Incyte Corporation (INCY) Earnings Call Transcript & Summary

Thanks, everyone, for joining us. This is the fireside chat with Incyte. My name is Vikram Purohit. I'm one of the Biotech Analyst for the Morgan Stanley Research. Let me read a brief disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. With that, very happy to have with me Herve Hoppenot, CEO; and Christiana Stamoulis, CFO from Incyte, thanks for joining us.

Thank you for having us.

Of course, of course. Herve, Christiana just to start off with, could you provide some opening remarks on the current state of the business and just recap for us what do you think some of the key milestones are that Incyte's work through in 2022?

Okay. No, I mean if you look at the state of the business as of today first, on the commercial side, it has been a period of growth like again, we are at 25%, 26% growth versus last year on the total revenue and which is coming from a lot of the launches that we are doing around the world on Monjuvi and Minjuvi and Pemazyre and some of the partner products like Tabrecta, Olumiant. But the 2 big parts -- 2 big drivers for us are Jakafi and OPZELURA. So Jakafi has been approved a few months ago for chronic GVHD, and we see a lot of the growth there are -- and the launch doing very well, and the growth of patients, new patients start on Jakafi in the U.S. being driven by that in a very successful way. And obviously, OPZELURA which was launched almost a year ago now for atopic dermatitis, has been going through a very sharp curve of prescription, new patients being treated for atopic dermatitis. And more recently, we received approval in vitiligo, which was with a very good level, with a very interesting 52-week data being included in the level and will give us another boost over the next few months, as we are doing the work with dermatologists on which patients should be treated. We have done also in parallel, the work with the payers so that we would have coverage and as usual for this type of product, it takes time. But we are on a very good curve of improving the coverage for OPZELURA. And it's important to realize that it's a very unique product, certainly for vitiligo. It's the first ever product to be approved for this patient with the repigmentation endpoint. But in atopic dermatitis also, it's a very unique product where we have an opportunity for physicians to use that product after they have used or not been successful with other topical and potentially for avoiding going to biologics. So that's sort of position that we are in a field where there is an unmet need, is very powerful and works very well. So that's the sort of on the top line. On the pipeline as you know, we have 2 big -- 3 big categories. One is called LIMBER, which is our life cycle management in myelofibrosis, polycythemia vera and GVHD. So it's a Jakafi life cycle management program, where we have also a number of programs that have been progressing very well. We did the submission for a once-a-day formulation of Jakafi. And we have -- we did a partnership with Syndax and axatilimab for GVHD. So all of that is progressing very well with data coming in the next few months. In our oncology franchise, we have an important study in autoimmune hemolytic anemia that is now ongoing and could be very powerful because it will be first of its kind for parsaclisib. We have a program with an oral PD-L1. It's the first oral PD-1/PD-L1 showing clinical activity and that is also progressing very well. And we have a number of new products like CDK2. I mean there are a number of new mechanisms that are coming to the clinic. So a lot of progress on that side. And then there is a dermatology pipeline now that we are developing and I would say there is, obviously a lot of project with RUX cream. But we, last week, showed the first data at EADV for 707. It's a JAK1 systemic oral drug, where we showed the randomized study we did in HS, where we are showing a dose response, we are showing a very good level of efficacy and now we are moving to Phase III. And there are other projects with -- the product in vitiligo and prurigo nodularis. So there is a pipeline now developing for the dermatology franchise, oncology, life cycle management of Jakafi and obviously, the business progressing very well.

Okay, great. Why don't we start with dermatology first and let's just start with OPZELURA, the trajectory to-date and reimbursement. So obviously, one big investor focus over the past couple of months has been gross to net. You've guided to a 40% to 50% gross to net by the end of the year. You reported a little north of 80% for gross to net with 2Q earnings. So what needs to happen through the second half of the year to get to that 40% to 50% from what you reported in 2Q?

