Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Good morning, everyone. I'm Brian Abrahams, one of the senior biotech analysts at RBC Capital Markets, and thanks for joining us. Really pleased to have our next featured company Incyte, represented by their Chief Medical Officer, Steven Stein; and their Chief Financial Officer, Christiana Stamoulis. So thanks again for being here, and it's great to see you guys in person.

Thank you for having us.

Great. So I know there's a lot going on at Incyte, a lot to talk about, but we probably get the most questions these days on the OPZELURA launch. So maybe we can start with that. And maybe if you could just start broadly on how the launch is going. Where you're seeing the drug fitting into the atopic derm treatment paradigm, how docs are using this? And how you see that evolving over time?

Okay. So can you hear me or what?

We can hear you, yes.

Okay. So we love to talk about OPZELURA. We are actually very pleased with how the launch has been going, how the uptake has been progressing as of the end of Q1, so 6 months into the launch, we have already treated over 57,000 new patients on OPZELURA, and we are starting to also see refills, which is very, very encouraging and very much in line as we were expecting at least based on the clinical trial experience. The utilization of OPZELURA is very much in line with the label. So we do see it used in mild to moderate patients that have failed other -- the topical treatments creams, DCIs, DCSs. So the uptake has been going very well. The feedback that we are getting from patients and physicians is very positive in terms of the efficacy and how quickly they are seeing a benefit, especially around itch. That is a very big problem for many patients with atopic dermatitis. And then finally, also on the payer front, the progress has been great there in terms of getting OPZELURA covered and on formularies. So -- and I can -- I'm sure you'll have more questions on that, but it's -- the launch is moving very well across all fronts. And it gives us -- gives us a lot of confidence.

Excellent. Good. Well, that's great news. And certainly, the prescription data has seemed to reflect that. Would love to learn a little bit more about access because we get asked about this a lot as well. You've talked about contracting with some of the large PBMs. Just remind us where do you stand there with respect to PBM contracting? Are you seeing the drug being added to local and regional plans as expected? And then where do you expect gross to net and discounting to ultimately go? Are there benchmarks other branded topical derm drugs that we can look towards? Are there elements of your payer negotiations and contracts that kind of give you more confidence or less confidence in a particular goal of where this will ultimately equilibrate at?

So the payer and PBM discussions and coverage is, as I mentioned, progressing very well. You have 3 -- the 3 largest PBMs that account for the majority of covered -- of patients covered. So at around 80% of patients under those plans for commercial. And as we've shared in the past in the 2 updates that we've had since the launch, we have made significant progress with the discussions with those PBMs. We have contracts in place for the non-NDC business and now part of the NDC block business with 2 of the PBMs, and we are progressing our discussions with the third PBM as well. So when you look now at the commercial patients, we have at around 60% of patients that are now under contracts that we have with PBMs in place. So 60% or around 55% of covered lives now have access to OPZELURA. The way that things work is once you have the contract in place with PBMs, the payers that are under those PBMs have to go through their internal process to get OPZELURA on formulary and have the utilization management plan in place and that takes a little bit of time before they have the set so that then they can benefit from the contracts that we have established with the PBMs. And that's why you see a little bit of a gap between the time when we put those contracts in place and when you start seeing the benefit of those contracts reflected in the gross to net discount rate. In terms of the gross to net discount rate, we expect that at steady state, we'll end up at around 40% to 50% discount. And that will be fully loaded. So it's not only the discounts that we'll be offering to the PBMs, but it includes other costs, distribution fees, out-of-pocket support, et cetera. So 40% to 50% is what we are targeting at the end of the day, and we expect to get there by the end of the year. We started at around 92% at the end of Q4. We were at 86% at the end of Q1. We expect to continue to see that decrease in Q2 and a more substantial decrease in the second part of the year as we get the remaining NDC blocks removed. And the payers have gone through their internal process of putting OPZELURA on formulary. So with the -- then reimburse the drug. But given the contracts that we have already put in place and how the discussions with the third PBM are progressing, we feel confident with that shape of the curve that we have shared that the timing of getting to that steady-state level. In terms of looking at other creams as a comp, it is hard to really identify one because OPZELURA is so different than others. So there isn't really another topical comp that would be a good one to look at here.

