Incyte Corporation ($INCY)

Good morning, everyone. I'm Andy Berens, senior biotech analyst at Leerink Partners on day 2 of our Global Healthcare Conference in Miami. We're very happy to have with us Incyte. We have Pablo and Bill. Thank you, gentlemen, for joining us.

Thank you for having us.

It's good to be here.

Yes. It's beautiful weather. Why don't we start? I mean, obviously, I think a lot of people know Incyte, but maybe just a general overview. I mean, you assumed the helm recently, and maybe we could talk a little bit about how the company, what's changed and what's remained the same, I guess, since you joined.

Sure. We're focused on the company against, I think, 3 dimensions. There's a core business ex Jakafi that we estimate over the next 5 years has the potential to reach about $3 billion to $4 billion in sales. So our core business ex Jakafi, which is all FDA-approved marketed products, should be as big as Jakafi by 2030. That's important. And that namely is Opzelura, Niktimvo, Monjuvi. And then we also put in there XR and povorcitinib, which will be approved over the next 12 months. That's sort of priority #1. Then of course, we have a pipeline of 7 assets where about 80% of our R&D investment is focused. It's in hematology, oncology and immunology. We have 14 clinical studies that will be underway in 2026 against these 7 compounds and that, of course, builds the next growth phase for Incyte, and we'll continue to progress these programs in '26 and beyond. And more and more, I think there's visibility into what the potential of that pipeline will be. It hasn't completely declared itself yet. But on an unadjusted basis, that pipeline has the potential of 2 to 3x our top line sales unadjusted. And then the third dimension is business development, which like at any company, will play a role in supplementing our growth and extending the core franchise. And that's how we think about the business. That's how strategic operational and financial decisions are made against those 3 areas.

Okay. Why don't we start, I guess, with Jakafi, and then I think we'll probably very quickly shift to the pipeline and things in development that you mentioned. But Jakafi has been a huge success for Incyte. There have been other JAK inhibitors for a while. There were concerns about competition. You have an XR formulation. You have other compounds that are -- we'll talk about in the pipeline in myelofibrosis and myeloid diseases. But how should we think about Jakafi over the next several years importance to the company and the investment thesis?

Yes, it's a good question. In 2025, it was up just around 10% year-over-year. Keeping it healthy is a priority because it's a funding vehicle for the new product launches and for the pipeline. It's got 3 indications, as you know, MF, PV and GVHD. All of 3 are growing. Our focus right now is maintaining a mid-single-digit growth rate on Jakafi between now and the end of 2028. We'll launch Jakafi XR in the middle of this year, and that will preserve a portion of the Jakafi revenue after it loses exclusivity. In terms of conversions, and Andy, you know these models, you can assume based on analogs that we could convert about 15% to 30% of Jakafi. I'd like to use a sort of point estimate that's just below the midpoint of about 20%, which means we could preserve about $0.75 billion in Jakafi as we go through the LOE. And then, of course, the more important piece of our whole franchise as it relates to MPNs is in 989, the monoclonal antibody.

Okay. Yes, we'll definitely talk about that one. I just want to kind of get there because I know when we start talking about it, there's a lot to talk about. In terms of pricing, how should we think about pricing for Jakafi going forward?

Yes. We -- the company has done an exceptional job of managing gross to net and the average selling price for Jakafi. It's largely a Medicare Part D product as well as there's some 340B there. It's a relatively stable environment with the exception of migration of the 340B program, which can have an impact on every company's average selling price. I think we have it fairly well managed. As it relates to XR, it should be in the parity ZIP code. In order to get XR put on formulary, we're going to have to set a price that makes sense, most importantly, for PBMs and health plans and at the same time, makes sense for Incyte. And I think there's a price point that is going to be agreeable to the PBMs and the health plans. The key thing is to make sure that out-of-pocket costs for patients are not changed and that the net cost of the plan is not higher with XR than it is for IR. It will take us about 6 to 12 months to get formulary coverage. And then most of '27 will be about conversion. The second half of '26 when we launch will be about formulary coverage.

