Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Good morning, and Happy New Year, everyone. Welcome to the 40th Annual and Second, and hopefully the last time, Virtual JPMorgan Healthcare Conference. My name is Cory Kasimov, I'm the senior large-cap biotech analyst, and it's my pleasure to introduce Herve Hoppenot, the Chairman and CEO of Incyte, our first company to present here today. Please note that following Herve's presentation, we will have a Q&A session right here in the same Zoom room. [Operator Instructions] And with that, let me turn things over to Herve to get us started. So, Herve, thank you for being here.

Thank you, Cory. It's good to be first and it's a pleasure to speak about Incyte this morning. So I will call the slide numbers as I go through the presentation. So on Slide 2, I must state that safe harbor rules govern my remarks. Any forward-looking statement that I make, can I ask that you please review our latest SEC filings? Slide 3 is really looking back at the past 5 years and -- of growth and expansion of the portfolio of Incyte. So in 2017, we had 2 approved products, 3 indications. And in the first 9 months, which is what we use as a reference here for 2016, we had revenues at $700 million, which you see in 2021, we have tripled our product and royalty revenues to the north of $2 billion, $2.1 billion, and we have 7 approved products with 12 indications. And it's important to remember that this revenue does not include Jakafi in steroid-refractory chronic GVHD because it was approved just at the end of the period here. It also does not include Monjuvi in Europe and maybe more importantly, Opzelura, where we have launched in atopic dermatitis in the U.S. recently. And obviously, we are looking for new indications coming in the next few months. And obviously, we expect these new launches that are not included in the number here to provide further growth and acceleration of the revenue growth. So that's sort of looking back at the past 5 years. On Slide 4, we are really speaking about what makes Incyte Incyte, what drives our success. And the first is obviously the unique ability to develop highly selective molecules. So we have 4 molecules now that were discovered at Incyte, are commercially available today with ruxolitinib, baricitinib, pemigatinib, capmatinib. We obviously have rux cream, which is a very important innovation and we have new small molecules going through the process with our adenosine franchise and the oral PD-L1 program, for example. So that's the first thing. The second thing, which I think is very important, is our ability to develop in areas of high unmet medical needs, which is basically be first to go in new areas where medicines can change the outcome for patients. It's true for Jakafi in MPN, Pemazyre in cholangiocarcinoma, and with Opzelura first in AD, but if approved next in vitiligo, we are exactly in the same type of approach to clinical development, which is to look where other products are not yet available and it has a meaningful impact on many of the aspects of our portfolio. And the third is really our ability to commercialize, where we all know the success of Jakafi over the years in 4 different indications and the -- now the launch of Pemazyre globally. And as you will see, the success -- early, early success of Opzelura in the U.S., which I think is very promising. So Slide 5 is really an agenda of what I will be speaking about, and I would like to start with dermatology as it is newest franchise we have here at Incyte. So on Slide 6 now is the picture of the launch of Opzelura. We are speaking of 10 weeks here. So it's still very early, but what you can see is that we have had a lot of growth over these 10 weeks. Just a reminder, Opzelura is approved in atopic dermatitis. It's a first and only topical JAK inhibitor approved in the U.S. and it has unique characteristics of managing both inflammation and each with a very rapid onset. So on the left here, you can see the so-called NBRx, which is trying to capture in some ways new patients that are treated every week in dark blue and the refills are in the lighter blue. And what you see in the first 10 weeks is that the NBRx total is 15,500. And we have now more than 3,500 prescribers for Opzelura, so a very good beginning for this brand. At the end of the week ending December 17, we have more than 2,900 weekly prescription, and which means that it's around 2,500 weekly new patient starts and 370 refills, which is important and is a very good thing. The share of what we call the basket -- the market basket reference, which is made of tacrolimus, pimecrolimus, Dupixent and Eucrisa, as you see, is already around 9.4%. So very strong start with Opzelura in the U.S. The reason why -- on next slide, Slide #7, the reason why this successful launch is happening is mostly this cycle of experience for both the physician and the patient, which is driving the launch. The first factor driving the uptake is obviously the safety efficacy profile of a topical treatment for atopic dermatitis, and we know dermatologists like to use topical treatment where they can. And the fact that we are launching into a market with millions of people living with uncontrolled disease, which obviously is leading to a need for novel effective therapies for patients, and the feedback we are getting from patients and physicians are getting from their patients is overwhelmingly positive and it's about what we discussed, which is a rapid itch relief and skin clearance, and because it's a topical formulation, the safety that the patients are observing. So the feedback loop is working, patients are coming back to the physician with positive feedback and physicians are prescribing more as a consequence of that. So it's a good start. On Slide 8 is basically looking at where are these patients treated with Opzelura coming from, and I think it's very interesting because it's showing that Opzelura has the potential to redefine the sequence of treatment for atopic dermatitis. And