Incyte Corporation (INCY) Earnings Call Transcript & Summary

Awesome. Hi, everyone. This is Maneka Mirchandaney from the Evercore ISI biotech team. Very pleased to be here with Incyte at a pretty important time for the company with what looks to be a pretty strong start for Opzelura. From the team, we've got Christiana Stamoulis, who is EVP and CFO; Steven Stein, who is EVP and CMO; and Christine Chiou, who is the Head of IR. Thank you all for joining. And I really wanted to start with Opzelura since that's clearly been the big area of focus this year. I think we're all kind of watching the IQVIA scripts that seems to be off to a good start for atopic derm. But maybe you can talk a little bit about the initial launch trajectory, how that's going, and some of the early feedback that you're hearing from physicians.

Sure. So the launch is going very well. It's a very strong launch, and I'm sure people are looking at the IQVIA data that is available, which is great because it does provide some visibility on a daily basis as to how this launch is progressing. It is a very strong launch. If you look at some of the metrics that we had shared, we had indicated that we would expect that in the 4 weeks of the launch, we will get to 3,000 scripts. We actually surpassed that number. And if you look at the IQVIA data for November 12, which I believe is the last one that is publicly available, we were at 1,600 scripts a week. So the -- we achieved that milestone that we have set for the 4 weeks. We continue to see significant growth. So a very nice trajectory there that puts us in line with the -- some of the strongest launches -- recent launches in the space, if not better than those. We are also starting to see refills. Obviously, it's very early given that we are just a little bit over a month since the launch. But even those early signs of refills are very, very encouraging because it means that patients see the benefit of using the cream and go back to refill, which was an issue that other programs in the space had -- have had. The feedback that we are getting from HCPs and patients is very positive and especially around the itch relief, the reduction in itch and how quickly that happens. And that's a very big differentiating factor of Opzelura. So very encouraged by what we're seeing in terms of scripts, what we're hearing in terms of feedback, and we are also progressing well with the discussions on the payer side and continue to be confident that in Q1, we'll have broad coverage. So everything is progressing as we're hoping that it would be progressing at this point in time.

From the feedback that you've gotten so far, who have kind of been the early adopters of Opzelura so far on both on the physician side as well as on the patient side, the initial group of patients trying the drug?

So it's still a bit too early to have a lot of details, but we are looking at a broad update. 65% of the prescriptions are coming from switches from corticosteroids. As you know, this is a product that is very well positioned between corticosteroids on one hand and systemics on the other. So it is well positioned, and we see a lot of patients that are not well controlled with other topicals. And therefore, this is really an opportunity to address a significant need that exists there for those patients and also allow to postpone, hopefully, the time or the need for them to move to a systemic treatment, which is also a much more expensive treatment. And this is a value proposition that is also very attractive to payers.

You mentioned a good number of patients switching from topical steroids. As you think about getting broad reimbursement and what payers might want before a patient is allowed to try Opzelura once some of those wheels are in place, do you think the primary population will be people who have tried topical steroids? Or do you think there is likely to be also some requirements to kind of have tried a topical calcineurin inhibitor for some of these patients?

So we do expect that there would be people that have been cycling between 2 topical steroids -- corticosteroid and topical calcineurin inhibitors. The majority of patients that fall in this 5.5 million patients tripping have been cycling through those types of therapies, and so it's not a big hurdle to me to have to pick those patients and move them to Opzelura.

Got it. On your last earnings call, you talked about some texture considerations that have come up in the commercial setting, some grittiness that a few patients had seen. Maybe we can get just an updated sense for how you're thinking about that, how broad it's been in the commercial landscape, and just any thoughts on what might be causing some of those considerations.

So let me start with addressing the commercial landscape, and then I'll turn it to Steven to provide an update or recap what we have been seeing there. As we have discussed, the issue has been very limited. It has not have -- hasn't had any impact on the safety or efficacy of Opzelura. It hasn't had any impact on the availability of commercial supply. And even though we did stop distribution of samples, it hasn't had any impact on the launch, as you are seeing. Samples are nice to have. We would have loved to have them, but they are not as important in the launch of the program. Dermatologists are used to having launches where there are no samples at the beginning, and they can deal with that. And also, there is -- patients can get access to Opzelura very quickly, and therefore, they are not relying on samples in order to start therapy. So we are not seeing any impact from a commercial point of view. I'll turn it to Steven to give -- to discuss what we saw there.

