Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. We made it to the final session of our Oncology Summit. And last and certainly not least is Incyte. So from Incyte, we have a full house, but I'll introduce Herve Hoppenot, Chairman, President and CEO; Steven Stein, Chief Medical Officer; and Christiana Stamoulis, CFO; and of course, the fabulous IR team. Thank you guys for joining me. I really like this setup. It's nice to have everyone on one panel. Before we jump in, I just want to address a few housekeeping items, and then we can go into Q&A. On the Webex, if you'd like to ask a question, there is a mechanism to do so. You can also e-mail me, [email protected], and I'm happy to ask on your behalf. And thank you, everyone, for joining us. We were just talking before the session started about how we want to do this in person next time, how -- too many months of Zoom and Webex calls at this point. But thank you, guys, for joining. We're glad you're here. So Herve, before we...

No, thank you for inviting us.

Of course, of course, of course. And Herve, before we head into Q&A on oncology, I do want -- I want to give you an opportunity to talk about Opzelura. I know this is an oncology day, but that's a very important asset for Incyte and your evolution as a company. There were questions on your recent earnings call. So maybe you could just give us a quick update, and then we can jump into everything oncology, and I'll stick with that for the rest of the conversation. But I wanted to give you an opportunity to talk about Opzelura and the recent approval.

Okay. No, thank you. It's obviously a very important part of Incyte now where in fact, we have now literally 2 divisions. When you think about Incyte, we have an entire team working on the launch of Opzelura in its first indication in atopic dermatitis. It's ongoing and it's off to a very, very good start. I mean we spoke about that a little bit. We are targeting -- we are doing a targeted launch to specialists, to dermatologists. We have been able to reach 80% of them in the first few weeks, 90-plus percent of the time in person, face-to-face meeting. And we are tracking for what has been published. We are tracking north of 3,000 units being shipped in the first 4 weeks of launch, which is very much in line with the best launches in the field. We are obviously working with payers to get the coverage as soon as possible. Usually, it takes a few weeks and months, so we expect a broad coverage in Q1 of next year. And in between, we are palliating the lack of coverage with an access program that is giving patients access to Opzelura. So what you can expect in Q4 is to have obviously the prescription growth as one good indicator of the success of the product. You will have a large gross to net because the free drug will be counted in the gross-to-net calculation, so net sales may be on the low end maybe of -- or the gross to net may be higher than what it will be when things are stabilized in terms of access. But the feedback from doctors and patients, and we have a fair amount of it, is excellent because as you know, Opzelura is a product that has a quick impact on itch for patients suffering from eczema, and that is something that people can realize very quickly. So it's a very good launch. It's doing very well. What we said also on the call is that we have a report of a texture issue with -- at the time, the sample batch of -- a sample of Opzelura. So obviously, since then, we have worked on it fairly actively. And what we realized is that there was -- in one of the batches that was used for samples, there was some -- very small quantity of active product that was not completely dissolved. And that was leading to this sandy, gritty kind of feeling that we got in a very small number of cases, a handful of cases that were reported on that. We know there is a batch of the sample because we had one single batch for the samples. We also had, out of the 3 commercial batches that are available, one of them where it was reported. So what we have done is obviously stop distribution of these batches. We have an ample quantity of commercial product available from other batches that have -- don't see that issue. And we see that it has no impact on safety and efficacy of Opzelura. So it's something that we are obviously looking at very carefully in terms of the root cause analysis. It's a product that we have produced for a number of years, for 8 years, in fact, for -- it's something that we have not seen in the previous batches. So there is something that has happened that was not normal that we are trying to identify. And obviously, we will keep everybody aware of the resolution of the root cause analysis when it is finished, which is not yet the case.

Excellent. Well, I appreciate that update. And let's shift gears to oncology. You all will have to come back when we do a dermatology summit because there'll be plenty to talk about as you grow the Opzelura franchise as well. But kind of give us an overview as to where Incyte is with oncology. You've had a lot of success with Jakafi. You've long -- in the past couple of years, you've also had some other novel developments and, of course, the acquisition or partnership with MorphoSys. So why don't you kind of give us a state of the state -- inside oncology, and then we can get into some specifics.

