Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Good morning. Thank you, everyone, for joining Jefferies Healthcare Conference in London. My name is Clara Dong, one of the Biotech Analysts here at Jefferies. So sitting next to me, we have the Chief Executive Officer from Incyte, Bill Meury and the Head of R&D, Pablo Cagnoni. Thank you very much for joining for this discussion. Welcome.

Nice to be here.

Thank you. Good to be here.

So Bill, let's start from the big picture. You've been in the CEO role for 6 months now. Tell us how you've enjoyed your time since joining and how your initial vision is coming to life?

Good afternoon, everyone. It's good to see you. It's been busy. Great company. Great culture, I think, strong organizational DNA and most importantly, which is one of the reasons I joined, just a lot of substrate in terms of meaningful product flow over the next several years. In terms of the vision, our focus right now has got to be on one thing, and that's transitioning Incyte from essentially a Jakafi company to a high-growth hem/onc and I&I business. We are hyperfocused right now on 3 verticals or areas: hematology, more specifically MPNs, blood cancer; second, solid tumor oncology and I&I. In hematology, I think we have an opportunity or a window of opportunity to transition that market from nonspecific symptomatic therapies to mutation-specific targeted therapies. In solid tumors, we've systematically, strategically and quietly up until ESMO, developed what could be a high potential oncology portfolio across ovarian, pancreatic and colorectal. And then in I&I, it's a franchise play. And ultimately, what we're trying to do is build a glide path to high growth and durable revenue and earnings and cash flow out into the future. And 2026 is going to be about executing 5 Phase III programs across those 3 areas.

So as you mentioned, Jakafi has been really the cornerstone for Incyte for the past years. And sorry, I have to ask this question, so let's just get it out of the way early. And the loss of exclusivity, how are you thinking -- how are you planning to really navigate that through your kind of life cycle management in your MPM franchise and especially with your mCALR program as well?

Yes, it's a good question. We're not going to cut our way through or buy our way through 2029. I think we get through it 3 ways. First is our core business has to continue to meet or exceed expectations and our core business today, excluding Jakafi, should be as big as Jakafi in 2029, all right? That's number one. Number two, we have 7 pipeline projects that are in mid- to late stages of development. And those will start to launch in the 2029 period. Third, we'll control our cost base and manage our expenses. And what that means is streamlining in areas that we can and at the same time, making sure that we don't underfund any critical initiatives that compromise future growth. And there is enough substrate here so that when we look out in the future post Jakafi, we see a business that has the potential, I don't expect anyone to take my word for it, but has the potential to grow at a 15% to 20% CAGR, a business where we have instead of one product north of $1 billion today, Jakafi, we could have 3 to 5 products north of $1 billion. And just as importantly, as those 2 things, LOE exposure of only 15% to 20% as opposed to where we are today, which is much higher and healthy operating margins.

Great. Maybe let's directly turn to your mCALR program. I mean, investors are watching very closely ahead of the ASH update this year. So maybe at a high level, just tell us why is this program so important and meaningful for patients with myelofibrosis and in ET as well, which folks might be less familiar with?

I'll make a few comments and then ask Pablo to talk about it, too. First of all, hematology is a central identity of the company. This is an outlier opportunity. Now it hasn't fully declared itself, but we've derisked the program with Phase I data that we presented in abstract form, and we'll have more data at the ASH Meeting. There is -- there are no targeted treatments available for blood cancer, MPNs, MF, PV and ET, very different than in other cancers where you have targeted treatments. We've produced meaningful data that shows that 989 is a superior approach, no head-to-head data yet, but it is a superior approach to the standard of care in MF and to the standard of care in ET. And this business has the potential to at least replace Jakafi. Where we are right now is to convert Phase I results into a Phase III trial and an FDA approval. And I'd just ask Pablo to just make a few comments about the data and how he sees it as a transplanter.

