Incyte Corporation (INCY) Earnings Call Transcript & Summary

Welcome back to the 44th Annual TD Cowen Health Care Conference. I'm Marc Frahm from the biotech team. We're really happy to have with us the team from Incyte. We've got Christiana Stamoulis, CFO; and Pablo Cagnoni, the President and Head of R&D; to join in. We'll go through a number of topics. But maybe to start off with, Christiana, do you want to just provide a quick high-level status update on Incyte, and when you lay out the key events over the next 12 months or so that investors should be looking at and then we'll tie into some of the discussion of those events.

Okay. Great. So I'll start with a recap of '23 because I think it's very relevant as we are looking in '24 to continue to build on the progress that we made in '23. And then I'll turn it to Pablo and he can walk through some of the key milestones that we are looking forward to in '24. So '23 was, first of all, on the commercial and -- a year of continued execution, strong performance. We delivered $3.7 billion in product and royalty revenues for the year, which represented a growth rate in the mid teens. The key contributors there were Jakafi that contributed $2.6 billion in revenues, continuing to grow and Opzelura, which is moving at a very nice trajectory 2 years into the launch and we contributed close to $340 million in revenues for the year, representing a growth rate of over 160% growth year-over-year. During the year, we also got Opzelura approved in Europe, and we launched in -- already in Germany. And we're looking to continue to launch in additional countries as we gain pricing and reimbursement in the course of 2024. So a strong base to build on. The other key milestone that is worth noting for the year was the achievement of $1 billion in product and royalty revenues in a quarter. So that was achieved in Q4 and obviously, an important financial milestone for the company. On the development side and something that will also contribute to revenues going forward, we had a number of updates and progress made, starting with MPNs and GVHD, axatilimab. We disclosed a positive Phase III data with file for BLA and we are expecting, hopefully, approval later this year. And that's a program that we expect to add to revenues later in 2024. And we also shared the data on the number of programs, especially in dermatology, where we disclosed data from a number of Phase II programs for povorcitinib in HS, in vitiligo and top line data MPNs. And we also disclosed data from Opzelura in additional indications and specifically AD -- pediatric AD, which is an indication that we are preparing to file for approval later this year. So this creates the base off of which we are looking to continue to grow and build on in '24.

Yes. So let me pick it up there. So it's going to be another busy year, and I think the pipeline across the board is advancing very nicely. So if you look by pillar, if you start with dermatology and inflammation first, as Christiana mentioned, we will have the filing for pediatric atopic dermatitis that will happen this year, which we think will lead to a launch of Opzelura and pediatric AD next year, which is an important new indication potentially for Opzelura. Next week at American Academy of Dermatology, we announced, we're going to have 2 really important presentations, several others but 2 very important presentations. One is the Opzelura presentation of ROCK screen presentation in patients with mild to moderate hidradenitis suppurativa that will be presented Sunday afternoon, and we will have an investor event early Monday morning, where we will not only review that data in detail with [ QPM ] leaders but put it in context with the competitive landscape in HS as well. So that's another important potential growth opportunity for ROCK screen. There is no, to our knowledge, any topical that has shown this level of efficacy in hidradenitis suppurativa mild to moderate HS as we have. So that's really important going forward. For povo at AAD next week as well next Sunday, we will present in detail the prurigo nodularis data. We presented -- we put a press release with top line data recently, but we are now going to present the data in detail and again, put it in context with the competitive landscape. And we're planning a Phase III study with povo in PN as well we will launch this year. So that's really part of the dermatology side of the business. If you move to axatilimab, Christiana mentioned, we have a PDUFA date in August of this year for the access submission in third line chronic graph-versus-host disease. Our goal now is with our partners at Syndax is to try to make it available as quickly as possible. We're also launching 2 randomized trials, randomized Phase II in combination with ruxolitinib in patients first-line chronic graft-versus-host disease in a Phase III in combination with steroids also in first-line chronic graft-versus-host disease. If you shift now to the MPN side of the business, we talked at ASH in December about 2 really important programs for the long term, not just for the business but changing the objective of treatment in patients with myeloproliferative neoplasm. So the 617F inhibitor, which is going to enter the clinic next month and the mutant-CALR antibody, which is already in the clinic and going very well. If you look at closer milestones, our BET inhibitor program in combination alone, single-agent in combination ruxolitinib is tend to look very good. We showed some of that at ASH. We'll have more data later this year, and we intend to initiate a pivotal trial with our BET inhibitor. We haven't disclosed details yet, but we'll do that later this year. And I'll close with oncology. Obviously, I think everybody is aware of the transaction we did for the remaining part of tafacitamab that we didn't own before. We completed that acquisition. Now we have full rights development in commercial to tafa and we'll have data in the follicular lymphoma, mantle cell lymphoma trial this year. And we revealed at the last quarterly call, our CDK2 inhibitor program, we've seen numerous partial responses in that program. and we will disclose detailed data as well as the development plan for our CDK2 inhibitor later this year. So all in all, a really busy year across the board, advancing a number of programs, early, mid- and late-stage programs forward.

