Incyte Corporation (INCY) Earnings Call Transcript & Summary

Greetings, ladies and gentlemen, and welcome to the Incyte's GVHD update conference call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Christine Chiou, Head of Investor Relations. Thank you. Please go ahead.

Thank you, Donna. Good morning, and welcome to Incyte's conference call and webcast to discuss the recent approval of Jakafi in chronic GVHD and this morning's announcement of our collaboration with Syndax Pharmaceuticals. Speaking on the call today are Herve and Peter Langmuir, our Group Vice President of Development in Oncology Targeted Therapeutics. Barry and Christiana will also participate in the Q&A session. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements and are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our 10-Q for the quarter ended June 30, 2021, and from time to time in our other SEC documents. We'll now begin the call with Herve.

Thank you, Christine, and good morning, everybody. So it has been a very exciting week for Incyte with the FDA approval for Opzelura in atopic dermatitis and for Jakafi in its fourth approved indication steroid-refractory chronic GVHD. We have significantly expanded our portfolio of commercial products over the past 1.5 years, not just in the U.S., but also in Europe, with the approvals of both Pemazyre and Monjuvi. Last week, we took the opportunity to provide detail on our upcoming launch of Opzelura. And today, we would like to discuss our GVHD portfolio, including Jakafi's approval in chronic GVHD as well as our collaboration with Syndax, which we announced his morning. Moving to Slide 5. We continue to work towards addressing the unmet need in patients with GVHD with the most recent approval of Jakafi in steroid-refractory chronic GVHD. Following today's partnership with Syndax, we will be able to develop new therapies with the use of axatilimab in monotherapy following treatment with Jakafi of combination therapy with a JAK inhibitor earlier in the treatment paradigm. Chronic GVHD is a life-altering condition for thousands of patients, and we are dedicated to providing new therapeutic options for these patients in need. With that, I'll pass the call to Peter.

Thank you, Herve. If we go to the next slide, graft-versus-host disease is one of the leading causes of morbidity and mortality for patients after an allogeneic stem cell transplant. Acute GVHD is a disease primarily mediated by mature donor T cells and mostly affects the skin, the gastrointestinal tract and the liver. Up to 40% of patients with acute GVHD have initial Grade 3 or 4 disease. And as you can see on the left, these patients have a very poor prognosis. Chronic GVHD, which will be the focus for today, is a bit different in T cells, B cells and macrophages are involved, and multiple organ systems are affected with skin being the most common. On the right-hand side, you can see the overall survival of those with severe disease is significantly less than those with mild or moderate GVHD. So there's clearly a need for novel therapies to help improve outcomes in these patients. As you know, we recently announced the approval of Jakafi in the second-line setting for the treatment of steroid-refractory chronic GVHD in patients 12 and older, which is the fourth FDA-approved indication for Jakafi. In the REACH3 study, Jakafi improved the overall response rate through cycle 7 day 1 or 6 months to 70% compared to 57% for best available therapies. Jakafi was also able to significantly improve symptoms with 40% on Jakafi and 29% on BAT, achieving a 7 points or greater decrease in the chronic GVHD total symptom score at any time through cycle 7 day 1. The median time from first response to death or new systemic therapies was 25 months for patients on Jakafi versus just 5.6 months for patients on BAT, again, highlighting the benefit of Jakafi in this patient population. The side effect profile was consistent with the known side effects of Jakafi and for patients with chronic GVHD and the most common hematologic adverse events were anemia and thrombocytopenia. In the U.S., there are approximately 14,000 patients living with chronic GVHD. Steroids are the standard of care in first line, but over 50% of these patients require additional therapy and many require the chronic use of steroids, which can lead to additional complications. A significant percentage of patients become steroid refractory, whereas you can see on the left, there are very few approved treatments. So there's an opportunity for new drugs with novel mechanisms of action to provide benefit to patients who are steroid refractory or to reduce the dependence on long-term steroid use. One of the reasons we're so excited about the collaboration for axatilimab is that as an anti-CSF1 receptor monoclonal antibody, it works by a novel mechanism of action and has already shown promising activity in chronic GVHD as a monotherapy treatment in the third-line setting. So in addition to the potential for sequencing axatilimab and our JAK inhibitors as monotherapies in chronic GVHD, we will also have the ability to evaluate combination therapy with these 2 complementary mechanisms of action. The 2 different mechanisms provide opportunities for treatment that neither of our JAK inhibitors nor axatilimab alone could offer with the potential ultimately to arrive at a safe and effective combination that could lead to a steroid-free regimen for chronic GVHD. Turning to Slide 12. We're seeing some promising early data with axatilimab as a third-line monotherapy treatment in chronic GVHD with response rates over 50% and an encouraging rate of complete responses, which is in line with other treatments. Responses were observed at all dose levels and across multiple organ systems, as you can see on the left. And on the right is an example of a patient who had experienced chronic ulcers and who is unresponsive to prior therapies, and you can see the dramatic improvement in ulceration following treatment with axatilimab. So in conclusion, the significant unmet need in chronic GVHD remains high. Patients continue to have long-term morbidity with worsening of symptoms, a poor overall survival outcome and many are unable to taper their use of steroids. As a leader in the GVHD field, we are working to develop novel therapies that can help patients, and the axatilimab collaboration allows us to expand on those efforts in a meaningful way. And with that, I would like to pass the call back to Herve.