patients who have been living with uncontrolled disease have been cycling through steroids and sometimes some other type of medicine, mostly topical. And what you see here is that the source of business for Opzelura, for 34% is coming from what I described the so-called market basket product, tacrolimus, pimecrolimus and Eucrisa and some patients from Dupixent, but 60% of these patients are coming from outside, which is mostly from steroids. And we can see here in average over the 10 weeks that the refills are around 6% and growing relatively quickly. So that's a very good picture. The prescription on Slide 9, the prescriptions for Opzelura are mostly coming from dermatologist offices, so 62% from dermatologists themselves and 34% from nurses or other people in the dermatology office. And I think it's really important to remember that we decided to target this specialty from the beginning and to launch Opzelura as a specialty product. As we know, there are more than 2 million patients treated by dermatologists every year, and that 78% of these prescriptions are written by the top 20% dermatologists, so -- and allergists. So it's a relatively targeted launch in what we see as a targeted market. Now if you look at the overall market evolution for this group of products, which is Dupixent, Eucrisa and TCI, what you see is that in 2017 -- I'm on Slide 10. In 2017, we started to see the impact of new market entrants on the overall number of prescriptions and the CAGR there is around 36%. And what we expect is that this market expansion with the entrants -- the entry of new products to the market will continue over the next years, a little bit like what we have seen with the psoriasis market in the past, where the growth has been driven by the availability of new products that would change the sequence of treatment. And the uptake of Opzelura we have observed over this 10-week period is showing us that we are very possibly on the track to reach what we have given as a guidance of $1.5 billion peak sales in the U.S. with the refills that we are expecting at 3 to 4 tubes a year, and overall, a very good situation for Opzelura. Just a word about the payer negotiations, still on Slide 10, so we expect the majority of the contract with the PBM to be signed by the end of Q1. And obviously, as I said, we think it will be also adding to the growth profile of the product for this year. Now moving to the broader question of dermatology. So we have, obviously, Opzelura in both -- in AD today, in vitiligo, hopefully soon if approved by the FDA, we have a program in chronic -- in the chronic hand eczema already ongoing also with Opzelura. And then we have a JAK1 inhibitor, 707, that we are studying in Phase II for vitiligo, for HS and for prurigo nodularis. So that's a program that will be solidifying our franchise in dermatology and, obviously, synergizing our commercial operation in the field. Now moving to MPN/GVHD, so it's a sort of a Jakafi franchise today. So what you see when you look back at the past year is a very good growth profile that continues where, obviously, the growth is driven by efficacy and safety, which is unique, the long-term clinical data that we have and a number of new indications that have been coming out over the years, starting with myelofibrosis, moving to polycythemia vera and then adding both acute and now very recently chronic GVHD. So in the first 9 months of 2021, we had around $1.5 billion in revenue coming from this product with a 5-year CAGR of 20%. What's interesting to see is that the number of patients continues to grow and to increase across all indications. So myelofibrosis being the oldest is growing at a lower rate, followed by polycythemia vera and the most recent GVHD. And that's leading to this double-digit growth I was describing in my earlier slide. Now if you look on Slide 15 at where we are in myelofibrosis. On the left, we are trying to describe the existing patients in the U.S. So there are around 16,000 patients eligible for Jakafi. And among this, we have 55% of them currently on Jakafi and 20% have been on Jakafi previously and have discontinued and around 25% have been recently diagnosed and are not on therapy yet, if I can say that. So what's interesting to look at is how can we improve on the clinical efficacy and safety profile of Jakafi in that indication? And what you see is that there are 25% of patients on Jakafi who have a suboptimal response to single-agent JAK inhibitor and 25% who are on a sub-therapeutic dose because of anemia most of the time and could benefit from JAK -- higher JAK inhibitor dose intensity. And then when you look at the patients who have discontinued, we know that they have had to discontinue either because of anemia or thrombocytopenia or disease progression. And that puts in perspective what we are doing with our so-called LIMBER strategy, which is improving our Jakafi in that setting, where we have a number of strategies that include our PI3 kinase delta, our BET inhibitor and some novel targets that we have not yet disclosed, and our ALK2 inhibitor in combination with a once-a-day form of ruxolitinib. And what you see is that there is a lot of patients where this approach of better efficacy with PI3 kinase delta or BET or higher dose intensity with ALK2 or better safety in combination with ALK2 can have a meaningful impact to expand and prolong the life of this franchise for Incyte. Now moving to Slide 16 in GVHD. So we have now established Jakafi both in chronic and acute steroid-refractory GVHD. And what you see is that we have opportunities in the first line setting that we are studying. We are in sort of dose optimization Phase II randomized phase with itacitinib. And more recently, we added axatilimab from Syndax to our portfolio with opportunities both in third line as a single agent and then in combination in either second line or first line potentially to improve over what we are delivering today with Jakafi. So there is a lot of work both in myelofibrosis and GVHD at