Incyte Corporation (INCY) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us, and welcome to day 2 of the Goldman Sachs Healthcare Conference. We're really pleased to have the Incyte team with us. We have Herve Hoppenot, Chairman, President and CEO; and Christiana Stamoulis, CFO of the company. So with that, Herve, happy to turn it over to you for any opening comments or we can just jump right over into questions.

No, good morning. I think we can jump to the questions because there are a number of moving parts at Incyte. So let's go.

So product diversification has been a focus for Incyte. And at this point, you now have Jakafi, Pemazyre, Monjuvi, OPZELURA and the pipeline here. So what is the outlook that you have for the business over the medium and longer term?

So the business strategy is growth, and we are -- we have a double-digit growth rate now, that we have replicated quarter-after-quarter. So we want to continue to do that over a long period of time. And obviously, it goes with diversification, as you said, with the portfolio that would be geographically diversified and where we will have multiple sources of revenue. So today, we have 7 products. In fact, when you take into account some of the partner products like Olumiant, that was approved yesterday for alopecia areata and Jakavi, outside of the U.S. and Tabrecta for lung cancer also with Novartis. So we have 7 sources of revenue, and many of them are still in a phase -- in the cycle of the products where they are growing very quickly. That includes chronic GVHD with Jakafi in the U.S. and Jakavi outside, where it has been recently approved and it's going very well. And obviously, the Monjuvi, Minjuvi launch taking place with the Pemazyre launched around the world. And in the U.S., the launch of OPZELURA which is -- has been very successful and is still growing very strongly and where we see an opportunity to really, over a period of time, relatively short over 3 years, to have portfolio that will look very different from what we have today, where Jakafi is still relatively heavy in terms of proportion of the total revenue. So that's sort of a short-term view where we believe there are a number of drivers that will help us get where we want to be. And then we have a longer view where we are looking at how the pipeline can be delivering products that will be first, helping our Jakafi franchise diversify by itself, where we will have new product replacing Jakafi in MF or PV or GVHD, and we can speak about that. There are a number of projects that are moving very quickly where we will establish a dermatology franchise. Beyond just the first indication for OPZELURA, and that's vitiligo coming in July. So the PDUFA date is in July, new indications for OPZELURA and new products that we are now developing in the field of dermatology, where we have a pipeline of new products for hematology/oncology worldwide, including a number of fairly interesting projects like hemolytic anemia, where we have a Phase III ongoing and new products that have a lot of potential, like our oral PD-L1, the adenosine program and new projects that are coming into the clinic recently like a CDK2 that is now where we got recently the IND, et cetera. So on top of that, there is this royalty portfolio. I know it sounds a little different from the rest, but it's very important where what we see is that not only is Jakavi growing very quickly outside of the U.S. But we now have Olumiant with new indications yesterday in alopecia areata, a few weeks ago in COVID and Tabrecta approved for a subgroup of patients with lung cancer, also growing very, very rapidly. So that's the vision that there are [indiscernible] 4 cylinders in this organization and all of them have the potential to contribute to this growth and diversification that we are looking at.

Can you speak to business development activities? So biotech valuations have pulled back. Clearly, you've got 2 verticals, 1 with oncology and 1 in dermatology. How are you thinking about that approach?

So we are looking at BD as a way to supplement our internal activities and continue to add to growth and to the diversification strategy that Herve described. We, to your point, we have 2 verticals, hematology, oncology and derm, and we are interested in assets in either of these 2. It allows us to leverage our expertise in those areas, and it allows us to leverage our infrastructure and capabilities. We are looking for assets that are around the PoC type time frame. So assets that would be coming in the second half of the decade. And with valuations now coming down, I think we start seeing more interesting opportunities. I think in the past, we were looking at things, but it was hard to make the valuation work, while now we are getting to levels where things start making more sense. The other thing that is very interesting, and we are always open to and we have done a lot of -- a number of transactions along those lines are partnerships. And I think now companies are interested more than in the past to partner an asset so that they can continue on a stand-alone basis but can bring in non-dilutive capital. And we're absolutely interested in doing those type of transactions.

Just starting with OPZELURA, where we've seen a really nice launch to date. Could you just comment on where physician and patient feedback remains at this point? And how -- when you look at the script data, it can be misleading in terms of filled scripts versus non-filled scripts and how we should think about the year as you're going from a gross to net of 90% towards 50% and what that means for demand?