Yes. Maneka, from -- in terms of giving a substantive update, there's actually nothing more to say at this juncture until the root cause analysis has fully been completed, and then we'll be able to give a substantive update. But just in terms of what we disclosed previously, the product complaints are isolated and very small in number. They came initially from the 5-gram sample. That's why we stopped the distribution of that, and then subsequently, from a single commercial batch, and we stopped distribution of that one batch. Based on early analytic chemistry in vitro release testing, the fact that we knew from our Phase III program that even at 0.75%, we have similar efficacy, the efficacy assessment and safety assessment remains the same, that there's no impact. As Christiana just said, there's no impact to commercial supply. We have other batches which are healthy and don't have the issue and are out there. And as we complete the root cause analysis on the affected batches and come forward with that and potentially weight spot on how to manage it, then we'll share that at the time. But there's no substantive change at the moment.

Any latest thinking just on how long that root cause analysis might take? And also if you've kind of screened the other batches to be certain that you're not seeing anything in those?

Just the back end of your question, so the batches undergo a pretty routine testing at a predetermined schedule. So at release, then at 1, 3 and 6 months thereafter, this is part of your NDA submission and very standard, and that will go on. It's hard to commit to a time frame when we don't have the complete thing yet. It's very thorough and end-to-end. So you start right at the beginning with API and then go all the way through to the fill-in. We know, and as we've communicated, that this -- what's been described as grittiness are crystals. We know that those crystals from analysis are ruxolitinib itself. They're the active pharmaceutical ingredient and a very small amount thereof. And until we work out what happened in the sampling and with that one batch as to why they dissociated and came out of solution, it's just hard to commit to a timeline right now. But we're in a comfortable state given that we have a secure commercial supply. And as Christiana said, the launch is going really well.

Got it. On the reimbursement trajectory, I think gross to net right now is high, but you kind of talked about that coming down meaningfully over time. What's kind of the trajectory that we should be thinking about for that in 2022 and beyond for that group to net -- to start decreasing?

Yes. So we did share with you a gross to net range of 25% to 50%. When you look at programs, other derm programs, you tend to see them being on the higher end of the range, especially when you have the -- take into consideration all the components that go into the gross to net calculation, not just the discount to payers, but also the fees, the out-of-pocket reimbursement, et cetera. So in our $1.5 billion number, we assume the high end of the range to get to that. And I think looking at the higher end of the range is it's a reasonable conservative assumption to have. Also, what we have discussed is that there is a trade-off between discount and access, and what we are looking is to find that point where we optimize the net revenue opportunity for Opzelura. In terms of when do you get to that stable rate or long-term rate, we would expect Q4 to have a much, much higher gross-to-net rate because until we get on formularies and have broad access, we are picking up the cost of Opzelura, and as a result, that means a very high gross-to-net. And that's why we said don't expect meaningful contribution from Opzelura in Q4 even though you may be seeing that there is a very nice uptake in terms of prescriptions. They won't translate into net revenue. We would expect to start getting to a more stable rate in Q2-plus time frame. So in Q1, we would expect to start getting broad coverage through the quarter, and then in Q2 start getting to a more stable gross-to-net range.

Got it. With vitiligo coming on board on next year as well, I guess just based on what you're seeing in atopic derm so far with the Opzelura launch as well as some of the feedback from docs, how are you thinking about the relative vitiligo opportunity versus atopic derm now?

So we see vitiligo as another significant opportunity for Opzelura. As it addresses a significant medical need. There, there is no therapy that has been approved for repigmentation, so there is a very big need there. The patient population is smaller relative to atopic dermatitis. So we're looking at 1.5-plus million patients with vitiligo in the U.S. However, the number of tubes, the average number of tubes that we would expect patients to use a year, it's at around 3x higher than in AD. So on average, for atopic dermatitis, we're looking at 3 to 4 tubes a year based on the experience that we gained from the clinical trials. And in the case of vitiligo, we would expect that around 10 tubes a year. And so even though the patient population may be 1/3, the number of tubes is 3x that of AD.

Got it. That makes sense. Maybe shifting gears to some of the other moving parts. Just on the LIMBER program for Jakafi. We've got a few updates coming up. Maybe you can just help kind of set the stage for what we should be looking for in each of those. And ultimately, what percent of the population for MS you think would switch to one of the LIMBER approaches?

