Incyte Corporation (INCY) Earnings Call Transcript & Summary

Ladies and gentlemen, the program is about to begin. Reminder that you can submit questions at any time via the Ask Questions tab on the webcast page. At this time, it is my pleasure to turn the program over to your host, Tazeen Ahmad.

Thanks so much, [ Elijah ]. Good morning, everybody, and thanks so much for joining us on the first day of our virtual SMID Cap Biotech Conference. It's my pleasure to have with me for the next half hour management from Incyte, specifically CEO, Herve Hoppenot as well as CFO, Christiana Stamoulis. Good morning to the both of you. Thanks for joining us.

Good morning. Thank you for inviting us.

So we have just a limited amount of time. So I think there's a lot to talk about, so let's just go straight into Q&A.

So Herve, you do have some presentations coming up in a day or 2 at the ASH Conference. And so I wanted to maybe get your thoughts on what you think the important ones are and what we should be looking for and take away from those presentations.

Yes. So good morning. Yes. Let's start with that. I mean you know how much the Jakafi franchise is important for Incyte. So we are speaking of a number of projects that we have where we are starting to see interesting data that would be presented at ASH. So let me go through that. I mean we will have an event there, where we will go into a lot of details. But overall, you have first annual presentation that will be about parsaclisib plus Jakafi in MF. So there are patients who have been not fully controlled with Jakafi and where adding parsaclisib is showing improvement in the spleen, in the symptoms with a very good safety profile. So I think it's an important step because we have been in this mode of looking for new options for patients who are not doing well on Jakafi, which is a very large number of patients with MF, at some point will have progression of disease. So it is a very meaningful set of data that will be presented at ASH. In the same vain, but very much earlier data, we have the first published data, I think, about our BET inhibitor in -- also in MF, same concept, how to deal with progressive disease in MF and what it could do. So that's early data, not a very large number of patients, but it's a first step. And then we have a very important mechanism called ALK2. So ALK2 is a way to manage hepcidin pathway, which is, obviously, leading to anemia. And anemia is part of MF as an effect of the disease, but it's also one of the potential side effects of Jakafi. So being able to deal with anemia and to manage it will be very, very important. And it has consequences in terms of safety, but it has consequences also in terms of efficacy by allowing to maintain the dose intensity of Jakafi. So we have an ALK2 inhibitor in the clinic. We are combining it with Jakafi. And what we will see is the first data with -- from the dose escalation phase of the study, and I think it's very highly -- it's the highest potential for products that will be like a super Jakafi in MF. This is a combination of ALK2 with ruxolitinib. So that will be important. And then there is somewhat of a surprise in some way, a plenary session about new products that we are developing -- that we have been developing for the past years, and it's going to be entering the clinic in '23. It's a new target called CALR. And it is a target that we know -- mutations that we know is oncogenic and is in 25% to 35% of patients with MF and ET. So that is a mechanism where, obviously, it will be changing completely the whole safety, efficacy ratios that we observe in either of these two diseases because it will be disease modifying by design. And it's a very interesting target. We have been working on it, and it will be presented. The preclinical data will be presented at the plenary session of ASH. So a new drug, new opportunity to expand the market for us, to expand the franchise and also an opportunity to change the standard of care in MF for patients who have this CALR mutations. So that's what we'll be seeing at ASH. I think it's important because it's showing the progress we are making in the so-called LIMBER program of sort of improving our Jakafi in MF, PV and GVHD. And that's basically the MF part or the MPN part of it will be presented there.

So there's a lot that you said in the last minute. So maybe let's just dig in for a couple of the points that you made. So for the BET inhibitor, where in this MF patient population potentially do you think it would be best suited just based on what you know?

