Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Great. It's Michael Schmidt again with the Biotech team from Guggenheim, the next presenting company is Incyte. I'm very excited to welcome Christiana Stamoulis as well as Steven Stein. Welcome, guys, and thanks for joining us.

Thank you.

Thank you for having us.

So maybe jumping right into questions sort of in continuation of yesterday's earnings call, Christiana. Starting with Jakafi, which obviously has continued to deliver strong growth last year and guidance look very strong as well. I guess maybe talk a bit about in the commercial setting now, what is the main driver of growth of Jakafi? I know you've added patients across the board, it sounds like, but what is the single most important growth driver this year and then longer term as well for Jakafi?

So what we saw in 2022 was continued growth across all indications in terms of new patient starts, but more significant growth in chronic GVHD, given that it was a new indication that would launch the Jakafi for --- in September of '21. So '22 was still the launch year in that indication. And when you look at the level of incremental revenues we launched -- we achieved in '22, it was at around $275 million. When you look at how much we have been adding year-over-year over the last 5 years, it's at around $200 million to $250 million. So you can see the incremental bump because of the chronic GVHD indication. As we look now going forward, we are continuing to see opportunity to grow across all indications. MF, there, we have at around 55% penetration. But they are still at around 25% to 30% of patients that currently are not on treatment and are waiting. And so there is opportunity to continue to grow within MF. In PV, they are at around 20,000 to 25,000 patients that could be eligible for Jakafi. We have a penetration of around 20%. So you can see that there is significant room for continued growth in PV. And the PV patients tend to be the ones that stay on therapy for a longer period of time than MF and GVHD. And then finally, GVHD, we see, again, both significant growth that we have already been experiencing as well as potential for further growth. At around 2,500 patients are on Jakafi. You have 14,000 patients in GVHD, 50% of them tend to require something beyond steroids. So you can see 7,500 patients. We are at 2,500. There is, again, there room for continued growth.

Okay. Great. And maybe sticking with commercial products. So now Opzelura met -- I would say, set expectations in terms of sales yesterday in the fourth quarter. You said you did reach the target gross to net adjustment of 50% around year-end, but there was a little bit of debate on the free drug program that you initiated in the fourth quarter. Can you talk a little bit a bit about how you think product or patient demand will evolve as we think about those as those programs kick in?

So let me step back to just quickly review Q4 because it's very important to look at the fundamentals here that are very strong. The launch has been going very well, very strong demand. We see an increase in demand quarter-over-quarter of at around 34%. We are also seeing -- and by the way, the demand -- the increase in demand is across the board. AD is growing at double-digit rates, and we see -- we are seeing increasing contribution for vitiligo. Then on the payer front, we have continued to expand payer coverage. And in Q4, on average, we had 73% of scripts that were covered by payer. So that's a significant achievement over the course of a year since the launch Opzelura -- and that increase in coverage was reflected in the reduction in the gross to net discount. The average was 57% for Q4, and we exited the year at 50%, which we indicated is a reasonable assumption for an average level for 2023. We continue to see a lot of enthusiasm and very positive feedback for Opzelura, both from the AD side as well as vitiligo. AD, the feedback has been very, very positive. And I think thinking back at the decision that we made at the beginning to launch Opzelura and put in place the full buydown program in order to get Opzelura to patients very quickly even though when there was little payer coverage was very important because it got patients to experience Opzelura, to see the benefits, to go back to their physicians, and that helped reinforce the efficacy profile, the safety profile, the effect on each and get more and more physicians to prescribe Opzelura. So we are continuing to see a lot of positive feedback from Opzelura in AD. In vitiligo, it's very exciting because, as you know, there are no other therapies that have been approved for repigmentation. Opzelura is the first one. There is a significant need there. And again, there is a lot of enthusiasm, both by prescribers as well by patients. There are 2 sets of patient populations for vitiligo. One is the 10% of patients with vitiligo that have been actively seeking treatment. And these are the ones that have been visiting the dermatologists and are probably the first ones that would be going to get on Opzelura. And then you have 90% of the 1.5 to 2 million people with vitiligo that have been inactive. And these are the patients that we are looking to activate to make them aware that now there is an efficacious treatment for repigmentation so they can go and visit the dermatologists and get on Opzelura. And so a lot of the focus this year would be around patient awareness around DTC, we have multichannel activities in order to get that activation of that patient population that we believe represents a very big opportunity.