So first, we had -- so when I think about the -- putting on the side the new division in dermatology. So if you take the sort of the onco-hematology portfolio, we had a lot of success this year on the regulatory side with the approval of Monjuvi in Europe and Canada, with the approval of Pemazyre in Japan, in Europe and in the U.S. So the portfolio we are dealing with has been expanding relatively fast in terms of number of products obviously over the past few months. So that's very important. At the same time, we have the growth of Jakafi that is not slowing down. So we have had a very good year in spite of all the situations that we know in terms of access to our customers and in terms of access of patients to their own physician's office, with the 3 indications where Jakafi is approved in the U.S., in MF, PV and acute GVHD where, as we discussed on the call, the 3 of them are growing. Now we know there is a deficit of patients during the COVID period that we still have not seen rebound in some way. So there are patients who are getting more symptomatic that we think we will be, at some point, seeing coming back to see their physicians. And then we had the news of the approval of Jakafi for chronic GVHD in the U.S. I think it's a very important approval. There are a number of patients that are diagnosed with chronic GVHD who could benefit from Jakafi and are not yet benefiting from it. So we are in this mode where we are launching the first indication for Jakafi. And I think it will be visible in our numbers over the next quarters in part because it's a new pool of patients that we can access and also because I think the post-COVID phase will show some patients coming back to see their physicians. So that's the Jakafi kind of picture, and it's very much attached to what we call the LIMBER program, which is how do we go beyond Jakafi in the next 5 years by improving on the safety and efficacy that Jakafi is providing to these patients in all of these different indications. So if you take it in order, maybe starting with GVHD where we were just discussing, we are working on one internal program with itacitinib in chronic GVHD. So it's an ongoing program that is progressing relatively well. And as you have seen, we have an agreement that was done very recently with Syndax on axa, which is a different target that could be potentially combined with either Jakafi or itacitinib, a JAK inhibitor, in the first-line treatment of chronic GVHD. So we are starting with third line, and then we'll be looking at can we have a steroid-free first-line treatment for chronic GVHD. So that's an entire program to maintain the leadership in GVHD beyond Jakafi. And then we have a number of programs in MF and PV that are sort of looking at where is the room to improve. So on the efficacy side, we are looking at combining with active program -- PI3-kinase delta is now in Phase III. It's a very interesting mechanism in that setting of combining with a JAK inhibitor. And then we have a BET program, a BET inhibitor program in combination with Jakafi. And we are looking at the safety aspect with an ALK2 program, which would be dealing with anemia and how we can improve the dose intensity of the JAK by preventing or treating the anemia. So it's a comprehensive program that is basically looking at how to improve over Jakafi. And frankly, it has made a lot of progress recently -- in spite of some delays due to COVID, we are able to initiate the studies we are planning to initiate, and it has been fairly successful. In terms of the rest of the portfolio beyond the Jakafi MF, PV franchise, obviously, one of the key components is our PI3-kinase delta, parsaclisib, which is now being submitted in the U.S. and in other parts of the world for a number of types of lymphoma. The data is excellent. In fact, it's a very active product. We can speak about it. And I think there is a case there with this asset to be able to reestablish the class of PI3-kinase delta, which has a bad rep to say the least. And we think we have done the work to improve on the safety profile and reach a level of efficacy that is very unmatched at this point. And then we have a number of products in our earlier pipeline that are moving relatively well. And next week, you will hear about our oral PD-L1 program that will be at SITC. And frankly, we have new mechanism. We have an adenosine program that is now in the clinic and moving also very forcefully. We have an AXL/MER program that is very unique. So there is a very good early pipeline. There is a late pipeline. There are ongoing launches. So after maybe a few years where we were on -- all on Jakafi, now we are in a mode where we have a fairly large number of programs that are evolving. On top of it, we have tafasitamab with our partnership with MorphoSys. The launch was maybe slower than we were expecting in the U.S., and that's something we do recognize. We are launching in Europe as we speak. And it will be interesting to see how that curve is sort of shaping from the get-go. And we have a number of interesting new indications we are looking at with Monjuvi. It's a fairly unique profile in terms of efficacy and safety. And it has a very -- I think, a very important role to play in the lymphoma or B-cell malignancies in general. So it's an evolving portfolio that has, I think, a lot of movement coming in the next few years that will sort of renew the entire portfolio for Incyte in the field of hematology/oncology.

Perfect. And I want to start off with the Jakafi franchise and some, I guess, kind of longer-term guidance that you gave, I believe it was at this past JPMorgan, talking about greater than $3 billion in RUX-based sales for MF and PV by 2027. Is that correct to just make sure that I have...

