Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Welcome back to the 46th Annual TD Cowen Healthcare Conference. Really happy to have the next session here with -- I'm Marc Frahm from the biotech team here at TD Cowen, and we're really happy to have the next session, Incyte with Bill Meury, the CEO, to join.

Maybe just start off with, Bill, do you want to just give a kind of high-level kind of status update of the company? What do you think the kind of key value creation events for investors will be over the next 12 to 24 months?

Yes, sure. Thanks, Marc. I think about the business in three parts. Part one is we're focused on our core business ex Jakafi, which in 2025 finished at about $1.2 billion. We estimate by the end of '26, it could approach about $1.7 billion. When you go out to 2030, we have a target for that business of $3 billion to $4 billion, which is to say that the core business ex Jakafi has the potential to be as big as Jakafi is today by 2030. It replaces it. Key to that growth will be products like Opzelura, Niktimvo, Monjuvi, povorcitinib and XR, namely. That's where the majority of our growth over the next 5 years will come from. Second, of course, is pipeline execution. We have 7 products that are in late stages of development. That's where 80% of our R&D investment is in those 7 products. On an unadjusted basis, we estimate peak sales for that group of 7 products could be roughly $10 billion unadjusted. Now not all of them are going to work. But I think the point here is we have much more visibility into the growth profile of our pipeline at the end of '25, beginning of '26 than we did at the start of 2025. And so for example, we had no proof-of-concept data on 989. We had no proof-of-concept data on G12D for pancreatic cancer or TGF-beta by PD-1 for colorectal cancer. We had no Phase III data on povorcitinib. We had no frontline data in DLBCL with Monjuvi, and we had no combination data of Niktimvo and Jakafi from a safety set. We have all of that now. We have more work to do in 2026, of course, and beyond. But I think the depth and maturity of our pipeline is stronger today than it was a year ago. And then third is business development. And we'll use business development like any company to strengthen our core. We're not going to use business development to fill a revenue gap, but rather to create long-duration revenue earnings and cash flow. And those are the three priorities of the company. We'll, of course, manage our cost base very carefully, both R&D and SG&A. In 2026, our SG&A is -- it's only going to be up about 4%, with G&A down 10%. And R&D, of course, is where we're leaning into to build a pathway to growth in that post-2030 period.

Okay. Great. Thanks for that overview. Maybe we'll start on the commercial side. The biggest longer-duration asset for you guys right now in terms of sales is Opzelura and your background on the commercial side. So now that you've been in the job for 6 months. What -- as you've kind of looked into that franchise and looking forward, what has insight gotten right about the commercial effort? What needs to be tweaked and is being tweaked now? I think we saw a little -- one piece of it with there's some pricing concessions this year, but what else beyond that?

Yes, it's a good question. Fundamentally, that business is in a good position. And what I mean by that is strong demand, 250,000 patients take Opzelura annually in the United States. Prescription volume is going to be up 15% to 20% year-over-year. There's 20,000 writers of Opzelura, and you have exceptional formulary coverage. What you're going to see in '26 is we'll expand the size of the target audience, which means we'll expand our sales force to drive growth of Opzelura at some point in 2026. We'll call on more physicians. That's number one. Second, the NPPA specialty in atopic dermatitis is very important. That segment, it accounts for roughly 40% of all prescriptions. It will be bigger than dermatology in AD probably this year. And it's also the fastest growing. And so we'll relaunch or launch a new program to NPs and PAs, dedicated sales, dedicated MSLs, dedicated peer-to-peer program, dedicated materials. And I think that focuses us on the first priority, which is continue to drive AD vitiligo use in the United States with Opzelura, all right? I think the other thing is the moderate AD indication in Europe is going to be a real value driver. And just to sort of put it in perspective, first of all, in the moderate AD study, the drug had an EASI50 rate of 70%. And there was itch relief in a large percentage of patients at 8 weeks. In fact, its relief in some patients, about 10% to 15% of patients was in 15 minutes. It's a really, really good topical antibiotic, topical anti-inflammatory. In Europe, we did $130 million with vitiligo. We didn't have the AD indication. AD is 3 to 5x the vitiligo market. And so you could see revenue from Opzelura in Europe in AD approaching $200 million to $300 million over the next several years. And then the last point I'd make about Opzelura is we expect to have data on the use of Opzelura and HS at the end of 2026. An indication for HS for Opzelura could be as big as both AD or vitiligo is in the United States, which is a couple to $300 million.