Got it. And how should we expect the launch trajectory to evolve as you get on to these formularies? Is there additional -- are there changes in the degree of paperwork or that would need to be done to enable patients to get onto the drug that may be today, they're able to get it more easily or vice versa? Would you actually expect that to see an increase because there are patients who are not able to get it today?

So we don't really expect to see any impact of moving from the patient assistant programs that we currently have in place to the payers covering OPZELURA. The prior authorizations, step edits, et cetera, are all done in a way that is seamless to patients. Physicians are used to do that for AD and psoriasis, it's done online. So there is no paper work related to that. So it's a very quick process that shouldn't, in any way, impact the uptake of OPZELURA.

Okay. Got it. And then you mentioned earlier that you're starting to see now that you're several months into launch, you're starting to see refills, which is great. I think on the earnings call, you mentioned a 23% refill rate. Early days, of course, but can you help us understand how to think about translating the refill rates you're seeing to a number of tubes per year? I think you've said in the past 3 to 4 tubes per year is what you'd expect the average patient to be getting. Does a 23% refill rate translate to that ultimately? Or is this sort of a refill rate that you're -- that's kind of the tip of the iceberg and over a 6- or 8-month period, you'll be looking for a higher refill rate to translate to that? How should we -- how do we think about the math there? And what's your expectation for what the ultimate number of tubes each patients are going to use each year will be?

So it's still very early to try to draw any conclusions from the current refill rate as to how -- what the utilization would be and how many tubes on average patients would use per year. The 3 to 4 tubes a year comes from our Phase III study. So from the clinical experience that we had. So we don't have yet real-life data that is long enough to be able to see how it's used and how long a tube last. It is very efficacious. So we will see how it will play out. But if you think about we launched the drug 6 months ago, so now you would expect to start seeing, again, refills even based on this 3 to 4 tubes a year. So after 3 to 4 months, you will start expecting to see refill. So the fact that we are seeing that is very encouraging.

Good. Excellent. And then maybe one more on OPZELURA for the vitiligo indication. You recently had a delay in the PDUFA there. But since then have presented some compelling data showing consistent and maybe even improving benefits out to 52 weeks without any -- really any new safety issues emerging at all. What's the nature of the delay? Why do you think this was pushed back? Is this just a matter of FDA being very cautious about the JAK class. Do you -- have you had additional communication? Do you feel like you've addressed the FDA's needs? How important is this 52-week data? And then maybe lastly, on the label itself, of course, I know you guys get asked about this somewhat and would love to hear the latest view on. You do have a label suggesting finite use whereas in the vitiligo indication, this would be more of a chronic treatment. So how does that all play in? Is that -- and does that relate to the FDA, perhaps wanting to see this longer-term data and the PDUFA delay?

Yes, I'll try answering all the questions you asked there. So firstly, it's nothing nefarious. The derm division, unfortunately, doesn't have a brilliant track record of hitting their PDUFA dates over the last few years. It was quite simply a response to an information request that was given to them that resulted in the 3 months delayed to July 18. And we've actually -- we don't typically give a lot of granular details. But on this one, it was an information request related to the 52-week data, which you alluded to. So we just presented that update at the AAD meeting for both Phase III studies through 52 weeks and there's appreciable absolute improvements in the primary endpoint, which is facial VASI 75% improvements that went up 20 percentage points in both studies with continued use from week 24 to week 52. When we did the original submission late last year, it was the primary endpoint and a very small amount of the 52-week data. At the 4-month safety update, we provided more of the 52-week data, but not a complete set. So now during this further extension of the PDUFA, we've been able to provide all of that data. Whether that gets into labeling or not, we'll see. I mean it's -- we're not sure at the moment. It will be great to have it there. It's very informative for physicians to have the full 52-week data. Just to manage some expectations though, that's not a placebo-controlled period, week 24 who works through week 52. So it would be a little unusual to have that completely within labeling, but again, would be great. As you point out, the safety is unchanged during that time. It's the same very clean safety profile. So that's all very encouraging. In terms of dosage and administration, it's a very different way of doing it compared to AD, which is intermittent use. You treat until you get a maximum response and you withdraw and that came to the 3 to 4 tubes a year. For vitiligo, it's continuous, yes. And from the clinical trial experience, it's 10 to 11 tubes. We expect that to be addressed very clearly in dosing and administration. So there will be a section that's already there for atopic dermatitis, and there will be a dosing section that will reflect how to dose it in vitiligo as well, assuming we get approval on July 18, which we fully expect. So I think that answers all your questions. It's encouraging. It's never great to have a delay. But in this instance, if it does result in the 52-week data in some way, getting into labeling or at least in the clinical trial section that will be a very positive outcome.