Okay. Well, like I said, Jakafi has been very, very successful. It's been the foundation the company has been built on and generated tremendous free cash flow. One of the things that Jakafi was successful at was you basically defined the regulatory goalposts for myelofibrosis with the SVR35, the splenic volume reduction and then also TSS50, which is a measure of quality of life and symptom improvement. So how difficult is it to then come along? A lot of companies have tried with other compounds to beat Jakafi at those 2 endpoints were essentially created for the molecule.

Specifically today, compounds that are looking to enter the MF space you're talking about?

Yes.

I think when you look at other JAK inhibitors that are out there or other mechanisms that are in development that could be introduced, I think they can be important treatments, but they're really tools for subpopulations, I think more niche in nature and refitting around the margins. I don't believe that there's going to be anything that disrupts the standard of care. In this case, Jakafi over the next couple to several years. I think that's how I see the competitive landscape.

Okay. And your program, so you've got several targeting different subgroups. We'll talk about the CALR. Do you think that those interventions can be Jakafi in symptom improvement and splenic reduction?

I think you have to look at the totality of the evidence when you look -- you're talking about 989 our targeted treatment.

Yes, yes.

And there are both clinical and molecular endpoints that matter in this whole equation. If you look at the data that we produced in Phase I in the second-line setting with 989 in both ET and in MF, it looks like first-line efficacy in a second-line study. That's whether you're talking about conventional endpoints like the SVR35, TSS50 or anemia response when you're talking MF, when you look at the results for 989 in the ET population in terms of complete hematological response or VAF reductions, that is a superior profile on paper to anything that's out there today, including Jakafi. And if we could replicate the results from the Phase I study in Phase III in both ET and MF, there's a potential for a real changing of the guard in the treatment of both those MPNs. We'll start those Phase III studies this year, midyear and then end of the year. And I think the key piece about Jakafi, Jakafi is an important product and made a big difference in patients' lives. It's a quality of life drug, makes people feel better, but it's also a trade-off product. If you increase the dose to control the symptoms, you can cause anemia. If you keep the dose low, you avoid the anemia, but you don't control the symptoms. On the ET side of the house with hydroxyurea, which is decades old, there hasn't been a change in the standard of care there. It's also sort of a product that requires a trade-off. Most patients with hydroxyurea can't get to 1,000 milligrams a day, which is dose needed, particularly for patients with high platelet counts to control the condition. I think 989 solves the trade-off with both the standard of care in MF, Jakafi and the standard of care in ET, which is hydroxyurea.

Okay. So why don't we pivot and start diving into 989 and the CALR pathway? What is the role of CALR in MF and ET?

I mean I think in the long run or not even long, in the medium term, our goal is to establish molecule-targeted therapies as a standard of care across all NPNs, Andy. We're starting with ET and MF with 989, which is, as you pointed out, a CALR antibody. And the data that we showed last year in 2 meetings and more recently at ASH clearly shows not only there is an improvement in clinical endpoints, which is what's going to matter for regulatory purposes and what matter to patients on a daily basis, as Bill mentioned, spleen reduction, improvement in symptoms and perhaps more distinct compared with other available therapies, the improvement in anemia that we saw, which was pretty dramatic in over 50% of the patients. As important as that is, I think the other bucket that is really important is the translational data shows very clearly that 989 is eradicating the disease. It's a molecular targeted therapy eradicating cells that have the driver mutation. We saw that in the bone marrow reduction of mutated karyocytes. We saw that in peripheral blood with the elimination of CD34 positive CALR positive cells. And we see that in the progressive VAF reductions more dramatic so far in ET, but also present in MF. So the way disease -- the word disease modification gets a little bit overused, but I think what we're seeing is truly disease modification in the sense that 989 can selectively eradicate the burden of disease in patients with ET and MF. I think that's the most important way to look at it in the long run because I think in the long run, that will translate in all kinds of benefits for patients even beyond what we've seen so far in terms of spleen reduction, symptom improvement and anemia improvement.

And Pablo, do you want to comment on the frequency of the mutations?

