Incyte Corporation (INCY) Earnings Call Transcript & Summary

Great. Good morning, everyone. Welcome. My name is Jess Fye. I'm a biotech analyst at JPMorgan. And we're continuing the 43rd Annual Healthcare Conference this morning with Incyte. First, you're going to hear a presentation from the company's CEO. And then we're going to have some other members of the management team come on stage to take Q&A from the audience. If you have a question, raise your hand, someone will bring you a microphone, or you can send them to me on the iPad. So with that, let me turn it over to Incyte's CEO, Herve Hoppenot.

Thank you. Thank you very much. Welcome. Good morning. And what I will try to do for the next like 20 minutes is really give you a little bit of the picture of what's going to happen in 2025 in -- at Incyte. So I will shortly look at the '24 and then a little bit of a path of how this year is going to deploy. Because in fact, it's a year that will be full of many defining -- we call them defining catalysts, I guess, defining events, and the big news flow. So first, forward-looking statement, as usual. So 2024. 2024, obviously, was a very successful year on three different dimensions. I don't have the final numbers so I'm going to speak Q3 year-to-date, so that's 9 months. You can see the revenue growth at 14%, which is good, and it's in the sort of the perspective of the past years. But importantly, where the non-Jakafi business is growing at a rate that is way faster than the Jakafi business. So we are -- the two lines have been crossing a few years ago. So we are in this mode where revenue at Incyte is growing because of diversification of the portfolio and because also of international expansion, where the rest of the world is also a key driver of the growth of the corporation. So on the commercial side, on the revenue side, it was very successful. On the R&D side, we had one approval with Niktimvo with our partner, Syndax, for GVHD. So that launch is going to be happening in the first quarter of this year. And we have three positive Phase III studies that have been submitted to FDA for supplemental NDA or BLAs for Rux cream in pediatric atopic dermatitis for retifanlimab in squamous cell anal carcinoma and for tafasitamab in relapse refractory follicular lymphoma. So three submissions are in. And obviously, as I will be describing, which should be giving us launches in 2025. And we had positive data for our CDK2 in ovarian cancer that was disclosed, and now the pivotal plan is being put in place. And the same for our BET inhibitor in myelofibrosis, where we are also in the phase of designing and executing the pivotal study. At the same time, our pipeline has been managed, reduced a little bit, some projects have been stopped. And we are basically trying to direct our resources on what is novel biology, first-in-class, best-in-class kind of product. Now on the financial side, the cash flow of the company continues to grow, and we have basically 5 years of improving margins, so leverage of the P&L, which led to us being able to complete a $2 billion share repurchase during the year and maintain a strong balance sheet where we still have $2 billion in cash and no debt. So very sound financial situation, growing revenue, and the pipeline that is really delivering a number of very exciting project. Now if you put the revenue growth in perspective of the past 5 years at the CAGR of revenue growth of 17% from '18 to '23, and as I said, what's interesting in this revenue curve is that in fact the growth of the non-Jakafi business is higher than the growth of the Jakafi business. So we are in this mode of diversification of the revenue, which is obviously very important for the corporation. And it puts us in a very good momentum going into 2025. So here is a slide a little bit about what to expect during this year. So there are 18 events here, at least, that would be happening. So first, we have 4 launches that will be in the U.S., for Niktimvo, retifanlimab, tafasitamab in follicular lymphoma and Rux cream in pediatric atopic dermatitis. So all of that will be contributing to our revenue during 2025. We will have 4 projects with pivotal data for povorcitinib in HS, for Rux cream in prurigo nodularis, tafasitamab in first-line DLBCL, and ruxolitinib XR bioequivalent studies that is also expected relatively soon. There will be at least 3 Phase III studies that will be initiated for new programs. I said at least because depending on what's happening with our proof of concept, which is the next chapter, it could be more than 3. And then -- and I think it's probably one of the most important aspects of this entire presentation, there will be a number of proof-of-concept studies that will be coming to fruition during the year. So it's true for two new indications for povorcitinib, it's true for our CALR antibody in myelofibrosis and ET. We have a JAK217F selective inhibitor in myelofibrosis. We have a KRAS12D project. And there is a TGF-beta PD-1 bispecific. All of this will have proof of concept, or lack of, but we'll have disclosure of the future of this project during the year. So it will be a year of a lot of news that will be impacting our future revenue. The short-term aspect of that is relatively -- not relatively, is very much, derisked. So Niktimvo is already approved by FDA. It's for third line GVHD with our partners at Syndax. And it is -- we submitted smaller vial to limit the waste. So that's what we are waiting for in Q1. So the launch is going to take place. It's a very interesting mechanism of action that is, in fact, adding to what exists in third line GVHD. And we know there is a market. We know there is a demand for this type of product, and we are fairly optimistic that this would be very successful. And there is also potential for first line as we are initiating the pivotal Phase III. So that's coming in 2025. Rux cream in atopic dermatitis in the pediatric population. It's a fairly large population. And we think the data we have shown is very positive with an excellent efficacy and a very clean safety profile. So that should be also approved by FDA during the year. Tafasitamab, you