Incyte Corporation (INCY) Earnings Call Transcript & Summary

Hi, everyone. My name is Matt Phipps. I'm a biotech analyst here at William Blair, covering Incyte. Happy to have them here at our 43rd Annual Growth Stock Conference. Obviously, first and foremost, please visit williamblair.com for any and all disclosures. But we have Herve Hoppenot, the CEO and Chairman of Incyte, that will give us a presentation today. I think it's clearly an important time for the company as Jakafi continues to dominate, but now it's definitely always a question of what's next. Opzelura is launching well, but I hope to see that continue to grow. So we'll hear about that and some more things in the pipeline today. So Herve, I'll turn it over to you.

Okay. Maybe I will stand, in fact, that would be working better. So thank you for inviting us to present about Incyte. So I will go through a few slides trying to give you the perspective. It's a fairly complex company. In fact, in many ways, it has a lot of different dimension. And so let me go first through a sort of a description of the whole organization, if you think of it, in one slide. So from the right to the left, it's a company that has an entire drug discovery program with our own research centers in 3 different technologies. One is small molecule, where -- which is the historical roots of the organization of chemistry, biology department for small molecule. We have biologic with 2 different technologies, antibodies, the next -- the new one entering the clinic is called -- going after [ CALR ]. And we have a partnership with Merus, and we also do internally bispecific antibodies where 2 of them are already in the clinic. The last one was the TGF-beta PD-1 bispecific. Going to the center in terms of clinical development, we have 2 franchisees and that's something that is relatively new in the past 4 years. We came from hematology, oncology. We have developed an autoimmunity, dermatology franchise. So now we have 2 teams worldwide developing our product in cancer with a special attention to MPNs, where we have many of our commercial product, and dermatology. And to the left, where we have now 3 centers for commercialization in North America, Canada and U.S.. For both oncology and dermatology, we have 7 approved product coming from our pipeline, 5 of them are commercialized by Incyte and 2 of them with partners. In Europe, where you have the 7 approved products and 4 of them by Incyte. And in Japan, where we are starting our commercial business with one product being commercialized by Incyte, pemigatinib and 3 of the other products approved in Japan with a partner. So it's a fully integrated biopharma company. If you think of it that way, that has all the components from research to commercialization at least in Japan, Europe and North America. For the rest of the world, we are working through partnership and companies who have good local infrastructure. If you think of -- if you look at the revenue, speaking of growth, we have been in this mode of growing in the 18% to 20% year after year over the past year. So in the full year, product revenue was $2.7 billion. The guidance for this year is to continue to grow at that double-digit rate with Jakafi and other products at $2.55 billion to $2.63 billion and $200 million for the other hematology. And we don't give guidance for Opzelura because we are still in the phase where we are growing and launching, in fact, in many parts of the world. The last quarter, the first quarter of '23 is following the same pattern with a growth of around 14%. Q1 tends to have a little bit of a slower growth for many technical reasons on the U.S. market. And as you can see, Opzelura and the rest of the hematology portfolio is growing faster than Jakafi. So we are in this mode now of basically gaining diversification of the portfolio beyond Jakafi. And interestingly, in Q1, we had 2 new approval. One is Opzelura, our dermatology product in Europe. So that's important because that's -- the launch now is taking place. And Zynyz, an antibody against PD-1, in the U.S. in a very small indication also in Q1. But it's important because it will allow us to have future indication going through faster review process. So good momentum on the top line across the entire portfolio. So let me now split the presentation in the different therapeutic area, where we are working. The first one is obviously what we call MPNs, GVHDs, that's where Jakafi is being used. And I think Jakafi, in fact, is an extraordinarily interesting example of what -- how we approach many of the strategic decisions we are making about the portfolio. If you go back 10 years to when it was first approved in 2011, it was the first and only FDA-approved product for myelofibrosis. And you will hear that a lot in our portfolio first and only approved product because we tend to go into indication where other companies have never been before. And in the case of Jakafi, it really happens that year after year, where from 2011 in MF to 2014 in polycythemia vera, PV, another rare type of hematologic disease, to GVHD, acute GVHD in 2019 and the last indication in chronic GVHD in 2021. All of them are first and only