Maybe starting with the commercial -- with Opzelura. Christiana I think it's been talked about a fair amount that you've had some big formulary wins late last year that are now being activated. Of course, those usually come with somewhat of a hit to [ Gross-to-Net ] concession. As you've laid out before, the idea of being TRx is going to more than make up for that. How quickly should we think of those translating -- those changes in formulary translating into an acceleration or an improvement in TRx trends.

Yes. So in terms of access, when you look at the efforts that we've made over the first 2 years of the launch. Our focus was on getting broad access. So we worked very quickly to get contracts with all 3 PBMs and then work to get Opzelura on formularies with all the plants under those PBMs. So that was the focus initially. Now our focus has shifted on enhancing access. And part of the activities that we are doing have to do with getting Opzelura higher up in the formularies in terms of the tier and getting on preferred tier. The first such agreement is CVS Aetna. It went in effect at the beginning of January. To your point, getting Opzelura higher into a preferred brand level. It does require some additional discounts but we are doing that only if we feel that it will help us maximize the opportunity for Opzelura, i.e., it will translate into greater demand and have a disproportionate impact on net sales. To see the -- or the benefit from this will take some time because now we have the agreement, it covers at around 30 million lives with the plants under the CVS Aetna umbrella. But now for this agreement to be filtered down the plants, it will take some time. But we do expect that it would have a positive impact on net sales on demand for the product. And the other impact that we believe that will be positive and somewhat offset of the discount is the fact that when you have a drug in preferred tier, the out-of-pocket associated with this is lower. And given that we are the ones that are paying for the out of pocket, it will offset some of the discounts. So net-net, we expect that it will be a positive impact that we will see over time.

And how should we think about -- this is one of the earlier Q1s going through, you have a big track record of how big the -- there's always a lot of headwinds in Q1, but how big they are for really Opzelura and its markets? How should we kind of view this Q1, can there still be growth? Or is the hits to gross to net and reauthorizations and all that so much that it -- maybe demand is growing, but sales, not so much.

Yes. So we expect to continue to see growth overall in 2024 from AD and vitiligo. In terms of Q1, we do expect Q1 to be lower than the previous quarter and subsequent quarters. That's something that we across all products, whether it is Jakafi or Opzelura for the similar reasons, and we expect to see it as well here. In Q1, you usually have the plants resetting deductibles. So we do get that impact at the beginning of the year and is a big driver of the lower revenues of the year. When you look at Q1 last year, we saw that if you look at Q1 as a percent of total sales for the year, even though the total sales grew Q1 was a much smaller percent of the total relative to other subsequent quarters, and we expect to see something similar this coming year.

Okay. What's the latest data you're seeing on refill trends, stick with AD, we'll move to vitiligo in a minute. Just within AD, kind of how should we think about tubes per year, and are there any real efforts there that can be done to try to increase that number?

Yes. So in AD, we are seeing an average of 2 tubes per year per patient. This is within the range that we were expecting, the 2 to 3 tubes a year, probably at the lower end because of how efficacious Opzelura has been. And we expect that it would probably stay around that level with some potential for an increase if it gets to be used even more from moderate patients that may have a larger surface area to use a cream on and, therefore, need more tubes per patient per year. So that's in terms of the AD refill rate.

And as you got approved in AD, you guys have talked about the opportunity with the existing label before you get to the pediatrics was potentially about $1.5 billion in AD for Opzelura. Now that you're a couple of years in, are you still confident in that number? And what are the big pushes and pulls to actually get into that for the year where I think the AD is probably averaging about $250 million a year on an annualized basis, something like that right now?