Thank you, Peter. And before we head into Q&A, I want to briefly touch upon the agreement with Syndax. So this collaboration, which involved an upfront payment of $117 million in cash and the $35 million equity investment, provides us with an additional opportunity within chronic GVHD in both the steroid-naive and steroid-refractory setting. As part of the collaboration, Incyte will lead global commercial activities and record revenues worldwide. There will be a 50-50 profit share in the U.S. and double-digit royalties on ex-U.S. sales paid to Syndax. The 2 companies will split the cost with Syndax -- will split cost with Syndax funding 45% of development costs related to global collaboration studies. Strategically, the partnership maximizes axatilimab potential, expand Incyte's portfolio within the GVHD field and builds on our portfolio ex-U.S. The potential for combination of axatilimab and our JAK inhibitors provide value for the portfolio beyond each stand-alone assets. In addition, given our experience and position within GVHD, we are able to capitalize on significant synergies by leveraging our commercial capabilities. This provides us with the potential for additional revenues with minimal added commercial costs. And lastly, we gained an optionality and further upside potential for axatilimab in idiopathic pulmonary fibrosis and other serious life-limiting chronic disease. And with that, operator, please turn to Q&A.

[Operator Instructions] Our first question is coming from Salveen Richter of Goldman Sachs.

This is Andrea on for Salveen. As a first question, just on the combinatorial approach with Jakafi, just wondering if you have existing preclinical data supporting this. And are there any other targeted agents that would make sense to combine axatilimab with?

This is Peter Langmuir here. So we don't have any preclinical data at this point with this specific combination. Obviously, the 2 mechanisms of actions since they target different parts of the GVHD pathway, T cells with Jakafi and monocytes and macrophages of axatilimab, there's a potential for synergy when you combine these 2 agents. So we're interested to look at these in the clinic. Obviously, there are other mechanisms of action out there being used in GVHD. So there's the potential for other combinations as you suggest in your question.

Our next question is coming from Srikripa Devarakonda of Truist Securities.

I know you laid out how you think about developing the monotherapies and the combinations and the potential market opportunity. Can you give us a little bit more detail about the development part? The PR also mentioned additional monotherapy trials. Can you talk a little bit about how you expect to progress through the treatment paradigm, so you can move up in the treatment paradigm? And also one follow-up question. The fact that RUX is oral is probably a very convenient dosing for the patient. So how does an antibody fit into this treatment paradigm?

