Incyte Corporation (INCY) Earnings Call Transcript & Summary

Healthcare Conference. I'm Marc Frahm, the biotech team. Next up, we're really pleased to have with us CFO from Incyte , Christiana Stamoulis; and the General Manager of North America, Barry Flannelly.

So maybe to start off, Christiana, you want to just kind of level set people on, insight status updates and kind of what are the major updates you're looking to over the next 6, 12 months?

Sure. So as you may recall from our earnings call this last month, we had progress along a number of different fronts in 2022 that we are looking to continue in '23. First, on the commercial end, very important was the progress of the Opzelura launch both in AD as well as in vitiligo, which was the indication that we got approval for in 2022. We are very much looking forward to the continued progress with both indications and the launch there that we are expecting to see in 2023. Then on the clinical development front, there were a number of programs that had updated data in '22, and we're looking for several additional readouts in '23 across the board. So LIMBER, we shared at ASH some initial data with ALK2, which is one of the LIMBER programs and where we had proof of mechanism with the program for anemia. We look forward to sharing additional data in '23 and especially combination data with Jakafi. Same for BET, which is our BET program is in development also as mono and then going into combination with Jakafi, and we're looking forward to sharing data later this year from this program as well. And finally, moving the mutant CALR program into the clinic. It's a program that we are very excited about because we're looking to address the 30% of patients with CALR mutant in MF and ET, which will potentially take us into ET and MPN where we are currently not with Jakafi. And then in terms of other oncology, oral PD-L1, we have the lead products selected. We have started combination studies, and we'll be looking for additional data later this year as well. And finally, dermatology. We have a number of studies in dermatology, both with Opzelura as well as our second dermatology asset, which is povorcitinib, which we are developing for HS vitiligo and prurigo nodularis as well. So we'll be looking forward to data from those programs as well. So a lot that is going on that we are looking forward to see this coming year.

Okay. Barry will start with you on diving into some of the specifics there. Remind us where Opzelura is on -- there's a lot of progress, both in volume, but also in terms of net pricing because gross to net was coming down significantly through the year. So where did Opzelura end the year -- exit the year? And kind of what are your expectations going forward for '23?

If you're talking about just gross to net, for example, we ended the year, as we said, around 50% or right at 50% gross to net. We continue to see in 2023 that the average will be about 50% in the first quarter, as happens with every product essentially is that the gross to net will be impacted because of the restart of deductibles and the high deductibles that unfortunately, some patients have a high amount of co-pays that they have. So you have to pick that up in the first quarter, and that will be lessened over the rest of the year. But as far as the uptake in AD that continues to grow, the uptake in vitiligo certainly continues to grow. So that's what we have looking for this year. The continued launch specifically in vitiligo and continued rollout of direct-to-consumer approaches to attract those patients that have vitiligo.

And maybe on those kind of more volume side their trajectory in '23, I guess, how much of the driver of growth is still AD versus how much is the vitiligo coming in and being a major driver of growth?

Sure. So at the end of '22, as we said, we had double-digit growth in AD. We expect that to continue going forward. Vitiligo though is becoming a bigger portion of the net sales. We estimate from inside data, outside data, the data is not always perfect, but about 30% of our net sales volume currently is coming from vitiligo. We'll see that continuing to grow just because of the number of refills those vitiligo patients will get as compared to an AD patient. There's many more AD patients than it is vitiligo patients, nevertheless, the patients with vitiligo will come back for more tubes.

And one thing that we frequently get questions from investors is that you guys are kind of the first novel topical in these spaces. Well, the only thing in vitiligo, but in the AD the first. But there's kind of a few companies coming behind that are commercially available and other indications that are expected to come into AD. Just how do you see that impacting the AD market?

Well, AD is becoming more crowded both with systemic therapies and with some topical therapies. We just think that our profile for Opzelura in atopic dermatitis is the best. We think it's actually the best drug to use in the treatment of model, mild to moderate atopic dermatitis. And we think that will continue. The other competitor is the data that they released so far, Phase III data. The other topical potential competitors Phase III data and Phase II data doesn't compare to the efficacy data and safety data that we have with Opzelura. So we think we can maintain that position and continue to grow in AD going forward.