the clinical stage today to improve. So Slide 17 is ASH data that was published for axatilimab in monotherapy in a group of patients that were very heavily pretreated. And that you can see that there were a number of doses that were tested with 1 milligram per kilogram every 2 weeks, 3 milligram every 4 weeks, and that will be moving forward in the so-called AGAVE-201 study along with a low dose of 0.3 milligram per kilogram every 2 weeks. The best of our response was 68%, and 53% of patients reported improved symptoms. So it's a good product with a unique mechanism of action that we think could be very beneficial for patients when combined with a JAK inhibitor or alone in the third line setting. So that Slide 18 is a summary of our work that we are doing in MPNs and GVHD. And as you can see, there are a number of opportunities to -- as I said, to expand and continue to develop our franchise in this indication. Now let me move to some selected programs that I would like to highlight in our pipeline here. The first is obviously tafasitamab, where we are launching both in the U.S. and in Europe. It's approved in the second line treatment of DLBCL in combination with lenalidomide. And here, we are doing multiple things. The first one is to shift to earlier first line use and the studies are ongoing for first line DLBCL and to expand in other indications where it could be appropriate in combination with R2 and in the follicular lymphoma and marginal zone lymphoma, and in combination with parsaclisib in different type of non-Hodgkin's lymphoma and CLL. So the launch of Monjuvi is happening as we speak in Germany and is doing well. And as you know, we have been on the market in the U.S. and we observe now progress and growth as we are moving to other lines of therapy. So a lot of potential for the long-term with tafasitamab. On Slide 21, I'm speaking about a program with parsaclisib in warm autoimmune hemolytic anemia. So we are moving to Phase III study. You can see on the left of the slide the data coming from the Phase II program with different cohorts. And what it's showing is basically there is a dose effect. But more importantly, there is a durable normalization of hemoglobin as early as week 2. So the Phase III has been initiated at a dose of 2.5 milligram and it's a study of around 100 patients evaluating the safety and efficacy of parsaclisib versus placebo with a primary endpoint of durable hemoglobin response at week 24. And we believe it's a significant opportunity for Incyte and for patients with no approved therapy today. Now let me speak of some of our early development program with our oral PD-L1 program, where we have 3 programs in development, 3 molecules in the clinic now. 550 is obviously the most advanced and we'll have a number of updates in 2022. Another one important program is our adenosine program, where we have a small molecule against A2A/A2B and an antibody against CD73 that obviously we are planning to combine and where we have data expected also in 2022. And the third one is the LAG-3 program that we have already in the clinic and where we are going to Phase II now with the strategy of combining it with TIM-3 and PD-1 also from our own portfolio as a triple combination that we believe from the biology we have been studying could be very interesting for patients in this sort of strategy of checkpoint inhibition. So on the next slide, which is Slide 23, is just a snapshot of our oral PD-L1 program, where we have obviously 550 where we have shown data at SITC recently showing a number of patients having responses, so efficacy has been shown. We also have shown that some patients had a higher rate of peripheral neuropathy than was expecting, so we are basically improving this peripheral neuropathy effect or side-effect with optimization of the dosing schedule and all of that is underway. We have 2 other molecules in the clinic today, and they are not far behind 550, and we have observed tumor shrinkage with both of them and we have not seen peripheral neuropathy yet. So it's earlier. So we have to be careful with that, but it's certainly very promising and the dose escalation is ongoing. On the right of the slide, you can see one example of a patient treated with 280, where we have seen a reduction in the measurable disease. It's a patient with microsatellite stable metastatic colon cancer, which is usually not very responsive to antibodies as a disease, not this specific patient. He was treatment naive, but where we see also the clinical efficacy. So it's a very important program because it has a number of applications because of the short half-life of the small molecule. So it makes it a switch off -- easy switch off strategy when you observe unwanted side-effects, but obviously also because of the ease of administration and the ability to do fixed dose combination with other oral products. So that's my last slide, I'm on Slide 24. So we spoke about the past 5 years and the growth and the expansion. And for the next 5 years, we think we have a number of opportunities to have transformational growth for Incyte. And you can see it in MPN, as I described, with GVHD, MF and a number of programs to improve on safety or efficacy of what is the standard of care today, Jakafi. In the rest of our hematology/oncology portfolio, Monjuvi, Pemazyre obviously being launched worldwide. I spoke about parsaclisib in hemolytic anemia and an earlier pipeline with a number of important molecule, among others is oral PD-L1 and the adenosine program. Our new franchise in dermatology is developing, first, with the launch of rux cream, but we have the further development of rux cream beyond atopic dermatitis and vitiligo and new molecules like 707 providing us with the new opportunities. And something we didn't speak about, but the royalty portfolio of Incyte, which is already fairly large, is continuing to increase at a rate that is fairly high. So that's the picture we have for the next 5 years, and I will stop here, so that we can spend time on Q&A.