No. So the launch in atopic derm has been very successful. I mean, we are speaking of like 38,000 patients in the last quarter. What's more important than the absolute number of new patients is the feedback and the satisfaction from the patient standpoint, and therefore, from the physician standpoint, is absolutely clear. I mean, every survey we do, every discussion that we have is showing the same thing, is that OPZELURA is very unique. It has a mechanism that leads to relief of itch very, very quickly after the first application of the product. And therefore, physicians are prescribing more and more, and that trend continues as we speak. What has been happening in parallel to that sort of growth of the prescription is that we have been working on coverage and reimbursement with a plan that we disclosed to everybody of saying, you will see the gross to net evolve from Q1 to Q2, slightly. And then in Q3, you will see a larger effect of the coverage by the plan, Q3, Q4. And therefore, we will end up landing if you want, at 40% to 50% gross to net, more or less. And we are very much seeing that happening in front of our eyes. So it's -- we are confirming that curve because now we have 2 of the largest PBM, GPOs where we have signed contracts. The third one is under discussion. And we are seeing the plans include OPZELURA in their formulary and therefore, covering for the cost at that level of gross to net. And that's where there has been a little bit of noise in the system where at the pharmacy level, not at the physician prescriber level, there were some delays because of the new coverage that has been happening, switching from the full free drug program, if we want that we had in place to covered, there are some pharmacies where there is a need to get a prior authorization, which is very common in this field. And what we have seen is that the field prescription had a little bit of a flattish trend over the past few weeks but it's something that will be transient. And then when coverage is happening, and we see that already with some of the plans, obviously, things go back to normal. So it's a very promising launch, frankly, from many standpoints. The number of prescribers is growing all the time, the number of prescriptions per prescriber is evolving in the right direction, and we are very optimistic about this product for atopic derm. We have a long-term guidance of $1.5 billion, which maybe at the beginning, look like a little optimistic for some people, where, frankly, now we see the trending of the prescription going in that direction. And then in July, there is the PDUFA date for vitiligo, same target physician group, dermatologists and they are the one treating the vitiligo patients. And that will obviously give another momentum to the product. And I think it's a product that has so many unique features in terms of what it does [indiscernible], it will be very, very successful. In vitiligo, there is no existing approved product for these patients. And in atopic dermatitis, it has a very unique positioning where topical are used by -- mostly by GPs, where the systemic treatments are part of the dermatology, what they do. And we have basically positioned for the first time a topical product in the dermatologist's office, and it's very unique from that standpoint.

And remind us with your free sample program, how you're managing around that as the payers come on board with paying for drug here in terms of patients?

Buy-down, these here are 2 things. We also have reintroduced sampling a few weeks ago, which is something that sort of coincides in terms of timing with when we were starting to see the coverage. The buy-down program is basically a program where at the pharmacy level, so the physicians are writing the prescriptions, it goes electronically to a pharmacy where up to -- as long as the patient is not covered by their plan, we will be providing the drug for free. And that's what we call the buy-down program. And as soon as coverage is starting to increase, we are shutting down the buy-down for that plan. So it's a way to target the patients who are part of a plan where it's covered and in that case, the pharmacist has to go through the process. Something they usually do for every other product that includes sometimes prioritization, sometimes some other paper work to make sure that the coverage is taking place. And that's what has been creating a little bit of a delay in some cases. You can see when you look at the IQVIA data, you see the field prescription, not the prospection that have been written.

Are there comparisons here where we can understand the trajectories of drugs in dermatology based on these gross-to-net changes going through the similar type of payer process as you are that from historical...

I think, historically, we are in a situation where we have been relatively fast in getting the PBM contracting because there are cases where it can take for many more months and what we have seen in our work case where, as I said, 2 of them already are signed and the third one will be coming in the next few months. So that has been relatively fast. I think it's very frustrating, frankly because it's a lot of paper work and not a lot of help for patients, but that's the way it works. After that, the speed at which each of the plan is putting the product in their own formulary is something that obviously we are helping. But it depends sometimes on the date. Some of them we'll have a meeting every month, some of them every quarter, a formulary meeting. And the speed at which this PBM contracting translates into a coverage by the plan is something that -- for the first plan, now we are north of 50% of the patients covered being reimbursed for OPZELURA, and it has been 3 months ago. So you can see there is a sort of a curve that you have to go through of time to get the formulary updated with OPZELURA and all the coverage for it. So that's something you should expect to continue to see in the next few weeks. And then as we said, by Q3, Q4 -- end of Q3, Q4, we expect to be in the 40% to 50% gross to net that we have predicted.