And then one of the guidance pieces was on the other oncology portfolio, which implied about 45% growth year-over-year in '26 versus '25. As we look at that kind of bucket of assets, what -- is there an asset in there that's like that's the one investors should pay attention to that's the real growth asset, that's going to drive it over the longer term?

Yes, it's a good question. I would focus on 2, and that is Monjuvi and Niktimvo. The majority of the growth in that business in '26 and even beyond is going to come from Monjuvi and Niktimvo. As it relates to Monjuvi, we have a 2-indication drug today, CD19. We will release data in the second half of the year on our frontline DLBCL study. A modest share of the frontline DLBCL market because you do have Polivy out there and you have EPKINLY, there'll be others, but a modest share for Incyte, call it, 10% would double the annualized sales of Monjuvi today. And so frontline DLBCL will be an important approval and new indication. Think community setting, think unfit patients, think a simple add-on to R-CHOP. And R-CHOP is still 50% of the frontline DLBCL market. As it relates to Niktimvo, it's year 2, arguably the most important year in a launch. I'd say even more important than year 1, off to a very, very good start. We have to continue to expand use, not just in fourth line, but in third line. Over the longer term, demonstrating efficacy on top of Jakafi or a steroid will be important to the long-term peak sales potential of Niktimvo. And so when you think about that other oncology business, that -- those are the two products that I focus on.

Okay. Just for the first-line DLBCL indication, is the marketing angle mostly going to be kind of the ease of use and convenience for the -- for -- particularly in some of the settings of community? Or is it a real efficacy differentiation versus some of the others besides R-CHOP that obviously you've beaten on a top line basis?

Yes, it's a good -- I think it's both. Here's what we know. We have a hazard ratio of 0.75. You'll see when we release the data of Monjuvi plus R-CHOP versus R-CHOP what the PFS percentages look like and the delta versus R-CHOP. And we'll also show activity in subgroups, ABC and GCB. And I think there is a benefit risk proposition for Monjuvi in frontline DLBCL in the community setting for certain patients that is as compelling as the alternatives. And all we need to do to move the needle here is collect sort of as a base case, an incremental $200 million to $300 million in sales. It could be bigger. As you know, that frontline market is large. The unmet need there is cure, but only 40% of people are cured with current treatments. And so I think when you see the data in the second half of 2026, you'll look. And the totality of the evidence is fairly compelling. But as you know, that landscape over the past couple of years has really started to evolve. And so I think we're focused on where the drug will most likely be used. And I think for a lot of people, it's going to be a simple intensification strategy tafa when on top of R-CHOP versus a replacement, which is what you do with Polivy or when you use a T cell engager, that benefit risk equation changes a bit.

Okay. And then XR should be launching later this year. I guess maybe can you walk through what the kind of value proposition is for that franchise versus traditional Jakafi, maybe from here to '28, '29 when the LOE happens? But then what's the value proposition to keep using it on the back end of the LOE?

Yes, it's a good question. You have a more convenient form of the standard of care. So just start with that. And I think that's clear. Once-a-day formulations and providers know this, payers know, will usually deliver an adherence gain of 15% to 25%, right? So there's the second sort of element of the proposition. Third, the price point is going to be economical for providers, for patients and ultimately for payers. Most important with this XR is, one, generate demand; two, we'll activate consumers. We have a database of Jakafi users that is sizable that we've built over the past decade plus. Then you have to get formulary coverage and secure enough formulary coverage that moving patients from IR to XR is frictionless. And we will find a price point that makes sense for PBMs, payers and one that makes sense for Incyte. Now this is a sprint. There's 2.5 years between now and when we lose exclusivity on Jakafi, and we're targeting a conversion rate in the range of about 15% to 20%. I focus just below the midpoint and call it 20%. When generic forms of Jakafi are available, there is going to be some headwinds on XR. At that point, Incyte is not chasing the XR number. XR is simply a bridge in the 2030 period. And when you hit that period, we should be launching several products from the pipeline, which will shorten the duration of this trough and build essentially a glide path to growth. And certain formularies or certainly payers will keep XR and formulary. Others will want a discount. Others will remove it from formulary. I think all we need to do is get it to about 20%, and it gives us the bridge that we need.

