for atopic derm, as I said, you have basically a first intention prescription of steroids or other topicals and that is well established. And frankly, we are not going to be competing there, except maybe for some unique cases. But what you have is there are around 5 million-plus patients who would be in that situation of having been treated with a topical product. They are not fully controlled. In fact, itch is what they are suffering from the most. And as you know, there is a circle of -- a vicious circle of itching, scratching, infection that is really fueling this entire issue of atopic dermatitis. And that's where the use of rux cream will be the most impactful. And what we have seen is that there is a very short-term effect that is very visible. Patients are the best advocates for the cream. If you want to speak to patients who have received rux cream, you will be impressed because they speak about it as something unique that had -- they had never had before in spite of multiple type of different prescriptions. And it has a long-term effect, is that for some of them, a large proportion of them, it's in fact helping control the disease in a way that would not require moving to any other type of treatment. And that's what we -- we'll be looking at. So it's a large number of patients who are in that situation, and that's -- we know that will be the first -- and most of them are treated by dermatologists at this stage for the initial prescription. So that's why we have from the beginning, described our team as a specialty dermatology team, and I think it fits very well with all the questions that are being asked now about the different type of treatment that will be available. In terms of vitiligo, it's a completely different story. There is no approved medicine for vitiligo. We know there are probably more than 1.5 million patients suffering from vitiligo in the U.S. Only a small number, like 200,000, would be seeking treatment and the treatment that they have available are not very satisfying. And that's where obviously it will be starting, but I think there is -- this 200,000 patients taking treatment. And the fact that when a product is becoming available, it will certainly stimulate patients to see the dermatologists. And we have a lot of data showing that it will be potentially the case. So there is a lot of potential for vitiligo. The limiting factor of using a cream in vitiligo -- the benefit is obviously systemic exposure. I mean -- so that's always the same. The limitation is that some patients have expanded vitiligo where using a cream would not be appropriate, but the large majority of patients are in the range that we had in our clinical trial in terms of extent of vitiligo. So probably 70% of the patient would be eligible for the cream [ or plus -- or more ].

And then on the topic of patient experience, there's been interest in learning more about what you think the anticipated amount and duration of use would be for the product. And I think investors are likely interested in that because it could be telling about kind of eventual pricing potential for the product. So how should we think about that? How much do you anticipate patients using? How long do you think patients would stay on therapy? What does the data so far tell you?

So the data from clinical trial is always a little difficult to interpret because in clinical trials, patients tend to be more compliant to what we ask them to do, which is twice a day, et cetera. What we anticipate in atopic dermatitis is that there will be intermittent treatment as depending on the flares and the disease coming back or not. And we see what we have seen and calibrated is that for a given patients started on rux cream, we anticipate between 3 and 4 tubes per year. So that would be the sort of the -- now, some patients have more extensive disease will require more, et cetera. But the average we have been using in our own, which may be conservative. In fact, there are a lot of questions about it, but what we are using is the 3.5 to 4 cubes per year per patient, which starts at twice a day at the beginning and maybe move over -- as the sort of the disease is being controlled, maybe it will be used less frequently. We hear about people speaking of moving from twice a day to once a day after a number of weeks and then maybe stop and start again if there is a recurrence of the disease. So that's what we are expecting from the atopic dermatitis. Vitiligo is very different because here, we are dealing in most cases with more than 10 to 11 tubes per year per patient.

Got it. And then let's quickly touch on your commercialization plan for rux cream as well. Just kind of give us a sense of how large of a sales infrastructure do you think you'll need. What's currently been done? What's pending? And who are the key providers that you're going to be targeting?