Yes. And then just going back to commercial sale the -- I think there was some investor concern that if you lower your gross to net rate that it could impact demand negatively, I guess, in a way. As you roll out the free drug program, which is, I think, conventionally done, to what degree does that offset or perhaps even drive additional growth, demand growth for the product?

So the growth to net rate -- gross to net discount rate, just to make sure that there is a clear understanding of the components has nothing to do with demand. There are 3 main components to gross to net. One is the discount PBMs. We have the contracts in place. The discounts are set. We know that. The second is the discounts to wholesalers and some other fees from pay, et cetera, that, again, are set are pretty small contributors to the overall gross to net discount rate. And the third is the co-pay assistance. And co-pay assistance is the level that we pay between where a payer may -- a plan may set the copay for a patient and the $10 per tube that we have set. And so we are paying the difference. And that is not impacting in any way the patient or demand. And the improvement that we have seen here is because we have been getting Opzelura on the formularies. We got a payer coverage, and now we are working on improving the co-pay level, bringing down the copay level. So the co-pay assistant becomes smaller required to get to the $10 per tube.

Okay. Perfect. And then as we think about 2023, at what point, I guess, how should we think about the pace of new prescriptions in AD versus with vitiligo? Is vitiligo growing at the same rate at this point? Or is it trailing the AD growth opportunity?

I think it's too early to comment on the growth trends. As I said, we are seeing double-digit growth in AD. And in terms of vitiligo is -- we are at an early stage in the launch. We are seeing increased contribution. What we have said in the past is don't expect a bolus of patients coming in, mainly because it does take time for patients to be able to make an appointment, see their dermatologists and get prescribed. And that's for the active population. And then the question that we have is -- and we want to see it by the way, before we can provide also more guidance is how quickly the inactive patient population will get activated and at what rate will come in to start to seek treatment.

And the treatment duration in vitiligo, which is meaningfully longer than an AD, has that tracked within your expectations?

So vitiligo, again, it's very early into the launch. What we have said there is that we expect patients on average to be using 10 tubes a year. And in the case of AD, it would be 2 to 3 tubes a year. So you can see that a vitiligo patient will have a much higher number of tubes than in any patient per.

Yes. And then the potential label expansion into the pediatric population is kind of the next big step for Opzelura. How significant is that opportunity relative to the approved label at the moment?

Yes. I mean -- so the label at the moment is 12 years and above. The pediatric study addresses 2 to 11 years of age. And that in the United States is an additional 2 million patients. So on top of the 5.5 million, so expands the total available AD population to 7.5 million totally.

Yes. Okay. Perfect. And then sticking with dermatology, you're also planning a Phase III trial for povorcitinib in vitiligo as well. And it sounds like it's a complementary market to the Opzelura indication. Is that correct?

I mean, yes and no. The Opzelura indication for repigmentation is in patients with body surface area involvement of 10% or less, and that stipulating the label. Obviously, the endpoint was a facial improvement. And these are people who see treatment tend to have facial involvement or hand involvement. For povorcitinib, it's a different population. It's 8% and above body surface area involvement. So the population Christiana was talking about, if you look at the 1.5 million vitiligo patients, about 80% of them are 10% or below body surface area. And because of the slight overlap, 8% and above incorporates about 30% of that population. And there, because of the more extensive involvement in total body involvement, in fact, in the study, and some of them have upwards of 30%, 40% involvement in terms of depigmentation. The therapeutic ratio will tolerate it will be different. So that's why -- and you can't apply that much cream. It's actually almost physically impossible. So that's why we're using an oral JAK inhibitor there knowing that the FDA doesn't -- is likely to impose black box warnings, et cetera. But the level needed to repigment is so great that the oral is felt to be warranted.

Okay. And then we'll get some data for that this year. Can you talk a bit about expectations? How many patients are enrolled? And is it a dose escalation? Or is it a Phase II, if you remind us of that?

Yes. It's Phase II but a large study. We're testing different dose levels of povorcitinib, so 15-milligram, 45 milligram and 75 milligram, which are not similar to the doses tested in hidradenitis suppurativa, except for the lower 15-milligram dose. We'll get that readout soon and then look at which is the right dose to take forward into the Phase III vitiligo program with povorcitinib and even potentially 2 doses as well, which is becoming pretty common now with the -- at least with the FDA, where you're going to see more dose-ranging work in Phase III even.