It is. $3 billion is the right number. In fact, what we did -- I mean basically, we are trying to replace Jakafi as much as we can before 2027. So giving a guidance on Jakafi became relatively absurd because our goal is to have more of this product. I'm speaking about either in fixed dose combination or instead of Jakafi. So we think the QD formulation will be in large part replacing the twice-a-day formulation of Jakafi, and then we'll have all of these other products that will be basically fragmenting this entire franchise into smaller patient subgroups. So what we'd said is that the $3 billion would apply to the franchise, not to Jakafi by itself.

Yes, that's why -- they're RUX-based, right? That's...

Yes.

So when you think about that, what -- just what are some of the drivers behind that number? And what needs to go right in terms of the LIMBER program to get there and to see that growth beyond the twice-daily Jakafi LOE come 2027? I guess that's kind of on most people's minds, how do you get through that with the LIMBER program?

Well, if you look at the trend, I mean if you look at the way the revenue from Jakafi has been evolving over the past years, in fact, that number could be reached by just doing nothing. Just leaving now the trend with a new indication in chronic GVHD, with the growing indication we have, MF, PV and acute GVHD, even with some new entrants potentially in the field, what we see is that most of the new entrants in MF after Jakafi and the other ones who are going to be coming in are in combination with Jakafi. So that could expand even more the Jakafi franchise. What we are saying is that we believe the QD will be used very broadly instead of the twice-a-day. So that will be the first element of a new product replacing Jakafi in some way. And then as we are developing these combinations, all of them are once-a-day. And in cancer, it's really important when you combine 2 products to avoid doing a twice-a-day with a once-a-day because it can create all kinds of potentially problematic situations. So we assume that once-a-day will be used in combination with some of the new mechanisms. And then we will be -- in parallel to doing the clinical work of Jakafi plus BET, Jakafi plus delta, Jakafi plus ALK2, we will be working on a fixed-dose combination of the 2 components of the treatment. And that will give us a life of that product that will go far beyond the first patent expiration of Jakafi. So that's the vision that we have. We are also working on new mechanisms that have not yet been disclosed that could be, in fact, introduced before the same end of '28 kind of deadline.

Right. And on the whole once-a-day Jakafi, are payers going to support that? I know you had mentioned the rationale when you have combinations in addition to that. But are you going to see similar coverage if there is a generic twice-a-day ruxolitinib versus a branded once-a-day Jakafi?

No, I think that's a very good question. What we are saying is that the once-a-day should be used because it's more practical, it's easier to combine. And that will give us a transition to the fixed-dose combination before we are in 2028. So that's one aspect of it. And then when -- if we are there -- when we are there and if there are still patients using the once-a-day by itself at that time, I think there could be an erosion that would be slower than it would be for generic over twice-a-day. So instead of having a curve that goes suddenly down, you have a little bit of a slower type of erosion because switching existing patients with cancer is a problem, and I've seen it in many circumstances in the past. So that is adding a small something, but it's not the most important part of the program. I agree with you.

Right, right, right. Okay. No, that's helpful. And I want to ask one to Steve about the delta inhibitor. I mean it is -- I'm sure everyone thinks delta inhibitors have toxicity, GI tox, it's really an issue. What differentiates parsaclisib? And have you often -- have you figured out that optimal level of efficacy versus a side effect profile to actually create an enhanced product when you put it on top of, say, ruxolitinib in these patients?

