Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Welcome back to the next session of the Cowen Healthcare Conference, where we're really pleased to have the team from Incyte with us. And joining the IR team, Christine and Greg in the room there as well as CMO, Steven Stein; and CFO, Christiana Stamoulis. And I remind everyone, you can -- I have a list of questions and I will walk through with them, but also would love to make this interactive today as possible. So please submit questions to me at [email protected] or through the chat function in the webcast, either route is fine, and then I will pepper those questions in as well.. So maybe just to start off, we will turn to Christiana Stamoulis. Christiana, can you just kind of level set everybody with just high-level update from the earnings report and kind of what you think the takeaways are moving forward, and then we can get into some of the specific questions.

Yes, absolutely. I can start with a quick review of 2021 given that, that sets us up well for our discussion and for where we are going in 2022. So 2021 was another year of strong execution for Incyte, both on the commercial front as well as on the clinical development front. On the commercial end, product and royalty revenues grew 17% year-over-year, and we saw growth across all products, both products commercialized by Incyte as well as our products that have been partnered, and are commercialized by our partners. What is important to note as you look at the growth rate in '21 is that it doesn't really reflect any meaningful contribution from our new product launches during the year. So starting with a very important launch for us, Opzelura. Opzelura was approved for atopic dermatitis in October, and we have been going through a very strong launch. Already between October and the end of the year, we treated more than 19,000 new patients on Opzelura, and we have been getting very positive feedback by both patients and physicians, and we have been making great progress with our payer fashions for reimbursement and already have contracts in place. So a very good launch, a very important future revenue growth driver and value driver for Incyte and also a cornerstone product for our dermatology franchise, which is a new franchise, commercial franchise, for Incyte and a new future source of growth going forward. So a really important growth driver and product for Incyte. And again, this is not really reflected in the growth rate that you saw in 2021. In addition to that, we had several additional product launches, Jakafi in chronic GVHD, which was also approved in October. Pemazyre in Europe and in Japan and Minjuvi in Europe. And again, this didn't really have a meaningful contribution to growth in 2021, but we expect them to contribute to growth and diversification going forward. So now turning to the clinical development front. We are making progress across a number of different programs. So I'll start again with dermatology. Opzelura, we are developing it for additional indications and most notably, we completed clinical development and filed for regulatory approval for Opzelura in vitiligo and the PDUFA is set for next month, April 18. So we very much look forward to hopefully getting approval and bringing Opzelura to be vitiligo patients. We are also making great progress across the portfolio in a number of different other programs, including LIMBER our oral PD-L1 program, where we have 3 molecules in development, and this year, we'll be looking to select the LEAD program to take forward. [indiscernible] anemia as well as other oncology programs earlier in development. And then on the dermatology front, we are also developing Opzelura for additional indications like chronic hand eczema and other indications that we have not yet disclosed. And we are developing 707, which is an oral JAK for HS and vitiligo. So a number of programs, very exciting programs in clinical development. And for several of these, we will be providing data updates in 2022.

Thanks for that overview. One of the things you did talk about on the call. And I think you just kind of brought up with Opzelura's launch. And that it didn't really have a chance to contribute meaningfully to growth yet given the approval time line. So maybe an update there on progress and negotiations with GPOs and PBMs kind of where are you today? What's a reasonable expectation for what percent of lives should be covered or should have a contract in place at least by the [indiscernible] Q1 call or the midyear?

Yes. So discussions with payers are continuing to progress well what we indicated on our call is that we have 2 of the 3 largest PBMs, the 3 that account for around 80% of covered lives in place for base access contracts. So the 2 largest PBMs have -- we have base access contracts in place with them, which account for 55% of their covered lives. And we are continuing discussions with them to get the NPC block side of their business. And also, we are continuing discussions with the third PBM for the full business, the NPC and base access business. So right now, for the contracts that we have in place, we have the negotiated discount. And what is happening is now moving at the payer level, each payer needs to add Opzelura to formulary in order to benefit from the discounts that we have negotiated with PBMs. And that's now is in process. It takes a little bit of time, and that's why we said that even though we do have those contracts already signed and in place, don't expect to see any meaningful change in gross to net in Q1 when you compare to Q4 of 2021, but expect the gross to net start -- discount to start coming down in Q2. And then getting to the steady state levels at some point in the second half of the year. So it will take some time, but we expect that in the second half of the year and as we get the NPC blocks we moved to get to this 40% to 50% gross to net steady-state rate.