Yes. So the CALR, which was described, as you know, in 2013, is present in about 25% of patients with ET and about 35% of patients with MF. Now we need to spend a minute on this type 1, non-type 1 story. Type 1 is very clear. That happens probably in about 55% of those mutated patients with ET, maybe 55% to 60%. In MF, we think that frequency is higher. It's probably 65% to maybe upwards to 70%. Those are non-type 1. The best way to characterize, and there's a small group that is type 2, and then there's a group that is non-type 1, non-type 2. And that is a very heterogeneous group of patients that has characteristics, some of those non-type 1, non-type 2 look more than type 1, some are non-type 2. So it's not as straightforward. I'm now for short, I call them type 1 and non-type 1 just because it's simpler. And the important part is, I think the type 1 is about 65% to 70% of MF and about 55% in ET.

Okay. And the difference between type 1 and type 2 and ET versus MF in terms of what we've seen, and we'll talk about the data with 989 and maybe we can talk about it now if you want. But it seems like there is a difference in activity targeting CALR and why would that be?

So 989, which is our first entry into the space, we've known from the beginning has different affinity for type 1 mutations than non-type 1, specifically type 2 in this case. So we knew there will be a difference in dosing. And we think largely that difference in affinity can be addressed with difference in dosing, but just increasing the dose. That's not to say that the efficacy in non-type 1 will be identical to type 1, but we can get pretty close simply by increasing the dose, which is what we intend to do in pivotal trials. We are discussing -- we're in the middle of conversations with the FDA, and we're discussing a dosing strategy that we think will in part address this difference in affinity. I think it's important to note also that by the time of our quarterly call in April, we will have clarity and we'll be able to provide clarity on the design of the first Phase III trial in ET, which will be in second-line ET when it comes to population, which we intend to enroll all comers, dosing strategy in order to be able to address the differential affinity for type 1 and non-type 1 as well as the endpoints, including the incorporation of some molecular endpoints in the study.

Okay. And the endpoint, the molecular endpoints could be a pathway for accelerated approval or you don't know yet?

We think that in ET, based on the conversations we've had with the agency, hematologic response will be the approval endpoint. We intend to incorporate VAF as a molecular endpoint whether it's the hierarchy, we'll disclose that in April, but we think there's a way to incorporate VAF as one of the endpoints in the pivotal trial. The other conversation we're having with the FDA is the timing for the assessment of the primary endpoint where there's 52 weeks, which is what's been used traditionally in ET or it can be done sooner.

Okay. And what do you see when you target CALR, when we talked -- you mentioned the SVR35, the TSS scores. What about bone marrow changes? And you mentioned anemia, too, is improving. But what about some of the bone marrow changes? -- the hallmark of the disease?

What we saw and reported at ASH is there's 3 things that are important for, I would say, we see a very clear and very fast reduction of malignant megakaryocytes in the bone marrow. That's really part of the source of the disease, and they lead to the fibrosis in the bone marrow, which we also see improvement on. We saw improvement in fibrosis in the bone marrow. The second part is in peripheral blood, there's very mature cells in these patients that you don't see in normal population that are malignant CD34-positive progenitors. We saw dramatic reduction in those as well. The third part is we saw an increase of normal erythropoiesis. So basically, cells that make normal red cells increase in these patients on treatment of 989. And that supports the improvement in anemia. So improvement in anemia is truly because of normalization of hematopoiesis in these patients, normal production of red cells in these patients. And then the fibrosis improvement is also important to note in a subset of patients. So overall, every measure of the disease, it's getting better on patients undergoing treatment of 989, and that's reflected on the spleen shrinkage, on the symptom improvement and the anemia improvement.

Is the fibrosis improvement is just to stop it from happening and then it starts to remodel on its own? Or is there some direct impact on this fibrosis reverse?

So malignant megakaryocytes produce mediator cytokines that basically trigger fibrosis. And by reducing those, I think fibrosis start to improve through remodeling. There's no direct targeting of the fibrosis by 989. It's just the reduction and hopefully, over time, elimination of malignant cells in the bone marrow that then allows the bone marrow to regrow normal hematopoiesis and remodel over time.

Okay. And I think you mentioned before that there's no way -- I mean, the FDA is difficult to biopsy, obviously, the bone marrow and there's inconsistencies because you're only getting a small segment. And there's no modality to measure with imaging the fibrosis yet.