Right. And you mentioned vitiligo, where there's an approval expected shortly. How are you thinking about the launch here and how you'll go out to prescribers and the target population? And then any concerns at all from -- on their side from a potential black box label, I mean, black box warning?

No, I think the data has been now presented, including the 52 weeks data. It's very, very clear that the repigmentation is continuing beyond the first 6 months end point that we had and a majority of patients are seeing very meaningful, like 50% or more repigmentation after a year, 52 weeks. And it's extraordinary. It's a life-changing thing for many of these patients. So that benefit now is well understood. The safety profile of OPZELURA in this study in where it's continuous treatment for 50 weeks is excellent. And there was nothing new or special that was seen in that part of the study. We had like 6 months placebo controlled. So it was very strong data showing the excellent tolerability of the product. So we assume that it will be used. There will be, at the beginning, no need to rediscuss with the PBMs because the contract is already established for the product, not just for the indication, but there will be time to be included in each of the plans. And during that period, I think physicians will be potentially using -- there is a medical exemption process where you can ask for coverage, and that's what we will be seeing at the beginning. So I would not expect like a rocket type of increase at the time of the launch in vitiligo, but more of a progressive uptake. It's a very large number of patients. In the U.S., there are probably 2 million people suffering from vitiligo, to 10% of them maybe today are seeking treatment. So it's like close to 200,000 patients. And we believe that having for the first time a product that leads to repigmentation in a meaningful way will be leading a number of patients to go see their dermatologists that maybe they did not do anymore because they were told there's nothing we can be for you. So it's a very large population. It's a treatment with a clear effect. And in fact, the effect can be seen relatively early in the treatment. When you start applying the cream after 8 weeks, 16 weeks, you start seeing the repigmentation. And our experience with the clinical trial is that it has been -- the compliance has been very good because patients could see the progress that their repigmentation was leading to a normalization of the skin as they were continuing to apply the cream. So we are very optimistic about the potential of that indication and the fact that it will be changing the life of many, many patients.

Can you comment on the messaging that will be required as you go out there and launch the drug about how patients will need to be using the cream for a certain amount of time before they start to see the benefits here?

So in our clinical trial, it has not been a problem. The compliance was excellent. But you know in clinical trials, sometimes you have a different type of behavior, different type of patients who are specifically motivated. So a lot of the programs we have at launch will be programmed to help patients realize the progress that they are making, quantify it, and therefore, be able to keep the motivation to apply the cream because then they will see the repigmentation happen and progress. So it's one of the key elements. We don't have a lot of ways to quantify what compliance will look like in a sort of real world yet, but it will be one of the key aspects of the launch.

And in terms of body coverage, how do you break down the patient population here?

So it's -- in fact, it's a complex question because if you take what is a body level, and there are not a lot of data that are very specific. What you see is that 80% of patients will have a BSA, body surface area that will be appropriate for using the cream in the context of what we did in our clinical trial. At the same time, there are patients who have facial involvement of vitiligo that you can see on the face or the neck and that will be a very large majority of that 80% that we have and we believe, at the hands, the most visible parts of the body. And that will be the key to the launch because that's where patients want to see progress quickly. And that will represent probably maybe 70% of the total population that we are speaking about. So 80% and then around maybe a 10% drop, if you take patients who don't have any facial or neck or hands. So that's what we will be looking at. In terms of skin characteristics, one of the things we have learned is that, in fact, the willingness to be treated has very little to do with the type of skins. So people of all types of skin color are, in fact, very motivated to get the treatment to treat their vitiligo, which was maybe something counterintuitive at the beginning of the process, but that's something that we have learned in the recent months.

And what are your plans to commercialize ex U.S. here?

So the submission has been done in Europe for vitiligo first. If you remember, we wanted to flip the sequence for Europe for reimbursement reasons. Our review is ongoing. It's doing very well, and we are anticipating approval somewhere at the beginning of the next year, let's say.

And you will market it...

So in Europe, we'll be marketing. The European launches are now very sequential, is that to launch in Germany and takes multiple months, sometimes close to a year before other countries will be covering and reimbursing for the product. So the first launch is in Germany. And that will be a year of work and then the other big countries, France, Italy and the Nordic countries and Benelux will be following that.