Okay. So this first biggest step is to get all the 3 largest PBMs that account for close to 80% of commercial lives under contract, which is something that we have achieved now. As we indicated at the end of the second quarter or during our second quarter earnings, we now have contracts with all these 3 largest PBMs. The second step that we are working on and -- it's an ongoing process is to get now the many payers that are under those PBMs to get OPZELURA formularies and remove the NDC blocks. And that would enable them then to benefit from the terms that we have agreed with the PBMs. And this is an ongoing process. It's progressing as we indicated on our call as of the end of July at around 55% of patients or claims were covered claims, and this is progressing. But it does take some time, and we are continuing to work on this. And then the final step is to shut down completely the full buy-down program. We have gradually started to remove the full buy-down program for payers where there is coverage, and we expect to continue to do that until we fully shut it down. We want to make sure that we do it at a point where there is significant coverage in order not to disrupt anything. But things are progressing well. And as we indicated in the past, we expect by year-end to get to this 40% to 50% gross to net.

Got it. And regarding your comment on kind of shutting down the buy-down program over time, you mentioned that 2Q prescriptions hit a bit of a blip as pharmacies transition from free drug to paid drug, with a level set for everyone in the audience. Could you just unpack exactly what happened there? Just give us an update on what you're seeing now on how that phenomenon might be unwinding?

So there are a couple of things that happened. First of all, when you transition from free drug to covered drug, paid drug, there is -- there are few more steps that pharmacy has -- dermatologists have to do in order to get authorization and reimbursement. They need to go through a prior authorization process, very standard. Basically, all drugs have to go through that, but it's one that wasn't needed when we were giving free drug. So that takes a little bit longer, a few more days in order to get the approval and get the prescription outpatient. So that's one thing that resulted in the prescriptions taking a few more days to get filled. The second thing is that, as I mentioned, 4 payers, 4 plans where there is coverage, we shut down the free drug, the full buy-down program. And there were certain pharmacies that continue to try to attempt to get the prescription filled through the full buy-down program. But because it was shut down, they were getting a denial. And as a result of that, they were not processing or delaying to process the prescription. We are working with those pharmacies to educate them on the process and to make sure that they understand why the full buy-down program may not be available any longer and how to follow the right process, which is not anything new for them in order to get their prescription filled. And this is, again, an ongoing process.

Got it. Do you think that a repeat of this kind of process might occur as the vitiligo launch progresses, as you have those patients trying to transition from their free drug to paid drug?

We don't. There are a couple of things that we have done for AD that we are going to fully leverage for vitiligo. The first one is the contracts that we put in place with PBMs. These contracts are for OPZELURA 60 gram. So it's not specific to an indication. So it covers both AD and vitiligo. We will not have to put in place new contracts with the PBMs, GPOs. The second thing that we can leverage is that indication that we're going through with the pharmacies. Once they understand the process, they won't have to go back and relearn it for vitiligo. It will be the same process. What would need to happen, specific to vitiligo is to continue to work with payers to make sure that they put in place utilization management criteria for vitiligo, so that the OPZELURA for the use in vitiligo gets reimbursed. And that's something that we expect will be happening over time.

Okay. And one more logistical thing that you mentioned with your 2Q '22 update was a bit of an overstatement from IQVIA on the prescription data for OPZELURA. Do you have any insight into whether that's been rectified at this point or how that process is going?

So it's taking time for this to get rectified. So we would expect this to continue over a period of time. Eventually, it will go away, but you tend to see this with new launches, and we expect it to continue for a longer period of time before we see it getting closer to actual.

Got it.

And today, it's still the same as with vitiligo.

Okay understood. Let's switch over to vitiligo then. For the first couple of quarters of the vitiligo launch, what sort of metrics do you think you would plan to provide the Street on how to gauge how the launch is going? And what do you think is the main set of metrics that people should be looking at? Because I think you mentioned that you're not going to be breaking out sales by indication. So in the absence of that, what's useful to look at?

So we'll try -- we will collect data and see what data would be helpful to breakdown or what type of information we will be able to breakdown by indication, how accurate or reliable that data is before we decide what would be the best to share in order to give a sense of what is AD versus what is vitiligo. So we still need some more data before we can make the decision.

Okay.