saw the data may be at ASH, it was in the late-breaking session at ASH a few weeks ago. It's very, very good data, very unique safety efficacy profile in follicular lymphoma. So that will be also -- it is already submitted at the FDA, it would be approved in the second half of the year. And retifanlimab, which is a PD-1 antibody, where -- which is already approved in the U.S. in Merkel cell carcinoma, where we have submitted this data in squamous cell anal carcinoma that was presented in the plenary session at ESMO. So very important data, first of its kind, and again, should be also approved in the second half of the year. So 4 launches for 2025. So each of them having relatively -- when you think of it, relatively modest sales potential, if I may say that. It's not each of them like a multibillion product. But when you add the 4 of them, what you see is that these are projects that could be exceeding -- even if you are relatively conservative in your forecast, could be exceeding $1 billion by 2030, which is obviously very important to us. So all of that is very well aligned and with excellent Phase III data and should be starting to contribute to revenue in 2025. Now if you look at the overall pipeline, for between now and 2030, that's the picture that you have. So usually, at this point in the presentation, I'm diving and going as fast as I can to present everything. So I'm not going to do that this year. What we did is try to select a few projects that are in fact either high impact or coming in the short term to go a little bit more in depth for each of these 3 projects. So I will be speaking about povorcitinib because it's coming soon, and it could be very big. So that's why it's interesting. I will be speaking about CALR, because CALR is a completely new biology that could transform, and I know everybody is using that word, but can make the treatment of ET and myelofibrosis completely different when it's available than what we have today with Jakafi. And the CDK2 inhibitor, because also it's moving into Phase III. It's a fairly large potential in ovarian cancer and it is unique and first of its kind. So let's try starting with povorcitinib. There are 3 indications we are pursuing with this product. It's a very selective -- it's the most selective JAK1 inhibitor in development. So it's very -- it has obviously the optionality to get the power and the efficacy of the JAK inhibitor with less of the JAK2 side effects that we are trying to avoid. So it's a very selective JAK1 versus JAK2 inhibitor. It's in development in these 3 indications: HS, vitiligo and prurigo nodularis. So these are Phase III that are ongoing. And as you can see on the right, it has the potential to treat around 300,000 patients in the U.S. for HS, more than 1 million with vitiligo, and in prurigo nodularis around 200,000. So it's a fairly large population that could benefit from this product. And as you will see, the data is fairly convincing. So this is HS. And I don't know if you are familiar with HS, it's a disease that is characterized by nodules, painful nodules, abscesses and draining tumors. So it's a very symptomatic disease. There is no oral therapy approved now, I mean the treatment for HS with IV biologic. And as you can see here on the top graph, the level of efficacy that we are seeing is, we call it like biologic like. It's very high level. It's in Phase II. The Phase IIIs are ongoing. So we need to see how the Phase IIIs unfold. That's why we will be learning when we get the result. But it's certainly a product that has a high level of efficacy. The highest bar you can set for yourself when you are testing efficacy in HS is called HiSCR100, which is what is here on the slide. And many of the products are not even reporting it. And in our case, we are showing that we can have between 23% and 29% of patients reaching that level of efficacy with povorcitinib at 45 and 75 milligram. The other aspect of this disease is the pain. And at the bottom, you can see that more than half of the patients are observing very meaningful reduction of pain. And again, it's important because the speed of -- so pain reduction is also one of the key expectations from the patients. So we should have this data before midyear, so in the next few months. So studies are fully accrued and we will have this information available for you in the first half of the year. So second indication is vitiligo. So if you are familiar with vitiligo, we have launched now a few years ago the first ever FDA-approved product for vitiligo with Rux Cream. So it's a local topical treatment. Here we are developing a systemic treatment for patients who could not benefit from the cream because the size of the vitiligo is too large, for example, or because they will choose to take a pill that is a topical treatment. So the Phase IIIs are enrolling. We are expecting the data in 2026. And as you know, there are more than 1 million patients that will potentially could benefit from this treatment. Vitiligo is very underdiagnosed. Vitiligo is very undertreated. We are at the beginning of what will be, I think, a complete change in the way people think about vitiligo when they see that you can repigment very meaningfully most of the patients. And what you see on the picture here is telling a lot because it's looking at 50 weeks of treatment. So it's a slow process. Repigmentation is not very fast. That's one of the aspects, is persistence on the treatment. But you can also see from the data that most of the patients will have a fairly meaningful, if not complete, repigmentation, which is obviously very important for them. So the second indication for povorcitinib. HS will come this year. Next year will be the data in vitiligo, and the data in prurigo nodularis. So prurigo nodularis is a disease that is already characterized in terms of impact on the patient by itch and the issues relating to itching. We showed this data at AAD in this year -- or last year in 2024. And basically, what you are looking at is patients -- the proportion of patients achieving a meaningful reduction of itch. And the number to look at, at week 16 is that around half of the