And that's probably a good bridge now to talk about CALR. And 989, so obviously, we saw some data late in the year presented at ASH. But I guess what are, in your view, the questions that have clearly already been answered by 989? And what are the big remaining questions that you need to answer this year and beyond with that asset?

Yes. I think the threshold questions in terms of 989 utility in ET and MF have been answered. In ET, we have a complete hematological response of roughly just over 80%. real-world evidence data with hydroxyurea, which is the standard of care, the CHR is like 25% to 50%. And unlike hydroxyurea, which has 7 warnings and precautions, 40% of people have Grade 3 AEs, the benefit risk profile of 989 is compelling. And I think the availability of it, even in the second line, will reshape the use of hydroxyurea. Anyone that's not getting complete hematological response who's in their 50s, going to live with the disease for 30 years is likely to get a targeted treatment. That's ET. On the MF side, you know the data from ASH. We have an SVR35 that's roughly 33%, TSS 50 of 40% anemia response in 50% of people in a second-line setting. VAF reductions will take more time in MF because it's more complicated biology than ET. Right now, the focus is complete our interactions with the FDA. By the first quarter earnings call, I would expect we'll be able to provide clarity on the Phase III program in ET second line. We've been having constructive interactions. The goals are still the same, type 1, non-type 1. If it's not 1 dose, it's 2 doses, that's not an issue. Both clinical and molecular endpoints, we're still talking about the length of the study, conventional is 52 weeks. That's most important. We'll have that same conversation with the FDA on MF in the middle of the year. And I would expect by the third quarter call, which will be sometime in October, we'll provide more clarity on starting our second-line study in MF. Those are -- that is the regulatory milestones. In terms of frontline, which is very, very important, I do believe there's a feasible path to frontline in MF, whether it's frontline mono or frontline combo, we will share data in the second half of the year, towards the end of the year on 989 in a frontline setting, both mono and combination with the expectation that if those data stand up, we could be starting a frontline study sometime in early 2027.

Okay. I think before we get to that presentation at the end of the year, there's also planned a more Q2 midyear update on the second-line patients. Maybe you want to frame that, the size and scope of that presentation. And I think you were able to get a few Jakafi ineligible people in back end of the ASH presentation. Are there more of those patients coming, which maybe gets a little bit of a flavor of what to expect at ASH?

Yes. So the data update for middle of the year with 989 second line, we had roughly 36 patients at the ASH in the -- at 24 weeks evaluable for efficacy. That number could be between 40 and 50, let's call it 45 patients. In the ET, I believe we had -- there were about 30 patients that were evaluable for efficacy. That number is going to be probably almost twice that, right? I'm just talking about at week 24. As it relates to the frontline data, which was effectively a frontline population, JAK-naive, we're focused on the true frontline mono and combo study. And so you'll get a few more patients in that. What I would say about it is definitely a strong signal of efficacy. It -- as you know, though, it's mathematically fragile. One patient moves across the line and you could move the SVR35, which was 57% in that population by 14 points. I think it was certainly encouraging, but the frontline data that we'll share will be the most important piece.

Okay. And maybe you started to touch on the design question for ET, just dose to address all mutations. How important is it to -- maybe for convenience and ease of prescribing, have one dose even if it means you're kind of overdosing some patients versus really optimizing the dose for the right dose for the right patient?

Yes, it's a good question. I think that one dose is always ideal. I think two doses is not an issue at all. If there was a -- the framework we've been working with, and all of this is subject to discussions with FDA, which are happening right now; if there's a starting dose and then an escalation dose, we'll have a subcu device on the market. I think that makes a great deal of sense for providers. And that is a framework that we're focused on.

Okay. And thinking back to going to frontline, when these trials started, there was this combo approach, particularly for the frontline, a concern that maybe the CALR antibody would take some time to really develop efficacy for patients and you'd want the kind of rapid action of Jakafi. But I mean, given the data we've seen and that there are some fairly rapid responses happening, what's the rationale for that combination still? Is it -- or is it more like, look, this was just going and but -- so we'll see, but most likely, it's the monotherapy?