For the BET inhibitor? Yes, I think the BET and parsaclisib are in the same category of saying some patients are doing very well on Jakafi for a long period of time, Jakafi alone. So in some ways, there is no need to add another mechanism for them. And some patients are not doing well relatively quickly. After like 6 months -- in our study, we are looking at patients who have been exposed to Jakafi for 6 months, and they have been on a stable dose of Jakafi. So it's not the usual study where you treat with Jakafi, you stop and all the symptoms and the spleen are obviously coming back with -- after stopping Jakafi and then you treat with something else. In that study, what we do is that we are keeping Jakafi at the dose where it was used without ever stopping, which is really important because you know there is a rebound. And then we are adding parsaclisib. And in the case of BET, we are still in the sort of single-agent phase. But I mean we are doing the combination, but the data you will see is the single-agent data. So both of them are looking at these patients who are not doing well on Jakafi and then patients who have been on Jakafi for a very long time, and we know after years of Jakafi for some of them, unfortunately, there is -- suddenly the spleen is starting to grow again and the symptoms are coming back. So it's really the sort of not fully controlled by Jakafi population, which is a very, very large proportion of the MF population.

Do you know what percent it is just based on feedback from physicians in your field force?

Like...

Yes, that would qualify as over time the spleen is growing again and/or they're not responding well.

I would say, I mean, it's a difficult question. Most patients, if not all patients, treated with Jakafi at some point will progress in myelofibrosis. So the thing is that for some patients, it will take 6 years. I know personally some of the patients we had in the clinical trial back 10 years ago and who are still doing relatively okay. So for most patients, there will be, at some point, they will be hitting a situation where, in fact, symptoms are starting to come back and that's where you need to have an alternative mechanism. And that's what BET and parsa will be able to do. ALK2 could be helping in the sense that you can increase the dose of Jakafi versus not being able to use the full-dose intensity. So it may have an impact. But my vision is that starting with Jakafi is very reasonable today because there is a survival benefit. It's the only product with that kind of data. And then what you do is monitor how Jakafi is doing. And that's what we did in the parsaclisib study, where we call them suboptimal responders where we are basically starting to add a new mechanism when we are seeing that there is no full control of symptoms and spleen. And that's what, I think, will be used for most of the patients at some point in their visit. So in our view, it's really some things that will be replacing Jakafi over the next years.

So is it your view that you'd want to develop all of these mechanisms together? Or would you want to pick one, eventually?

I think at this point, we would rather have more than one shot on goal. Each of them have their own risk, as you know, and we don't think it's necessary. In fact, I would even add more because I think -- I mean, our experience in leukemia, in general, in hematology, oncology is that there are always escape -- unfortunately, in many cases, there are escape mechanisms that we'll be building. So you will need to have more than one backup mechanism to JAK inhibition.

Okay. Fair. So let's maybe move on to Opzelura and talk about how that launch is progressing. So you've got a couple of quarters of experience now, still very early, but I think we've gotten a lot of questions throughout the year on how comfortable you are with gross to net exiting the year, let's say, 40% to 50% gross to net. How has this quarter been progressing? If you can share with us some qualitative commentary. And how are you feeling as we round out December about getting to that goal that you said?

Yes. I think -- I mean, first, I mean, you have to look back where we started a year ago, more or less, a little bit more than a year. So we are on a very fast curve in terms of both adoption and volume. You see the prescription curve is a very good one. And in terms of managed care coverage, if you want to use a very broad terminology, when we see that some of the new products being launched in dermatology in the same indication, atopic derm or psoriasis, I mean, they will take like 2 years. Recently, one of the new products they said it will take 2 years to get coverage. So in some way, we are very proud of the kinetic of the coverage that we have for Opzelura. It has been doing well. We have PBM contracts very early on. And then unfortunately, because the system is what it is and, frankly, it's not very bright, but it is the way it is, we have been sort of adding to that quarter after quarter. So after Q3, we were at like -- north of 70% of claims were covered, and there is still room to do better, obviously. And we are on our way to what we describe as a steady state of 40 to 50, which is sort of reflecting the stacking of different discounts that go to distribution. It goes to PBM and then it goes to the copay part of it because we are capping the copayment for patient at $10 per tube. So all of that is moving in the right direction. At the same time, we were very happy to get the approval in vitiligo, which just happened a few weeks ago. And that has been adding and fueling the demand and the perception of the product. So we are in a very good situation here. We believe there is an absolute vacuum in options for patients in atopic dermatitis when they are not fully controlled by a topical steroid or Elidel or such type of product and where physicians don't think they should go to a systemic treatment like Dupixent or RINVOQ. And that's the space that we are basically filling with Opzelura, where it gives dermatologists an option for these patients who are not well controlled by other topicals. And it's a large -- it's a very large opportunity, and we think Opzelura is doing -- is controlling inflammation and itch very quickly. So it's very good. In vitiligo, as you know, there is no approved treatment with repigmentation endpoint. So we are the first of its kind and their obviously -- there is a huge medical need and many patients are looking for opportunities to repigment vitiligo lesions. And that's something that we'll have, I think, a lot of potential for Opzelura. So both are doing well and the sort of coverage, managed care aspect of it is also progressing very well.