patients are, in fact, benefiting from that treatment. The study -- the Phase II study, obviously, met all the primary endpoints. At the bottom of the slide, as you can see, the speed of itch relief is very much dose dependent and is very good -- I mean, for 75 milligram, is 17 days, which if you compare to all the existing treatment is a fraction of the number of days it takes for current treatment to relieve itch to the same proportion. So the speed of itch response will be one of the main reasons for using povorcitinib in this disease, and obviously, the depth of the itch relief as you can see at the top of the slide. There are 200,000 patients in the U.S. diagnosed with prurigo nodularis. Again, it's a disease that today is not universally treated. It's -- people are using usually biologic. And we think povorcitinib will, in fact, have a chance to become standard of care. I mean, 200,000 patients is not a size of -- a potential size of that market that is meaningfully different from what you have, for example, for HS. So it could be a very big contributor. So that's the povorcitinib story. As we have it, we have two more indications we are working on, where we don't yet have the proof of concept. We have three indications where we are fully into the pivotal study. And we believe that this product will be contributing meaningfully to the '27 to '30 window where we will be launching each of this indication, one per year. The second product I wanted to really spend a minute on is CALR. So in myelofibrosis and essential thrombocythemia, around 1/3 of patients have their disease driven by a mutation in calreticulin, CALR. So the mutant CALR is a driver of the disease. And what we have done at Incyte is develop an antibody that will be selectively targeting the mutant form of -- the mutant clone and eradicating the clone. And I think it's really important. This is a cover of blood of -- I think it was in November, just a month ago, 1.5 months ago. And you can read what people say about the potential for this product because it will be functionally curing patients from what the driver of their disease. And that's something we have seen in CML with Gleevec 10, 15 years ago, where you can literally reduce disease burden to a point where it becomes undetectable. And so you can call it a functional cure. And that's really what we are targeting with this product. And we believe from what we have seen in our preclinical model that it could be potentially done. So you see on the left the selectivity versus -- of the wild type versus the mutant. So it's a selective inhibitor. And you see the normalization of platelet in that case, and selective destruction of the mutant clone, while preserving the normal clone. And -- so this project is now in the clinic and has been in the clinic. We will be disclosing our data during the year, probably in the second half of the year. And we believe it could be really transformational for 35% of patients with myelofibrosis and 25% of patients with ET. It's totally different from what we are seeing and observing with Jakafi in myelofibrosis where Jakafi has a very, very powerful symptom effect, has an impact that is relatively slow on allele burden, where here we are really dealing with reduction of the mutant clone in a way that will change the history of the disease for these patients. So we'll have the proof of concept also presented during the year. The third one is our CDK2 inhibitor. So it's a mechanism that is targeting cyclin E overexpressing tumor types. We decided to start with ovarian cancer, and that's where we have done most of our work. You can see the presentation that was done at ESMO, here showing that there are a very large number of patients who are benefiting from this treatment either with stable disease or with technical responses, that's on the right of the graph. And we are moving this project to pivotal studies. And we will be pursuing three different studies. So the first two are in platinum-resistant ovarian cancer. So it's a sort of later line of treatment. So the option one will be a single-arm study that would lead to accelerated approval if successful. And the second option is the same population where we will be doing a randomized study against standard of care, which today is best available therapy -- chemotherapy type. And both of these studies are being initiated as we speak. And as you can see, obviously, the single-arm study will come first. And depending on the FDA's reaction to that, we will be able to get approval by this time or we will need to have the data from the randomized study for Europe and maybe for the U.S., and that will be a little bit later in 2027. So this is being initiated. The third study is a very different setting. It's basically maintenance treatment after first-line chemotherapy for patients who are HRD negative. So that's a place where today, Avastin, bevacizumab, is being used as a maintenance treatment and where we are basically designing a study that will be comparing Avastin to Avastin plus CDK2, and where, obviously, it could be very beneficial in an early stage of the treatment with what I think is a very meaningful market potential. So all of this is going to be started this year. Now when you take this entire portfolio I just showed a few slides ago and start projecting it over time, that's the picture that you see. So you have the existing portfolio on the left. In 2025, we have these 4 launches that are going to take place with, as I said, a very high probability of success because the data is very strong. And these are products that are already approved, where it will be a supplemental submission -- it is a supplemental submission. And then if you start looking at the year '26 to '30 is where each of this projects, as I described them, would be adding to our potential revenue for Incyte in the next 5 years. And if you look back at 2025 itself, that's the plan for the 18 events, so catalysts that will be spread out throughout the year. So thank you for your attention. It will be an interesting year for the corporation. And I think we can take questions now. And my colleagues will join me on stage.