Sorry, I should have been more specific. No partner, you're going to market this on your own?

In Western -- in the large countries in Western Europe, no. We have partnerships in Japan already. We have a very good partner developing the RUX cream in Japan. We will have probably other commercial partner in the ex Eastern Europe, but for the larger Western Europe part of the -- large countries in Western Europe, we'll do it ourself.

Great. So transitioning to Jakafi, clearly, if you can extend the IP on that product, that's a key driver of value for the company here. So you have the LIMBER program in place. How do we think about the various programs and how they kind of fit into your plan to extend the future of this franchise?

Yes. I mean, I think the Jakafi franchise is -- so you have GVHD, you have MF and PV. In GVHD, as you know, we have a partnership with Syndax for our product that is in a phase of development where it could be approved for the first sublime treatment relatively quickly. The Janus study could be a pivotal study. And obviously, we will be combining it to Jakafi for second line and potentially having a steroid-free first-line treatment. So we believe in GVHD, through this combination of work that we are doing, there is a very good possibility that we would have a combination that will have a life beyond 2029 potential first generic entry of twice than the Jakafi. In myelofibrosis, which is the largest indication that we have. Today, we have a number of projects, 2 of them are about improving efficacy. And it's a BET inhibitor and parsaclisib. So parsaclisib is already in Phase III. So we have 2 settings where we are studying it. The most interesting is the suboptimal population who are patients who are treated with Jakafi for a few months and then don't have a good response, meaning they still have some symptoms or they have still some spleen enlargement and where we will be showing that by adding parsaclisib, you can, in fact, improve the efficacy of the product. The same -- we are also doing a first-line study that will be looking at a more challenging type of endpoint, which is doing better than Jakafi in the overall population. The BET would be -- the BET inhibitor would be exactly the same approach where we would be looking at the suboptimal and the first line with the goal of improving efficacy. And then we have an ALK2, and the ALK2 idea is that we would be able to help patients who have anemia due to myelofibrosis or due to Jakafi and ruxolitinib treatment in such a way that you can increase the dose intensity of ruxolitinib, and we know by maintaining a higher dose intensity, you can improve outcome for patients with myelofibrosis because it has been already published. So all of that is ongoing. It's making progress. We have the Phase IIIs ongoing with parsaclisib. We have the proof-of-concept studies with ALK2 and BET, where there will be some data by the end of this year. And that obviously will translate into starting what could be pivotal studies in the next months after that. And I think it's very promising. On top of it, we have new mechanisms that we are also bringing to the clinic knowing that the deadline we have in some ways, beginning of 2029, and it gives us 7 years to be able to do that work.

And with the QD formulation, how do you think the payer process will play out there?

So I think the QD formulation is obviously more practical than twice a day, but frankly, it's not such a big difference. The key to the QD formulation is the ability to do fixed dose combination with QD products like ALK2, Bet and parsaclisib. The 3 of them are once a day. We would be looking obviously first at the combination. And then we will be and we are already working on it of creating a fixed dose combination of the product and therefore, have a very simple way to address what would be, at that time, the combination market for myofibrosis.

And moving here to Monjuvi. There has been a difference in the launch trajectories in Europe versus the ex U.S. versus the U.S. Maybe you can just comment here on how you think that trajectory will play out over time.

So the launch of Monjuvi in DLBCL was very different in Europe from what we saw in the U.S., and there are a few reasons for it. The way treatments are administered, the use of CAR T in Europe is very different from what we see in the U.S. And the launch in Germany has been taking a shape that is very good and fairly a little bit more with a better shape maybe than what we have seen in the U.S. The U.S., I mean the lenalidomide and Monjuvi is a very active combination. It has an excellent safety profile. It's a non-chemo type of treatment, which for patients is very important in terms of the safety and not just the sort of the deep safety but also the comfortable aspect of having a non-chemo containing regimen. We launched it at a time where it was not easy to see physicians during COVID. It's not an excuse, but it's a fact and obviously, since then, we have been in the process of trying to position our Monjuvi combination with lenalidomide versus all of these new products that have been introduced for DLBCL. It's work in progress. I think there is a lot to be said about the efficacy of that combination. We have a complete response rate that is sort of [indiscernible] like. In fact, in some way, very long responses, and we need to make progress on the type of patients that will be treated with Monjuvi and lenalidomide. The launch in the U.S. was disappointing in overall net sales. But in fact, the share of patients treated was very much in line with our prediction, but the duration of treatment was very much shorter because patients were at a late line of treatment at that time. We need to reestablish Monjuvi and lenalidomide where it should be used, which is in second line where it is approved, and that's what we are working on as we speak. So I think there is a product profile that's still fitting with a clear medical need where we just need to establish it there in Europe. It's taking a shape that is slightly different, and I think it could become a big contribution to our success. And we have Phase IIIs ongoing in follicular lymphoma, first line DLBCL. So there are a number of indications that could be fueling that growth in the future with Monjuvi and Minjuvi.