So Peter Langmuir here, again. So there are a couple of paths that we're interested in with regards to axatilimab and then specifically axatilimab plus our JAK inhibitors. So one is trying to further define the benefit of axatilimab as a monotherapy. And that could include randomized trials versus best available therapies. So similar to the REACH3 trial where we selected commonly available therapies and showed that Jakafi was superior to those. We could do similar trials with axatilimab as monotherapy in the third-line setting where the current trials are being done. And then in terms of how we integrate that with JAK inhibitor therapy, the first step would probably be to do a combination in the steroid refractory setting, basically where both agents have shown data at this point. But ultimately, I think, what we'd like to arrive at is moving earlier in the treatment paradigm. We know that steroids are the mainstay of initial treatment for chronic GVHD. But unfortunately, many patients don't respond. Those who do respond, many of those progress. And many of those are dependent on steroids over the long term. So they are unable to taper off the steroids. Otherwise, their disease flares back. And so it would be great to try to find a therapeutic option that ultimately hopefully can avoid the use of steroids because we know that a lot of the complications of GVHD are actually related to long-term steroid use. So if we can find a combination that avoids the use of steroids in the frontline setting, that's ultimately where we'd like to arrive at. So it's sort of a stepwise approach in multiple different areas where we could look at either drug in monotherapy or as combination. And as far as the dosing question goes, IV injectable versus oral, we think that the disease is severe enough in chronic GVHD that patients will readily take a regimen that can really relieve the suffering that they're going through. So obviously, Jakafi is an oral drug very convenient. But put together with an every 2-week or every 4-week injectable regimen is doable.

Our next question is coming from Marc Frahm of Cowen and Company.

Congrats on the deal. Just one clarification on the plans to move into the -- ultimately move axatilimab into the first-line setting. Would that be with Jakafi or instead is that itacitinib? And I guess is that decision somewhat dependent on what happens in the 309 trial?

Yes, exactly. So Peter Langmuir here, again. As you mentioned, we have the GRAVITAS-309 trial that's currently ongoing. This is a trial looking at itacitinib on top of steroids in steroid-naive patients, and that study is currently enrolling. And based on the outcome of that trial or preliminary data from that trial, if we're seeing encouraging activity with itacitinib in that setting, then that would be a natural combination in the frontline setting. Itacitinib does offer some potential benefits over Jakafi in terms of a potentially lower rate of cytopenias. But having said that, Jakafi also would be an attractive agent to combine with axatilimab, given its known efficacy in the chronic GVHD setting. So again, it will be somewhat dependent on the data that we're seeing from the 309 trial with itacitinib.

Okay. And then given the different mechanisms of action here, I mean, do you think these are entirely overlapping patient populations in terms of who's responding? Or are they somewhat different populations? And kind of related to that, when you put them together, are you expecting to get something closer to 100% response rate? Or is this really more about kind of broadening and extending the benefit that patients are already getting from JAK inhibition?

I think the sort of first point is just trying to improve the benefit for these patients in whatever way we can, to be honest. I think that we probably need more data to be able to say whether it's going to target particular patient populations more than others. I think what's encouraging about the data for both compounds so far is that we're seeing -- for both Jakafi and for axatilimab, we're seeing responses in different organ systems. We're seeing responses in patients who have fairly severe GVHD. So we're not seeing any obvious patient population that benefits more or less. It seems to have -- both agents seem to have pretty broad activity. But obviously, as we get more data and particularly as we move into the combinations, we'll be able to identify whether they're specific groups of patients that do better with that combination. So I think, ultimately, what we'd like to try to do is improve the overall response rate across all patients with chronic GVHD, improve the duration of those responses, improve the symptoms that many of these patients experience and do that in a safe and tolerable way.

Our next question is coming from Mara Goldstein of Mizuho.

Great. I have two. The first is, can you just maybe expand a little bit on the statement in the press release about bearing the 100% of future development costs for trials that are specific to ex-U.S. territories, and what you mean by that? And secondly, given the AGAVE trial programs started really in earnest just a few months ago, have you looked at that program and do you anticipate making any changes to that trial?