So as I said, I mean, we see it as a specialty product. We think -- and we have a lot of data showing that it will be the case for a large majority of patients. We see the dermatologists as initiating the prescription. After that, it can be renewed somewhere else, more in GP kind of setting, but the initiation of the prescription will be done in dermatology. We have 150 people on the field that will be in the promotional effort for this product, and it's a good size. I mean it's a number that will be addressing the key prescribers that we have identified. We have also a team working with payers on the reimbursement side. And all of that is in place. So we are ready to go. After a few years, we can think of how this is evolving and how that should be like adjusted. But for both atopic dermatitis and vitiligo, in fact, we believe that this team is what we need to do the -- to optimize the launch. I mean the number of patients who are -- of physicians that we'll be targeting is around 14,000.

Got it. So outside of rux cream, but staying within derm, there you have another JAK inhibitor in evaluation for hidradenitis suppurativa. So I just wanted to see what the status is of that molecule, when we could expect to see some more data there.

Sure. Thanks, Vikram. It's Steven. So 54707 is a differentiated JAK inhibitor. It's both from a selectivity point of view as well as its half-life. It's about 50-fold more selective for JAK1 when you compare it to rux itself. HS is a condition that there is about 50,000 patients a year that are treated in the U.S. with very limited treatment options currently. In fact, the -- one of the indicated drugs there is not extremely effective at eradicating a disease which has a lot of morbidity in terms of abscesses and nodules in skin falls. We have Phase II data with 707 showing very encouraging activity there. We're now in Phase IIb looking at both abscess and inflammatory nodule formation. It's about a 200-patient study. The main endpoint is the abscess and nodule endpoint at week 16, and we'll have that completed in 2022. And then we would make decisions on whether or not, based on that data to go forward with a registration-directed approach there. We're also looking at it in more severe vitiligo. Obviously, we know now based on the cream data, that we have a very effective drug, as Herve just alluded to, that gets more effective over time. But from a risk-benefit point of view, we would look at more severe patients here, given that this will be an oral systemic therapy. We initiated the Phase II in the first half of this year, about 160 patients, an endpoint that we'll look at the total body repigmentation at week 24, and we'll also finish that in 2022. So those are the 2 projects directed with that and just talk to our commitments to dermatology in general.

Understood. Okay. With that, let's pivot to tafasitamab. So maybe let's start with tafasitamab in the EU. So as investors think about commercial potential there, how would you guide them to think about what the launch would look like in the EU? And what are some of the similarities and what are some of the differences that people should keep in mind when they're thinking about EU versus the launch in the U.S.?

I mean the big -- obviously, the disease is more or less similar. I mean the number of patients is a little higher in the EU because there are like 450 million people living if you add the U.K. now to the EU. And -- but the treatment patterns in first line are not very dissimilar. What is very different in the EU is where patients are treated because, as you know, in the U.S., we have a group of patients who are treated in private practice. That's usually where they are diagnosed and then they will go to a specialized academic center maybe later in their treatment. In the EU, in most countries, they will be starting in centers that are very specialized in the treatment of that type of patient with a large number of them. So that gives a slightly different dynamic to the launch. But we expect the same approach, which is saying after the first-line treatment with Rituxan -- R-CHOP type of regimen, it is today the best option for patients to go to Monjuvi lenalidomide because you see the efficacy, the long-term effect and the complete response rate are very differentiated. And the safety profile of a nonchemo containing regimen is very unique. And we see in the U.S. launch where we started a little slow of -- not a little, we started slower than we were expecting to be frank. And we are seeing now as patients are treated in the second line or earlier in the sequence, in fact, we are seeing progress in the launch trajectory. And that's something that is obviously unfortunate. Sometimes is that patients who are treated at the beginning of the launch of a product are not the target patients that you are expecting in your second line type of level. But we -- I think the profile of the combination is such that we can get there. And in Europe, we'll certainly try to get there faster than we did in the U.S. What's happening also in Europe is that you have a sequence of countries where, obviously, you are starting. In Germany, where we have prescriptions already that have been written for Monjuvi. And then based on reimbursement, it will flow to other countries around Europe over the next 2 years.

Got it. And you spoke a little bit about distribution across lines of therapy in the U.S. How is that currently trending? And how is that...