Yes. Evan, thanks for the question. When I think about it, I'd sort of break it down into a number of aspects. So firstly, on its own as a PI3 delta inhibitor, it's a new generation of delta inhibitors. It was engineered chemically to dial out the hepatotoxicity that were seen with the first-generation inhibitors like idelalisib. And as you can see in quite a lot of cumulative clinical data now that we don't have adverse events as regards liver tox. So that's been eliminated. And then on its own, it's extremely active, if I can use that adjective, compound in B-cell malignancies. So if you look at the independently confirmed response rates in follicular, marginal or mantle cell lymphoma, they're upwards of 75% independently confirmed response rate with long durations of response and PFS 15, 16 months. So the efficacy is outstanding. Then to the meat of your question and what Herve was alluding to earlier, do we have a different -- once you have that efficacy, do you have a differentiated profile from a tolerability point of view? We spent a lot of time on dose and scheduling. We looked at different induction doses and then different maintenance doses. We think we've come up with a -- sort of best regimen, if you will, to sort of weave that therapeutic ratio, to maintain that efficacy I was talking about but eliminate a lot of the toxicity. So yes, we still have dose interruptions. But if you look at the true measure in terms of dose discontinuations in the most updated data, we only actually had 3 patients on that all-daily regimen discontinue the parsaclisib for tolerability reasons. And very importantly, limited by small numbers and caveats of the follow-up to date, with that daily regimen, we actually had no colitis or greater than grade 2 diarrhea. So across the board, we did, but in the daily regimen we're taking forward to approval, we didn't see it. So the jury will be out on bigger data sets, real-world settings. But we spent a lot of time and effort to get to what Herve was alluding to upfront, which is this optimized therapeutic ratio in -- on its own in lymphoma. Your question related to in combo with RUX in myelofibrosis is an important one. And again, if you look at the numbers I alluded to there, the ones I was just talking about, it's a good safety profile when you're trying to enhance the therapeutic efficacy. The pathway is upregulated in myelofibrosis patients, PI3 delta pathway. And we have data in suboptimal settings that adding faster to RUX can sort of "rescue" patients in terms of spleen reductions and symptoms. So we do think it's a new-generation inhibitor with the optimized profile that we spent a lot of time and effort to get there.

And you had also mentioned ALK2 and BET inhibitors earlier than -- earlier in development than the delta inhibitor. What do you hope to see from those 2 programs in combination with RUX as part of...

Yes. So both the BET and ALK2 programs are ongoing. They're important programs to us. They're both -- they're sort of in their safety phases now in terms of monotherapy and combo safety with RUX. Just BET itself as the drug we're using is one we know very well. We actually had in the clinic a few years ago in solid tumors at 3 to 4x multiples of the dosing we're using now. There was on-target thrombocytopenia then, and now we've dialed it way back. So again, the idea would be to -- in MF to get the best efficacy we know we can get without the on-target thrombocytopenia. Once we have that early -- late this year, early next year, that combination safe dose, we'll have to make bigger decisions on how to go forward on suboptimal and first-line settings with the RUX/BET, and we haven't done that yet. ALK2 is completely different. We have really cool preclinical and now some clinical data showing that on its own, ALK2 monotherapy definitely modulates hepcidin, definitely decreases hepcidin. And we see iron indices that are favorable in terms of iron mobilization like lowering of ferritin. So it's doing what we want in terms of potentially ameliorating the effect of the drug itself, RUX on anemia and then maybe the underlying disease. If it works and actually increases hemoglobin, they'll be really good for patients because one of the main reasons people discontinue RUX is anemia. So if we can get rid of that, we can stop those discontinuations and maintain RUX intensity to get enhanced efficacy as well. So -- and we're the leader in the space here. So again, we'll have the safe combination end of this year, early next year and be able to make a go decision there very soon thereafter. Just to mention for completeness, even though you didn't ask, we have a very interesting combination with an umbilical cord-derived regulatory T cell product from Cellenkos that we're doing in combination with RUX that may be disease-modifying as well. So we have a very enhanced efforts across. And for completeness because -- not to leave it out, but P vera remains a very active area of investigation for us. And hopefully, next year, we can show you some targets that we're going to bring to the clinic pretty soon in P vera as well.

And before -- I just want to be conscious of time because I do want to get on Monjuvi and some of the earlier programs, and then just I have a few questions for Christiana. Anything else with LIMBER that we should really be thinking about as we head into ASH and the data next year?

Yes. I mean again, everything I spoke about -- plus, remember, it includes graft-versus-host disease. So again, an active area of investigation, we've brought the REACH studies home, REACH1, 2 and 3, and have the indications now in the U.S. But we have ongoing work with itacitinib, our relative JAK1 agent in steroid-naive graft-versus-host disease, chronic graft-versus-host disease. And then we've just announced and waiting for regulatory clearance on the Syndax deal with axatilimab, anti-CSF-1R antibody, which is clearly active in third-line chronic graft-versus-host disease that may be very important to combine with JAK inhibitors and maybe use a little earlier. So I think that's just for completeness.

Perfect. So I want to spend a few questions just on Monjuvi. First off, you had mentioned the launch is going a [ little bit lower ] than you would have liked. What's causing that? Is it just that late-line DLBCL is a crowded space, and there are a lot of options? COVID? Or -- and how do you think about kind of getting over that hump to encourage use given kind of the compelling efficacy data we've seen thus [ far ]?