We've continued to -- we're receptive to ideas. We've interacted with a number of institutions that have claimed to have a method that can be reproducible and widely applicable because if you're going to run a worldwide study, you need for this imaging assessments to be done everywhere. We haven't seen it, and I don't think biopsy is reliable enough. I don't think the FDA is going to agree to that. Besides, I'm very happy if we can incorporate VAF and then as exploratory endpoints, we can have things as megakaryocytes and more important perhaps the peripheral. But those are really time-consuming cumbersome. I think they're very important to understand what the drug does, but they are not necessarily the right regulatory endpoints. I think in the molecular side, I think reduction in VAF might be the most -- the one that's going to be most widely applicable.

How much of a reduction in VAF do you think you need to have to see clinical benefit?

I don't think there is a line. What we saw in the ET trial, which is easier to measure because platelet normalization is such an easy to measure and reproducible marker. There is a clear correlation between degree of VAF reduction and degree of platelet normalization. That is pretty clear in ET. I think in MF, we need more data and more patients because VAF reduction in MF is lower. Those patients have higher VAF at the beginning. They have lower residual normal hematopoiesis. And since VAF measures a ratio, if the residual hematopoiesis is lower, that ratio takes longer to reverse. So we've seen changes in VAF in MF. It seems to be taking longer than in ET. I think ET is a cleaner story. And in that one, there is a clear correlation between hematologic responses and VAF reduction.

Okay. Can we talk a little bit about ET because it seems to be a less well-defined disease right now. What we hear from physicians is a lot of patients are watch and wait compared to MF. But what's your sense of how these patients are treated now? And how could a CALR agent change that?

Yes. So I think the standard of care first-line ET today is hydroxyurea. I think a lot of patients are intolerant to hydroxyurea. It requires multiple dose adjustments because of the white cell count. I mean, basically, hydroxy is cytotoxic, right? It just happens to kill platelets and white cells. That's why it gets used in ET. Second line is in patients that are intolerant, which is very common or cannot quite maintain an adequate platelet count or they have a thrombotic event on hydroxyurea, the options are anagrelide or interferon and interferons have been developed as well in first line. I think the important part with interferon is in second-line patients that are post hydroxyurea, the complete hematologic response to interferon is probably under 40%. So it doesn't seem to work very well. And anagrelide is probably under 10%. I'm talking about platelet normalization. So that's what's available, nonspecific therapies that just happen to normalize platelet count in some patients with some safety concerns and some cumbersome dose adjustments. I think what 989 brings to the table is a completely different value proposition. It is the first molecular targeted therapy, not just for ET, but for MPNs as a whole. It showed very clearly not just platelet reduction, but platelet normalization. What we see in the graph that we presented at ASH is the platelets drop and they -- without those adjustments, they stop dropping once they normalize. The reason for that is 989 is killing the malignant cells and completely sparing the normal megakaryocytes. So then you normalize the platelets and you keep dosing the patients and those platelets don't move from there, don't keep going down. Also, we saw no leukopenia and really no anemia to speak of. So I think it's a different value proposition that would exist. And in general, when you look at hematology, malignant heme the last 25 years, going back to Gleevec, going through CD34 antibody, molecular targeted therapies, when they work, they really take over segments of the market based on that.

I would just add that because I've heard the indolent component of the ET population in the watch and wait group. Patients with a CALR mutation ET, there's about 20,000 of them. You remove watch and wait. They're not in that group. Real-world evidence studies with hydroxyurea, only about 25% to 50% of people get to a complete hematological response. Non-989 makes it to market. Someone has a CALR mutation, is not getting a response with hydroxyurea usually because they can't reach the dose, highly likelihood that they get put on 989. If you stratify that population just one more level, about 25% of people are resistant to hydroxyurea, which is a negative prognostic indicator. That's about 5,000 patients. They're also going to be immediate candidates for 989. So I think even in a second-line setting, what's likely to happen is the use of hydroxyurea gets completely reshaped. Anyone that doesn't have control or isn't tolerating it because almost 40% of people have Grade 3 AEs would get put on 989. I think it's an underappreciated indication for 989, and it will be the first one.

Okay. And the natural course of the disease, the patients that don't get therapy, what percentage of them progress and then ultimately either get worse with more aggressive disease or end up getting treated?