Listen, what you're -- I think what you're describing is an induction and maintenance approach. And in fact, if you ask most hematologists, put aside the regulatory environment and what you have to study how they would use 989, several have said to me, I can envision a world or a future where I'm using Jakafi and 989 together for induction and then maintaining patients with 989 for obvious reasons. One, it's going to provide spleen shrinkage, symptom relief and improvement in anemia, not just less anemia, which I do think is proof of mechanism. And then, of course, you have the disease-modifying benefits, which clearly are going to take a little bit more time in MF. Our view is given the results we produced in a heavily treated population, second line. I mean I remind people that the average spleen volume size for people in that study was [ 23 50 ], right, which is almost the same spleen volume as the COMFORT-I and II trials, and we had an SVR35 of about 25%, a small number of people. It seems to me that you're probably going to get better results if you take a combination and move it into a pure frontline setting. And so all the options are on the table right now. When we get the results from our frontline studies, mono combo in the second half of the year, we'll make a decision about exactly how to prosecute this.

Okay. And maybe -- we're starting to get a little close on time. Just we'll turn to ET. We get a lot of questions about the IV formulation and how acceptable that is there or how much it really relies on ultimately getting the subcu of the on-body to work. Just what are your -- is IV a viable formulation if that's ultimately what you need? Or do you absolutely need the subcu?

In this population, I think a subcu is going to be really important. We've already started the healthy volunteer study. Our aim is that within the first 6, 12 months of the launch of 989 for ET, we follow with a subcu device. I think the gold standard for a fast follow IV to subcu was J&J's Darzalex. I think we'll do the exact same thing here. There is the potential in ET to reach a several thousand patients. There are many patients out there that are not in the watch-and-wait bucket that are not low risk, but are actually high risk, and they don't have complete hematological control and a targeted treatment that's easy to take is going to produce for us a meaningful revenue stream. And I believe the subcu will be available as we continue to move this program forward.

I think investors are used to with subcu like auto-injector pens and stuff, but this is a little bit different with the on-body. You want to talk through kind of the format and what that experience, what do you expect it to be for patients.

Yes. It would -- it's a disc, and it's a very elegant disc. It looks -- the company is an able and it was -- it looks like Apple produced it. It's not a big, clunky device at all. And we believe the admin you fix it on to a part of your body, and we believe the infusion time is going to be roughly 15 minutes. And so -- and you do it twice a month. Do it 15 minutes, take it off, 2 weeks later, you do it again. If I was -- like I mentioned, if I was 50 years old with ET and was going to live with the disease for 30 years rather than taking hydroxyurea, I'd rather take an infusion every 2 weeks. And I think that's the aim.

Maybe you started to touch on a little bit of how the treatment paradigm may evolve in ET with this drug. Just what is that vision for what ET looks like on the back end of the second-line trial you're reading out? Because you have hydroxyurea, but also potentially in between you starting and finishing that trial, we'll also get bomedemstat data potentially for Merck. Just what does the ET paradigm look like in, call it, 2030 or something?

We have a targeted treatment that has high CHRs and fairly dramatic, deep, rapid VAF reductions. that you'll get more data on VAF with our update in the middle of the year. And I think you'll find those data in ET, which is a pure setting. I think it's a crystal ball into how the drug works on mutant CALR. It gets more complicated, as we know, in MF. And I don't see a reason or a version of the world where 989 can't become standard of care relative to hydroxyurea or anything else that's out there for both hematological response and molecular response. And I think the control rates with hydroxyurea are very, very low, not because it's not a good cytoreductive agent, but because people can't get to the therapeutic dose of 1,000 milligrams a day. And what's important to remember is that patients who have CAR and ET have very high platelet levels. like 1 million versus 600,000 or 700,000 with other mutations. And so 989 in a CALR population is going to be, I believe, differentiated relative to other alternatives.

Okay. And is there a first-line opportunity in ET? And what does that drug profile need to look like to really support that?

