Incyte Corporation (INCY) Earnings Call Transcript & Summary

Welcome to the 2024 Citi Global Healthcare Conference, first time in Miami, Florida. Today, in our first session here, I have with us not in Miami, Florida, via video, management from Incyte Pharmaceuticals. I guess if you could start, very -- thank you very much for being here, by introducing yourselves and kind of run through the top-level mission of Incyte and where the company is in its history.

So David, we have a little bit of trouble hearing you well. But let me kick off the discussion. First of all, thank you for having us. I'll kick off with a very brief review of the year-to-date and the achievements to date as well as where -- what there is to come over the next 12 months. So first of all, 2024 has been a year of strong commercial and development execution at Incyte. In the first 9 months of the year, we've delivered $3 billion in revenues, representing a 14% year-over-year increase. And that has been driven by both Jakafi that has continued with its very strong performance; and Opzelura, where the uptake is continuing both in AD and vitiligo. So the commercial side of the business is going very well. And in addition to the current portfolio, now we are looking at a set of potential new products that could be coming to the commercial portfolio in the very near term. So to give you a quick overview of those. We recently got approval for axatilimab in third-line chronic GVHD. We are now waiting for approval for smaller vials and we expect to commercialize products in the first quarter of 2025. So that's a very exciting new product that we'd be adding to the commercial portfolio. In addition, we filed for the approval of Opzelura in pediatric AD and expect the potential approval in the second half of 2025. And finally, we -- in Q3, we shared data -- positive data from three Phase III programs that are hopefully going to be added to our commercial portfolio as well. And these are tafasitamab in third-line follicular lymphoma and retifanlimab in non-small cell lung cancer and anal cancer. So significant progress also with the late-stage programs and on the regulatory front. And finally, we made also significant progress across the pipeline and transformed our R&D pipeline over the last 12 to 18 months. So we have progressed a number of programs in Phase III of development and we have a number of new programs now in the clinic. And from the current R&D portfolio, we expect more than 10 launches by 2030. So a number of programs that we're looking to fuel the future growth of the company. So now turning to the -- what we expect over the next 12 months. 2025 is expected to be a very big year for Incyte with significant flow coming across the pipeline. So a number of other programs in our pipeline are going to have data that we expect to be sharing over the next -- the course of the next 12 months. So let me stop here, and I'm sure you have many more questions on this.

Start with Jakafi. It's been on the market for 13 years. It's on for myelofibrosis, it's on for PV. Could you tell us how the drug has been able to maintain such strong consistent growth for such a long time despite the entrance -- the attempted entrance of new competitors?

Yes. Jakafi has been performing really well. That's based on the very strong efficacy across the indications where it's approved. You've seen this year already, in the first 9 months of the year, Jakafi delivered $2 billion in revenues. And that represents a 6% year-over-year growth. That is driven exclusively by demand across all indications. We've seen the growth be driven primarily by PV and GVHD, but also we've seen some growth in MF over the last couple of quarters. In PV, the growth that we are seeing more recently has been driven by the MAGIC PV data that underscores the importance of Jakafi as a therapy for PV. And we've seen the benefit of Jakafi in the indication and how the data has now further fueled the growth in this indication. Chronic GVHD in general has been growing as well. And MF, we are seeing some growth in a very established indication, and that's despite new entrants that have come in the MF indication earlier this year.

Now earlier this year, there was a little slowing growth in Jakafi. And of course, in the third quarter this year it really picked up again and it was growing pretty back in the double digits. Could you tell us about what factors played into the earlier growth? What factors are pulling into the more recent growth and how we should think about that into fourth quarter and into 2025?

Yes. So demand for Jakafi has been growing throughout the year. What we saw in the first quarter of the year was some pressure on the revenue coming from two things. First of all, the typical dynamics that you have at the beginning of the year with the reset of the deductibles. Always, Q1 is higher gross to net. We've seen it every year. We expect to continue to see it going forward. So Q1 is always the lowest quarter of the year and lower also relative to the prior year quarter, Q4. So that's what we saw again in Q1. In addition to that, there was a destocking that happened in Q1. There was an increase in inventory at the end of Q4 last year given that there were a number of patients that have moved to free drug, and we're anticipating those patients to come to pay demand at the beginning of the year, which happened. And so there was a higher level of inventory in anticipation of those dynamics. So the destocking of the inventory had a $50 million plus type of impact on revenues in Q1. Since the end of Q1, inventory has been very stable. So we haven't seen any real impact from inventory on revenue in the subsequent quarters. And so you see the benefit of demand growth playing out throughout the year. That's what actually led to us updating the guidance range a number of times through the year. And more recently, during the third quarter earnings, we provided an updated range of $2.74 billion to $ 2.77 billion of the year for the year, which positions Jakafi very well to get to that $3 billion-plus peak sales by 2028.

