Incyte Corporation (INCY) Earnings Call Transcript & Summary

Good morning, everyone. I'm Andy Berens, senior biotech analyst at SVB Leerink. Thank you for joining us on day 2 of our Global Healthcare Conference. We are very happy this morning to have with us Incyte Corporation. We have Herve and Christiana and the IR team with us. Thank you for joining us. We appreciate your time and sharing the Incyte story with us. Herve, why don't we -- yes.

No, no, I was going to say thank you for inviting us and we can talk the way you wish. I was planning to go quickly through a few slides and then going as quickly as we can to Q&A, if it's okay with you.

Absolutely.

Okay. So this slide is -- just I must state that safe harbor rules govern my remarks and any forward-looking statements that I make, would you please review our latest SEC filing. So Slide 3 is really the picture of the full year 2021 and the first quarter '21. And as you can see, the growth of our revenue has been 17% for the full year in '21. It has been accelerated in the fourth quarter in part because of Jakafi. And Jakafi was growing at 15%, and it's a result of getting the approval in chronic GVHD during that time. And it's also because we have the launches of the new product happening across the world with Pemazyre and Minjuvi and an increase of our royalties, which are growing very steadily and had an accelerated growth for Olumiant, mostly because of the COVID indication where now it is used. And obviously, the launch of Opzelura in the U.S. is starting. It's still a modest number. And we'll speak about that, but it has been certainly a great success to get it approved and launched. So let's move to Opzelura in atopic dermatitis, where it is currently approved. The treatment of atopic dermatitis was, in the past, before Opzelura, very much about a number of topical products that were used, TCS and TCIs and one systemic product, Dupixent, at the other end of the spectrum. What we are observing now is that there are a number of patients, a very large number of patients who are not fully controlled where their eczema is not fully controlled, who are eligible for additional therapy beyond TCS and TCI, and where Opzelura is sort of filling this unmet medical need, where physicians have a choice of using, for some patients, a systemic therapy when -- depending on their disease. And now obviously, they can use Opzelura for the patients where it's indicated with a mild and moderate disease. That number of patients is very high. And we are speaking about 40% of patients experiencing flares in spite of their current treatment. And that's really what we are targeting with Opzelura with the launch that we are doing, of trying to target patients who have been previously treated with steroids or other relatively less active type of topicals and who are not at the severity that will require a systemic treatment. So the next slide is about the launch. You can see on the right, the number of prescriptions per week. So it has been a successful launch. We are now north of 3,000 prescriptions per week. In Q4, we had 19,000 new patients being treated. And as we are progressing, we see the refill rate improving. And at the last count, it was around now 15% of the total prescription in January, we're coming from refills. What's really important to realize is that what makes this product very different from the other products available in the field of eczema is obviously the lack of systemic exposure compared to the systemic product and the level of efficacy that you can have with the topical product that has not been seen before with the other topical product, specifically regarding itch relief, which is extremely fast and is obviously leading patients to give feedback to their physicians about how rapidly they have this very important efficacy. We are in the process of negotiating and signing contracts related to reimbursement of Opzelura in the U.S., and I'm sure we'll speak about it in the Q&A. The Q4 number is based on a gross to net that was very much driven by our choice to unblock the blocked prescription, to give patients access to the product and to create experience with the product for the physician. We are already getting some of the best rebate agreements being signed. And over time, during the year 2022, we will see this