Yes. So we continue to see AD in the U.S. as $1.5 billion opportunity. So we continue to feel comfortable with this. It includes the pediatric indication. So it's both adult and pediatric. Right now, to your point, the run rate would imply given the share that is coming from AD at around $250 million, but it's a great trajectory to get to this number. It's getting to the peak sales in dermatology looks very different than getting to peak sales in oncology in terms of the trajectory. There are a number of initiatives that will get us to that level. First of all, we are looking to expand the patient population through hopefully the approval of Opzelura in pediatric AD that should expand the patient population by another 2 million to 3 million people in the U.S. We are also having a number of initiatives to help with access in AD initiatives like what we discussed before in terms of getting Opzelura to a higher tier to a preferred tier but also working with physicians to make the process of the prior authorization and certification easier so that patients can more easily get on therapy.

You mentioned the pediatric label and you're presenting the full data at AAD in about a week. The -- just -- is that all we need to file? Or is there still more follow-up that you need from a safety perspective before you can actually submit that sNDA. Just kind of what's limiting to getting it in.

No. We need to complete the longer follow-up because it's a pediatric population. We need longer follow-up for safety, mainly to comply with the FDA. We had this conversation with the FDA. The plan is in place. We mutually agreed. It's on track. There's no derailers between now and the filing. We will file later this year.

Okay. Maybe turning to vitiligo, just maybe a question on tubes per year. Just the latest data on vitiligo, how persisting are patients and then we can get into some more dynamics?

So we are still early into the launch of Opzelura in vitiligo. And we see patients not yet using Opzelura appropriately. They either get on therapy and stop and start again or stop altogether because they don't see any effect, any repigmentation in the first week or 2 of treatment, forgetting that you -- it actually takes some time before you start seeing results or the experimenting by using the cream in a small area to see whether it will have an impact before they start using it more broadly and more appropriately. So there are a lot of efforts and activities that we are starting on helping with adherence, and we expect that this should have an impact on the use of Opzelura. And these are targeted both on patients and how to use appropriately to the cream and stick with the treatment as well as prescribers reminding them how the cream should be used and how they should be directing the patients. So we are waiting to see more data on the utilization under the right way before we have a better sense of how the refills would look like for vitiligo. And that's the reason also why we haven't provided any guidance for Opzelura overall and especially for vitiligo, even long-term guidance because we want more real-world data. And right now, it's not being used as it should be used. So once we get to that point, where there is greater adherence we'll be able to have a better sense of the number of tubes that the patient will be using.

Do you have a sense of when you might be able to get to that level of comfort to start issuing guidance, that's inclusive of the entire franchise, not just...

Yes. So the adherence activities -- increased adherence activities are initiated as we speak. So it will take some time through the course of the year, but as we get more data, we'll have a better sense of when we feel comfortable providing guidance.

If it's -- throughout this year. So at some point this year, you would be or you get comfort this year and then as you go to issue '25 guidance that kind of where you're likely to be there.

It is hard to commit at this point.

Okay. The other piece is just vitiligo, right, as you've mentioned, patients have to stick with it for a while to start seeing effects, but this is potentially a very much more chronic therapy than AD. Are you seeing much management from payers in terms of reauthorizations and payers trying to see like is it actually working for this patient to let them keep up or are they just trusting that a patient is going to discontinue on their own if it's not.

So first of all, what is great to see is that most of the plants do cover Opzelura for vitiligo. So only around 2% of the commercial plants do not currently cover Opzelura. This is great to see. They realize that it's not a cosmetic, that is a real autoimmune disease that needs to be addressed if a patient chooses to. The -- Sorry, I lost my train of thoughts -- the reauthorization process, usually, plants are looking for reauthorization after 3 to 6 months. And also physicians are looking or seeing their patients within the time line to make sure that they are using appropriately, the cream, and they see progress. But as per the label, they need to stick with the therapy for at least 6 months before they see results and they can really determine whether the cream is working for them or not even though in real world, we're seeing patients seeing results much earlier than that.

Pablo, you mentioned the HS data -- the topically HS data that you're going to be presenting. I think investors have grown increasingly used to thinking about moderate to severe disease with the number of development programs in that space. But mild to moderate, can you just kind of lay out what is the unmet need there? And how should we think about endpoints? Have you figured out a way forward, not just that you have impressive Phase II data, but what can be viable from a Phase III endpoint perspective?