I think fear some investors have is that maybe if they -- even if they agree with you that the data looks better for your drug on an efficacy basis that these products will have less warning statements and things like that in its label. Just -- and therefore, patients will just seek to -- at least try them first and see whether they work and do well for them before they would go to an Opzelura?

Well, I mean, the way I look at it, especially if you look at -- Christiana, for example, we don't have to step through Eucrisa therapies. It's already improved. It's a relatively safe drug. It's just not that effective. So dermatologists aren't going to prescribe something that's less effective or they'll try to get around it. So I don't have any expectation at all that those other products, if they're priced less or have -- well, they don't have a black box, for example, it's not that there won't be used. They'll probably be used, but we still think we can maintain our leadership and continue to grow there without too much trouble.

Might their entrant's kind of trigger some renegotiations and things like that, where maybe we should think about price coming down some as just more -- there's more options for payers to play off of each other?

Well, again, it doesn't really happen now -- with one PD, 4 that's on the market. So there's always a chance to renegotiate. I mean, we can go back and renegotiate the payers can come back and renegotiate. But we're set for 2023 and some of them are multiyear contracts. And so we don't anticipate that anything untoward is going to happen because of these new entries, but you can always go back and renegotiate or try to renegotiate again.

Okay. And who are -- maybe switching to vitiligo quickly here. Just who are the vitiligo patients that are kind of starting Opzelura today? Who's the kind of early adopter?

I think the patients who are already seeking treatment, as we said, I think, in the past of 150,000 to 200,000 vitiligo patients that are seeking that are using drug therapy now or have perhaps in the recent past, used drug therapy or even light therapy in the past. So they're looking for new options that will really help them. And we know I was speaking to many vitiligo patients are very excited about starting Opzelura and some have actually reported great results so far. And as they tend to do today is put those on social media. So we think that will continue, but it's those other patients, let's say, the total of 1.5 million or even more vitiligo patients that maybe gave up on seeking therapy because nothing was helping them in the past, and now here it is a new breakthrough therapy, the only proven therapy that actually provide a repigmentation, they'll go back to their dermatologists and then seek additional therapies like Opzelura.

And you mentioned the dynamic before there's obviously way less total patients, but there are less options for them, competitive options. The refill rate is potentially going to be much, much higher for these patients. Just how should we think about the market size? And maybe this is also a bit of a Christiana question, relative to the guidance that you have put out there for the AD label of about $1.5 billion of peak sales?

Yes. So for vitiligo, we haven't yet provided guidance in terms of the peak sales potential. But when you look at the different factors here, first of all, you have a patient population that is at around 1.5 million in the U.S. Of this, only 10% have in the past been seeking treatment because there were no -- before Jakafi, they go no, sorry, Opzelura, there were no efficacious therapies or therapies approved for repigmentation. So the key questions here and what we are waiting to see a bit more data and have a few more quarters to understand the trajectory and the mix of patients is how quickly, the 90% of the patient population that has not been actively seeking treatment in the past will now come and get on Opzelura. So we're waiting to see that. But given that for vitiligo, we expect to see patients using a higher number of tubes versus AD. Even though the patient population may be smaller, the total number of tubes per patient is expected to be larger. So for AD, we have said, expect on average 2 to 3 tubes for patients -- per patient, while for vitiligo, we expect on average at around 10 tubes per patient, which means that for every 10,000 patients, if you assume 10 tubes and a net price of $1,000, just to simplify the numbers, you get $100 million in revenues for 10,000 patients. And here, we are talking about 150,000 to 200,000 patients that are already actively seeking treatment plus another 1.3 million of patients that could potentially be candidates to come into treatment.

So I mean it seems like if you do the math there on those patients who are -- just ignore the activation piece, but just the patients that are coming into care today. If you capture large chunks of that, doing the math you were just doing, it seems like you end up at a pretty similar number to what you've already put out for AD. Is that the right way to think about it?

We believe that vitiligo could be a very significant opportunity. But for the reasons that I said, we don't want to come out with a number yet. But if you were to do the math on 150,000 patients, you get to similar type of sizes as it be.

And Barry, in terms of those patients that are already flowing into clinics, why wouldn't they get Opzelura? What would be the -- what's the pushback that you're hearing that your sales force needs to kind of to detail around and make sure that Opzelura is the choice not whatever else?