[Operator Instructions] But I will get things started, and we can see the rest of the team there around the table now. Let's obviously start with Opzelura here. And maybe can you just talk a little bit about where you stand with the manufacturing issues that you first disclosed back in November and progress you're making on that front and whether there is any risk to the commercial supply at this stage, it sounds like the launch is going quite well?

The launch is doing very well. We had an issue in a selected number of batches early on. We are manufacturing and producing commercial supply as we speak and we are able to fulfill the needs from the market. So there is no big change on that front.

Okay. Great. And then as you acknowledge, you are early in the launch, but it sounds like feedback from physicians has been very strong to date. Are there any particular attributes of the drug driving uptake at this point in time? And at the same time, are there any specific points of pushback you're finding you're having to explain a little bit more?

No, the -- I mean the -- I think the most important part of this presentation today is this aspect of redefining the treatment of atopic dermatitis -- the sequence of treatment of atopic dermatitis because physicians have been facing a situation where they were cycling like topical products with limited efficacy and had a number of problems in the case of steroids because there are a number of patients for whom it's not the right treatment or go to Dupixent. That was literally the situation that physicians were facing. And by providing Opzelura with a very rapid onset of efficacy, so that's important because they see it very quickly, but a very good control of inflammation and itch in such a short period of time, what we see, and that's what I was trying to describe on one of my slides is that physicians are rethinking the sequence. And we've seen a number of patients, not only coming from Eucrisa and coming from other TCIs, but we see patients coming from steroids into being treated with Opzelura directly, and that's the key of the launch process. The pushback we get is mostly as you would expect about reimbursement when you launch in the early weeks, we have taken a position of covering the cost of the product for patients who are blocked by their plans. And -- so you will see in the early, before we get the full listing on the -- by the insurance companies, we will be in a situation where we are covering that cost ourselves, so it will have an impact on the gross to net in the early days. And then when we are on formulary and the discussions are ongoing and doing well, that issue will be resolved. And then the clinical profile is frankly very positive and patients that we speak to and the reviews we have done or the surveys we have done are showing that patients are very surprised by the speed of action of the product and very happy with the evolution of their eczema.