contract with PBM translate into listing in the plans, and we anticipate at steady state the fully loaded gross to net, including all of the components of gross to net to be around 40% to 50%, and that should be happening in the second half of 2022. So the next event for Opzelura is vitiligo. We have a submission at the FDA with the PDUFA date on April 18. And vitiligo is a clear unmet medical need. There are millions of patients in the U.S. diagnosed with vitiligo. There is no FDA-approved therapy for repigmentation. We know around 150,000 to 200,000 of these patients currently knowing that there is no real good treatment for them are seeking treatment. And obviously, there are a number of patients who are not seeking treatment today who could become interested in having an option for repigmentation. You can see on the right the result of the TRuE-V study, which is our pivotal study in vitiligo. And showing that after 24 weeks, you have 30% of patients showing repigmentation. It's a TRuE-V1, the pink part of the slide. The blue part is the Phase II that we have done earlier where we have the follow-up over a longer period of time. And we had the same 30% of patients at week 24. And what you see is that by week 52, in that smaller study, it did improve to 50%. We will have the week 52 data for our Phase III studies in -- presented in this year in scientific conference. I think this vitiligo indication is, first, very important for patients who are suffering, but it's also a very large opportunity for Incyte as it will be the first product being available, if approved by FDA, with repigmentation as an endpoint. Now dermatology is not just about Opzelura in vitiligo and atopic dermatitis. We have a pediatric study that is now ongoing in atopic dermatitis. We have a Chronic Hand Eczema Phase III study that we are initiating. And obviously, as I described, the vitiligo study. On top of RUX cream, we are developing 707. It's a systemic JAK1, given the [ oral ] appeal, where we have now 3 studies being initiated, they're Phase II studies. One is in vitiligo patients with a large lesion size who would not be eligible for RUX cream. One is in HS and one is in prurigo nodularis. So the entire portfolio of dermatology products, now that we have a commercial infrastructure, a development infrastructure is, in fact, increasing fairly rapidly with very interesting indication with a high medical need. The next slide is about our LIMBER program, which is our life cycle management for MF, PV and GVHD. I will not go through all the list here, but their Phase III is ongoing in first-line and suboptimal responder myelofibrosis with parsaclisib and the number of mechanism BET and ALK2 that we are testing now in combination with ruxolitinib with a goal of improving efficacy with a BET inhibitor or parsaclisib or improving the safety profile and the rate of anemia with an very potent ALK2 inhibitor we are combining with ruxolitinib. In GVHD, as you know, we have acquired the right for axatilimab. It's today in the third-line treatment of GVHD, chronic GVHD. And we are in the process of combining it with JAK inhibitors, itacitinib or ruxolitinib, to improve efficacy in the second and first line treatment. And I will finish with 1 slide on other components of the pipeline, and there are a number of programs that are progressing very well. I would point to the autoimmune hemolytic anemia studies that we are starting. It's a Phase III study with parsaclisib. It's a very large unmet medical need where we have a very good Phase II multi-dose data that has been published; the oral PD-L1, where we have 3 products currently being developed; and very important, obviously, potential indication or part of our portfolio when you know the size of the -- and the importance of using PD-1 -- PD-L1 in cancer treatment, and two programs with adenosine, with A2A, A2B and CD73 now in the clinic; and a combination -- a sort of unique combination we are doing with checkpoint inhibitors combining LAG-3 and PD-1. So I will stop here. I mean it's a business that has been very successful over the past few years, growing very well. We have new growth engines now with Opzelura, with Pemazyre, with Minjuvi and some of this pipeline I'm describing. And obviously, all of that will be unfolding in the next few months and years.