where there was never an FDA-approved product in these indications before. And you can see the revenue curve for the product going from relatively modest in a rare disease at the beginning to becoming what is for this year in terms of guidance at $2.6 billion products. So it's stories that you can use as a reference when I'm speaking about some of the other products that we are developing in our pipeline, including Opzelura, because there is a lot of similarities between the 2. In Q1, again, looking at the growth of Jakafi, you can see it's happening across all indications, the 3 indications of myelofibrosis, PV and GVHD on the right of the slide, and you can compare to what we have been observing in the different years in Q1, where we are growing at around 7% in volume, which obviously is a good performance. So a brand that continues to grow and has a lot of potential to continue in many indications. The second big brand for growth is Opzelura. It's a topical form of ruxolitinib. So it's a cream -- it's being -- it's approved in the U.S. for atopic dermatitis, eczema and vitiligo. It's the first and only product that has ever been approved for patients with vitiligo with the ability to repigment the skin, and I will be speaking about that. It's a very important indication. And in eczema, it has a very unique profile. So the snapshot of the performance. So 60,000 new patients were started on Opzelura in Q1. So you can see how it has been growing over the past years, and it's a very successful product in terms of new patients being started on therapy. It's around 8,000 dermatologists using Opzelura. It's a product we have positioned specifically for dermatologists. So when patients are not fully controlled by steroids with eczema and they go to a dermatologist, that's where this product is being used. And as you can see on the right, the key drivers are very clear in terms of eczema, it's about itch. So the problem with refractory eczema that is not responding to steroids is that patients will be -- itch will lead to scratch. The scratch will lead to infection, and the infection will lead to more issues for the patient. So it is the most effective product for removing itch for patients with eczema. And in vitiligo, if you are not familiar with the disease, vitiligo is a discoloration of the skin. It's an autoimmune disease, and it's leading to destruction of melanocytes. So basically, the skin is losing its pigmentation. It's a depigmentation of the skin. It can be, as you can see from the picture, impacting patients very much. And there are a number of patients with vitiligo, who are really suffering from the impact it has on their life. And I can speak about that. It's something that's very meaningful for many of them. And we have introduced the first product ever to have an approval for repigmentation of the skin. And it's one example, and you can see many of them if you go to TikTok or Reddit or any of these websites where patients are posting picture of how the disease is evolving after treatment with Opzelura. And it's a fairly striking effect because for many patients, it is a repigmentation that is relatively rapid over weeks, a few months, and can be complete in many patients. And I will speak about it on this slide. So on the left is a curve that was very recently published on the speed of each relief in patients with eczema. So it's a change of the score -- of itch score. And what you can see at the bottom is that now we are counting in minutes. So after 15 minutes after putting the cream -- usually, people speak in weeks and days. Now we are speaking in minutes where you can see that the itch from eczema is in fact being reduced very quickly after application of the cream. And that's the reason why this is so successful. Opzelura is so successful in atopic dermatitis is that patients will go back to their physician and speak about how quickly the relief was perceived. On the right is the repigmentation curve for vitiligo patients. And as you can see, it's starting around week 4. So after a few weeks of using the cream, you start seeing the melanocyte repopulating the skin that was previously depigmented. And as you continue to treat over a year in that case on this graph, you see the pigmentation is improving week after week after week. And obviously, it's a great motivation for patients to continue to use the product when they have started their treatment. So 2 unique indication with a lot of potential. When we speak about atopic dermatitis, we are speaking of millions of patients in the U.S. When you speak of vitiligo, it's 1.5 million in the U.S., 2 million in Europe. And as we know, a lot of patients have given up treatment for vitiligo and now are rebooking appointment with their dermatologists because they heard about on social media or TV, some of the TV ad that we have done. So this is the curve of the uptake of Opzelura in the U.S. since we launched. We are sort of comparing to other dermatology products in terms of number of patients being treated. And as you can see, it is one of the most successful launches in terms of patient adoption, and I could have a curve about patient satisfaction showing also