Yes, I think you can -- obviously, we have been looking at how we can fully realize the potential of Monjuvi in second-line DLBCL where it is approved. In fact, in the U.S., it's the only approved product we -- for that indication. It is a situation where there were 2 issues that have been adding to each other. One was access to customer for us. We were in the dark days of COVID, the darkest days of COVID when we launched it. So we could not speak directly to our customer, which is not ideal, but I guess other companies have been facing the same issue. The thing with Monjuvi is that the number of injections in the first 2 weeks of treatment is relatively high. And the question we were really asking people -- what we're asking people to do is to ask their patients with lymphoma, recurring lymphoma to come to their office like 5 times over the first 2 weeks, which, in many cases, involves public transportation. And you can imagine, at the time we are speaking about, it was a month ago, was something that was facing a lot of reluctance because physicians are used to using Rituxan with chemo, and that's what they used even in second-line. They change their chemo, they keep their Rituxan, and they have been doing that for decades or years and years, and they are relatively satisfied with that, wrongfully because our data is showing that in fact, by using Monjuvi plus lenalidomide, you can improve on the complete response rate to 40% with a very good long duration of response. So it's not -- it's one of the explanations of saying that was not the kind of ramp-up you are expecting for that indication. And since then, we have been improving slowly but surely on the type of patients that are included. Now the patients we have on Monjuvi are more like second-line patients for many of them, if not most of them, and which was not the case at the beginning. So the duration of treatment is becoming longer and longer for each of the individual patients. The average, therefore, is improving. And so I think there is a good chance we can bring it back to where it could be or should have been with that type of indication because the feedback we get from both patients and physicians is, in fact, extremely positive. And I think it's now a question of execution on the commercial team. Unfortunately, as you know, we are not yet able to see many of the customers that are still not letting external people enter the hospital for cancer. It's not the case in dermatology or other fields. In cancer, today, there is still probably north of 60% of customers who are not accepting visits from the outside. That being said, I think everything we see is improving over time. And as you know, we have a long-term guidance of saying it could be a $500 million type of indication in the U.S. alone. And that's something we keep in our goals because I think it's feasible. When you look at the number of patients, the duration of response, if it's used in the right setting, it could be of that magnitude.

That makes sense. And in our final minute or so, I actually have 2 questions for you, Christiana. One, as Incyte evolves and becomes a dual-franchise company, how do you think about resource allocation between dermatology and oncology? And then my second one is just your thoughts on business development.

So on resource allocation, when we look at assets, we are investing based on the merits of the programs. We have a number of programs in development right now for oncology, as you know, a very broad pipeline, and the same for dermatology. We have a number of programs, both expanding the indications of Opzelura as well as other programs that we are -- we have in development for other dermatology indications. So we -- again, we invest based on the merits of each program versus allocating on oncology versus dermatology.

And then if you think about kind of one of the last larger deals was the partnership with MorphoSys to essentially bring on Monjuvi, how do you think about the importance of business development in the new Incyte story where you have dermatology and oncology? And how do you use it smartly to enhance your portfolio?

So we look at BD as a way to supplement our internal activities. We are a little bit different than some of the other companies that may rely more on BD as a way to grow. We have a very active set of internal programs, our own discovery capabilities. So we don't rely on BD as a way to grow but more as a way to supplement our internal activities. And we're looking at BD both to supplement our activities in oncology as well as in dermatology. So we are interested in finding assets that would fit both or either of those areas. In terms of derm, many -- fewer assets out there that would meet our high science threshold, but we are definitely interested in programs that may meet that threshold.

Excellent. Well, we are out of time, but I really want to thank all 3 of you and, of course, your fabulous IR team for arranging this. It's been a [ really great ] talk. I know it's on video. We are going to do it in person next time, I promise. We can talk more about dermatology and dive deep into those LIMBER numbers as well. But again, everyone who all -- to the entire audience, thank you for joining us. Been a real thrill for my first conference here at BMO. Big thanks to the entire events team. And of course, my colleagues, Matt and Trung, as well and my team back at the desk. So thanks, everyone, for joining. If you need anything, you know where to find us. Thank you again to the Incyte crew. We really appreciate it. You were a great way to capstone our event today. So thanks again, everyone.

Thank you.

Thank you.

Bye now.

Bye.