Thank you, Herve. A very extensive overview, Herve. I appreciate it. Why don't we dive into some of the individual products that you mentioned. Why don't we start with Opzelura. You've given peak sales of $1.5 billion in the U.S. in atopic derm. And I think you gave some of the attributes of the drug that are different than other ones. But to date, I don't think any topical cream has been blockbuster status worldwide in all indications. But what is it about -- and you've also -- I mean, you've chosen several different strategic decisions, the pricing, the size of the sales force, the target physician population. What is it that gives you the confidence that it will translate to $1.5 billion eventually? And what did the other companies do that led them to fall short of that goal?

Well, I think nobody tried because nobody has had a product with the efficacy and safety of Opzelura. So I'm not judging on the where other companies have been managing their own product. I think you know in the field of eczema, there is a clear unmet medical need. And that unmet medical need is exactly where we have decided to position Opzelura. There are patients who are not fully controlled with steroids, Elidel, or Protopic. And you know the level of efficacy is very different from what we have with Opzelura. And there are patients who are not eligible for Dupixent and the other new systemics that are being introduced. So there is in between these 2. We are not competing with the steroids. We are not competing with Dupixent. But in between these 2, there is a very large number of patients, and that's where our guidance came from, who are, in fact, in a situation of unmet medical need and where what Opzelura can do is exactly what they need. And what we see from the feedback of the launch and the curve as it has been growing is that, in fact, it is very visible to patients first who give feedback about the fact that this product is different from what they have had before, and from physicians who are very happy to see their patients finally after all these years dealing with these chronic flares that people have, to have a product that will reduce the itch very quickly and control the inflammation. We have data -- we have follow-up data from our pivotal study showing after a year that 80% of patients are fully controlled. So it is a product that is introducing a level of safety, obviously, as a topical product, and efficacy that has not been seen before in the field of eczema. And that's what's driving our view about the long-term potential. I mean when you think -- if you do the math, what you see that our guidance is based on like 400,000 patients that will be started. So if you look at how many patients per week you end up with a number that is below 10,000. We are already at 3,000 after a few weeks in the market. So that is not completely un-logical way to get to that number when you look at the medical needs, the patient profile and the trends that we are having with our launch.

Okay. And it does seem like demand -- unit demand has been strong so far and somewhat in line with what we saw with the early Eucrisa launch. But the gross to nets are really high, over 90%, I think, in the last quarter. So you did give some overview of where you are with payers. And the guidance now is 40% to 50%, previously 25% to 50%. What was the genesis of raising the bottom bracket there and the guidance for the gross to net?

Yes, the guidance, obviously, is something we have to keep very broad at the beginning because we don't want to just give our -- give that information too early in the process of discussion with the payer. So that's not a sort of a change. It's just -- it was a broader range and we sort of try to help everybody do modeling on where it could end up. And that's the process we are going through. Think of it, I mean, in -- there is a redefinition of the sequence of treatment in eczema happening now. And obviously, in the past, when a dermatologist was seeing a patient who had uncontrolled eczema coming from a GP, most of the time treated with steroids, Elidel, Protopic et cetera, basically, they had a choice of represcribing the same things that did not work or going to Dupixent. And that was the only thing they could do. So what we have now is a very different situation where, in the sequence of treatment between the more low effectiveness type of topical and the systemic treatment, there is an opportunity with Opzelura. It's very important for the payers because you know the price and the cost for Dupixent is very different from what we have. It's north of $30,000. You have RINVOQ, which is more like $50,000 a year. And then you have Opzelura, where, as you have said and seen, if you take the 50% as a way to calibrate, would have a cost per year based on like 3 tubes per year between $3,000 and $4,000. So it's a very different range of cost for the payers and part of the discussions ongoing today are exactly about that, and we are very confident we will be getting to the guidance we have given during the year. We have been very clear about Q4 from the beginning that we would be unblocking the blocks that were in the payer system. So that was something we wanted to do, and we communicated very clearly of saying we will have low -- very large gross to net and a low net sales in the first quarter of commercialization, Q4, and that we'll see more or less the same thing in Q1. And then starting in Q2, we will see the gross to net starting to trend up or down, if you want, in percentage. And we are estimating that it will be stabilizing in the second half of the year around this 40% to 50%. So that is something that was very predictable, very predicted and that we communicated very clearly from the beginning.

Okay. And we have a question from one of the clients on the webcast. Is there any chance that an approval in vitiligo would accelerate the improvement in the GTN transition over the year?

I think the approval in vitiligo -- so as you know, we have a PDUFA date in April. So assuming everything goes on time, it would be sort of around that date that probably it will take place. So gross to net evolution is independent of the launch of vitiligo because negotiation with the PBMs are already ongoing, and they are not related to a given indication. They are for product, so it's not indication-specific. And what will happen is that then we will have each of the plans having to put it in their list of product, and that will take a little bit of time after the approval, but it's not going to change the curve for the gross to net that we are anticipating.

Okay. And just I wanted to circle back. I think you said 2 of the payers were on board now. But within each of those payers, about 50% of the lives were not yet reimbursed. What's the reason for that? And what does it take to get full coverage?