The new patient being started on OPZELURA, it's a hard number. We know what it is. The question is that obviously, the value in terms of revenue of the patients starting with vitiligo versus atopic derm is a multiple. So we need to be careful of not extrapolating where the prescription curve is evolving, to where it would be in the future. So it will take us weeks and maybe more to be able to sort out which patients are which in this system because there are not a lot of very good reliable system to evaluate that.

Sure, sure. No, understood. I guess maybe from a qualitative standpoint then, understanding that it's still pretty early in the launch for vitiligo. But what are you hearing from prescribers, patients in terms of what they like, points of pushback, et cetera?

First, the approval in vitiligo was done by FDA with a level that is very important for OPZELURA. And it's telling physicians something about the continuous use, the degree of safety margin that we have with the topical product versus a systemic product. So even for atopic dermatitis patients, the vitiligo approval became something very important and useful for them to see. As a safety data, over 50 weeks of application twice a day, it's showing that in fact you don't have a lot of problematic side effects. So that's the first thing, the strength of the level. I mean, what we see in vitiligo is that for years, there have been patients seeking treatment for vitiligo, being disappointed by what they have seen from medicines and having as an alternative, which is not having a very high efficacy but has some efficacy having light therapy, which is expensive and burdensome because you have to go 3 times a week for et cetera. And what we see is that now everybody is looking at vitiligo population, their patient base with a new eye of saying who would be eligible for using the cream. And you know, there are some limitation about the type of extent of the disease, et cetera. And what they find is that a very large majority of their patients, in fact, would be eligible for RUX cream. And then you have -- and that will take time because they have to go back to their physician, get the prescription. I mean, so it's not going to happen in 5 minutes, but we see it happening already since -- there was a lot of noise at the time of the approval by the FDA, and it will continue. And then there is another wave of patients who are patients who have been treated by a dermatologist maybe a year ago, completely gave up because we are not seeing any progress and who are going to go back to the dermatologist and ask if that opportunity for them would be appropriate. And that pool of patients is 90%. So we have -- 10 of them are actively treated, 10%, and 90% are in that category of never having received treatment or having received treatment long ago and completely stopped seeing their dermatologists for the disease. So we see it as like a Phase I, Phase II kind of situation. I think all the dermatologists, opinion leaders and not opinion leaders are saying the same thing. It's a first of its kind to have repigmentation efficacy proven in randomized bigger studies, and it has a safety profile because of the topical application that is in fact, very natural.

Got it. So for the 90% of patients that aren't actively going to their dermatologist for treatment, do you feel like OPZELURA necessarily needs to gain uptake in that segment of patients to be a successful drug or do you think that 10% that's going…

So, the definition of success, I think both if you're ambitious with this -- both of them, they are like 150,000 to 200,000 patients who are identified seeking treatment. Think of it like every -- in terms of what it does to our -- to the revenue is basically every 10,000 patients would be like $100 million more, I think. So that gives you the scale of what this could become if you add the other 90,000 who are not taking treatment today.

Got it, okay. You spoke about the launch curve a little bit, but just to maybe put a fine point on it. What should the first 6 to 12 months of the vitiligo launch look like or how should people anchor their expectations for what that's going to look like versus what we saw with atopic dermatitis?

As Christiana was saying, I mean, we -- in the launch in atopic dermatitis went through a number of steps that would be useful for vitiligo. So we already did that for the PBM contract, some of the process with the pharmacies and how to make it work, so that we don't have to redo it. There will be some plans who don't have in fact, a policy, a utilization policy for vitiligo at all. So they will need to have it. And during that time, obviously, the reimbursement will not be taking place so that we anticipate that. We don't know how many it is. We know there are guidelines in almost 50% of the plan, more or less. So there will be that to be established. And we think, as I said, that just going back to the dermatologist is going to take some time. So our anticipation and we would love to be pleasantly surprised. But our anticipation is that it will be a sort of a relatively gradual curve. But obviously, because of the duration of treatment in a way that we have seen in the study, it will have a cumulative effect that will go way beyond the 6 months of we are speaking about. I think in the next 6 months, you have to anticipate that it's going to help. It's going to contribute to the new prescription, but I don't think it would be a very sudden jump as maybe some people were expecting.