Any questions from the audience?

So you guys have an oral JAK in development for vitiligo as well. Are you going to have data for that this year? And what is -- what have you heard from doctors and patients on the risk-benefit profile...

In dermatology?

Yes, oral JAK in vitiligo.

Yes, oral JAK in dermatology. So it's -- 707 is the product we are developing. We are looking obviously, oral JAK -- it's a JAK1 specific type of inhibitor versus JAK2. So it's a different profile from what we have with rux and baricitinib. We are conducting studies in systemic vitiligo where using a topical formulation would not be -- I mean, like extended vitiligo with BSA more than 8%, and where using a cream will not be practical. And it could be complementary to using a cream at some point, but that would be the first, one of the first indications. We are doing a study in HS, and we are doing a study in prurigo nodularis. So it's 3 indications where the biology is very, very strong, obviously. Showing -- and where now we are testing different dose, different ways of doing it and where we think it can have a clear benefit for patients and potentially be first in class in that specific indication. And the medical need is there. So I mean, everybody is sort of waiting to see what is the profile that we can get from a product. It's a different approach than what we do with topical because obviously, you have a safety, efficacy window that you need to be working on more carefully, if you want. And that's what we are in the process of doing. And I think we could be in pivotal studies in the next year.

Maybe a last question here for me. What are you most excited about in your pipeline? You have DIO franchise ongoing and you do have some other programs as well.

I think one that is not very visible or I didn't hear a lot about yet. In terms of question is autoimmune hemolytic anemia. It's a very good data set. It's showing parsaclisib is very effective in improving the red blood cell count for patients. And it's very well tolerated. It's a very different safety profile than what we see in lymphoma. And now we are in Phase III. So we just started the Phase III. It's a relatively small -- and for the Phase III, it's like 100 patients, 50 on 50. It's discussed with the FDA. That's what they want to see. It's randomized, and we could have next year the result of that. It's not such a small potential indication. And I think it's typical of what we tend to do, which is doing an indication where there is, today, no approved product, and that would be very promising. The oral PD-L1 program is progressing very well. As you know, we had a number of projects -- a number of products that we were developing there. The first one, 550 was showing good efficacy and was also showing unexpectedly peripheral neuropathy for some patients that we thought was not easy to manage in a competitive situation with IV or subcu antibodies. So we decided to push 280, which is the second product that we have and now 280 is moving forward very quickly, it's at the same stage. And we could be, again, assuming everything goes well in our dose timing, we could be next year also starting pivotal study with oral PD-L1. It's a very interesting project. It's not about being a [indiscernible] of the antibodies. It's about having a product that you can switch off if you choose to, if you see on-target type of toxicities, immune type of toxicities, you could basically stop taking the product and the half-life is short enough that the next 2 or 3 days, you will reverse the effect of the product, which is impossible with an antibody. It's a product you can combine with other oral products. And there are a number of indications where oral combination would be very useful. It's a product that is well fit for adjuvant treatment of some indications. So there is a lot of ways where that program would become something that is more than just an oral form of KEYTRUDA. It would be really a new product with very unique feature. So that's fairly exciting. We have an adenosine program that is also moving forward very well with the CD73 antibody and a small molecule against 2a, 2b and it's progressing and will be in a [ talk ] phase probably next year with that. And then as I said, we have new products coming from our own research now entering the clinic and the last one was CDK2 inhibitor, which, as you know, I mean, it's a sort of a relatively well-understood target where there is a clear population that could benefit from that mechanism. So it can help drive development program relatively quickly.

With that, thank you very much, Herve. Thank you, Christiana, for joining us.

Thank you.

Thank you guys.