So vitiligo is very new to being marketed. What can you share about feedback on that? Are you actually seeing scripts already being written for that indication? Or is it still -- physicians are educating -- are being educated by your sales force?

Both, but we see -- obviously, we see prescriptions and refills being done for vitiligo patients. So that's going on. There is not the same sense of urgencies that you have with atopic derm. Atopic derm, you need -- eczema, you need to do something because patients are scratching and the infections, et cetera. So there is a sense of like you have to do something immediately for eczema. In vitiligo, patients are coming back to the physicians and then there is a decision because you are basically entering what will be 1.5 years of treatment. And it's a decision that doesn't need to be made in a sort of urgent way, but it's happening. We see the medical need in vitiligo having been very under-evaluated in the past because there was no treatment options. So patients who are basically facing situation of saying, hey, there is nothing I can do, I will use makeup or not, but there is nothing I can really do to get the repigmentation happening or very little you can do. And here, it is changing that entire paradigm. And people now are discussing like how is it going to work? And depending on the type of vitiligo, you have to -- a number of choices to make. And we get feedback from patients. In fact, we get e-mails. I get e-mails of patients sending pictures of how it has evolved in the first 2 months after it was started. So it is a good dynamic happening there.

Okay. That's good to know. That's encouraging. How are you thinking about -- on the last earnings call, a lot of time was spent on phasing out the free drug program and making sure that as many patients are being covered by insurance. Now given that there's a little bit of a difference in where the AD launch is versus vitiligo is still early, are you treating the vitiligo launch differently because you are trying to promote, but at the same time, you're not trying to encourage free drug use?

Yes, in fact, the vitiligo launch is benefiting from the AD coverage. So what's happening is that we had at the beginning, because it is the right thing to do for patients and, frankly, for the brand, we had this system buy down or availability of the product for physicians so that they could prescribe it. And frankly, it was very useful because they were getting feedback from patients. And the feedback in atopic dermatitis and eczema was excellent because the drug is -- the medicine is really doing something unique that other topicals are not doing in terms of itch, speed of relief, anti-inflammatory effect, et cetera. So that was put in place, so people could use it widely. And then as coverage was starting to be happening, we were shutting down the so-called buy down, specifically for the plan where it's covered. And then we arrived at a point today, more or less, at the end of the year, where we have -- most of the plans are covering the product. And therefore, we will remove completely the buy down, including for vitiligo because in most cases, vitiligo is covered when atopic derm is covered. And there, we will replace it with what is a more normal way to do it, like what we do with Jakafi, with Pemazyre, with the other products that we have where patients will be directed when they don't have coverage to our Incyte care system. And from there, there will be another attempt to get coverage. And if nothing is available, they will receive a free product. So it's basically going back to normal after like 13, 14 months of being in the launch mode where we wanted people to use the product widely because we think it is the best way to convince physicians it's a good option for their patients.

Okay. So that's also a good sign. We do get questions about things like how many tubes on average are patients going to use for AD versus vitiligo. It's early, but do you have a sense for that yet?