I do believe there is a first-line opportunity. We're starting second line. And I say that because of the point that we just talked about, which is CALR patients have very high platelet levels, dosing hydroxyurea high enough to control counts is more difficult. And in a first-line study, we may be able to show that in CALR. That said, I think when a second-line agent -- the second-line study comes out with 989, I think hematologists -- someone said to me the other day, hydroxyurea is what we have, and it's important and it helps patients, but it's the equivalent of Tylenol for a fever. And he went on to say that ET, while there's a large group of people that are in this watch-and-wait bucket or taking aspirin, there's many people that have gotten a partial response. They have residual symptoms, residual thrombotic risk, residual transformation risk and it's the equivalent of a ticking time bomb. And so I believe the second-line data will be enough, but I think we're going to still look at whether or not we could do a first-line study.

Okay. And then the other mutation that's quite important in these diseases is the actual JAK2 mutation where you do have an inhibitor there. What is the bar for success? Is there any -- look like for a mutant selective JAK inhibitor? Is there any difference than how we thought about CALR just based on the biology being a little different? Or is it just the same kind of 30-ish percent response rate?

I think the framework, if you have both clinical response like you talked about SVR35, TSS50 and then molecular response, I think the framework, Marc, is the exact same thing as we see for CALR with 617. It's just that if you believe in 989, 617 is twice the size of 989, given the mutation frequency.

And maybe explain how -- you have a couple of different assets in the space. Just how they fit or rights to a couple of different assets in the space? How they fit together?

Sure. We actually have essentially four programs. We have a lead. We have an ASD formulation of the lead to improve solubility, dissolution and bioavailability. We have a backup 617 internally, and then we have the option on Prelude. And there's four horses in the race. And we're prepared to progress as many as we need to in order to solve what we think is not a PD problem, but a PK problem. In other words, when you look at preclinical data with 617F, the very same models that predicted the utility of 989 in MF and ET also predict utility of 617 in MF, PV and ET. And I think we need to solve this PK problem, whether it's a prelude compound, I'm really impressed with the work that they're doing or whether it's one of our internal programs, we want to get to the finish line sooner than later.

Maybe we are running out of time. So maybe on povo, just so we get a lot of investor pushback of it's another JAK, like aren't they just going to lose out to other JAKs, even if people want to take that mechanism in some of these diseases you're developing? Just what are people missing about povo in your view?

HS is the most challenging dermatological condition you can have. There is no FDA-approved oral treatment for mild -- moderate to severe disease. If you look at the data, whether it's ours or even AbbVies, I don't think it's -- if I'm in a 1 of 2 situation in a market that does really well, that's excellent. It's a multi-cytokine inhibitor. Clearance rates, itch relief, flare control, draining tunnel clearance is as good with a JAK povo as it is with the biologics. It's oral. And the most important thing is it works faster. What is missing today in HS? There is nothing in the moderate to severe that's oral. You can use an antibiotic, physician will tell you keep your skin clean, all right? And then you have to jump right to an IL-17. I believe there's an opportunity for povo to be positioned in a pre-biologic setting, which would be a natural sequencing from antibiotics, whether they're oral or systemic before you go to an IL-17. There's, of course, the post-biologic opportunity, which is rather than sequencing through IL-17, you can move to a JAK inhibitor. But our data are very compelling. The most important thing for us right now is complete the NDA review with the FDA, assess the benefit risk, assuming it works in both pre- and post-biologic, we have a broad label. And I think there's a lot of potential there.

And then maybe quickly on G12D, obviously, a competitive space. You're towards the front of it. But how do you win long term? Is it just about being first to market? Do you think 734 is actually a differentiated G12D versus other G12D inhibitors?

Well, as you know, it's an on-off inhibitor, 80x more selective for G12D. And we know that we can combine it with standard-of-care chemo. I think the most important thing for us to do right now with G12D is complete the Phase III, demonstrate a PFS of call it, 9 months, hazard ratio of 0.7 and low grade 3 toxicity. And if we're 1 of 2 in pancreatic cancer, I think we're going to be just fine.

Okay. Unfortunately, that's all the time we have for today. We're already over a minute, so we'll have to stop there. But thanks a lot for joining, Bill. Thanks, everybody, in the room and online.