So it is trending earlier -- as we said, I mean, I think patients at the beginning who were treated with Monjuvi where -- not enough of them were the second line type of patients where the product is indicated and we have a product has shown to have this long-lasting effect for 40% of patients with complete response, and so it is improving. We see it now from all the research we are doing is that patients who are -- started on the regimen earlier lines of therapies, there is still work to be done. I mean ironically, I mean the competition in the second-line setting is not very new. It is basically a Rituxan plus chemotherapy in many cases, where after R-CHOP, basically, physicians will be using Rituxan again with a different type of chemotherapy. And that's -- and -- I mean it has been that way for a long time. So what we have is to really make them think again. I think the fact that our field team are able to meet face-to-face with prescribers is very important. And as you know, when we started, it was not the case. So it's more and more the case now. And I think it will make this second phase of the launch of Monjuvi more effective and more successful than maybe the first phase.

Okay. Helpful. Helpful. Maybe with that, let's pivot to Jakafi. I wanted to touch on LIMBER. I thought it might be helpful if you could just summarize for us the 3 combinations that you've mentioned that you're evaluating for rux, kind of where each of those program stands? And also, which segment of patients do you think these combinations could be best suited for once these programs are kind of deeper in development?

So maybe you can start there.

I'll start, Vikram. It's Steven. So thanks for the question. Just to step back a little bit, if we look at across LIMBER and we look at the life cycle management of rux as well as myeloproliferative neoplasms in general, just to remind the audience that the once-daily rux bioavailability is complete and we've met the criteria for area under the curve. It's in stability now, and we aim to submit that in early 2022 for approval. It will also give us optionality on any of the other combinations to develop a fixed-dose combination should we want to. The program that's most advanced of the combinations is rux plus delta, rux plus parsaclisib. We presented data at EHA this year, showing with that 5 milligrams on top of a stable dose of rux, where patients have been on rux for 6 months with 2 months of stable dosing. The additional parsa, you've got further decrements in both spleen response as well as an increase in symptom response. So we're encouraged by that data. We have 2 pivotal studies, which are open and enrolling now. The one that will complete faster is in the so-called suboptimal responder. So patients who've been on rux who aren't having an adequate response in terms of spleen or symptoms, with parsa added to it, it's a few hundred patients enrolling now, and that would be our first registration effort there. And then there's an ongoing first-line study with parsa as well. The other 2 programs, they are a little behind. So we have a BET program. We're in safety at the moment, monotherapy safety and then combination safety with rux and then we'll make strategic decisions, do we go all out at the registration approach there or not. And obviously, people know from another compound that it looks like BET has added to the activity when added to rux certainly in terms of spleen response. And then our ALK2 program, which we're very excited by. The mechanism there is that ALK2 inhibition should inhibit hepcidin as well, and we've shown that already, at least preclinically, and thus get an improvement in the anemia both from the underlying condition from myelofibrosis as well as potentially the anemia that rux itself induces. So that combination could be potentially both a safety play in terms of decreasing the amount of patients that discontinue rux because of anemia, but then also allow us to maintain rux dosing at adequate levels for longer and thus improve efficacy as well. And both the BET and ALK2 programs could lend themselves to fixed dose combinations as well. So those are the plays. In terms of patient segments, how this will play out will be both -- when you look across rux itself is extremely successful compound in terms of spleen reduction and symptom control, but there's still patients who escape either because of intolerance and the principal one would be anemia. So the ALK2 there would be a really important segment to address should that work the way we wanted to. And then from an efficacy point of view, patients either don't get sufficient efficacy or it's not sustained over time. And then both -- all the combos -- parsa, BET or ALK2 depending on the profiles there. And we think physicians can then adjust to a particular patient before them to use the combo that's most relevant based on its tolerability profile as well. So that's how we see it playing out.