Thanks for the kind of nuanced gross to net guidance that you have given. I guess given that trajectory that you kind of laid out at gross to net over the year, what's assumed been there and factored into those estimates, things like vitiligo coming into the label, possibly also at some point over the summer, potentially start negotiating for next year's plan year? Just kind of those pushes and pulls, what's factored into that guidance?

So Opzelura for vitiligo is factored into the guidance. We do not expect to have to start from the beginning, the discussions when we look for coverage for Opzelura in vitiligo, they are conversations with PBMs are for Opzelura, not just for AD, but Opzelura in general. And then what we will be looking once the Opzelura for vitiligo is approved to then have the payers add this to the formulary. So we expect that they will steadily start adding Opzelura for vitiligo to their formularies. And this would happen in the course of the second half of the year, assuming approval in April.

So those for me other updates that I guess it depends little on the exact plan, but you would expect that to be a separate formulary update from the AD update?

They will have to add it to the formularies for --, but the negotiations are for Opzelura regardless of the indication. So the terms are really set.

Okay. That makes sense. And maybe one other issue that was disclosed late last year was you had started with samples, but the those had to be pulled because of a texture issue. I guess just lead us on resolving that? And when do you think you'll be able to kind of resume sampling? And then how important is that to driving growth?

Yes. So Marc, it's Steven. Maybe I'll take that. So obviously, we've been able to maintain a healthy commercial supply during what is a successful launch, as you heard from the numbers of patients treated. And that remains obviously the main focus. We also have the upcome -- upcoming, as Christiana said, vitiligo PDUFA date mid-April, April 18. And obviously, that's something we also want to have a healthy commercial supply for. So taking those all into account, the plan is obviously to reinstitute sampling when we can, and the focus is on the near term to get that done. But we can't give you a precise date yet just because of all those moving parts. So the main priority is maintain a healthy commercial supply of the 60-gram tubes and as soon as we can, hopefully, near term, get samples instituted. Because -- just to go back on the texture issue we know what it is. It's a very small amount of ruxolitinib, active pharmaceutical ingredient that comes out and crystallizes. There are things that we could do within the NDA specs to improve that without having to get new regulatory approvals, and there are some things that we're waiting for, some regulatory approvals for it to institute further, process improvements to increase solubility basically. And some of those take 30 days through what's called a CB30 supplement and some are prior approval supplement, which take a little longer. And that latter 1 includes bringing on a new manufacturing site as well, which is pretty common practice. So long answer to your question, but healthy commercial supply, main focus, sampling as soon as we can and there'll be some further process improvements when they're approved by the regulators on improving [ solubility ].

And those pieces of the kind of manufacturing process improvements that you can implement that require some sort of FDA review. Do you need to wait for the vitiligo label to be issued to kind of file those either because the FDA tells you to or just so that you don't risk something going wrong with the CMC section of that review?

No. So the -- a few things to step back. So the NS NDA doesn't have a full CMC section. So it's all part of the NDA. So it's somewhat independent. We don't have to wait, which is the bottom line. The -- it turns out because we've already filed some of the supplements and the prior approval stuff, that will all be coming around the same time but it's not linked to vitiligo in any way. And just to reiterate, the vitiligo submission because it's an sNDA doesn't really have a large CMC section.

And then hopefully, a sampling will eventually come back in another piece to kind of drive growth that the company has mentioned before, is potential for DTC ads. Christiana when is the right time to add to the mix one, are they still planned? And two, when is the right time to add them?