So let's first agree on what we're going to see at ASH. We showed just to recap a little bit of what happened over the past 6 months at EHA 5 months ago, we showed data in ET. We showed very clearly that 989 was well tolerated by patients, and it basically normalized, not reduced, normalized platelets and almost all the patients that were treated despite the fact that data was at a range of doses in a Phase I study. And we also saw significant reductions in VAF, which is arguably a lagging indicator of the fact that the drug is basically reducing the burden of the disease, and we can elaborate further. At ASH, we're going to have 3 abstracts where we put out 3 abstracts, and there will be presentations accordingly. One, updating the ET data, a little bit more data. There's a little more data in the abstract than EHA, but there will be a little bit more data at ASH, again, showing consistently that there is normalization of platelet count together with reduction in the burden of the disease. And there's a couple of different measures to establish that. We'll then have a translational abstract or we have a translation that gets into more detail into what 989 is doing to the bone marrow, to the immature CALR mutated population in peripheral blood as well as VAF. So this comprehensive understanding of why 989 is so important for patients is going back to the question, which is a disease-transforming targeted therapy as opposed to a nonspecific cytotoxic. And the third data set, which I found -- I think is the one you're most eagerly awaiting is MF. Obviously, there's a lot of data in the abstract. I think directionally, that's the data you're going to see. You're going to see more data at ASH, consistently showing that single-agent 989 leads to substantial reduction in the spleen size, improvement in symptoms, improvement in anemia and the disease-modifying aspect, again, reflected not just in VAF, but most importantly, in reducing the number of mutated megakaryocytes in the bone marrow and reducing the number of immature mutated cells in peripheral blood, both of which are leading indicators of the disease-modifying aspect of 989, which is why we think is such an important medicine for patients and eventually for the business.

And then when we see the ASH data in December, what kind of benchmark should we look at? Maybe you have your own Jakafi and then there are other approved JAK inhibitors as well. So what's the most relevant benchmark here?

Look, we can -- I'm sure everybody in the room has their favorite benchmark. So if you look at second-line MF, you always have to be careful when you look at comparables to look at the right eligibility criteria for patients in different studies, right? The data in the abstract and SVR35 of 30% with reduction in symptoms and improvement in anemia over 50% of the patients. There's no precedent for that kind of data in this same population. This is a Phase I population, patients with a range of doses. The higher doses tend to have shorter follow-up, so they had less time to work. So let's keep that in mind. The most recent approval in second-line MF is momelotinib. Depending on the momelotinib trial you look at, it's between 7% and 22% SVR35. I think the difference there is basically the patients that were enrolled in one study versus the other. For the combination data with 989, we need more time. The data that we put out in the abstract confirms that the 2 drugs can be combined safely in patients with MF. And in a population of patients that achieved a ceiling on the benefit of Jakafi, there's still room for improvement when you at 989 in terms of spleen symptoms as well. So that data needs to evolve a little bit further, but we're very confident in the direction it's going. The data that we won't have yet, but we'll have next year is in naive patients. We are enrolling that cohort now. We're treating previously untreated MF with 989 alone or 989 in combination with Jakafi. We'll have the data in 2026. That's the data that will inform the first-line MF trial.

And just to add to the benchmarks, if you look at ET for a second, in the abstract, the complete hematological response was 73%. If you look at real-world efficacy data with hydroxyurea, it's between 25% and 50%. So it's pretty clear. And then on the MF side, look, if you look at the label for Jakafi, the SVR 35 is between 28% and 40%, and our abstract is at 30%. And then on anemia response, as Pablo said, if you look at the Jakafi label, obviously, there's no anemia response. There's actually grade 3 anemia in about 34% of patients. So it's just a fundamentally different data set and approach.

And then besides SVR35 and TSS50, I mean, for folks who might be less familiar, you're also reporting VAF reduction as well. So maybe just tell us a little bit about the significance of VAF reduction and how -- like how should we interpret VAF reduction in terms of clinical benefit?

Yes. So the first point, I think anybody has to remember is VAF is a lagging indicator of what's truly going on in terms of reducing the burden of the disease, okay? And the reason is when you think about it, what's truly going on here is that it's an abnormal population of cells in the bone marrow are CALR mutated megakaryocytes. And there's a spillover of mutated early progenitor cells in peripheral blood. These 2 populations are generating the malignant cells in MF and ET. Reducing those, it's critical. And that's what 989 does. As a result of reducing those over time, you will see decreases in VAF. VAF is easier to assess. It's just a peripheral blood sample, it's simpler, but it's a lagging indicator of what's truly going on when you give 989 to patients with ET and MF. We showed at EHA that there seems to be a correlation, maybe not hardly -- hard established correlation yet, but a correlation directionally between reduction in VAF and complete hematologic response. That was data we presented a few months ago. And we are seeing in almost all the patients with MF, a certain reduction in VAF. The magnitude is smaller than we've seen in ET. I think it needs more time. It needs more time because the starting VAF in MF patients is higher and because the residual wild-type clone, the benign cells are smaller in MF. So that flip, that ratio takes longer to occur. But as long as we reduce the source of the disease, bone marrow and CD34-positive peripheral blood population, over time, the VAF will continue to come down, and that's what we expect to happen.