Now GSK launched OJJAARA. Has that had much effect?

We haven't seen any effect on Jakafi. As you saw from the results that we've shared over the course of the year, demand has continued to be strong in the last 2 quarters. We are seeing actually year-over-year growth. We're expecting stable demand but we are actually seeing growth in demand. And we haven't seen any impact on the duration on therapy either. We see OJJAARA playing more in the second line plus type of treatment and not where Jakafi is as a first-line therapy and a very established first-line therapy.

Now you've been developing an extended release once-daily version and it was originally placed in front of the FDA. And the FDA sent it back. And you reformulated, and there will be data for the next version coming up in the first half of this year. Could you just run us through a little what happened with the original formulation, how is the new formulation different and what we expect to see in the first half of 2025?

Let me make a couple of distinctions there. So the original bioequivalence study for the XR formulation, the once-a-day ruxolitinib formulation that you mentioned, what happened with the FDA was basically we failed to meet the Cmin level for bioequivalency. So we had to develop a new tablet, which we now have done. It's a 55-milligram tablet that was tested in a bioavailability study. And after those results were clear, we moved to bioequivalence. That study is being conducted and we expect to have data in the first half of 2025, as you point out. Important to understand here is to meet bioequivalency according to the FDA criteria, you have to meet not only certain Cmin and certain AUC within a certain margin that you get to define as bioequivalency. So once we get that data, assuming we meet bioequivalency with the new tablets, we will move forward to resubmit the data to FDA. This should be a faster review time line than the regular application. And we expect, assuming we might meet bioequivalency and approval of the late 2025, early 2026, that will allow us to -- once it's approved, every new patient that started for MF, PV with Jakafi -- the standard for Jakafi, to be starting a new formulation. So in a way, when you do it that way, if you think about it in MF, the median -- the average duration of therapy of Jakafi is about 20 months to 2 years. In PV patients, it's about 40 months. So if you can start patients ahead of the LOE of a twice-a-day Jakafi and once a day Jakafi, we might be able to smooth the cliff a little bit once the LOE hits at the end of '28 or early 2029. So that's the plan with the once-a-day formulation.

When thinking in terms of pricing a once-daily formulation, would you expect to price at parity given that the cliff is coming up in 2 years? Or would you consider applying some premium just because it's a once-daily versus twice at this point? And can you actually do that given it is equivalence technically?

Yes. So at this point, we are not commenting on pricing strategy for Jakafi XR.

How easy do you think it will be to transition patients?

I think that it's not about transitioning, it's about new starts, right? The idea is to really convey the message to treating clinicians and patients once a day. They're bioequivalent, as you just pointed out. It's more convenient for patients. And so every new patient ideally should start on once a day. Transitioning an existing patient twice a day to once a day will be more challenging. We expect the opposite will be challenging. One patient is on once a day. Even when the LOE hits and there's a generic twice a day, that moving patients with branded once a day to generic twice a today will also hopefully be hard. That's part of the plan.

Now, of course, a once-daily plays into the strategy of some of the follow-on assets. Could you tell us about the LIMBER programs and the various drugs being developed over there?

Sure. So let me -- let's spend a few minutes on each of those. So the ones that we promised we will provide updated data and clarity in the pivotal plan is our BET inhibitor. That will happen at ASH. We will present an updated set of data. We continue to see what we believe are very strong symptom control data, symptom improvement data as well as spleen reduction data together with some patients improving in hemoglobin and a tolerable safety profile. So based on that, we'll discuss next week what the next steps are for that program, as we had promised. And as you point out, potentially because our BET inhibitor is a relatively lower dose because it's very potent and it's once a day, it can be very combined very well with the once-a-day formulation of Jakafi and potentially even in a co-packaging or co-formulation strategy. Our ALK2 inhibitor, which we developed in order to try to improve or prevent the anemia induced by -- in some patients by rux, we mentioned at the last quarterly call that so far, the data we've seen does not seem compelling enough to warrant further development. We'll talk more about that next week when we provide an update after the ASH Conference. The other two really important programs are our mutant CALR and our V617F programs. But I'm sure you have separate questions for those. So let me pause there on BET and ALK for now.