So the sense we have is mostly coming from the clinical trials, where we had, obviously, vitiligo was more than a tube a month if you want. And in atopic dermatitis, it was probably in the 4-plus, a little more than 4. So what we said is that in the commercial setting, it will be less than that because we know in clinical trials, there is more motivation to be compliant with the regimen. So we believe from what we saw 1 year ago, the first patient who were treated with Opzelura because that's what you need to look at. And there were very few of them. It was just the beginning. Based on that, we spoke about the 2 to 3 tubes for atopic dermatitis with a very large spread of many patients getting 1 tube, and we have not yet seen them back in some way. And some patients, a lot of them, in fact, getting 2 to 3. So that's the sort of average we are speaking about. And some patients getting many more because of the size of the eczemas that they are treating. So that's where -- that's why I spoke about the 2 to 3 as a good way to calibrate per patient per year atopic dermatitis. In vitiligo, obviously, we don't have commercial visibility. We don't know yet what it will be, but we assume it will be 10 tube-plus per year.

Okay. And in terms of supply, do you think you have enough -- manufacturing wise, you'll be able to meet the demand that you've seen so far for AD and now vitiligo?

We have plenty of inventory now. So we went through a little bit of a rocky situation at some point, but we are in a situation where there is no concern about manufacturing at all.

Okay. And just to close on that topic, that issue with the inconsistency in the texture that was in the very early stages you were seeing with some of your batches that's been resolved?

That is -- it has been completely solved, yes. There is no issue anymore. Yes.

Okay. Great. Now would you be in a position to provide sales guidance for Opzelura next year? Or is it too early? And maybe that's a question for Christiana.

Yes, to your point, we are still in early days of the launch, especially for vitiligo. And what we want to see before we are in a position to provide guidance is a few quarters of uptake and uptake, especially in the vitiligo patients and the ones that have not previously actively sought treatment. So we want to see how quickly they get to therapy and see more of the uptake curve before we are in a position to provide guidance.

Okay. So we shouldn't expect that in a few weeks' time then for Opzelura?

No, you shouldn't.

Okay. Good. So as we think about the market opportunity here, some of us are -- including myself are bullish that the 2 indications together could justify over $1 billion in sales over time. Now you obviously have your own estimates. Not looking for you to share the details. But in theory, do you think a market like this qualifies as being $1 billion plus, just based on sheer number of patients with undermet needs?

With eczema and vitiligo, you mean?

Yes.

Yes. I mean we gave long-term guidance on eczema alone being north of $1 billion. So we think it's -- in a bizarre way, there is an unmet medical need in eczema. And that's what I was describing is, between the other topical and the systemic treatment, there is a white space of some sort, and it's a clear situation that dermatologists are facing every day of patients coming referred by a GP to their dermatology practice, where their choice is basically either go back to something that had been prescribed before by the GP or go to a systemic treatment like Dupixent and RINVOQ. And here that space by itself is very large in terms of number of patients. So we think there is that -- and then in vitiligo, we know there is 150,000 patients seeking treatment today. We also know there are like 2 million patients. So it tells you that there is 1.85 million that are not seeking treatment or have had treatment in the past but are not anymore. And the question will be how many of them are coming back to their dermatologists over the next few months to get a treatment. And we think that proportion -- based on our own discussion with patients -- directly with patients about what they intend to do, that number could be very large. So if you take the number of tube per year that are used in vitiligo, it's, I said, 10 as an average. So it's an estimate. And you take the net price of $1,000. We are speaking of $10,000 a year per patient. And then you have this vast number of patients who potentially could get treatment. It puts you very quickly in an estimate -- peak sales estimate that would be very meaningful impact. So we need to see how the ramp-up is happening, and we'll be spending most of the next year doing that for vitiligo. But I think it's a medicine that has a very, very large potential for both AD and vitiligo in the U.S. And then we'll be launching in Europe next year, which is another potential to add to the U.S. market.

Do you think that the diagnosis in Europe and availability to -- the ability to find the patients quickly is as robust as it is here in the U.S.? Is there any reason to think not?