Great. Thanks for the presentation. I have a couple of commercial questions, although most of the presentation was really about the pipeline. Herve, I just want to ask about Jakafi heading into 2025 as we think about the Part D redesign continuing to be implemented here. What is that impact this year? Should we think of that as a tailwind? And if so, is it possible to quantify?

So the story is the following. I mean, I feel it's a very personal subject, because I frankly have spent probably the last 15 years lobbying, if I may say, for reduction of co-pays for cancer patients. Because believe it or not, in this country, if you are treated for cancer, you have to pay out of pocket a fairly large amount of money just to avoid that you would abuse your chemotherapy and take more than you need or something like that. So it's totally insane. It's immoral, in fact. And that's something that I've been speaking about for a very long time. And as part of the IRA, somewhere in this big thing, there is one piece that is saying that starting in January 2025, there will be a cap on out-of-pocket payment for Medicare patients. And that cap is $178 per month or $2,000 per year. And I think it will be, first, meaningfully helping patients who need it. So that's really important. And it could, in fact, increase usage of products like Jakafi in polycythemia vera where we know for a fact that there are patients who go to the pharmacy in January, in the past, they were receiving their $3,500 co-pay bill at that moment. And frankly, many of them, sadly, will just go home and say, "Okay, I will skip on that treatment because it's not possible." Or they will discuss with their physician before getting the prescription. So we know there is an upside. We don't -- we cannot quantify it because we have no way to know the non-filled prescription or the situation where the physician himself or herself has decided not to use a certain type of drug because of the co-pay, but we know it's happening very frequently. So it could be helping. And frankly, beyond the business aspect of it, I think there is something else which is making our product available for patients who need them, and that's something that by itself would be very valuable.

Maybe sticking with the Jakafi franchise, what about once-daily Rux? I feel like we've kind of made some progress since the initial regulatory setback. What's the IP for that asset? And how are you thinking about the magnitude of revenue you could preserve after the LOE of kind of original Jakafi?

So we are speaking of a twice-a-day and a once-a-day formulation of the same entity with the assumption, and that's what we are -- we need to demonstrate, that you have basically the same exposure with the once-a-day that you have with a twice-a-day. It's progressing well. So we are anticipating to see that bioequivalence in the next few months. What it will do is there are two aspects to it. One aspect is combination, and that could have a big strategic impact. And I think we don't have visibility there yet, but it's something that is always possible. The second aspect, even more simply, is that if you have a very large number of patients who are on the once-a-day treatment, by the end of the patent on the twice-a-day, it gives your curve a different shape. And I think new patients will probably be started on the generic twice-a-day and existing patients will probably stay on the product on which they are, and that's what we are anticipating. So patents for the once-a-day is -- it's in the '30s, yes, in the 2030s.

What about Opzelura? We see these scripts every Friday, it looks like they had kind of a nice uplift towards the end of the year.

You all go see your dermatologist on Friday, huh?

What's driving that growth here? Which indication kind of...