Sure. Start with the BET inhibitor. Can you tell us about the target, as far as what makes it an attractive target? And what else is in development? How is that dynamic setting up? What do you need to achieve?

So there's two potential paths forward with our BET inhibitor. I mean, what we like about our program, our molecule, is it can be dosed daily because of the safety profile that we've seen. And we think that's important and one of the key endpoints in patients with myelofibrosis particularly, which is symptom control. So based on that, we intend to move forward with one or more pivotal trials, and we'll give more details next year. But the obvious options here are either first-line in combination with Jakafi or second line post-Jakafi as a single agent. And we'll talk more about those next week. But so far, as I mentioned, improvement in symptoms, effect on spleen, effect on hemoglobin in some patients and the ability to dose continuously, we think are the key elements of that program.

Where do you ultimately be -- what population do you see it being most optimal if it were to reach market?

Well, I think it can be used in both cases, right? I think it potentially, in patients that need -- that tolerate the combination with Jakafi, potentially it can be used in those patients to improve symptom control further and spleen reduction further. But also in patients that progress after Jakafi. As we know, as good as Jakafi is in terms of symptom control, spleen reduction and improvement in survival, eventually all patients in Jakafi progress, unfortunately. And so we believe that there's a lot of patients that need a better alternative after Jakafi, better to the existing alternatives on the market. And we think our BET inhibitor can potentially fulfill that.

And just as a little bit of a preview, what do you expect to show next week?

It's just incremental data we'll be showing on the Phase I/II study with some cohort expansions as a single agent and in combination with Jakafi and again emphasizing the very, very strong effect on symptoms and the very strong effect on spleen reduction that we've seen so far.

So let's jump over to CALR. What is CALR? It's different than the other mechanisms and its little focus on a specific population. Can you run us through the mechanism of that? What makes it attractive?

CALR is -- the way to understand the mechanism here, why it's so different is CALR is an ER residing chaperone, basically. And so it's inside the cell. When it's mutated, patients have mutation with CALR, there's two, type 1 and type 2 mutations are the 2 most prevalent, basically binds to the thrombopoietin receptor and moves to the cell surface. When that happens, it signals in a constitutive manner and that's an oncogenic signal. So it's basically an oncogenic driver. And it's an oncogenic driver in about 30% of patients with MF and ET, 25% to 35% depending on the series. So we believed -- quite some time ago, our team was convinced that it will make an ideal target in patients with MF and ET. And to that effect, we developed a monoclonal antibody. The antibody basically binds to mutant CALR and prevents the signaling downstream that generates this oncogenic signal. So the idea here is to suppress and eventually kill the growth of the malignant clone in patients with certain myeloproliferative neoplasm, so as I said, about 25% to 35% of MF and ET. By doing that we will allow, over time, the normal clone, the wild-type normal hematopoiesis, to replace the malignant hematopoiesis. We think this is a potentially transformative way to treat patients with certain MPNs by truly trying to achieve in a way a functional cure, not only resolution of signs and symptoms, but decrease it over time and perhaps even elimination of the malignant clone by following allele burden over time. And if we can do that, then we can fundamentally change the natural history of these malignancies. So that's the goal. The program has been in the clinic. It's [ accruing ] very, very well. And we expect to have data to share with all of you next year.

Very helpful. How are the -- this specific cohort of patients, what is their prognosis at present relative to other MF patients? And I mean, obviously, this could stand to improve them further.

Yes. There's some data that suggests that patients with mutant CALR MPNs have slightly better prognosis than patients with non-mutant CALR MPNs. They're not dramatically different but they tend to do a little bit better. Regardless, almost all patients, if not all patients with MF eventually die of the disease. They progress to either profound fibrosis of the bone marrow. They progress to AML. They progress -- or they die complication. So these patients truly need just to replicate in the way the journey that we went through in other malignancies like CML to really convert this -- or even multimyeloma for that matter, to convert some of this malignances almost into a chronic disease as opposed to something that continues to be uniformly fatal for patients.

