Incyte Corporation (INCY) Earnings Call Transcript & Summary

Salveen Richter, biotechnology analyst at Goldman Sachs, and we're really pleased to have with us the team from Incyte. So next to me is Christiana Stamoulis, CFO, and Pablo Cagnoni, President and Head of R&D.

To start here, maybe we could have a high-level overview with regard to the outlook for the business, right, in the context of Jakavi's upcoming LOEs. Maybe just walk us through where you stand today with regard to not just the pipeline, but your ability to use BD and the forward strategy as you look to kind of offset the LOE aspect?

Sure. So we have been making strong progress executing on our strategy to diversify the revenue in our commercial portfolio in advance of the LOE and make sure that we have a number of new product launches leading into the LOE and around the time of the LOE to fill in the gap and continue to drive growth beyond 2029. So when you look, starting with our commercial portfolio, we have been expanding the commercial portfolio. Already, you see we have a significant base that we have been building beyond Jakavi. So Opzelura, for example, it's set at midpoint of the guidance that we have provided to contribute $650 million in revenues this year. And with significant growth left in the program, we have a portfolio of other oncology assets that are set to contribute over $400 million this year, again, with significant growth. So you see just between those 2 components, we have over $1 billion in revenue this year coming from products outside Jakavi and with significant growth, as I said, left in those programs. We have 4 expected product launches, new product or indication launches this year, 2 already are happening, 2 to come. And we've said that we expect from those another $1 billion in contribution by 2029. So you can see the base that we are building without any further risk associated -- development risk associated, which will be playing out between now and '29. And then we have the pipeline, which is expected to contribute, as we have indicated, 10-plus high-impact launches between '26 and 2030 that is going to play the role that we have -- that I've said of filling the gap and continue to drive the growth beyond '29. This is a very important year for Incyte because we are going to be turning the cards and have already started doing so on a number of programs. We have 4 programs with Phase III data, already 3 of those readouts have happened with a fourth to come and 7 programs -- and by the way, among those is povo for HS. And povo is expected to be a very significant program for Incyte and a program that we are developing across a number of indications. So we are already very pleased to see the HS data and additional readouts from Phase III studies to come next year. And then we have 7 proof-of-concept readouts for programs that have significant potential as well. Mutant-CALR is one of them that we are very excited about. We will be presenting data in ET on Sunday. And that's another program with significant revenue potential. We are also developing in MF. So we are making great progress towards that goal, and we believe that we are well positioned to address the LOE.

Great. Maybe starting here with mutant-CALR. So we saw initial Phase I data in the abstracts, but the full data is going to be presented coming up. Maybe walk us through what the high-level takeaway is from this update and how it informs your developmental strategy in both ET and MF?

So we think the data set that we put together, the abstract are a really, really important piece of data for the program for Incyte and for patients with MPN overall. Because I think it confirms 3 things that are really critical that we talked about for the past 1.5 years in hypothetical terms, and all 3 have turned out to be true. The first one was that a mutant-CALR antibody because of the specificity of this specific antibody that targets a neoepitope would fundamentally be well tolerated by patients. And I think that's clearly demonstrated by the abstract. 41 patients were enrolled at a range of doses, median exposure is about 20 weeks and only 1 of the 40 patients had to discontinue treatment. So that -- in a Phase I study, that tells you a lot about the tolerability of intervention. The second point was that we predicted that by shutting down the malignant clone and sparing the benign cells, the wild-type cells, this would lead to a correction of the manifestations of the disease. And what we showed in the abstract is the platelet counts come down. But importantly, they normalize, which is different from reduction. You can reduce platelets with a number of interventions. You have to constantly adjust the dose, so you don't go too low. What we saw here in the curve is that platelets come down to a normal level. And then without those adjustments, they stay there through the follow-up that we showed in the abstract. And that's a really important principle. And the third was that we expected that there would be a certain level -- and early evidence is beyond my expectations, at least, there will be a certain level of reduction of the allele burden. By targeting the malignant clone, specifically the mutant-CALR positive TpoR receptor positive cells, there will be a reduction in the variable allele fraction of VAF, which we showed as well in the abstract. So in a way, we have established a very, very important principles that the mutant-CALR antibody, 989 as we call it, is well tolerated at the doses and for the length of duration given. Number two, that it can improve or normalize some of the manifestations of disease in ET. And number three, that reduces the presence of the malignant clone. So that's ET data, which is what we're focused on now, and we're going to talk about more next Sunday. But whatever your preconception is about MF, I think your view of MF as an opportunity should be improved after the ET data that we put out. And the reason is it's the same molecular mechanism is the fact that the mutant-CALR protein by complexing with the TpoR receptor basically is an oncogenic signal that leads to proliferation of the normal clonal cells, which is a different lineage in ET than in MF, but it's the same principle. We'll have MF data later this year. What we've said several times was that we want to have the combination with Jakavi before we talk about MF because we believe that is a key element of the development plan. As we all know, Jakavi in first-line MF improves survival. And so to develop a new intervention in MF without having that combination data for us is premature. Once we have that data later this year, we'll talk about MF.