Excellent. Shifting gears, Jakafi has been a long-time leader in the myelofibrosis market as well as other myeloproliferative diseases. But by this time next year, we'll likely have 4 JAK inhibitors on the market. How do you foresee overall market dynamics evolving specifically in MF? And I guess, do you expect patients developing anemia or thrombocytopenia on RUX to maybe be switched more early to alternative agents? Are those patients already -- have those patients mostly already discontinued ruxolitinib? I'm just sort of wondering how you see market share evolving over the course of the next year or 2 with some of these new agents available?

I mean I'll talk about the clinical part to that. So obviously, as you know, it's been approved on the market since 2011 for MF and since 2015 for p-vera. More than 50,000 patients treated. We have 3- and 5-year updates on the initial studies, the COMFORT study showing the survival benefit. So RUX is a very established product in the MF space. It has outstanding efficacy as regards spleen reduction and symptoms and is widely used. I think the different subsets, which will be addressed by the new JAKs are positive for patients. So if you look at pacritinib and its indication for very low platelet patients that's somewhere around -- depends on how you divvy it up, but 3% to upwards of 10% of the market at certain times of less than 50,000 patients that can be addressed by that drug. If momelotinib gets approved, it will be, per their data set, post RUX and was -- failed the non-inferiority versus ruxolitinib in the Simplify study. So we're very comfortable in that. We have a very good and what we think is a better JAK inhibitor there but it will serve that segment. Just to address your anemia thing head on, it is one of the main reasons for discontinuation of RUX, but still a very small percentage and that could be addressed by a drug that has the potential to address the anemia there like momelotinib. And that's, quite frankly, why we have the ALK2 program as well. We have a very potent ALK2 inhibitor, which we see a lot of promise for. Fedratinib doesn't seem to be widely used based on the market data we all get plus there's a different safety profile and hasn't been an issue to date. But any additional therapies that address patient unmet need is good. We don't see a change in a very dominant positioning of RUX first-line use, and the survival benefit is very, very clear there for us. So that's where we stand. It's why the LIMBER program is so important and also addressing other segments. We have an ongoing effort with PI3 delta in suboptimal and first line. The suboptimal study will deliver next year. The ALK2 program is going well. We've seen the iron kinetics we want. And hopefully, that will result in hemoglobin increases. We have the ability to make fixed-dose combinations with both of those. And then with BET, that's also progressing well, and we'll have to make strategic decisions on where to go there. So we feel no concerns and only positivity from the way the areas evolve in to address the various segments of MF at least.

Got it. And that's actually a great segue to my next question, which was going to be on the LIMBER program. Can you tell us more about what we should be expecting later this year? I know these trials have been going on for some time, and it seems like we're finally getting to a point where we might see meaningful, interpretable data to understand whether these combinations could really -- can foster benefit as well as revenue durability and life cycle extension for the Jakafi franchise. So can you maybe tell us more about like just the extent of data that we might expect to see and what your expectations are from and the level of enthusiasm.