And then maybe talk about your time line to start pivotal development. I think you touched on a little on your recent earnings update as well. So any regulatory interactions related to potential trial design and any possibility of using like a composite endpoint, including VA reduction as well?

So our most urgent trial now is second-line ET. It's pretty straightforward. The design is simple. You've seen the data at EHA. We think we have a medicine that is superior to anything that has been tested in second-line ET patients. So design, we've already started conversations with FDA, and we'll finalize the design and start that in 2026. I assume at this point, to be clear that the approval is going to be based on conventional endpoints such as hematologic response. We will have a conversation with FDA about incorporating VAF and some capacity, maybe as a key secondary endpoint. I think it's important to inform treatment decisions. But while directionally, it seems that lower VAF leads to better hematologic outcomes, I'm not sure the data are ready for the FDA to accept as an approval endpoint, just to be clear. But we're going to try to incorporate some capacity. So that's ET. We're not convinced about the need of a trial -- of a pivotal trial in first-line ET. We think that with 989 approved in second-line ET, the pressure to switch patients from hydroxyurea, which is toxic and convenient and doesn't really modify the natural history of the disease, probably the pressure to switch patients will be intense. So we're debating that. We haven't said -- we're not saying no, but it's not an urgent need right now. MF, sort of the same. Second-line MF is pretty straightforward. We have data in a population of ineligible suboptimal and intolerant to Jakafi patients, which is what we've been talking about. So it will be a single agent 989 with a controlled arm, incorporate the best available therapies for MF. We think that's pretty straightforward as well. The one thing that there comes into play that is very important is anemia. More than half the patients in the abstract, as you saw, have anemia improvement, which is something I haven't really been seen in patients with MF. And we think that we'll try to incorporate that in the endpoints for the trial. We think it's important for patients, and it's important for treatment decisions. First-line MF, we need the data from the naive patients with both 989 and the combination. We'll have that data in the early part of '26. Our goal in '26 is to start more than one pivotal trial with 989. The most urgent one right now is second-line ET.

Got it. And I also want to touch on the JAK2 V617F. We recently announced the acquisition of Prelude inhibitor. I mean what drove that decision? And how should we think about the position of that asset in the landscape of the other efforts you are making in the MF?

Yes. Our goal by the end of the decade, early next decade is to have a new treatment for every single patient with myeloproliferative neoplasm, okay? And that, obviously, CALR, we discussed 25% to 35% of ET and MF and then leaves our V617F, which is almost all the patients with PV and the remaining MF and ET patients. So we have a program in the clinic. We just introduced a new formulation because the previous formulation could not get to the right exposures that we predicted would be necessary to inhibit the target. The new formulation has been introduced. The thesis is very much alive. We believe we're convinced that inhibiting the pseudokinase and V617F in a selective manner will lead to good outcomes in patients with a V617F mutation. Now like with other programs, we have internal backup programs, and we're constantly scanning the landscape to understand what else is out there that is potentially different from what we're doing. We saw a series of compounds from Prelude, as you pointed out, and we thought it was important to have an option to acquire them if the data convinces us at the right time. That's simply what's going on. We're pushing our lead program forward. We're still studying our backups. This is another set of backups basically that are external to Incyte right now.

And just to put in the context, the targeted treatments we have in development, today, as successful as Jakafi has been, it's used in roughly 20,000 people. So only 20% -- less than 20% of people with MPNs. We, of course, have work to do with both 989 and 617. But if we can successfully move these products forward, you'd cover an addressable market that's about 2 to 3x that between the small molecule and the monoclonal antibody.

Got it. And I'm going to go by chronological order. Maybe recently also presented some data at ESMO in solid tumor. So let's discuss on that a little. I mean, for your KRAS G12D inhibitor in PDAC, maybe walk us through your key highlights there. And then another exciting program is your TGFß, PD-1 bispecific and you're actually assuming initiating Phase III program in early '26. So tell us what you've seen give you such strong conviction to have the program move forward very fast?