Can you talk a little bit more about the reimbursement process? And you guys have obviously launched multiple products before. So how straightforward this is compared to prior experiences and maybe how you expect the gross to net to evolve as reimbursement comes along?

Yes. And Christiana can speak about the gross to net. I will tell you, I mean, the experience we have in oncology has no relevance to this. So it's -- we -- what we did is we hired a group of people who have been experienced in dermatology, many of them with topical products. And the negotiation with the payers are progressing very well. I think people see the value. Think of it, I mean, the alternatives to Opzelura would be to use either ineffective treatment that have already been tried for the same patients or to move to a very expensive type of approach -- well, very expensive, more expensive type of approach like Dupixent and maybe some days some of the oral tracks if they get approved in that indication. So in some way, when I speak about redefining the sequence of treatment, it's also something that applies to the payers where they will have an opportunity to use Opzelura for the right patients. And in some cases, they would delay or prevent the use of more expensive treatment. So if you want to speak about the gross to net?

Sure. In terms of the gross to net, as Herve indicated, we expect to have the majority of the contracts with payers signed by the end of this quarter, Q1, and then we'll work with payers to get the NDC blocks removed. That means that in the first quarter, we expect gross to net to continue to be high, but then start seeing this trending down and start normalizing in the second half of this year.

Okay. That's very helpful. And then what kind of evidence do you have at this point in terms of repeat prescriptions from patients? How do you expect that to -- obviously, this is something that's going to be sort of an on and off type of therapy, but any evidence of repeat prescriptions yet from your patients so far?

So yes, what I showed on one of my slides is -- I think the Slide #6 is that, in fact, we are starting to see -- obviously, it takes a few weeks. But even in this short period of 10 weeks, we have started to see -- we had at the last week 370 refills. So 13% of prescriptions already are coming from refills. So that's a quantitative aspect. On the qualitative, there is no -- yet no good data because we don't know how much the first tube is going to be used in the -- depending on the size of the -- the extent of the disease. So we don't have yet any kind of a number of tube per patient that we can speak of, but we are starting to see the refill and it's a very good sign.

Okay. And then one more question for now on Opzelura. Just kind of bigger picture, how do you see the ultimate opportunity for this product between when you compare atopic derm with vitiligo? And how do you think the number of tubes used per patient per year may vary between the indications?

Yes. I think it will be very different between the 2 indications. Atopic derm, I mean, we are speaking of 5 million of patients. I spoke about the more than 2 million who are treated by dermatologists. So that's -- that gives you an idea of the potential size that we could have there. We have been assuming the number of tubes per patient to be between 3 and 4, and that was based on our clinical trials, where we had the same on-demand type of treatment. Now is it going to be identical in the clinical -- in the commercial setting, we don't know yet, but that's what we have been assuming. And we know there are millions of patients who are cycling through steroids. So when I spoke about more than 60% of our patients treated with Opzelura coming from the steroids, I think it's a very important new information that we got while -- as we are launching it. Vitiligo is a very different treatment scheme, where we assume there will be around 10 tubes per patient per year. You saw the data maybe we generated recently showing that there is continuous improvement of re-pigmentation for many of the patients up to 2 years. So the duration of treatment, the number of tube per patient will be very different. And there, the number of patients who will seek treatment is very much unknown. We know today in the absence of any available efficacious approved therapy, there are around 200,000 patients, 150,000 to 200,000 patients seeking treatment for their vitiligo. But we also know that there are more than 1.5 million patients suffering from vitiligo in the U.S. So there is a lot of upside, if you want, from that number. And we believe both atopic derm and vitiligo will be very meaningful for Opzelura. Just a side point, we are -- we have also submitted vitiligo in Europe. And we know in Europe, there are more than -- like a little bit like the U.S., there are more than 2 million patients suffering from vitiligo in Europe. We are assuming in Europe to have feedback from the regulatory authorities at the end of the year.

Okay. All right. So yes...