I mean, LIMBER is incredibly important to us for all the obvious reasons, patient as well as commercial reasons, but it's progressing really well. So it's life cycle management of RUX, it's management of myeloproliferative neoplasms in general because we know the space really well. And it also includes graft versus host disease. So its importance is enormous. The state of the program in terms of the pillars, so formulation work, the RUX XR work in terms of bioavailability and bioequivalence is complete, stability testing is complete now and the submissions going in for RUX XR. And we expect approval given what we expect is a 10-month review period early next year, so Q1 2023 for RUX XR. In terms of the combos, PI3 deltas in pivotal studies for suboptimal as well as first line, both are improving well. The suboptimal study is smaller. It's about 220 patients that will complete enrollment and should have data next year. And then the first line study, which about double the number of patients, 440 patients a little bit longer. The BET and ALK2 monotherapy parts and now the combo work with RUX are continuing and going really well, so we'll have safe doses and combinations. And I can say that with pretty much confidence in terms of the data sets this year, and we'll be able to present in the second half of this year, appreciable data from the Phase I experience, maybe not as much efficacy data as you may want. But just because we'll need more time. But for ALK2, we've seen, as I said earlier, exactly the iron kinetics we want. So hepcidin is decreasing, the ferritin levels are going where we want them to. So we've seen mobilization of iron the way we want and that should translate in the right patients to hemoglobin increases. And then given the potency of the ALK2, that's a combo we're likely to be pretty aggressive with in terms of going forward next year, but we'll show you data on it this year. That's a little bit different because of the competitive space. So obviously, the Constellation, now MorphoSys, compound is already in registration. And we'll have to end of this year or early next year, make strategic decisions on where to go and how aggressive we want to be there in terms of either a suboptimal study or a first line or both there. And then there'll be new targets come in. We only release those when the IND is clear. But some of the new targets will be actually PVR-specific. So it's been a bit of a quiet arena which we're really excited about. And then just to round it out, graft versus host disease, an important and growing entity commercially and addressing a lot of patients. But now with Syndax, we have axatilimab, G-CSF1R drug, that registration study will complete enrollment this year. We'll have data next year with a high property of success and we'll file that. And then we can also use that with a different MO in combination with JAK inhibitors to address other GVHD needs. So it's an important year, this year, next year, just to reiterate, will be RUX XR filing, the suboptimal study data with PI3 delta and then some big strategic decisions.

Great. And maybe just drilling down on your comment, the fact that it might take a little bit more time to generate efficacy data from some of those combos, is that just a factor of the just slower enrollment due to COVID? Or is it more about having to dose escalate more slowly to ensure that you're staying at these safe doses that you seem...

Yes, I think a bit of both, and then treating the right patient sets, what -- it's not been easy to do the monotherapy part because to treat MF patients with monotherapy is a little tricky when the expectation is with JAK you get most of your benefit. But now that we can do that, we can treat those patients and get those data sets, also treating the right patients less feed-up marrows, less fibrotic marrows. So we see with ALK2, the hemoglobin improvements has taken a little longer. So just in terms of managing expectations for data sets this year, it's really dose escalation and expansion with the more substantial efficacy parts coming a bit later.

Okay. Got it. Maybe just one more question because I know we're bumping up on time. You mentioned the XR formulation. How does that play into the ultimate market? Is this something where you launch right away and begin converting patients? Is this more a backbone that you'll save for future combinations that could be once a day? And I guess, what do you think you need to do to convince physicians that it has comparable efficacy to Jakafi, given Jakafi's entrenchment?

Yes. I mean on the physician piece, we'll do the BA/BE work's done, the stability is done, we'll file. Do we -- we'll probably do more potential clinical differentiating work start now, but only have it after clearance to show potentially less anemia because there's less of a Cmax, et cetera. It lends itself to all the once-daily combinations for fixed dose. So PI3 delta, BET and ALK are all-in scope. And then in terms of the market dynamics and what we do, it may be a bit early. But Christiana, you want to say anything?

Yes. It may be a bit early to comment, but obviously, there are 2 benefits here. The one is the obvious benefit of the once a day combination, there may be some advantage from a safety point of view and then the anemia point of view, there, but there is definitely the convenience of the once daily therapy. But the biggest opportunity that we see is the combination with other once a day therapies and the ability, which is pretty unique ability that we would have to create a fixed-dose combination having both components.

Okay. Got it. I know we're out of time. But Christiana and Steven, thank you guys so much.

Thanks, Brian.

Thanks.

Really appreciate it. Thanks, everyone, for joining.

Thanks.