Yes. I think it's even better in some way because in Europe -- in many European countries like France, Italy, there are specific vitiligo centers. So the patients with vitiligo are treated, in many cases, in specialized centers where it will be far easier for us to address, to discuss with the physician because it's a more centralized system. So I think the epidemiology is identical to what you have in the U.S. It's exactly the same, whatever is the skin color. There is no difference in the rate of vitiligo and the different other characteristics. And yes, so I think Europe with 400 million people is going to be a good -- very good market for Opzelura.

Okay. Perfect. Now one more question on Opzelura. You've been telling The Street pretty much all year that not necessarily to follow what the script vendors have been tracking. Is that still the case, like IQVIA? Do you think people should even use it directionally to get a sense of how the quarter is going? I know it can't be exact on the number, but directionality-wise have they improved or not?

So in terms of the reliability of IQVIA, I would say that at this point neither the absolute number of scripts nor the trend are reliable. So I wouldn't look at this, especially during this transition period from the full buy-down program to the traditional free-drug program, where there is uncertainty as to how IQVIA will be capturing scripts, whether they will be including all scripts versus just the paid scripts, et cetera. So -- or they would be making adjustments along the way that could throw off the trend. So I would not be looking at the IQVIA data for the next quarter or so, and we'll update you when we feel that the numbers start becoming more stable.

Okay. It's your first season of 4Q sales, but would you expect to see any seasonality?

For...

For vitiligo or AD. I mean, vitiligo...

Yes, there is some discussion about seasonality, but I don't think we see it because we are on a curve that is growing. I think the seasonality is more when the dermatologists' office are closed, which is happening in Thanksgiving and Christmas. And so that could have a sort of a technical impact. But in terms of the demand itself or epidemiology, I think there is some level of seasonality in atopic derm, but it's not something we see very clearly on our own prescription patterns.

Okay. I think we have time for maybe one more question. So let's wrap it up with a pipeline one, if we could. So Herve, at the beginning, we talked about what to expect at ASH and you've got several presentations that you've highlighted. If we were to ask you what in your pipeline you're most excited about, what would that be?

Well, I would say in dermatology, so we have all of the new indications for Opzelura. So that's really interesting because what we see is that there is a lot of potential there, and we are starting new studies in additional indications beyond the pediatric AD. We are going in all of these new indications. So that's one thing. It's like Opzelura as a franchise, not just 1 or 2 indications. We have povorcitinib, where we have shown the data in HS. So it's a long half-life, selective JAK1. And we have multiple programs going on beyond HS in more like extended vitiligo and in prurigo nodularis. So povorcitinib, I would say, is a very important part of the derm pipeline. And in oncology, you saw at SITC, that's a data emerging with 280, the oral PD-L1. So it's a very unique mechanism. We are the leaders in the field. And we think having an opportunity to have an oral PD-1/PD-L1 product is really important because it gives an opportunity to switch off the effect that is obviously not feasible with an antibody. And it has all sort of practical aspect of being able to do oral combination. For example, we announced recently, we are working in combination with KRAS to look at how it will be feasible to do the combination of this 280, oral PD-L1 with a KRAS inhibitor 12C. As you know from the data, it will be very useful in some way on safety side but also on the practical side. So I would say povorcitinib for dermatology is moving and it's a very interesting product, starting with HS and potentially other indications. And then the oral PD-1, oral PD-L1 franchise. That's the one I would pick from the pipeline.

Okay. So we will have some pretty important pipeline update to look at over the next 12 to 18 months, so we will be on the lookout for all of those. And perhaps when we speak again for 4Q results or before, we can talk about some of the details that you present at the upcoming ASH meeting. So with that, we are out of time. Thank you both so much for joining us this morning. It's always great to catch up with everything that's going on at Incyte. And as we close out the year, we wish everybody at Incyte a happy holiday season and a safe and healthy and happy 2023.

Thank you.

Thank you, Tazeen. You, too.

Take care, guys. Bye.