And is the combination approach versus a monotherapy approach primarily driven by positioning? Or is there the titration aspect or some other aspect that you need to manage with regard...?

No, honestly, look, there's a development path in MF that is single agent as well, potentially, which is in patients that either are intolerant or failed Jakavi so we're not ruling that out. But before we have the whole picture and we talk about this externally, we want to have more data with the combination. And as in any Phase I trial, first, you escalate a single agent and then you incorporate the combinations of the combination that is lagging a little bit behind, which is why we'll have it later this year.

Can you also speak to your confidence on the V617F program, where we'll see data later this year? And then what's the opportunity here?

Correct. So the -- look, I remain confident in our program. The principle, which we established preclinically, and we've showed a couple of times, including ASH 2023 is once again, is the other big driver mutation in MPNs, as you know, right, it's almost all the patients with PV and a good percentage of patients with MF and ET. So -- but the principle there is that by binding -- everybody knows that Jakavi is a dual JAK1/JAK2 inhibitor, so less selective there, but it's also less selective or very low selective between wild-type and mutated JAK2. By developing the 617F inhibitor, which is a specific JH2 inhibitor, we think we can deal with that lack of selectivity and potentially lead to similar effects in terms of reducing the malignant clone. The window that we've shown is a little bit tighter, and we've showed that preclinically. But we think that with the right formulation, we can hit that window and lead to the same type of effects. And we'll have data later this year. That study, if you all remember, the first part of the Phase I study was in healthy volunteers in order to understand the formulation that we needed to advance. So that's why that is behind the CALR program in terms of generating data in patients.

Fast forward, say, you have positive data in hand for mCALR and 617F. How much of Jakavi have you offset through these 2 programs?

I mean I can -- Christiana can talk about revenue potential. I can tell you, when you just look at -- let's start with CALR because we put data out, okay? And so I think that's a little bit easier to talk about already. 25% -- sorry, it's about 100,000 patients with ET in the U.S., 25% of them are CALR positive. Of those, probably about 1/3 to 1/4 are indolent enough that they can be managed with either observation, maybe aspirin, about 2/3 to 3/4 require an intervention. Currently, those interventions are suboptimal, and we'll talk about this with KOLs next weekend. But clearly, a lot of patients become intolerant or refractory to hydroxyurea, which is the first-line cytoreductive therapy and other therapies after that. So it's about 18,000 patients that potentially are the target population in the U.S., the same number, give or take, in Europe. So you're between 35,000 and 40,000 patients that at least in principle are the addressable population for the CALR antibody in ET. It's an important metric to know that Jakavi in the U.S. today, there are about 28,000 patients on treatment in PV, MF and GVHD. So in a way, that gives you an idea that just CALR it's a bigger addressable population that the total number of patients with Jakavi on treatment in the U.S. today, and we all know what the revenue of Jakavi is.

CALR in ET and...