In the U.S., the PDUFA date...

Yes. It seems like this would be one of those opportunities when there's a product available that more patients start to seek therapy and then what -- than what we see today. In the interest of time, I'll pivot and talk about some other aspects of the company. I want to ask, how confident are you that the LIMBER program -- we have a lot of combinations that are going on there, how confident are you that this program can increase -- extend the durability of this franchise beyond Jakafi's LOE?

Steven can speak about the -- sort of the clinical aspect. I can speak from the revenue standpoint. We are looking at it as a source of expansion of the business because I spoke about all of these patients who today are not anymore treated with Jakafi and could benefit from Jakafi. And that's clearly something that will be expanding the opportunity before 2028. And then there is a combination with once-a-day ruxolitinib, which is a product that we are submitting to the FDA now and where we will be able to do fixed dose combination. We are already working on it from the pharmaceutical standpoint of building the new formulation, and that will have an impact on how it could extend beyond 2028. So there is a sort of medium-term before '28 expanding the market and then beyond '28 making this proprietary fixed dose combination something that would be useful for patients.

Okay. Moving on then, on Monjuvi, I would -- I think it's safe to say that the product hasn't been kind of the immediate top line driver that some on The Street were expecting. Has your outlook on the longer-term opportunity changed at all when you think about front line and combination potential?

Yes, it does. And as we said, I mean, the U.S. launch has been slower than expected. We continue to work. We see progress and a lot of the progress has to do with the type of patients who are treated, earlier line of therapy, longer duration of treatment. And we see that it's moving, maybe not fast enough, but it's moving in the right direction. And then we have all the expansions we are doing in new indications.

Yes. So Cory, just to add, it's Steven. Across the board in terms of non-Hodgkin's lymphoma, so obviously we have the ongoing first line study front line, which is a tafa-LEN combination with R-CHOP versus R-CHOP encouraged by now for the first time in a long time, somebody has been able to improve progression-free survival versus R-CHOP using a B-cell directed therapy. So we feel that that increases the confidence for us of doing our study, the enrollment is going well. It's targeting patients with first line diffuse large B-cell lymphoma that have a slightly worse prognosis in terms of their prognostic index. Then in indolent lymphomas, we have an ongoing study called inMIND versus R2 in that setting, again, looking at a combination of tafa in that setting to improve the outcome there. And then very interesting for us, bolt-on data that MorphoSys generated with PI3 delta inhibitors looking at a combination of tafa with parsaclisib, our PI3 delta inhibitor in various B-cell malignancies, including CLL. So it's an important development program that is across the spectrum of non-Hodgkin's lymphomas and some indolent diseases as well.

Okay. And you mentioned parsaclisib, curious on how you guys evaluate the commercial opportunity for that program.

In -- so the way we look at parsaclisib is first what I described, which is this program in myelofibrosis in combination with Jakafi. We are in Phase III. We have 2 Phase IIIs ongoing. One of them is in this group of patients with suboptimal response to Jakafi, and we think it's a very promising option for this product. We have shown efficacy in our early studies, and that's one that is ongoing. The other one is in hemolytic anemia because there is an unmet need. There is no approved product for this indication. We have shown 2 different groups of patients being treated and showing the benefit of parsaclisib and the dose effect that you can see on the graph I was presenting earlier. So that's really 2 high potential type of indication for parsaclisib. The submissions we did in different types of lymphoma are being reviewed by the FDA. There are more ways to get the product approved earlier than we would by waiting for the result of the Phase III studies. And we need to see what the FDA is thinking about it because, as you know, they have a number of questions about PI3 kinase deltas in this indication. So that one is an ongoing process.

Okay. And in our last minute, my final question for you, bigger picture, just latest views on business development. Is it status quo with the approach you've been taking over the last number of years or any differences to that?

So our BD priorities have not changed. We continue to look for clinical stage assets that are in areas where we have expertise and where we have infrastructure that we can leverage. And so that means such hematology, including MPNs, oncology, broader oncology and specialty there.

Okay. Perfect. Well, we are out of time. So I want to thank you all for joining us here today, and good luck the rest of the week. Really appreciate it.

Thank you.