Yes, it's Steven, I'll try to answer you quickly. So obviously, RUX itself is an excellent drug for the treatment of both MF, PV and actually GVHD. But even given that, about half the patients still have a somewhat suboptimal response to Jakafi in terms of either spleen reduction or symptoms or both. So those are people who could benefit from the addition of things that address the underlying reasons for that. And a lot of that are patients who can -- are inadequately dosed with RUX because of the side effects like the anemia side effect. So there's opportunity despite it's really excellent profile and widespread use. So LIMBER looks across the board at addressing those. So firstly, formulation-wise, the RUX XR program went well in terms of its BA and bioequivalence work. It's in stability now. As soon as that stability completes in early '22, we'll file and are looking at an approval. After filing in about a 10-month time frame, probably early '23. And that would also -- in addition to the obvious differentiator from once-daily therapy, we'll also open us up to do fixed-dose combinations with it with other mechanisms. So then you turn to where we're going in MF, the sort of second pillar. So the most advanced is the RUX-parsa combination work, both a suboptimal study in about 220 patients that's pivotal and then a first-line registration study in about 440 patients of the combination. The endpoints are standard for the first line. It's both SVR35, so spleen reduction 35% or greater, plus symptom improvement. And then for the suboptimal settings, it's a lower bar in terms of getting there, but it's a very clever design. So patients who aren't getting adequate response from RUX are randomized to continue RUX plus the add-on with parsa. And then the 2 earlier programs, we have a BET program going through dose escalation this year and in combination safety work. And then we'll have to make big, strategic decisions. And then the very interesting ALK2 program, which we know already and have data that the mechanism works. So ALK2 inhibition decreases hepcidin levels, decreases ferritin, so ferritin's showing that iron's been mobilized. And then we have to show that it's addressing the underlying anemia of MF, plus the anemia of RUX. Should that work, it's potentially great therapy because it will address the condition itself, MF, the anemia from the drug and allow dose intensity and increase efficacy. So again, dose escalation combination work now and a safe dose and schedule next year and then strategic decisions. We will have an ongoing collaboration with sell-in costs with umbilical cord blood, looking at T Reg manipulation there, that's also important. And then very early on, we won't declare targets until the next year, but for PV, we hope to take a couple of targets into the clinic in the next year that are directed to very relevant mechanisms there, and then ongoing discovery work in MF as well. So a total program, the most advanced of the QD formulation, and then the RUX-parsa pivotal studies with follow-on thereafter [indiscernible]. The meat of your question is who gets what. It's not clear because we don't have clear biomarkers for each program. So what will happen is, I think, people will look at the efficacy and safety profiles. If it's a patient with dominant anemia, they'll probably use ALK2 and et cetera, depending on the patient profile that comes from the different combinations. Thanks.

Got it. Last question for me since I think we're already a minute over, just tell us how you think about building out the pipeline on -- where are you kind of focused both in terms of internal R&D as well as potential for external types of deals as well?

I'll do quickly the internal side, and Christiana will quickly do the external side. Internally, I guess the 2 most exciting current programs are RUX cream itself. It's a pipeline in our product. You have, as you mentioned, vitiligo, to come, and then more life cycle management. We'll probably do a number of registration directed efforts. One is already declared, chronic hand eczema, but a few more to come that are relevant to the biology. And then the -- on the IO side is the RO PD-L1 program. We had an update at SITC, 3 compounds there. 55O was clearly active. It has this peripheral neuropathy signal we're still trying to sort out. But the follow-on drug's a little earlier, so they're caveats, but seen activity in terms of tumor shrinkage, and no evidence of neuropathy yet. And then on the biz dev side, I'll ask Christiana.

So regarding business development, we are looking at BD as a way to supplement our internal activities and not programs, especially in areas where we have both capabilities and infrastructure that we can leverage. So those areas are obviously hematology, oncology and derm. We look at BD as a way to add. We don't depend on BD. And that puts us in a very nice position because we can be more patient and selective and wait until we find opportunities that makes sense both from a clinical point of view as well as a financial point of view. We have a strong balance sheet, $2.3 billion in cash, no debt. So that gives us the capacity to be able to consider attacking acquisitions, which is really the focus of our efforts.

Awesome. I think that's all we've got time for. But thank you, Christiana, Steven and Christine for joining us. And thanks, everyone, for listening as well.

Thank you for having us.

Thank you.