CARL in ET alone, exactly. And then you add to that, that it's likely to be longer duration of therapy and obviously, a different price point for biologic that launches in the next few years. So I think the opportunity in ET alone is huge. And I don't know, if Christiana, you want to go beyond that in MF and the 617F, but I think...

Well, everything then becomes additive. You have MF and then you have 617F that would address MF and PV. So you can see how, as we have said in the past, we expect that we will be able not only if successful to replace Jakavi but grow significantly beyond. We will be addressing MF and PV and then we will be expanding into ET that as described, it's a very big opportunity. Bigger than what we have in Jakavi alone today.

Touching on Jakavi. So you reported a really nice first quarter, and you raised 2025 guidance to about 7% year-over-year growth at the midpoint. Just walk us through the key underlying dynamics for the remainder of '25, including how we should think about Part D redesign in the second half?

Yes. So Q1 was a very strong quarter. Jakavi grew 24% year-over-year. There were 3 components to this growth was demand 10%, 7% was coming from net price where the Part D redesign drove that effect. And then another 7% came from less destocking that we saw this year versus in Q1 of '24. Going forward, we expect the growth for the remaining of the year to be driven exclusively by demand. You won't expect to see that jump that you saw between Q1 and Q2 in prior quarters coming from net price impact. And the reason is Part D redesign. Part D redesign, if you recall, in the prior years, Q1 was always affected by the fact that for Medicare Part D, we were covering the donut hole. And that impact was reflected primarily in Q1. This year, under the Part D redesign, there is no longer the doughnut hole, but there is participation in the initial and catastrophic phases at 10% for the year -- for this first year. However, Jakavi has qualified for the small biotech exception. And as part of this, we are participating only at 1% of the initial and catastrophic phases this year. So this provided a big benefit relative to the donut hole coverage that we had in the prior years. And that's the benefit that you saw reflected in the net price in the Q1 of this year. Again, this benefit is really reflected in Q1 versus Q1 of the prior quarters. So when you look at subsequent quarters, you should expect net price to be pretty stable. There would be still some benefit from the impact of commercial deductibles reset, which impacts Q1 that you won't see in the subsequent quarters, but that benefit would be outweighted by the 340B growth that we expect. So expect the net price to be pretty stable with really the growth to be driven by demand.

Sticking with the commercial business here. What are your expectations for Opzelura through the rest of the year and as we look longer term in terms of the sales trajectory?

So we provided guidance for Opzelura for this year. At the midpoint of the guidance is $650 million, reflecting around 28% growth year-over-year. We see growth coming both from the U.S. and Europe. In the U.S., we continue to see growth in both AD and vitiligo. And in Europe, growth driven by the continuing uptake in the countries where we have already commercialized Opzelura for vitiligo and the additional contribution coming from the new markets like Italy and Spain that are contributing in a more significant way this year. And we expect this to continue going forward. In addition, in the second half of the year, we expect in the U.S. the potential approval of Opzelura for pediatric AD. That would be another contributor to revenue. We see pediatric AD as a significant opportunity as you have 2 million children with mild-to-moderate AD that are still on corticosteroids. So there is an opportunity there for Opzelura and especially given that itch is a very big problem and itch reduction is a big characteristic and differentiator for Opzelura. So that's another opportunity to expand the use of Opzelura. And then beyond AD and vitiligo, we see an opportunity for Opzelura to play a big role in other diseases where itch is an important characteristic. Again, the rapid itch reduction is very important here. So diseases like HS and PN, where we are developing currently, Opzelura could add to the overall opportunity. In HS, when you look at mild to moderate, it is at around 150,000 patients in the U.S. PN, prurigo nodularis is another 200,000 patients. So there are significant opportunities to continue to grow Opzelura.

And maybe touch on the expansion into the pediatric population and how big an opportunity that represents?

It's at around 2 million children between the age of 2 and 11. In the U.S., as I said, a big share of those children still use corticosteroid, TCRs, PCAs. So there would be a need for a product like Opzelura, especially given the itch reduction. We expect over time, in the long run, pediatric AD to represent at around 10% to 15% of the overall opportunity for Opzelura in atopic dermatitis. And that's very much in line with other products in those indications.