that it's very high. So it has been an experience to launch this new product in a place where before there was never a medicine being approved in vitiligo and certainly with a very unique positioning in eczema, but it has been something that, as you can see, has made a lot of progress month-after-month. One of the driver for vitiligo, we believe, will be the DTC campaign. So we have a campaign ongoing. You can see some of the pictures here that are used there. And we see already that 20% of patients going to their dermatologist today are asking and requesting Opzelura. We don't know if it's coming from the DTC on TV or if it's coming from Instagram and TikTok and all the other social aspects of it, but it's clearly something where patient demand is driving a lot of the adoption process. And in most of the cases, then it will be used. So there is a real movement of patients now who wish to get repigmentation and going to their dermatologist and being treated. And we see that in our prescriptions that we are seeing for Opzelura. So that's the 2 key drivers, Jakafi on one hand and Opzelura on the other, that are driving our revenues today. Let's now speak about the pipeline and the efforts we are doing in R&D. So this is the least -- we recently did the pruning of the portfolio, and we identified these 8 projects that you see on the left as the key project, key driver of value with high potential. So I'm not going to read all of them, but I'm going to speak about some of them because they could have a meaningful impact on our revenue and business in the next few years. And then on the right, you have a number of earlier programs just entering the clinic or some program with a very different profile. But the 8 program on the left are where a lot of our investment people attention is going with potential in different indications. So the first part of the pipeline is in dermatology. So Opzelura, we spoke about. It's already approved for vitiligo in Europe, for vitiligo and eczema in the U.S. And we have a number of new studies that are being conducted and are going to give us new data in the short term. We have started Phase III studies in prurigo nodularis recently. We have pediatric atopic dermatitis, which will more or less increase the size of the potential in atopic dermatitis in eczema, where the data will be available in the second half of this year. And we have now 2 study in a disease called hidradenitis suppurativa, HS, which is a very serious disease, where there are very few treatment options and where we believe a JAK inhibitor topically can have an impact for the mild form of the disease. On the right is our second product in dermatology, povorcitinib, where now we have moved into Phase III study in 2 indications: HS, more severe form of HS, the same hidradenitis suppurativa and in vitiligo, and we have Phase II studies in prurigo nodularis and asthma and chronic spontaneous urticaria, where we are testing the mechanism in other form of immune type of disease where we believe it should be working. So 2 product with a lot of potential and a lot of data coming in the short term and medium term to help grow this franchise. You can see here the whole program for RUX cream, Opzelura. So 2 indications we have in dark blue, the new indication in light blue, 2 of them in Phase III and a number of new indications, like lichen planus sclerosus, where today there is no FDA-approved product and where we believe this mechanism could be working well. So an ambitious program. It's moving very well, driven by a lot of enthusiasm from investigators because they can see some of the efficacy of this product in these indications. And one of the indication where we recently moved into Phase III, it's called prurigo nodularis. You can see here, it's a very itchy disease, where itch is a main issue for patients, and it's not like just a little bit of scratching. It's a real problem and where we believe this mechanism, in fact, will have an impact. There is no topical product or oral product available for these patients. It's injectable today that are used. And we have -- you can see the design of the study on the right with a week 12 end points. So it's a study that could be giving us data at a relatively good speed and will be important to continue to grow this franchise. Now moving completely out of dermatology back into oncology and Jakafi. What you see here is basically where Jakafi is being used in MPN. So myelofibrosis, polycythemia vera, the gray part. So there are still a lot of patients who either have received Jakafi in the past and it's not appropriate for them or have not yet received Jakafi because patient -- physician will choose to do a wait-and-see kind of approach to the treatment. And we are speaking at the bottom of the slide on what we are doing to try to improve over Jakafi with a number of mechanisms like BET inhibitor, CALR inhibitor and ALK2 that could be, in fact, adding to efficacy or safety of Jakafi in this indication. And it's a very important program for us. Just a word about some data that was presented here in Chicago yesterday, or the day before, and it's about combining ALK2 with ruxolitinib. So it's Jakafi