I don't think we're getting any pushback all we get is positive feedback. But we do have to educate not just a patient, but we have to educate the dermatologist as well. Some dermatologists are very comfortable and experienced in treating the vitiligo, others aren't because they just didn't have anything to offer them in the past or they may specialize in other various skin diseases, but didn't concentrate so much on vitiligo. So it's as much getting them comfortable with them bringing back the vitiligo patients or bringing them into their office and offering them a new effective therapy that they have in the past. So that's, I think, our biggest challenge educating; one, the prescribers, the dermatologist; and two, then educating the patient.

Okay. And then in terms of trying to access another 90% of the patients who are not kind of coming into clinic today vitiligo, insights recently launched in DTC. Can you maybe lay out what that strategy is of how you're going to try to drive, hopefully, large chunks of them into care? And maybe can you quantify some of the early returns you may be seeing from them?

Sure. So in terms of DTC, it goes far beyond television, what we think of as commercial television, obviously, in today's world, that goes to connected and disconnected television viewing. So linear TV, nonlinear TV is one way to get to the masses, I suppose, but we also do it through social media, of course, we do it through online searches. We do it through print materials. So the way that we really see the early returns, we just launched our vitiligo commercial, for example, I think it was February 13. So it really has just been rolling out. I just saw it here in the hotel yesterday. So that was good. I'd like to see the Opzelura commercial with Morgan Freeman out there, advertising, talking about the drug. So that was good. But we'll end up continuing that strategy of reaching out to patient through all a variety of ways, but it's also working with the Patient Advocacy Community that are very excited about here is a new research coming in. Obviously, there's starting to be other therapies coming into vitiligo, and they're excited about that. But we're the first ones to sort of make this breakthrough for repigmentation, and they know that, then that will trigger more research in this area. And of course, we have our own additional research going on in the field of vitiligo. But it's also then -- we even run our own we'll do patient direct educational programs for patients, whether it's a webinar series or whether it's live programs that we're bringing experts and talk to them just about the disease themselves, not necessarily about Opzelura specifically. But in those variety of ways, we'll be bringing back those patients who now want to see if they can do something about their vitiligo.

And the ways to kind of quantify the impact that you're seeing -- maybe in terms of Web searches, page views on the Opzelura website, but then also maybe things like is that vitiligo patients' organization? Are they seeing much rapidly growing membership, things like that?

Yes, sure. Yes. It's exactly I should have said that before, is that. As soon as we launch a commercial, for example, then we noticed immediately the searches for Opzelura and for vitiligo go up dramatically or for AD. We're running the AD commercials as well and then do more searches on Opzelura, and then they go to the various websites that we follow or sponsor. And then we know there's just more hits, there's more download of information about vitiligo or AD. There's more downloads about Opzelura. So that's very important as well. So.

And can you walk through kind of the time line of when we should expect -- if we see -- okay, web traffic is increasing. What's the time line of that translating into actual sales?

Yes. So for AD, we think it's much more rapid because for AD, the patients are actively suffering right there. They're scratching their bleeding; they're getting infections because of the constant scratching. So they might have a great more sense of urgency to get back to the dermatologist. But for vitiligo patient, who's been sitting on the sidelines, especially -- obviously, they have to get in touch with the dermatologist, make an appointment and then come in. So there could be a little bit of a lag, I guess, in terms of actually turning that into prescriptions, but hopefully, that won't be too long of a lag.

Okay. And in terms of rounding out the vitiligo profile, there's going to be a couple of data sets at AD both on Opzelura and then also from your checking -- from the next molecule, povorcitinib, which is oral. Just how do you, from a market perspective, kind of see those informing use of both drugs?

So for -- so the studies that you're talking about, obviously, that are coming up AD on March 18. We're very excited to oral presentations on Opzelura for vitiligo and one oral presentation on our JAK1 specific inhibitor, povorcitinib. So the way we think they fit together is simply that just by the label, so for Opzelura, for those patients that have less than 10% BSA for their vitiligo makes up less than 10% of their BSA. And for povorcitinib, it's more than 8% of their BSA. So I'd just say more than 10%, less than 10%. So extensive vitiligo then povorcitinib could be the right drug to use, and less than 10% then Opzelura could be the right. But I think there's -- there will always be an opportunity for both an oral and topical for vitiligo for just because of patient choice, but also just because of the extent of their disease.