Yes, got it, got it. Okay. Let me ask you one last question on dermatology then. You mentioned that there was some data for the oral JAK inhibitor in HS presented last week. Could you touch on that a little bit and just unpack the potential of that molecule? And then also just touch on what are some of the key late-stage programs across the derm franchise that people should be aware of?

Apart from the derm franchise, so…

Within the derm franchise.

Within the derm franchise. so in the derm franchise, there is a first -- the multiplication of possible indications for work's claim. So that's a lot of work that we are doing there. You know, we have already ongoing studies in some indication in the pediatric population, et cetera, but we are certainly looking beyond that. The oral JAK1 707, baricitinib is -- it's a selective JAK1, long health life, and we have initiated a study in vitiligo for patients with an extended vitiligo at baseline. We have a study in prurigo nodularis, where we believe the biology is very strong. And we have a study in HS and the study in HS was the first to be published last week, in fact at the EADV, showing that we have a dose response. We have a very good safety profile and a level of efficacy in a mixed population where some patients were pretreated with Humira, some patients were naive to Humira. And -- but where we have a level of efficacy that is very competitive, and we are in the process -- more than in the process. We are really finalizing the design of the Phase III with the FDA, and we anticipate to be able to start that pivotal study before the end of this year. So that's the 3 indications we have identified. So you will see data in vitiligo and prurigo nodularis as the Phase II. And they are strong -- I mean they are a good sized Phase II randomized studies that will tell us if we have a good reason to go to Phase III in this other indication. But it translates certainly a fairly large opportunity for the product.

Got it. Got it, okay. We have around 10 minutes left. Why don't we switch over to LIMBER? So there's some data for the LIMBER program expected by the end of the year. But before we get into that, do you want to just remind everyone the different components of LIMBER and like what the thesis is for each of those components?

Okay. So that's -- I'll go quickly. Basically, LIMBER is a life cycle management of Jakafi. So Jakafi is approved in MF, PV, GVHD for each of this indication. And specifically for MF and GVHD, we are looking at where is the unmet medical need and what we see is that there is room to improve over Jakafi in efficacy because there are patients who are not doing well as well as they should on Jakafi alone. And in terms potentially of safety, which has an impact on efficacy with anemia being one of the dose-limiting toxicities. So we have a number of projects that are trying to add to the efficacy of Jakafi. I'll start with GVHD because it's easier. We have a product called axatilimab. It's an antibody against CSF1 where we have an ongoing randomized study looking at 3 dose levels and assuming that would show the level of efficacy safety we expect. It could be something that could be submitted to FDA as soon as next year. And then we will combine it with Jakafi and then go to second line and maybe even to first line. So that's one aspect in GVHD. In myelofibrosis, we are pursuing a number of opportunities. One of them is first to develop the once-a-day form of Jakafi. And the key reason is that once-a-day is better, but more importantly, is that most of the combination partner for Jakafi in MF are once-a-day. And what we want to do is to be able to do fixed dose combinations so that then we will have in one pill, the ability to have a product that will have a better therapeutic index than Jakafi alone for some patients. So we do that with parsaclisib, where we have 2 Phase III studies ongoing, one in first line, trying to see -- and frankly, it's a longer shot in first line, trying to see if you can improve Jakafi de novo from the... And we are doing one in suboptimal responders where we are looking at patients who are not doing well on Jakafi, and we have standard of care today is still Jakafi alone and comparing to that with a combination of parsa plus Jakafi. So that's ongoing. We should have the results of that second study called 304 by the end of next year. And obviously, assuming it's positive, that will give us a new product that will have potentially address like 60% of patients with myelofibrosis when their outcome on Jakafi alone is not good enough. And then we are looking at 2 mechanism, one is the BET inhibitor, where you should see some information before the end of the year on the dose escalation we are doing, the safety and potentially what it does in terms of entire MF effect. And we have a product called, it's an ALK2. An ALK2 is basically the upsizing pathway to manage anemia. And the idea there is that if you can combine an ALK2 with a JAK, very selective JAK -- very selective ALK2, you could potentially improve anemia, be able to provide higher dose of Jakafi and therefore, have a better outcome for patients. So -- and that again, we'll have some data probably between now and the end of the year. So it's moving well. It's progressing. We are conscious that it's very important for everybody to see how the franchise, the Jakafi franchise will be evolving. But between the different optionalities we are creating, I think it will be starting to show that it's a real thing for certainly for GVHD and for MS.