And how is compliance playing out in Vitiligo.

So vitiligo compliance has been an area where we have been working on because patients need, first of all, to stay on therapy for a longer period of time in order to see the results that we were able to demonstrate in the clinical studies. And they need to use the cream appropriately, apply it twice a day and for that longer period of time. And we've seen that patients don't necessarily comply with the appropriate use and a big part has to do with lack of information, education. And so there are a number of initiatives that we are currently pursuing to educate both the prescribers and the patients around the importance of staying on therapy and using the cream as they are supposed to use it. We are already seeing some benefits. The benefits translate into 2 metrics. The one has to do with how many patients go beyond the first script. So we've seen that 40% plus patients were only getting one script and then weren't refilling their prescriptions. So we are seeing now this number coming down, which means they are using it more and didn't have the need to go back and get another script, another refill. And the second is what is the average number of refills a patient makes in 1 year of -- on therapy. And that's a number that is still all over the place. You have patients with a couple of tubes a year, and you have patients with 10 tubes a year. So what we are trying to do again through the various initiatives and increased education is get patients on using this Opzelura appropriately and see the number of tubes per patient start on average coming up.

Pivoting over to povo here. So the Phase III povo data in HS fell short of expectations, but the efficacy looked better in the biologics experienced patients. Maybe walk us through how you're thinking about the commercial strategy in light of this data and what the ultimate opportunity is?

Yes. I would challenge that fell short of expectations. Let's just set things -- let's agree where we are here. First of all, we had 2 positive Phase III trials, both hit the primary endpoint for both dose levels. And that's important. It was 12-week data as opposed to some of the other data that has been compared against, which tends to be week 16 data. So that needs to be kept in mind. There was an artificial threshold set out there. We don't know where that came from. But from our perspective, we have a new medicine for HS. We 2 positive Phase III trials. And importantly, aside from primary endpoint, there was a very important -- and we replicated the impact on pain improvement that we had from Phase II, which we think is very important. Pain is the #1 symptom in patients with HS. Obviously, the lesions are very bothersome for these patients for a long list of reasons, but pain is a very important symptom. And pain improvement on povo, we believe, remains at least for orals, best-in-class. So that's where we are. In addition to that, we showed 18-week data, which all the caveats to the fact that it's open-label data. When you look at the placebo patients that crossed over, we doubled the number of responders, not the percentage because the denominator changes, but the number of responders doubles in 6 weeks only when they switched from placebo to povo. So overall, we're very happy with the data. And as you point out, Salveen, the data in biologic exposed patients looks even better with a 15 to 20 percentage point placebo-adjusted rates of HiSCR. So as we see povo eventually come into the market either late '26, early '27 as we submit the application of FDA later this year, probably early '26, we believe there's a couple of different groups of patients and pools of patients available at the time of launch. And that's an important thing, new patients ready at the time of launch. And there's a group of patients that probably prefer strongly an oral over an injectable. In our discussions with KOLs and others, that percent is about 10% to 15% of patients, and it probably presents about 3,000 patients ready to go when povo is launched that are waiting for an oral option. Then you have a group of patients that are already biologic experienced at the time of launch. And those patients that have received an anti-TNF and/or an anti-IL-17 are ready for a new mechanism. We think that pool of patients is ready for povo. In addition to a group of patients for which perhaps povo because of pain improvements or others is competitive as well. When you put all that group of patients together, it's about 30,000 patients that are good candidates for povo, which we think is a very substantial commercial opportunity. I think it's important to remember that HS, the treatment flow here, patients won't disappear, right? They are -- this is a chronic disease, unfortunately, not curable. Patients were cycled through different mechanisms. And our prediction is that they will cycle different mechanisms. They will not repeat the same mechanism over and over. So you'll have biologics anti-TNF, biologics anti-IL-17, and then we'll have an oral JAK1 inhibitor. We think that based on Phase II to Phase II data, we have so far in HS, the best-in-class JAK1 inhibitor. Obviously, the RINVOQ data will come next year, and we'll see what it looks like. But at least particularly when you look at pain, Phase II to Phase II data, our pain data are significant -- far superior to our competitors. So in summary, we think we have potentially a best-in-class oral JAK1 inhibitor for HS. We think we have important segments of the HS, moderate to severe population where povo will compete very well, if not be better than biologics. And we think that creates a very significant commercial opportunity in HS alone. And then all the other indications that we've talked about, PN, vitiligo, we have proof of concept now in CSU as well, and we'll have asthma proof of concept later this year.