And how receptive is committed to the labeling here, like Opzelura does have the JAK class label, but there's also a lot of qualifying language around what it's been observed in the -- this is a topical, which will have much lower exposures versus the oral is the JAK label. How receptive do you think the market is in vitiligo to those risk statements relative to, say, the AD market or some other places where we've seen those labels commercially available already?

So obviously, especially for Opzelura, we're not happy about the black box. We'd rather not be there, but dermatologists are used to dealing with black box. They have other drugs that have been dealing with black boxes for a while. I think Accutane, for example, I think of the calcineurin inhibitors, for example. But they also recognize that the oral JAKs had a very specific labeling and side effects that unfortunately, we got connected to, but we didn't necessarily see in our trials. So that's one thing. But I think they're open to -- it's evident that they think that the safety is going to always be better with a topical and that's why we thought the topical was great. In terms of povorcitinib, at least for vitiligo, it's a JAK1-specific inhibitor. It's different than the other JAK inhibitors that may have gotten stuck with a black box warning. We hope that we don't experience that with povorcitinib, but it may be inevitable just because of the JAK class, but dermatologists are smart, and they recognize the safety and benefits that these drugs provide.

Maybe before we fully get Opzelura, Opzelura just receive CHMP positive opinion for vitiligo. Maybe Christiana, do you want to walk through kind of the launch plans in Europe. What build-out has already happened, what your investors be expecting over the next year or so?

Absolutely. So we have now the positive CHMP opinion. We would expect, hopefully, approval in the next 60 days. And then it's going to be a rolling launch starting with Germany. Germany tends to be the first country that -- where drugs are launched following approval. So we expect to launch in Germany in 2023. We are in the process of building the team there. There would be a dedicated sales force, specialty focused sales force for Germany, and then we'll continue the discussions on the reimbursement front at the country level or with the other countries. And we would expect the other countries to follow usually take at least 6 months to see the next country following Germany. So we'll be looking at more countries to follow in 2024. So the build-out will be focused on Germany for '23, and then we'll continue with the other countries in '24. Outside Germany, the way that vitiligo is treated in Europe is -- tends to be in specialty centers. So it would be a very small effort in each country, again, dedicated effort for derm.

Can you maybe provide some scale there? How big of a sales organization should we expect again once you've kind of done that stage rollout gone through the reimbursement. Does this look like what we think of as a European oncology sales force? Is it bigger than that? How close to what Barry is built on the dermatology side in the U.S.?

It is smaller than the U.S. And the reason, again, is that with the exception of Germany, you go to specialty centers that treat vitiligo. So it's a very focused sales effort.

Okay. Also in dermatology, what you -- the company has recently reported was the long-term Phase II data in hidradenitis with povorcitinib. Can you just frame that data, how do you vary if that is replicated in Phase III, how do you kind of see it fitting into the HS market?

Well, I think the data that we've had for the Phase II that was just recently presented at the European hydro -- the Hidradenitis Suppurativa meeting was very compelling, in fact, and certainly as good as the biologics so far and maybe even better. So the Phase III studies are very exciting. We're launching into 2 large Phase III studies for hidradenitis suppurativa to 600 patient studies. We're actually very excited about that potential. We think it's perhaps an underrecognized marketplace and opportunity for a drug like povorcitinib. So we're really looking forward to finishing those Phase III studies and reading out the data.

And Christiana, how do you think of that in terms of market side. You've put up some numbers for Opzelura and AD, we've talked about a vitiligo before. Like what's that HS opportunity for an oral agent in terms of magnitude, just ball parking it.

So for HS, there are around 300,000 patients in the U.S. And these are mild and moderate to severe at around 50% are mild and around 50% are moderate to severe. So we'll be looking between Opzelura and povorcitinib to have options for both patient segments.