So there is DTC plan for sure. We want to make sure that there is broad payer access before we start going forward with DTC at least in a big way. There are already some activities that are underway, but we see most of the activities happening in Q2 and the second half of the year. And we look at DTC as a multimedia campaign. So it will cover TV, but as well as other types of media.

That's helpful. And then maybe back to Steven, just what's the path for Opzelura, expanding label into pediatrics? And how big of an incremental opportunity do you think that pediatric indication is versus the existing AD label?

Thanks, Marc. So we're doing a single study in AD for inclusion in the label in the pediatric population. It's underway. It's enrolling well. We estimate thereabout approximately 2 million patients, age 2 to 11 that are diagnosed with mild to moderate atopic derm in the U.S. so that's the opportunity, and that's the study. We'll also need to conduct pediatric studies in vitiligo to get additional label in vitiligo as well. But again, fortunately in the derm space, clinical studies enroll very fast. And we haven't had a COVID impact to speak of. So we've been able to conduct these really efficiently, and we expect to have similar results in adults, obviously.

Yes. So the 2 million that's over all severities. I guess how does the disease goes adults in terms of responsiveness to things like steroids and how many of those really need to flow through to something like Opzelura versus the adult population?

Yes. So that 2 million number I gave is our data for mild to moderate. It doesn't include severes in that population. I don't think there's a dramatic difference in responsiveness to either topical steroids or calcineurin inhibitors in kids. Obviously, we've done some work initially, and we don't see any difference in terms of efficacy with the product in that population to date. So that's why I said we expect the same data. There was a little more enabling safety work needed to get it underway from some regulatory concerns, for example, on bone growth. that translates to what's seen with oral JAKs, but we have obviously a lot of experience with RUX anywhere in this population oral RUX, including in a pediatric population. So we're able to -- that's how we could get it going so quickly because we have so much information already. But there's just a little more safety collection, principally on some bone growth velocity parameters. But from an efficacy point of view, we expect the same type of efficacy we've seen in adults.

Can you explain the bone growth what has been observed with orals?

It's a theoretic concern that the agency had years ago with oral RUX when we started doing leukemic populations to get our pediatric labeling with oral RUX. They were worried about bone growth being affected by JAK inhibitors. I'm not sure exactly of the mechanism and early termination, for example, early fusion of growth plates so that you would affect growth of bone. So there was a lot of enabling work done years ago with oral RUX, which has obviously much higher exposures to say that this isn't an issue. So thus, when we started this program, we had enough data is what I'm saying to get it going very quickly because we had data of high exposures in kids with no untoward effect.

That's helpful. And then maybe on -- turning to vitiligo a bit more centrally now, something on the FDA review, what are the points of debate with regulators there? And can you remind us of the indication statement that you're actually speaking there?

Yes. No, it's -- I mean, again, it's the derm division, I have to be careful because things tend to happen -- can happen late in the review, but things have gone very well. We don't comment on any granular details or substance there we remain confident in the PDUFA date of April 18. And the indication would be exactly in keeping with what was done in the clinical trial. In terms of the population, the age is 12 and above, and the limit on body surface area, which was 10% of maximum body surface here in those studies. The member was a facial VASI end point, and we expect labeling to reflect that. So it should be for 12 and above, people with body surface area involvement of 10% or less. There shouldn't be any other qualifications.

And should there be an explicit -- there is a statement on the AD label about non-continuous dosing. Should we expect an explicit continuous dosing statement? Or like how we...