So there are two indications for Opzelura. It's both. So both of them are growing. In fact, the proportion of sales in vitiligo and atopic derma have been relatively stable for completely different reasons. So there are literally two different dynamics. The atopic derm is about very, very fast itch relief with Rux Cream. And it's very fast, we speak about minutes. So you literally apply the cream, and it's fairly striking, it's very unique. And everybody wants to use it more, including the physicians, including the patients. There is a level of satisfaction when you have eczema, you had eczema for years, you start using Opzelura, the feedback is absolutely -- I mean, there is no problem there. But the issue is physicians prescribing Opzelura and how much of them will gain reimbursement and where it is going to be covered. So that's what we are working on, obviously. It's always a trade-off between volume and discount, and we are progressing. And in fact, we have a very good position today, relatively good. But we want to improve it because we know there is a lot of potential for using more Opzelura for more people if access was better. So that's one of the strategies. In vitiligo, access is less of an issue, but compliance or keeping treatment ongoing for a long period of time is really what we are facing. We are making a lot of progress, in fact. Part of the improvement of Opzelura these days is also coming from the number of tubes per patient that we are observing for patients with vitiligo. It's not yet where it should be. There is progress to be made, but it's also making a lot of progress. So it's a little bit of both. And frankly, when we get the pediatric indication in '25, it's going to give us another booster to the sales of Opzelura. We see Opzelura as a long-term contributor to Incyte that will become very, very meaningful.

I think in the past you've refrained from giving a peak sales guidance for Opzelura, but you said very, very meaningful. You want to put any brackets around that?

So I mean, the guidance for Opzelura, I mean there is something else that happened in '24, is the launch in Europe where we gained reimbursement for vitiligo. So we decided to flip the sequence in Europe and start with vitiligo. And I think it was a very good decision because we got a good price in many of these countries. We launched. And there, we saw, in some cases, surprisingly high volume of sales in these countries. So now there is a whole new dynamic with Europe contributing to Opzelura, which I think is going to give us an even larger potential for the long term.

Maybe shifting to povorcitinib, which I think could be the next pipeline readout. What level of detail should we expect with the Phase III top line results in HS? And I guess, what would define a competitive or a differentiated profile?

Anybody?

So I think it's important to remind everyone, first of all, how derisked the povorcitinib indications are. With the exception of two of those that we have Phase II data coming this year in CSU and asthma where we have a strong biological rationale but we don't have data. The other indications have been significantly derisked by randomized Phase II studies, which have consistently showed a very robust treatment effect, and Herve highlighted some of those results in his presentation. The first one this year that, as you can see in this slide, in the first half, is HS. We believe, based on the data, and I'm talking about the totality of the data, it's easier always to pick and choose endpoints and pick and choose specific time points for those endpoints. But you look at everything, HiSCR50, 75, 90, 100 pain response, and at different time points, 12, 16 and longer-term follow-up data, which Herve highlighted in his presentation, it's clear to us that the randomized Phase II data for povo supports a comparable efficacy to biologics in an oral -- with an oral medicine. So if we can replicate those results, it doesn't have to be perfect, but if we can closely replicate those results in the randomized Phase III studies that are going to read out this year, we think we're going be in a very good position to launch, hopefully, in subsequent years povorcitinib in HS. Whether -- how we disclose the data and the sequence of the disclosures, we're not going to discuss today yet. But obviously, it's a very important readout for Incyte and for the povorcitinib franchise in 2025.

So you mentioned that the data so far stacks up well against biologics. But how does povorcitinib's data so far compared to AbbVie's RINVOQ in either HS or vitiligo? And how do you think about the competitive dynamics with RINVOQ in those settings if they're both approved?

So let's remind everyone first. The theoretical -- it's not theoretical, the preclinical, differences. So povorcitinib is a more selective JAK1 inhibitor, is more potent. It has a very large volume of distribution, which we think is related to the concentrations [ achieved ] in the skin. And when you put side-by-side the data in HS, I think it's pretty clear that the data we've generated with povo is superior. The placebo-substracted data at, when you look again at every endpoint and every time point, is superior to the RINVOQ data, so far. Now we're both running Phase III programs, and we'll see how those programs replicate the randomized Phase II data. So I'll go back to the same answer, Jess, which is I think we have a product today that looks as the best oral for patients with HS, and I would argue as well for PN and for vitiligo. And we can talk about PN particularly, which I think it's really important how well-differentiated povo potentially is. And we think if we replicate that data, we're going to be in a very good position. I don't know if Herve wants to comment on the commercial landscape when it comes to competition with RINVOQ.

I mean I would say for HS, biologics -- at first, it's an expanding market. So we aren't in a situation of like a set number and everybody will be fighting and, if one wins, the other lose. I think it's an expanding market. We have another optionality with Opzelura that we are also going to study in a mild form of HS. And I think it's interesting as a franchise to have both. And frankly, we will -- and we are seeing that there are a lot of patients who are not diagnosed that are now diagnosed. And biologics injectable are the standard of care today. So that's really where the whole story will be for us as well as any other company with an oral product, is how do we basically establish it against the biologics.