Okay. And maybe turning off of dermatology, go to Jakafi. One thing we do hear from investors is concern is that there continue to be new entrants in MF and maybe the ones that are coming -- that have just entered and are about to enter seem to have more well-defined different -- points of differentiation versus Jakafi. Just Barry, how do you see that coming in? Obviously, there are some patients who are entirely ineligible for Jakafi that seem to maybe be eligible for some of these labels. But then there's also these patients who insight themselves have said are not getting the most out of Jakafi and or maybe getting less than ideal responses and might be looking for other options?

Well, I actually think that the point of differentiation is for Jakafi. I mean the only drug that has survival screen reduction and unsurpassed symptom improvement. So I mean, that's really the point of differentiation. And none of the competitors either on the market or perhaps coming to the market can claim the survival advantage that we've had. We've been on the market now for more than 11 years, we've demonstrated long-term survival improvements for these patients. That's the single most important thing that, that hematologists look for when they're treating myelofibrosis patients. And remember, we're only talking about myelofibrosis, it's not polycythemia vera nor GVHD. So it's really the MF market. So, so far, fedratinib really didn't pan out very well at all. For BMS and pacritinib just released some sales data, CTA just released some sales data. So it looks like they're flattening out, even in the patients that are less than 50,000 platelets. Momelotinib is going to claim some anemia advantage, but anemia without transfusion reduction is nothing, but also each of these drugs come with their own baggage as well, particularly in terms of side effects. So the great thing about Jakafi is not only the overall survival advantage that it provides to MF patients, but also the symptom improvement. So you feel better when you start Jakafi for the most part for these patients. Now on the other hand, for those patients who don't -- who stop responding for whatever reason, to Jakafi or have an inadequate response to Jakafi. If you want to go to a second line therapy and try one of these other JAK inhibitors that have come along. That's good because all we want to do is keep on moving up in the MF space, and we think there's a great opportunity to do that. Our biggest competitor has never been other drugs in myelofibrosis, it's actually been watch and wait. So because there was nothing else available to use after Jakafi physicians, hematologists waited to start Jakafi to patients really started seeing symptoms instead of we know what the best thing to do start early because that's really when you're going to take advantage of the survival advantage for those patients. We know in the recently published data, again, showing that if you start early, Jakafi after patients are just diagnosed rather than waiting until you see symptoms, their survival improvement is even better. So that's what we'll continue to drive going forward.

Okay. And do you have a PDUFA date coming soon for the once-daily formulation of ruxolitinib. What are the kind of commercialization plans for that agent?

I think we said on our last earnings call that we'll let you know all of that information once we're approved, PDUFA date, it's coming up March 23. We think that a once daily ruxolitinib is a good option for some patients. We think that the convenience factor is obvious. But the client's factor is -- so compliance could be better for some patients. And then if compliance is better for some patients, they may actually experience better outcomes. So we think for some patients, that will be a new one. But we'll release all of our strategy once we're approved about which types of patients we're going after, what is the pricing strategy and so forth once we're approved.

So I understand a big chunk of that QD formulation kind of longer-term vision is the combinations, which maybe we'll get to in a minute. But just as a monotherapy, are there examples that you look to of that show kind of what that path could look like and how much the monotherapy could protect the franchise?

Well, I think especially when you look at the end of the patent life, for example, is if you're now on this drug that once-a-day pill. And now some insurance company wants you to switch back to a generic ruxolitinib that's twice a day, there could be resistant. So I think in terms of the switch over to generics after 2029 and beyond, it could be slower and it actually could just as it set by itself, protect that, just the idea of convenience, compliance and perhaps better outcome could actually protect the franchise by itself. But as you said, Marc, is that the real strategy was once a day, so that we can combine with other once-a-day drugs, maybe turn that into a fixed dose combination, but just the combinations themselves, having 2 drugs that get at the same time is clearly a better advantage.

And in terms of those combination agents, is there one that you're most excited about?

Well, everybody in the company may have a different one. I think that the ALK2 is an obvious choice just because obviously, it's for some patients, it could perhaps reduce the amount of transfusions that they potentially would get if they became anemic stop them for becoming anemic in the first place. And then ALK2 by itself could be a stand-alone drug that could help anemia in other cancers or in other diseases. So by itself, it has a potential to become a bigger drug.

Okay. Unfortunately, that's all the time we have. So we'll have to cut it off there. But thanks a lot, Barry and Christiana, for joining.

Thank you.

Thank you for having us.