Okay. Helpful. Maybe in the couple of minutes we have left, we could talk a bit about the oral PD-L1 data that's expected later this year. Maybe you could kind of characterize for us what you expect to see and then more broadly, what your vision is for this molecule and where do you think this could fit assuming development goes well. And what's the unmet need do you think it could fulfill?

Thanks for bringing it up. It's a program we've sort of been somewhat stealth for a little bit because you -- the external world has been waiting for the data. Thankfully, the meeting is coming up pretty soon, where you'll see quite a substantive update on the lead compound there, 550. We have 3 compounds in the clinic on purpose. The idea behind that is to have an oncology backup given its importance as well as the potential for a nononcology compound to enhance things like viral directed therapies, hepatitis therapies, et cetera. One is chemically related to 550, the other is chemically distinct. That update on the lead compound at a meeting later this year will show quite a lot of efficacy data, albeit from a mixed Phase I, Phase II experience as well as a safety update. The latter 2 compounds, we'll show data in '22. We remain first in class. In fact, it looks like we may be the only program out there now that Gilead has discontinued their oral PD-L1 program. It's a validated target, obviously, PD-1/PD-L1, albeit with a different MOA here. And once you see the efficacy we show you, you can get a sense of where we think it may have certain roles. We may lend itself as an oral therapy is things like an adjuvant setting where people go away on 1 or 2 years of therapy, maintenance settings, which is similar to adjuvant as well. And then from a toxicity point on the other side, given it's oral and you stop it, it switches off within 24 hours or so, if you run into problems, you can ameliorate toxicity pretty quickly. So those are the scenarios that we think may be important for the entirety of the program.

Great. And we have time for one last question. So let's end with maybe a broad question for the whole team. So the profile of the business has obviously changed over the past year or so with the partnership with tafasitamab and then mid-stage data sets for rux cream in dermatology. And I think one natural question that comes up is what does this business look like in the long term, maybe in the next 5 to 10 years? What would you like this business to look like? And what needs to happen from an internal R&D perspective and also from a business development perspective to get to where you think the company should be in the long term?

I think the long term is for now -- I mean, we have this research, and I would put BD as a sort of a sub -- of the research effort because they go in the same direction, obviously. And we do this research in the field of immunology, in general. And we have application in cancer that we know that the entire I-O revolution. And obviously, we have application outside of cancer. And then we have work in inflammation and targeted therapies for cancer. So what we see is that, that sort of source of new products will continue to be around these 3 dimensions of direct targeted therapies, immunology and inflammation, and we'll be producing new products that can be applied on either side of the cancer franchise or the noncancer franchise. It just happens that the first product that came out of this project were in dermatology. So in the short, short term, we have a dermatology franchise. Now we are building next to the oncology franchise. And when you look at the next 5 years, I mean, there is a flow of new products and new indications that will be helping this entire group of products to continue to grow at very high rates and at the same time, diversifying our portfolio, both geographically where Europe is going to start contributing and Japan contributing more. And where we have also additional partners around the world that will be doing the commercialization for these products. So the royalty line, which is not a small part of our P&L, is going also to grow disproportionately fast. So that's the picture for the next 5 years. At the same time, we have this entire myelofibrosis, PV, GVHD franchise, where we are trying to go to the next step. And I think there was a lot of progress over the past months. So now it looks very credible that a lot of that franchise will be with products that have been launched in the next year. So the vision we have is diversified immunology and cancer, not just dermatology. There could be some other applications like hemolytic anemia and the autoimmune hemolytic anemia and where we will continue to have a very dynamic rate of growth, and obviously leverage on the P&L because a lot of the infrastructure is already in place.

Okay. Great. And with that, we're actually at time. So Herve, Christiana, Steven, thank you very much for joining us. Very much appreciate your time. Thank you, everyone, who have logged in.

Thank you for inviting.

Yes. Thank you. And we'll close out and the next session starts in a little over 10 minutes now. Thanks for joining.

Thank you.