I mean, obviously, it's best used very differently in vitiligo. It's actually fascinating. So it's continuous use, as you point out. And what's been interesting is we've conducted this program with the long-term extension. So we have 52-week data and now we have people out 2 years plus. But we've shown with the Phase II update that you get this substantial absolute improvement at 52-weeks. It's almost another 20 percentage points. So if you look at facial VASI75 at 24 weeks, it's in the 30% territory. If you look at 52-weeks, it's in the 50% territory. So you get this continuous improvement. And now with 2-year data, it continues to get to. So you're absolutely right. We expect the dosage section to reflect that, but maybe not the indication statement, that would be a little unusual. Our modeling from the clinical trial work is people would use on average around 10, 60-gram tubes a year to get there. So that's an extrapolation from that. But that's -- yes, that's the expectation that would be hopefully reflected in the dosage section.

And are there other -- beyond the primary endpoint of facial VASI, are there other kind of secondary endpoints that you think are important to get into the label from a marketing perspective?

Yes. I think what would be great is obviously all the other pre powered secondary endpoints around facial VASI90, total body VASI, but also the patient reported outcomes. Because there was a self-reported and physician-reported outcomes that were statistically significant. Now the reason we did that is not only for U.S. labeling, but particularly in Europe around reimbursement, they became really important. So the fact that we hit all those endpoints and they're statistically significant is going to be helpful in that regard. And we'll see with the FDA what they'll accept from a PRO point of view and invalidated PROs getting them in the label. But again, their main use will be in getting reimbursement in Europe eventually.

And in terms of -- just for now sticking with the U.S., just maybe Christiana, you will walk through the launch strategy for vitiligo, how it will resemble or how it will differ from what you're doing in AD?

So it is exactly the same call point. But they will be fully leveraging the sales force that is in place. So we'll be ready to go and start speaking about vitiligo as soon as we get approval for this. So this should not be much difference in terms of how we are approaching it. And again, the data here as in the case of AD, is very strong, and we are very excited to hopefully bring this therapy to patients.

And what are your latest thoughts on patient numbers here, both the absolute number of people with vitiligo, but perhaps more importantly, it's the chunk of that population that's going to be very motivated to see care and use something like Opzelura.

Yes. This is a very different situation than in atopic dermatitis, where you have a more developed market with a number of therapies that have been approved patients seeking treatment, although not very efficacious options available. And as a result, there is a significant opportunity for us to address with Opzelura. In the case of vitiligo, there are no therapies that -- therapeutics that have been approved for repigmentation. There are no efficacious options for patients. And as a result, patients don't go out to seek treatment. They are pretty unmotivated. And so while there is large patient population at around 1.5 million to 2 million patients with vitiligo in the U.S., only 150,000 to 200,000 patients seek treatment today. So what we will be looking there is once an efficacious treatment like Opzelura is introduced how that would change the market dynamics and patients' willingness to go out and seek treatment. But as you look at the opportunity here, given how Opzelura for vitiligo will be utilized where for AD, as you know, we expect that patients will be using based on the clinical experience, we expect 3 to 4 tubes on average a year, while in the case of vitiligo again, based on the previous clinical experience, we expect around 10 tubes a year, maybe a little bit less in real life, but still a much larger number of tubes a year you can see how with a small number of patients, you can get to a very significant opportunities. So basically, if you assume 10 tubes a year $1,000 net per tube, you get to 10,000 patients representing $100 million in opportunities. So for every 10,000 patients, you are looking at an additional $100 million in opportunity.

And the last few approvals, whether it's Monjuvi, Opzelura and AD, you add approval or shortly thereafter you kind of issued peak sales guidance for that indication? Is that something we should expect in vitiligo?

So because of the dynamics here, the situation that I described, the -- this not being a well-defined market. We are not committing at this point to providing big sales potential for vitiligo. But again, you can see how you can get to very large numbers very quickly. And I think that the ratio of the 10,000 patients representing every 10,000 patients, representing an additional $100 million in net sales is good way to start thinking about how big that opportunity could be.

Do you expect -- are you going to be able to have the granularity -- visibility to see use by indication with both internally but then also would you be able to report that to investors or [indiscernible]?

We expect to have certain visibility on the breakdown of prescriptions between vitiligo and atopic dermatitis and will determine what data would be helpful to share in order to give visibility on the progress and the uptake between the 2 indications.