So with the PI3K-delta combination studies, 304 and 313?

Yes.

I believe those are evaluating BID ruxolitinib?

Yes.

So assuming you get the QD version approved next year, what would be the path for getting the fixed-dose combination with the PI3K included in the label?

It would be based on -- I mean basically, the idea of the fixed dose combination is that it will be proven to be equivalent in terms of PK and therefore, it will go through that process at the FDA.

Okay, got it. BET and ALK2, I guess what can we expect to learn by the end of the year? And are you looking at this internally as a go/no-go decision for future work with these combinations or…

Internally it's always every program is in a go/no-go mode depending on the data. What we want to see is safety, so that in combination with Jakafi, it would be safe because it's a disease where the degree of safety that you need to achieve is fairly high, and we want to see some level of efficacy in the case of BET, like does it do something that as we would be expecting from other BET inhibitor? And in the term of ALK2, you certainly want to see mechanistically the mobilization of iron and the way the hepcidin pathway is impacted, and that will reassure us that what we are trying to achieve is in fact similar.

Got it. So once those data sets are out by the end of the year, is there a plan for more data around clinical efficacy from those studies expected?

We will continue to have patients being treated for a longer period of time and giving more data over time.

Okay, got it. And maybe one final question on LIMBER then. I guess across QD, RUX and across all these potential combinations for MF, BET, ALK2, PI3K, what is the range of patent life extension you could get assuming all of these components achieve some level of success?

If all the components achieve success, then we are in the -- end of 2030s, the beginning of '40s.

I guess what is the range between QD and then some of the combinations?

Yes, the QD -- I mean, the value of QD by itself is there. Has some value. I would not be advocating the fact that QD is going to -- no, I believe it will help, assuming nothing else works. So the QD, it will help have basically a curve at the time of the first generic that will have a different shape, but it's not going to be -- have a long-term effect, except maybe with -- for a small minority of patients. What will have a big effect is certainly I think those combinations, the new products, so axa on one hand, parsa, BET, ALK2, with or without the fixed dose combination because that will make the franchise grow and continue to grow. Because of the patents, the longer patent life up to the late 2030s, but also because the number of patients on treatment will be increasing. As we know today, some of these patients are stopping Jakafi because of either lack of efficacy or some safety limiting safety issues. So that will have a volume impact, and it will have obviously a patent life impact when these products are available.

Okay. So in the best case scenario, it sounds like if all the combinations are successful, late 2030s/2040s is possible?

Yes, I think you -- you would have to look at the exact patent discussion for this product, but yes, that's where I assume it will be.

It will be meaningful to that level, okay. We have about 2 minutes left. Any questions from the audience? No? All right. I'll keep going to close this out. So outside of derm, outside of LIMBER, what do you think are some of the key inflection points people should keep in mind across the entire portfolio over the next 6 to 12 months?

Outside of derm and LIMBER, I think the oral PD-L1 program. So we had a program -- we were the first company to develop an oral PD-L1 and to show responses. So that happened with a product called 550. That same product demonstrated in a small proportion, but we thought it was too much, a problem of peripheral neuropathy in some patients, reversible, but we thought it was not a good profile competitively when you compare it to the antibodies. So we had a backup 280 and 280 now is moving forward very quickly. We are showing a very good safety profile. We are showing efficacy, and there will be data that will be starting to be published showing that and some clarity about our clinical development plan. So I think that is a very meaningful project. It has obviously a potentially very broad impact on many different situations where having an oral PD-1 can be useful, having a PD-L1 inhibitor that has a switch -- you can switch off the effect of the product in combination with other products. So I think that's probably the leading program from the rest of the pipeline I would keep an eye on.

Great. And we're actually at time. So I think that's a great place to close out. Thank you so much for your time. Really appreciate it. Thanks, everyone.

Thank you.

Thank you.