Pablo, when you look across your pipeline right now, what are you most excited about?

Look, I'm excited about the overall pipeline in the sense that we have a very well diversified by mechanism, by therapeutic area, by modality pipeline across the board. We have some bispecifics. We have some traditional biologics. We have T cell engagers. We have obviously small molecules, and we have topicals still developing rux cream in other indications. And I think that provides a really important derisking across a range of potential therapeutic areas and indications. Honestly, I think it's not to be excited -- it's hard not to be excited about the CALR data. I mean we put it out just a few days ago. We're going to talk more about on Sunday. I think it's the type of data that really -- it's not just that I believe it's positive data at this stage of development. It's the type of data that potentially redefines how you treat a group of malignancies. And I think that is rare in drug development. We designed the drug to do specifically this, to suppress the malignant clone in myeloproliferative neoplasms. And it turns out based on the early data that, that's exactly that. That doesn't exist today for these patients. We think this will continue to change the goal of therapy in patients with MPNs from simply correcting the counts and improving the symptoms to doing that, but also to potentially have a path to a potential cure in these patients. And I think that is honestly a rare privilege in drug development. So it's hard not to be excited about that.

And when could we get next updates across your CDK2 and KRAS G12D as well as Escient programs?

Yes. Look, we're going to have additional updates later this year. So the CDK2 program, we updated it at ASCO. We are staying at about a 30% response rate with good durability and dose response over between 4 and 5 months. So we're happy with the data. We're pushing as fast as possible to an accelerated approval in platinum-resistant ovarian cancer. In parallel with that, we're launching randomized trials in platinum-resistant, and we're finishing the work in combination with bevacizumab for platinum-sensitive disease. We think this is going to be an important new medicine for patients with ovarian cancer. We realize how competitive platinum-resistant setting is, but we think that's why we need to establish this new medicine over time in platinum-sensitive disease. It's oral. It's well tolerated, minimal dose adjustments in the Phase I study. We think that it could play a very important role in platinum-sensitive disease. KRAS G12D is a very competitive space, as you all know. Based on our preclinical profile, we think we have a competitor. We'll have data later this year. We should talk about it with that data out. We think there's still a path to compete in pancreatic cancer. We obviously need to see what that data looks like, how it stacks with RevMed and others. But we think potentially if we have the right single-agent activity together with combinability with chemotherapy, we think there is a path to compete in pancreatic cancer still.

Great. Maybe a last question here on capital allocation. So you've noted that you continue to monitor opportunities, but are unlikely to do any major deals given the catalyst path this year. How should we think about scenarios here? And could this change on the forward?

So the priority continues to be the pipeline. You see how much we have going on with 7 proof-of-concept readouts this year, you could see at least a subset of those programs moving into pivotal trials. So we have a lot already going on in the pipeline, and that's the priority. Over time, we will be looking at the pipeline, the drivers, our financial profile and decide whether we want to supplement our internal activities. But right now, the priority is the internal portfolio. We have the financial flexibility opportunistically to look at bringing in assets from the outside. But the -- given how much we have going on at the later stage, the focus is more on the early-stage technologies capabilities that would help with the discovery efforts in the early part of the pipeline or if we were to find commercial, near commercial assets that would add to revenues without significantly adding to revenue at least -- to R&D burn at least for a long period of time, it's something that we will consider as well. But again, the priority is the internal pipeline.

Great. Well, with that, Christiana and Pablo, thank you so much.

Thank you.

Thank you.

Thanks, everyone.