Mara, it's Christiana. I'll take the first part of the question. Regarding the development costs, the parties will -- we and Syndax will be sharing global development costs going forward for axatilimab in GVHD, and we'll be sharing those costs 55% Incyte and 45% for Syndax. And then Incyte, is there any ex-U.S. territory-specific development activities, then Incyte will be covering the cost of those activities.

Right. But just I'm curious as to what is specific to ex-U.S. countries that maybe you could expand on. I mean is it indication-specific? Does it have to do with single-arm trials in the U.S. versus ex-U.S.? If you could just help us understand that.

Yes, maybe I can speak about it. I mean the area is that we have global studies that are serving the needs of all the territories. And then at the country level, as you know, there are always additional studies. They can be medical affair studies, they can be different type of additional studies, and that will be funded by Incyte. So it's fairly traditional, in fact, in that type of agreement.

Maybe I can follow up on the AGAVE-201 trial. And at this point, we're not anticipating any changes to that trial. It's underway. I think we'll provide clear evidence of benefit in the steroid-refractory GVHD setting. And we hope ultimately, it would lead to registration in the U.S.

Our next question is coming from Leonid Timashev of RBC Capital Markets.

It's Leo on for Brian. So I was also curious about some of the combo thoughts that you had. So I know Syndax presented some data at ASH that said that 60% of the patients had prior RUX. So have you looked at those patients? How did they respond? And I guess, are there any learnings to take away that suggest that a sequential approach -- how a sequential approach might compare to the combo? And I guess sort of similar to that, how are you thinking about both combining the efficacy and potentially some of the toxicities. So is it possible that axa might be working better in joints while RUX may not be working as well and that would be more effective? And are there any concerns about potentially overlapping infection toxicity concerns?

So thanks for the question. So at this point, we haven't -- as I mentioned earlier, with both Jakafi and with axatilimab, we're not seeing any clear evidence where one drug seems to work particularly better in one organ system versus another, or where one of the drugs works better in an organ system where the other drug might look less well. I think in terms of sequencing, there's definitely opportunity to sequence. And this has been the paradigm of GVHD treatment for the last few decades is physicians take whatever agent has some activity and just tried to sequence them changing the mechanism of action. I think that GVHD physicians are in a great place actually now just this year with 3 approvals of drugs for chronic GVHD, demonstrating encouraging efforts -- or sorry, 2 approvals with the Kadmon and then axatilimab data coming along. And I think it provides a lot of opportunities for GVHD physicians to use these different mechanisms of action and essentially learn how the drugs work best in sequence. Basically, answering your question will come from data and practice as people use these drugs in different sequences. In terms of the combination, I think that, ultimately, the hope is that to improve the responses and improve the duration of responses with all of these drugs even though we see encouraging activity, we still have room for improvement. There's still room to improve the response rate. There's still room to improve the duration of response. And so the hope is by combining these 2 agents, we can improve on those outcomes. In terms of toxicity, we, obviously, have to do the studies. We're not seeing a lot in terms of overlapping toxicities with these drugs. And so the hope is that we can arrive at a combination of doses that will be tolerable. But again, we need to do that study.

Our next question is coming from Michael Schmidt of Guggenheim.

Just a high-level question, you highlighted this 14,000 prevalence of chronic GVHD patients in the U.S. I was just wondering how we should think about Jakafi duration of therapy in clinical practice and ultimately, the U.S. peak sales potential in chronic GVHD for Jakafi.

Sure, Michael. I can take that question. As far as peak sales potential in GVHD, like we said, 14,000 patients, we know that Jakafi in chronic is, we estimate, at least a year of therapy. They're using it for, so a little bit shorter in acute GVHD. We think that the potential for GVHD in general, is quite large just because of the number of patients, the suffering they're going through and that chronic GVHD patients will end up on therapy for much longer.

Great. And then just a quick follow-up. You obviously saw recently the Sanofi acquisition of Kadmon in the same category with the drug there. Just wondering how you think about the market evolving longer term with other treatments being pursued as well.