Now let's move on to the JAK2. Could you tell us about that molecule and how this fits in?

So our V617F small molecule inhibitor is another terrific achievement of our discovery team. So this is the most common mutation obviously in patients with polycythemia vera. 90% of the patients with PV are V617F-mutated and a significant percentage of patients with MF as well. So the idea here was to be able to inhibit the pseudokinase domain of the V617F -- of JAK2 in patients with a V617F mutation. And by very precisely targeting that mutation of pseudokinase gene, the idea -- in pseudokinase domain is, again, to suppress the growth of the malignant clone in this patient. So it's basically similar to what we're doing with mutant CALR but with a different approach and a different set of mutations. And if you combine CALR and 617F, close to 90-plus percent of all patients with MPN have either one or the other. There's a small percentage of patients that have mutation of the thrombopoietin receptor. So the idea is the same: suppress the malignant clone, allow the benign clone, the normal hematopoiesis to take over and lead to potentially a functional cure in those patients. We started that clinical trial earlier this year in healthy volunteers because we had to select the best of several formulations to move forward. We have since then starting enrolling patients with myeloproliferative neoplasms initially in myelofibrosis, will move to PV later on. And we will have data in that program next year as well.

What should we expect to see from healthy patient data and the data next year?

The healthy volunteer data is simply to understand which one of the four candidate formulations we have was better to move forward into patients. So there's nothing really that is particularly exciting from that portion of the study. In patients with MF, what we hope to have next year is certainly evidence of spleen reduction, symptom improvement and reduction in allele burden over time, the same thing that we expect to see in the mutant CALR program.

Let's jump over to graft-versus-host disease, recent approval. Could you tell us about the market and how axatilimab fits in?

Yes. So we received approval of axatilimab for third-line chronic GVHD recently, and we are preparing to launch. We are waiting now for approval of smaller-sized vials and expect to be in a position to launch in the first quarter of 2025. Axatilimab works completely different than other agents. And so it high -- it can play an important role based on the high response rates that it has shown in clinical studies, and that's despite the -- or regardless of organs involved. We expect that it will play a key role in the treatment of chronic GVHD. There are at around 70,000 patients in the U.S. with chronic GVHD. At around 6,000 prevalent patients are in the third-line setting. So when you think about the opportunity for axa in that specific indication, I think you're looking at REZUROCK as a proxy is a good one. So REZUROCK right now has a run rate of $400 million to $500 million. So I think that's a good way to think about the opportunity for axatilimab in the third-line setting.

Got it, got it. And how does this impact Jakafi in that population as well?

So the Jakafi indication is for second line GVHD. We see axa being -- playing a role for patients that have progressed beyond the second-line treatment. And we are also looking to develop axa in combination with Jakafi for first-line.

So -- exactly. So the idea is to move -- to take advantage of the safety profile of axatilimab together with a unique mechanism of action to move it into earlier lines of therapy and combinations. And the two combinations that we're moving forward, one is talking to KOLs and treating physicians, we keep hearing the importance of a steroid-free regimen for certain patients with chronic graft-versus-host disease. These patients -- sometimes, they are on steroids for acute graft-versus-host disease and then transition to chronic. And getting them off steroids, at least for periods of time, is really important. So we started a second line trial -- sorry, a first line trial in combination with Jakafi. That's a randomized Phase II. That will precede a Phase III trial for approval, again, first line in combination with Jakafi. And we're also in the process of initiating a first line trial in combination with steroids. Steroids continue to be a foundational therapy for patients with chronic graft-versus-host disease. So we think that's another important way to move axatilimab to first line. So over time, we expect that axa's use will move to earlier lines of therapy. We're also developing the subcu formulation, which as we move to earlier lines of therapy, we think it's important for patients.

If we jump to a different part of the business, Opzelura, povorcitinib. Clearly Opzelura has been ramping in AD and it's got a submission for pediatric underway. There's the vitiligo, How do you see one of these -- one therapy versus the other? And ultimately, could you run us through the upcoming data we have for expanding the opportunity?