Yes, they have 2 categories of listing. So there is a base contract that applies to the non-blocked prescription. It's very technical. I'm sorry. But there is a non-blocked prescription and there is a blocked prescription. So the best contract will apply against a non-blocked, so that's the 50%. And there, we are in a situation where now we are speaking with the plans and the plans are including Opzelura in their coverage. So there is a step 1, which is a PBM-based contract. And then the second step, which is a planned inclusion in the coverage. So that is taking place. And the other part, the blocks are going to be unblocked when we can finalize the contract related to that, which is a different -- so that's why we spoke about 50% and 50% -- so around 50%, 45%, 55% for each of the 2 plans.

Okay. And what's entailed with getting the other 50%? Is it -- do you have to speak to individual plans in different geographies? Or is it all -- you're still negotiating with the mother ship?

So the first 50%, the ones that have been signed now are done with the PBM. We are discussing with the plans. So that's what needs to be done to get and translate into the coverage. The other of the block, we have to unblock them by agreeing on the term with the PBM. So that's the second half of the population.

Okay. All right. And then the refill rate, the 15%, I don't really have any metrics to compare that to. How have other launches done early in the launch? I mean how should we judge that 15%, I guess? And where do you think it needs to get to get to the $1.5 billion and the 3 to 4 prescriptions per year?

Yes. Well, it's a very good question. So there are 2 reference you can use. One is our own experience with Opzelura in atopic dermatitis in our pivotal studies, where we let patients treat on -- based on need. So it was basically you use the product when you need it when you have a flare. And that's where we came to these 3 tubes per year per patient. It came from our actual experience in our clinical trial. Now that's one point of reference. So second -- so and 15% at this stage based on the prescriptions number going up is, in fact, pointing to that 3 tubes per year per patient. So we are on track for that. Now if you compare that to Eucrisa, then what you see is that the curve for Eucrisa did very well at the beginning and plateaued because there was no refill, or very, very few. And the Eucrisa curve was driven by the fact that the efficacy is not as clear as what you see with Opzelura and the stinging effect and the burning effect was, in fact, the big issue that patients came back with after the first experience that they have. So we are doing better than historical topical launch, the last one that happened. And we are very much in line with what we were expecting, leading to something that would be around 3 tube per year per patient.

Okay. And I have another question from a client. Do you expect Opzelura to disrupt Dupi's patient starts?

With -- I mean, basically, the patients are different. We are not competing with Dupi. So that's something when you look at the label, when you look at the type of patients, there are patients with -- they're mild to moderate. It's basically patients who can be treated with a topical treatment. The numbers are far higher in terms of eligible patients for Opzelura compared to Dupixent. So it's -- basically, there is a little bit of overlap. In fact, we are seeing some patients being treated after Dupixent when they have some remaining form of eczema usually in the arm or behind the legs. So there is a complementarity of using a systemic drug like Dupixent. It has a slower effect on each, by the way. So you don't see the relief as fast as you see it with Opzelura, but it has obviously a very good efficacy. And that patient population is different from the one we are treating. What -- where there could be, over time, some impact is depending on how many patients with Opzelura are basically never going to systemic treatment. And that's what the payers are interested in looking at.

Okay. We've heard from reports of payers that Opzelura is being treated similar to like a biologic and the co-pay can sometimes be several hundred dollars unlike what's seen with other topicals. Is that something that you're seeing? And what are your plans, if so, to offset that cost?

I mean, I don't know. I've never heard that. So I don't know which case you are speaking about. I mean, what we are looking at -- broadly about co-pay is that we have like many companies, same situation. We have a co-pay program that will be limiting the co-pay for the patients to $10 per prescription. And that's something that is in place. But we have never heard about like hundreds of dollars of co-pay. I don't know how it could be the case, by the way, in the current state where we are, in many cases, unlocking the blocks. But -- no, it is -- I mean, the whole idea is to make it affordable for patients. I think more than just a business aspect of it because it's an important product dealing with a clear unmet medical need. And as most companies will do now, we have this plan of a $10 co-pay maximum that will be in place.