That's helpful. And then maybe back to Steven. Christiana, very briefly touched on some of these other dermatology projects that are ongoing. I guess what are you most excited about there? Is it some of these indications for the oral JAK? Is it more indications for Opzelura?

Yes. Thanks, Marc. So I think just to separate them a little bit. On the Opzelura front, obviously, now we have the AD approved and market in the U.S., vitilago, the upcoming PDUFA chronic hand eczema, we've announced the Phase III is underway. It's a really interesting condition somewhat covered within the label already. But there's the stand-alone sort of steroid-resistant hand eczema that develops. That's a really important indication to get under our belt and have a clear indication statement on it. And we expect the efficacy there, again, we already have some data. And then we spoke about the pediatric AD. We also, as Christiana said, are going to sort of use , if I can use the term, sort of boulder wall of evidence with Opzelura cream across a number of other indications that we'll announce as soon as they go on clintrials.gov on earnings calls, et cetera. But we will be pursuing a bunch of other indications with Opzelura cream that are completely in keeping with the medicine of action. And again, because the clinical trial programs enroll so efficiently, we can get them done pretty soon. So stay tuned on that. We also want to...

Just on the other -- I mean, is it more things like hand eczema that are maybe technically in indication statements, but just kind of really defining the benefit much better within a subset of patients? Or are these completely novel indications that you'd be expecting per se?

I would put them more in the novel category. So they're outside of -- they're not at all covered within the current label. That's why I set a wall of evidence beyond but an expectation, obviously, that they're really -- we'll get the efficacy signals we want within those indications, and we'll tell you about them. And then because derms become so important to us from a development point of view as well as on the commercial side now having a fully loaded commercial organization from centrally with payer access and then a field force. With 707, we already have programs in hidradenitis suppurativa that we, again, have already shown some interesting data, and we will be showing more pretty soon that there's a lot of unmet need in that condition. There's an indication with HUMIRA there, but not a lot of efficacy. So that's a population we want to address. And then the more severe vitiligo patients who have 8% or above body surface area involvement, where we feel that the risk benefit with the oral JAK therapeutic ratio will be in favor and we're going to be pursuing that with 707 as well. And then an indication, which also has a lot of unmet need and has a lot of itch associated with it is prurigo nodularis. So again, building there with an oral JAK 3 further more severe derm indications different therapeutic ratio, still lots of unmet need with that. So the totality of the derm program is becoming really interesting in that regard.

And then I know we're running short on time here. But just turning towards LIMBER there's a number of programs there. I mean, what do you view as kind of the key data updates that need to happen for investors to really have confidence that there's a fair amount of life cycle extension there going to happen? And when might we see those data sets?

Yes, I'll just be efficient from a time point of view. So RUX XR, the once-daily formulation completed, submitted should have a approval in early '23. The combo work with BET and ALK2 as proceeded we'll have to make bigger decisions on how to go forward from whether we pursue registration trials aggressively with either of those programs, ALK2 is really interesting because you've seen the momelotinib data if we alleviate the anemia of MA and the drug-induced anemia, you get this double benefit because you can maintain RUX dose intensity. And we're likely to have a really good potent ALK2 inhibitor -- so as soon as we have some confidence in the proof-of-concept there will be aggressive there. And then the ongoing registration studies with [indiscernible] in first-line and suboptimal are enrolling well, the suboptimal is about 212 patients, I think we'll have data in '23 there as well. So the totality of the program, again, covers most of the unmet need in MF. And then hopefully, we'll be able to either later this -- this year or early next year, announce a couple of new targets that will go into the clinic. That will include interest in polycythemia vera as well because that doesn't obviously be addressed by the ones I've just spoken about in MF. So the LIMBER again, is a comprehensive program that is proceeding well at the moment.

Okay. Very helpful. And unfortunately, it's all the time we have. So thanks a lot for joining us, and thanks for everybody else joining and listening in.

Thank you.