Yes. So we're going to present the results in detail on Sunday, and they will be discussed by one of our KOLs on Monday morning. The challenge here for patients is mild to moderate spectrum. And in general, HS spectrum, right? Some patients advance rapidly between stages, early stages, which is what we're addressing here 1, 2 and 3, other patients really have chronic disease with a certain stage. The Opzelura trial, the ROCK screen trial, address patients with [indiscernible] 1 and 2 and specifically in patients that had no draining tunnels, which is important to remember. And one of the reasons why the high score -- scoring system cannot really be used because these patients have abscess and nodules and a smaller number of abscess and nodules that patients with more advanced disease. But they still have a meeting of 5 lesions. These are abscesses and nodules related to HS, which are produced significant morbidity and need better treatment of what's available. So we think there is a clear unmet need. We think that ROCK screen being a topical agent with a very clean safety profile is going to provide a really good option here. The question now we need to discuss with the agency is what endpoint are we going to use for the Phase III trial. As you know, all ongoing trials in HS, as far as we know, have used a high score 50 as an endpoint, but that includes draining tunnels, which are not present in patients with mild disease. The alternative is to use the IHS 4, which is a rating -- it's a linear continuous variable as opposed to a binary yes or no that you hit a high score 50, which in the past, FDA has discourage, we need to have that conversation. I think there has to be a path here for us to develop this medicine in patients that need it and have no available therapy today. So I'm optimistic. We just haven't committed externally to what the endpoint is going to be and when the Phase III trial is going to start. But I fully -- we fully intend to go forward with this.

Okay. And how should we think of the scale of the opportunity in HS or MPN relative to the labels that you already have? Are they -- these all just one plus one plus one plus one. Or are these bigger or smaller?

If you take all HS -- and by the way, one thing you'll see if you dig deep into the HS literature, there's a lot of variability in this serious. Because of the population they focus on when they divide it in 1, 2 and 3. It's probably 40-40-20 in the study that we did with ROCK screen, it was 50-50 Stage 1, Stage 2, [indiscernible] 1 and 2. If you throw patients with Stage 3, the most advanced patients, they -- those are a smaller percentage, probably 20% to 30%. PN, the question, again, there's one approved medicine in that context, as you know. And the estimate is that there's about 100,000 patients in need of treatment with prurigo nodularis so we think it's a sizable opportunity as well. And again, it's chronic therapy, too, right?

And how should we think about body -- because that's one of the big variables, body surface area that's involved and therefore, how much drug you need to be applying for HS -- for more mild HS patients for PN patients relative to PN than AD in terms of how much volume they need, [indiscernible] vitiligo, which is...

Well, vitiligo was very highly variable, as you know, right? The existing the povo studies focusing on patients with 8% or greater percentage of body surface area. For ROCK screen for Opzelura been patients with been lower than 10%. So there's a little bit of an overlap. We haven't disclosed the details in PN study. I believe in PN, you're going to see patients that have intermediate between the 2 diseases. That's on the higher end, about the 10%, 20% because -- but they have some ties with nodules that they don't cover an extensive part of the body surface areas, but they affect different regions in the patient's body.

Okay. You started touching on povo a little, which has positive Phase II data in HS -- in the moderate to severe HS patients, you're running Phase III now. How do you view the type of profile it needs to demonstrate in Phase III relative to the IL-17s that are starting to get approved. Is matching it okay or because it's oral or because of the likely black box given the JAK class, does it actually need to be clearly better to really get adopted.

Yes. side-by-side trial comparisons are always -- we need to always be cautious, right? It's a little bit difficult. But I think what helps in this trial is a placebo-substracted efficacy data. And when we look at it, when you look at the Phase II data, I mean, we have the [indiscernible] that we have randomized Phase II data to make some of those comparisons. There's a couple of things that I think -- first of all, I think we have comparable efficacy in the primary approval endpoint, which is high score 50. You can debate it's a little bit higher than some a little bit lower than others, but it's basically comparable to the -- I would put povo on the top tier of efficacy for the approval in point of high score 50. What we have that I think is comparably better is high score 100, which we've shown about a 20-plus percent placebo [indiscernible] the high score 100. That's a complete resolution of the lesions, which I think is extraordinarily important for patients with HS. And if you ask [ QPM leaders ] they'll tell you that. which I haven't seen with any other medicine currently. And the other important point, we have a dramatic rapid and profound improvement in pain in these patients that I think the broader anti-inflammatory effect that povo provides, some of the more targeted anti-cytokine approaches do not. I would put that together with that oral convenience as a very competitive profile to be honest, in all the indications we're playing with povo today. I realize your comment about the potential black box. But I think in the context of this more serious forms of HS and other indications we're going with povo, the oral bioavailability and the they're really very strong safety and efficacy profile, I think, are very well differentiated.