Yes. So I'll start with the already commercialized indications and the one that we have filed for approvals, which is a pediatric AD. So we are already commercializing in the U.S. for AD in patients 12 years and older and -- for vitiligo. And we have also launched in several European countries for vitiligo. The launch -- the uptake of Opzelura has been going really well across both indications in the U.S., and the launch in Europe is progressing very well as well. In AD, it has -- demand has been driven by the very strong efficacy and especially the rapid itch reduction that we are seeing. That is a very big differentiation of Opzelura versus other AD treatments. And for vitiligo, obviously it's the only therapy available for repigmentation. The uptake is going well. Where we are working now is on two fronts that are important in the long-term potential for vitiligo. One is adherence, making sure that patients use the therapy appropriately, stick with treatment. You put the cream twice a day and stick for a long period of time until they see the results. And the second is activating the 90% of the vitiligo patients that have not been actively seeking treatment in the past. So there is a lot of work still to be done on the vitiligo front to get -- to realize the significant opportunity that we see in that indication. But in the meantime, the uptake has been going very well in the U.S. and is positioning Opzelura as the best topical launch in the derm space. In Europe, we go through reimbursement in France, Italy and Spain this year much faster than anticipated. Now in France, it's -- Opzelura is available in the retail pharmacies. We saw France and Germany contributing at around $20 million in revenues in Q3. So very nice uptake from France and continued growth in Germany. And now we are anticipating Italy and Spain to start gradually contributing to sales as well. We got reimbursement in both countries. But now we are working at the regional level to get Opzelura on formularies, and that would happen over the course of the next 12 months or so. And finally, we recently got approval for Opzelura for AD in Canada. And we will start again -- or we have started again working to get reimbursement province by province. So there also, we expect that the contribution to revenues will be gradual. So that's around the existing indications, the current indications that have been approved. Do you want to...

Yes. So look, we believe Opzelura has the potential to treat a number of conditions, whether it's inflammation and certain symptoms of the skin. And we presented last year -- actually, no, early this year in March data in mild to moderate hidradenitis suppurativa with topical Opzelura. We since then have moved forward, discussed with FDA the design of Phase III study and agreed on the design of that study, which we'll use HiSCR75 as the primary endpoint instead of HiSCR50 to reduce the impact of a potential placebo effect. So that study is going to be initiated in the first part of 2025. We're basically moving forward with initiating that study. The other important thing that's coming up next year in the first half is data with rux scream with Opzelura in patients with the prurigo nodularis, an intensely pruriginous inflammatory disease of the skin. About a couple of hundred thousand patients in the U.S., these patients need better treatments. We presented data with povorcitinib with that indication early this year. We believe that potentially Opzelura has a role to play there as well, and we will have data in the first half of 2025. So as Christiana mentioned, the expansion into pediatric AD and then, over time, potentially additional indications in hidradenitis suppurativa as well as perhaps prurigo nodularis.

Ultimately how do you see povorcitinib and Opzelura when they're in the same diseases being used?

So look, I think it's good for patients to have options. And we're happy that hopefully we will be the ones that have both options, a topical and an oral, both certainly more convenient than an injectable. I think for hidradenitis suppurativa, there will be a little overlap of patients with moderate disease, patients with mild disease, with small nodules, with no tracts. Potentially, those are going to be patients that are good candidates for rux cream. They can start therapy and see if that works. If, over time, some of them progress or don't respond to the cream, they can try povorcitinib. Patients that present with very severe disease, probably will be better candidates for povorcitinib from the start. I think for vitiligo, it comes down to two things. One is patient preference, whether you want to apply a cream twice a day or take an oral, or the extent of involvement. There's a little bit of overlap. Potentially there will be overlap potentially on the label. Patients who have between 5% and 10% body surface area and patients with more extensive vitiligo, we believe povorcitinib would be the better option for simplicity and based on the data that we've seen now with 2 years of follow-up in F-VASI75 And 19 patients taking povo that shows continuous repigmentation, even in patients with very extensive depigmented areas.

Excellent. We have reached the end of our time here. Thank you so much for being with us, and we'll chat again soon.

Wonderful. Thank you for having us.

Thank you.

Cheers.