Sure. Well, we think that it's good for patients when another drug is approved. Obviously, they're in the third-line setting. So Jakafi is generally being used before that. And I think these drugs will be, in fact, sequence. Obviously, we think our data is quite good. Obviously, we've had REACH3, randomized Phase III trial where they just to have a Phase II study. But nevertheless, I think the drug will be used, having Sanofi involved and their experience perhaps in stem cell transplants may help educate patients and positions to a greater degree about the needs in GVHD.

Our next question is coming from Ren Benjamin of JMP Securities.

Congratulations on the deal. This might be for Barry as well. It looks like the third-line opportunity is the low-hanging fruit. But as you mentioned, there's an approval there. So what do you think is the real commercial opportunity in the third line for something like axatilimab? And then maybe for Peter, it's kind of piggybacking off of a prior question, but did you see response -- based on the response rates that you saw in the Phase I/II trial, and the patients that were previously treated with Jakafi, I mean, did you see any sort of a difference in response rates from those patients that were previously treated with Jakafi versus those that were naive to Jakafi?

Yes. So I'll go first. Yes, I think that the third-line setting is an opportunity. Obviously, we had patients in our randomized Phase III trial. 50% of the patients had response versus about 25% of patients response at 6 months and 70% response rate overall. So some of those patients will go on to progress and -- in the third-line setting, we think that there's 7,000-plus patients in the second-line setting. And obviously, some of those patients will go on to be treated with the third line. So we think there's a significant opportunity there. Obviously, it all depends on the efficacy that we see in the future. And Peter?

Yes. So in terms of responses in the axatilimab trial, I mean, the data is still early, and these patients have been, in some cases, fairly heavily pretreated with a variety of different agents. We're not seeing anything obvious in terms of differences in response rates or organ systems in patients who were or were not on Jakafi previously. But obviously, it's something we'll look at as we get more data to try to understand if there are certain patients we should be targeting with both agents or how we sequence these better. But I think the encouraging thing about, again, both drugs is we're seeing response rates across different organ systems that doesn't seem to be impacted extensively by what prior therapy they've received.

[Operator Instructions] Our next question is coming from Matt Phipps, William Blair.

Obviously, I'll focus on the GVHD side, but intrigued by the fibrotic side, I'm just wondering if you can give any more details on that option to co-deliver an IPF. Is that post-Phase II? And is that built into the $450 million milestones? Or would that be anything additional?

It's Christiana. So the IPF is built into the agreement and into the $450 million milestone. In terms of the development, Syndax is taking it forward to POC and funding the POC study. And then following that, we have different points in time when we can come in depending on data and participate in the development cost.

Our next question is coming from Marc Frahm of Cowen.

I guess one just on the regulatory path. Do you think you have to wait for that randomized -- for the randomized trial to read out? Or given the precedent from Kadmon, do you think there's an opportunity to use the data set that we'll see at ASH to make a regulatory filing?

So I hope for the U.S. is to be used the current AGAVE-201 trial, so the dose finding study that our hope is to be able to use that for regulatory filing in the U.S. and not wait for a randomized study versus best available therapy. But following, as you said, the precedent that Kadmon set.

Okay. Great. That's very helpful. And then just on this idea of getting to a steroid-free regimen for the first line, is that something you think you can go straight to the first-line setting? Or do you need to first kind of prove the efficacy on top of steroids and maybe the ability to get more people off of steroids in the chronic -- in the longer-term follow-up before you can really take it on as a first-line opportunity?

I think it's somewhat a step-wise approach. I mean, initially, we have to evaluate the combination to see efficacy and safety of the combination, identify their particular patients that benefit more or less. But then hopefully, if we see encouraging efficacy, encouraging toxicity, our goal is to try to move to that frontline setting fairly quickly.

Ladies and gentlemen, this brings us to the end of our question-and-answer session. We'd like to thank you for your interest and participation in today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.