And then you're also running Phase IIIs with vitiligo -- in vitiligo. You started to touch on it, but how does that coexist with Opzelura? Is it -- you start -- obviously, if you have very extensive disease, you're out of the label for Opzelura, but is it then just get on drug, get your disease down into the Opzelura label and transition? Is it stay on povo long term? Just how...

We haven't really discussed how to do that, but I do think you bring up in part and ask when you think about our -- we're building here an extraordinary dermatology franchise, right? I mean we are the only company that has, for patients with vitiligo, we believe once we have all the data, we'll have an option with topical for certain patients and have smaller body surface, perhaps unexposed areas and an oral available agent for patients in more extensive disease or maybe eventually the combination of both. We haven't discussed those plans in any level of detail. Same is true for HS for patients with mild HS, will have ROCK screen available, again, assuming we launched the Phase III is positive, but that's the vision and obviously, povo for patients. So we haven't yet discussed externally how we're going to manage those transitions. But I think the fact that we have 2 medicines to control potentially the full spectrum of 2 really important chronic skin inflammatory diseases. And I think it's a great way to build what we think it's going to be an extraordinary dermatology franchise.

Maybe turning back to on the oncology side. Maybe starting with -- you brought up the CALR antibody, you said things are going pretty well in the Phase I. I mean, should we expect to see data this year from that program?

We're not committing to data yet. Let us take a little bit of a longer look as to how enrollment goes and the data that emerges. We have a lot of other data readouts this year as we discussed at the beginning of the discussion. So no timing for mutant-CALR antibody data yet, but it's possible.

And given that it's really going at the underlying mutation, maybe there's 2 diseases here, right, the MF MET. What does good data look like for this antibody in the setting. You name MF, is it spleen volume reduction? Is there something else that you'll be looking at? Just how will you be evaluating this?

So I think the early readouts are, obviously, nobody has given mutant-CALR antibodies to these patients before. So safety is important. We want to make sure that this medicine behaves as we expect in terms of PK. And then over the sort of intermediate endpoint is, yes, we want to see clinical activity between reduction, improvement in blood counts, et cetera. And the longer-term readout that I think would differentiate in mutant-CALR antibody from other interventions in MF and ET is the ability to reduce the allele burden in these patients to really try to eradicate the malignant clone in these patients and have [indiscernible] competed with the wild-type clone. That's a longer-term readout. I'm not committing to that this year for sure, but that would be the idea. Once we see that, we see not only that this medicine works in controlling spleen and symptoms and blood counts, but that truly has a long impact on the natural course of the disease.

Just a follow-up. Just -- can you just translate into what that means? Like what's the clinical endpoint is associated with that? Is it mortality or what...

No, we can measure allele burden.

Is that an approval end point?

[indiscernible] clinical end point?

We haven't -- the medicine just entered the clinic. I'm not [indiscernible] approval endpoints today. I think the question for approval would be whether the combination of mutant-CALR antibody with, let's say, ruxolitinib in the near term, improved spleen responses is improved blood counts and improves symptoms better than rux alone, and that leads to a quick approval with a longer-term follow-up for survival as you asked.

Do you think you need to combine it with Jakafi or I mean if it's directly hitting...

Once we have data, I will tell you.

And the other one is the CDK2 that data this half, right? First half or...

No, this year. CDK2 -- yes.

Okay. And then you talked about numerous responses. There are a couple of other CDK2 inhibitors and -- I believe that's [ going to stick ]

It's several. Anyway, yes go ahead.

The other are a little bit ahead of you in the clinic in terms of with direct inhibitor CDK2, Pfizer and Blueprint. They primarily talk about this as a combination program. But if you're seeing several responses, is there a real single agent opportunity here in your mind?

So we're going to assess that over the course of the year. So as you point out, both Blueprint and Pfizer have competitive programs. I think externally, what we've seen is their focus has been more strongly in breast cancer than in ovarian cancer. I think we've said publicly that we're more interested in ovarian cancer. We think it's a simpler development path. And there's 2 options or 3 perhaps single agent, obviously, we need to deliver a longer follow-up, more patients at the higher doses to really quantify exactly the magnet of the efficacy we're seeing and then we'll decide with it's a single-agent path. In the meantime, when the process initiation initiating combinations, mostly right now with the focus on brain cancer, but obviously, we're having discussions on breast cancer as well. So I think what we said is we'll have the data later this year, and we'll disclose at the time with the development plan for the CDK2 inhibitor looks like. But we're very encouraged by the responses we're seeing so far.

Unfortunately, that's all the time we have, so we're going to have to cut it off.