Okay. And then before we switch to the LIMBER, I know we're almost at the end here, but just can you give us some commentary on the oral drug you're developing? Data, Phase II data, expected the second half of this year. 54707, it's -- I think it's going to be tested in vitiligo. Is there any -- can you give us any color on that?

Yes. That's basically that building of a pipeline in the field of dermatology. 707 is selective JAK1 inhibitor. Its appeal, it's a systemic treatment. It has a very good profile. It -- obviously, we had a lot of experience in developing these type of JAK inhibitors. We are looking at it now in 3 indication where we are doing Phase II studies that will be telling us go, no-go, and the design of the Phase III. One of them is in vitiligo for patients who are not eligible for the cream because of the size of the lesion on their body. One of them is in HS, and one of them is in prurigo nodularis. So we have these 3 Phase II studies ongoing that will give us a go, no-go for each of these indications. There are indications with unmet medical needs, there are indications where the biology is obviously very strong. So it is building a pipeline of indications for RUX cream beyond vitiligo and atopic derm and additional products that will be more or less taking advantage of the existing infrastructure that we have in development and commercialization for dermatology.

Okay. And then would we expect that that drug would get increased scrutiny like the JAK classes from the regulatory authorities?

We expect it to have the same scrutiny as the other drugs, yes.

Okay. All right. And then so let's shift gears to the LIMBER program. Obviously, very important focus of some investors to extend the Jakafi patent book. What -- which of the approaches are you the most excited about as a company, the BET inhibitor, the PI3K combination strategy, the ALK2? Can you just put those in perspective of which ones do you think are most promising?

Yes. So the way, I mean -- so the patent situation with ruxolitinib is basically leading to potentially having the first generic launching at the beginning of 2029. So that's the time line that we have in front of us. And what we are doing is trying to improve -- so in myelofibrosis, we are trying to do 2 things. We are trying to improve on efficacy with combination. So we are doing combination with parsaclisib. We are doing combination with the BET inhibitor from our own pipeline. And we are doing combination with an ALK2. So the first 2 are about efficacy, and it can be used in first line or in suboptimal responders to Jakafi, which is a large population in myelofibrosis of patients who after a number of months are not doing as well as they could maybe with a better efficacy. And then -- so we have in Phase III with parsaclisib in first-line and suboptimal, and we are in Phase I combination with a BET inhibitor. Obviously, the goal at the end of the process will be if we see the level of efficacy that we are expecting is to do fixed dose combination, and that program is already ongoing, where we will be able to put in the same pill Jakafi, ruxolitinib and parsaclisib or ruxolitinib and the BET inhibitor. The other aspect is one of the limiting toxicity and toxicity and disease characteristic is that patients with myelofibrosis suffer from anemia. So we are developing, and it's now advancing very well, an ALK2 inhibitor, very potent, that could be combined with ruxolitinib with the goal of reducing the anemia from myelofibrosis and anemia side effect of ruxolitinib. And that combination is now ongoing. We have the same goal of being able to do a fixed dose combination and that could create a Jakafi without anemia, if you want, or with a very much lower amount of anemia, which is something that could be very valuable in the first-line setting. And then in GVHD, we have itacitinib and axatilimab, and both of them now are moving independently. And obviously, we have the goal of being able to do a combination. So if you look at the Jakafi business of today, if you want, a large part of it between now and 2029 could be improved upon with new type of products that have a longer patent life. So that's exactly what we are pursuing. And frankly, there was a little bit of a slow period during COVID where it was difficult to accrue to many of these studies, but now it's starting again on a very good pace and we are optimistic that if some of these are successful, we will have a very different perspective for the franchise for the long term.

Okay. What is the -- how do you calculate the 2029 patent because I thought that the IP expired in 2027?

Yes, the [ salt ] is expiring in mid-'28 and the 6-months exclusivity. That's how it came up with a pediatric exclusivity. So that's how we came up with the beginning of '29.

Okay. Well, great, we're at the end of the half an hour and obviously, not enough to discuss everything you guys have going on. I do appreciate the insights, no pun intended, and I look forward to seeing some of the programs continue to advance toward.

Thank you very much. Thank you for inviting us.

Yes. Thank you.