So let me start with the second one. So what we presented at ESMO for our bispecific PD-1 by TGFß receptor 2, arguably or not is the best anti-PD-1 data ever presented in late-line colorectal cancer, MSS colorectal, okay? We show response in patients with liver metastases and without. We showed long duration of responses and a response of about 15%, which may not sound like a lot, but in MSS colorectal in third, fourth line, there's 3 or 4 studies with nivo, pembro, atezolizumab, et cetera, 0% responders. So we saw that signal. We think it's real. We treated more than 100 patients. So it's not like we treated a handful of patients. So it's a sizable data set that convinces us we have an active drug in late-line MSS colorectal. So instead of going line by line backwards like people tend to do in oncology, we decided to combine that PD-1 TGFß receptor bispecific with chemotherapy and move straight into first-line colorectal. We are enrolling that cohort to have clarity on the safety, which we established already, by the way, we established we can combine them. We'll see what the response rate looks like. But in parallel with that, we're implementing a first-line MSS colorectal trial in combination with chemotherapy and bevacizumab. So we're basically bringing 3 distinct mechanisms to the table. So obviously, chemotherapy is in the background. We're giving these patients Avastin. So they get bev plus PD-1 plus TGFß. You're bringing 3 additional mechanisms to the chemotherapy. We think that is a very strong thesis to advance that medicine in early line. We have also good data, very good data in head and neck, lung and ovarian. We're trying to decide how to actionable that data are, and we'll give an update in the near future. So that's TGFß. On G12D, we have data in mostly third line, a little bit second line, but mostly third, fourth line PDAC that convinces us that we have a very competitive agent. We have some low-grade GI side effects that we reported. We have shown that we can combine with chemotherapy, both with Gem/Nab and with FOLFIRINOX. So again, we decided to move as quickly as possible to first line. We're fully aware of the competition. We think it's a race to first-line pancreatic cancer. We think our ability to combine with both types of chemotherapy that get used in first-line pancreatic is going to be an important differentiator. Now as with TGFß, in parallel with initiating the Phase III trial, we continue to track the response rate and the duration of response to make sure that with more data, we're still convinced on the activity of that compound. And if so, it will be a race to first-line PDAC.

When should we expect the next update from them?

We haven't decided exactly. I mean everybody knows what the right meetings are in 2026. At some point during 2026, probably in the first half at that point, we'll provide an update what these programs are. But our goal now is to initiate these trials as soon as possible.

Got it. And maybe let's switch to your dermatology and broad I&I franchise. Bill, as your I&I portfolio continues to expand, how should we think about the role you see I&I is playing in your company's overall growth? And like what's kind of your forward strategy to develop this franchise further?

Yes. The next step is povorcitinib, and we'll have the only sort of franchise that consists of a topical to oral solution covering mild to severe disease as well as local to extensive skin involvement. Povo mechanistically covers multiple cytokines. I think that is an advantage in a multi-cytokine condition like HS. I think it will be differentiated relative to an IL-17 or to a TNF-Alpha. If you look at the data from our HS studies, we had rapid pain relief and skin clearance that was on par with biologics. And of course, it's an oral. And I think there's a treatment gap right now in HS that exists between oral or topical antibiotics and IL-17 or TNF-Alpha. It's no different than what the position that Otezla occupied in psoriasis. The difference is povo is a high efficacy option. And we expect to introduce it probably in early, early 2027. It's going to be an important part of the growth of the business. It may not be as big as our hematology business, but I&I is valuable to us, especially in immune-mediated skin conditions. And if we can add to that through our internal research or external business development, we'll do that.

And what are the remaining steps for regulatory submission for povo in the U.S.? And then what are the other opportunities beyond HS for?

Yes. Well, we expect to submit an NDA in the first quarter of 2026. We're also running 2 Phase III programs for prurigo nodularis and for vitiligo. In PN, that condition was made for JAK inhibitors. Itch is the defining symptom of the condition. We know they work, especially with Opzelura extremely well on itch, and that will be an important driver of future sales and utilization of povo. And then for vitiligo, there's a large portion of the vitiligo population that has BSA involvement of greater than 5% that is sort of not using topicals. It's just not as practical. And so povorcitinib is going to open up a larger portion of that market. And I think Opzelura and povo will sit next to each other as a treatment solution for dermatologists.

Great. And for the last minute, though, I also want to ask, how do you balance your investment in internal R&D versus maybe external business development opportunities? And what kind of factors maybe it took to go one way or the other for insight?

Yes, it's a good question. I think most companies have to be agnostic. We can't have a bias towards internal or external innovation. We're more interested in strengthening the portfolio and outcomes than the source of a deal. And every project, whether it's internal, external, has to get put through a scoring system and ranked in terms of strategic fit and PTRS and rate of return. And the pressure to fill pipelines is unforgiving. And so we look at anything and treat it the same.

Great. That brings us to the end of our discussion. And thank you, Bill; thank you, Pablo, for this discussion, and thank you for the audience online and in person for joining us. Enjoy the rest of the conference. Thank you.

Thank you.

Thanks.