plus ALK2 in patients with myelofibrosis. And when you use Jakafi alone, you observed in most of the patients, a decrease of hemoglobin in the first few days and weeks following the administration of Jakafi, and this is limiting to patients and physicians in the sense that a lot of dose adjustments have to be made depending on the level of anemia that you are observing when you are using Jakafi. And anemia can be coming from Jakafi. It can be coming from the disease itself, but it is one of the most limiting aspect of this treatment. And what we are showing here on the right is that in a small group of patients, so again, this is early data, but it's interesting to watch because what it shows is that you can give Jakafi in combination with ALK2 and you don't observe hemoglobin decrease. In fact, you observe in average that there is an increase of hemoglobin during that period of early treatment with Jakafi, which we think is very meaningful because it could -- if it's confirmed in larger study lead to a very much safer way of using Jakafi in myelofibrosis and it could be a more efficacious way because those intensity could be higher and therefore, efficacy could be better. So important data is very fresh. It was just presented a few days ago. The other data at ASCO that was presented is this data with our BET inhibitor. So it's a new mechanism. It's not the only BET inhibitor. There is another one that is already in development in that same indication. What it shows here on the right is that many patients -- most patients treated had a response. And in term of spleen length, which is a way to evaluate the efficacy of this product, which basically tells us that we have an active product that can be given at this dose safely to patients. And the next step is to combine it with ruxolitinib, Jakafi, so that we can have a more effective treatment for patients, either in the first line or in patients who are not fully controlled by Jakafi alone. So again, very fresh data showing that this product, in fact, has a very promising future in terms of efficacious addition to Jakafi in myelofibrosis, which is our larger indication. So if you think of 2023 and what we are expecting to see on the Jakafi front, we have this BET and ALK2 updates that will be happening. It happened yesterday. We will have probably another update at the end of the year. We have pivotal data coming with a new product called axatilimab for GVHD. And that is very -- coming very soon. In fact, it's expected midyear, so we are getting there. On Opzelura front, we have the approval of vitiligo in Europe. It's done now. So we can put a checkmark on that, and we will have our pivotal data for pediatric atopic dermatitis in eczema. We have another on other -- the rest of the portfolio, we have an oral PD-1 -- PD-L1, small molecule inhibitor. It's very unique. The first of its kind. If you are familiar with the PD-1 situation in cancer, it's one of the most widely used mechanism, but it's used as an antibody, so it's an injectable product, and we are coming with the first oral form of that mechanism. And obviously, it has a lot of very promising perspective. We are now moving to the next step in the program, where we have a dose or multiple doses that we want to test, and we have a very safe -- very good safety profile. So we are moving forward with that into further development. And we will see in the second half of the year, the Phase II data in prurigo nodularis and vitiligo for povacitinib. In fact, we saw some of it already in Vitiligo. On the early portfolio, which is obviously on the longer term, but could be very important. We have 2 projects that are moving forward very well. One is a CDK2. It's a new mechanism where we are targeting patients with certain mutation with ovarian cancer and potentially patients with certain form of resistance in breast cancer. And the first patient have been treated already, and we expect to see some data before the end of the year. And we have this new antibody against CALR, which is calreticulin, which is a new target that we believe could be very important for myelofibrosis and [ itchy ] another type of MPN, and we are basically doing the first patient entering the clinic now this month. So we will potentially see some data on the first patient in the next few months. I'll just finish with a picture of the economics of Incyte. So the top line is the same. You have seen. It's the revenue line, and the blue is basically all of our R&D and SG&A. So leverage is the area between the curve. You can see it has been increasing up to 2020 in terms of percentage. So we have been very much leveraging our infrastructure over these years. In '21, '22, we are investing in dermatology. So the launch of Opzelura is taking place during these 2 years. So you can see the curves are more parallel. So ratio-wise, it has been stable, and what we anticipate now that we have done the fixed cost investment in this and the top line and the revenue continues to grow, is that we'll continue to create leverage for the organization over the next few years. So I will stop here. And I guess we have a Q&A organized in a different room. Thank you very much.