So look, I think that there's a high-risk population from the beginning, which are patients that are older and they had either a thrombotic or bleeding event. I think the important thing to understand, let me put it this way, Andy, about ET is -- and this is more clear even in CALR-mutated patients. There is a point where this disease starts to progress towards MF. And when that happens, it doesn't happen in everyone, but it's hard to predict who is it going to happen on and when is it going to happen. But it does happen in a big group of patients. What we're trying to do with 989 in that population and one of the many arguments for using 989 once approved in this population is that you can reset the clock another, let's say, 10 years. So if you're diagnosed with ET and you're in your 60s or 70s and all of a sudden, we add another 10 years to that clock, then ET becomes a solved problem for a very large group of patients just by a very well-tolerated injectable that patients can self-administer at home once the subcu is available, which is something we should discuss. Our subcu development starts this month, and we expect to have a subcu device and formulation ready for pivotal trials in the second half of this year.

Okay. And you also have several other compounds you said in development. You have a TC, but you also have another -- sounds like another MAB too.

Look, our MPN is an area where we're going to continue to innovate and continue to raise the bar of what we can do. We have a T cell engager in the clinic that's going through dose escalation. We'll present data at the appropriate time. We have continued to try to improve on the properties of 989 because we realized that the different affinity for type 1 and non-type 1 was something we could continue to improve even further. And of course, we have the whole effort in V617F inhibition. We have a lead program in-house. We have a backup program in-house, and we have an external backup of our agreement with Prelude. MPN is an area where we want to bring a molecular targeted therapy for every single patient with these diseases by the end of the decade.

Okay. Can you talk a little bit about the JAK selective program you just mentioned, your internal programs and then the option you have with Prelude?

Our internal program is a pseudokinase inhibitor. 058 is a short name, entered the clinic a little over a year ago. We had some challenges with the original formulation. The solubility of this molecule is not ideal, and we knew that. The initial formulation did not solve the problem. We paused. We switched to another solid dispersion formulation that is entering the clinic. We'll have data later this year with that formulation. If that formulation solves the problem, then we'll proceed as fast as possible with 058. We have a backup program that we think solves some of the problems of the lead. That is a pre-IND work is ongoing. We'll have more clarity towards the end of the year. Now we're constantly scanning the landscape for great ideas when it comes to molecule targeted therapies in MPNs. And it just so happens that Prelude, we thought had a really interesting idea in a different chemical space. So we basically did an option deal. They are running this program. We're not involved up to a certain point. At that point, we have the option to basically buy the program and bring it in-house. It will be a question of which one of these programs has the best data, but that's an option that we have on the table.

Okay. I know we have a couple of minutes left. We really didn't get deep into the pipeline. But what else in the pipeline would you I mean you have povo coming very shortly commercially probably. Do you want to talk about that a little bit and the time we have left?

Listen, we expect to be launching it in the first quarter of 2027. If we get a priority review, it would be the second half of 2026. You have a 3-indication JAK inhibitor, the first and only for HS initially. AbbVie will be shortly behind us with Rinvoq, probably first and only for prurigo nodularis and then it will be 1 of 3 in vitiligo. The indication for HS is probably the most important right now. That category, that condition is simply lacking in treatment options. On one hand, you have oral antibiotics or topicals. And then the other, you have IL-17s, and there's no stepping stone in between. We have data both in pre- and post-biologic patients. If you look at HiSCR 50 or HiSCR 75, pain relief, draining tunnels, flare control, the data on povorcitinib are very, very convincing. I think we should be able to capture patients at 2 inflection points in the treatment of HS before a biologic as well as after a biologic. You got a couple of hundred thousand people out there with HS. Only about 50,000 of them are taking an IL-17. The rest are on all off-label steroids or antibiotics. It will be an important first indication for the drug and important just from the big picture of shoring up our core business ex Jakafi. So when we hit the transition, you have a JAK inhibitor that's producing well over several hundred million dollars in sales and has the potential to be a $1 billion opportunity when you look across the 3 indications.

When we compare it to some of the biologics, what are the attributes? I mean, obviously, it's oral versus IV, but it sounds like there are other attributes to that you think are commercially appealing.

If you ask dermatologists when they look at it, you see biologic efficacy when you look at skin clearance and pain relief. Of course, it's an oral, which patients still prefer over a biologic. The other thing about JAK inhibitors to remember is they work fast. rapid. In other words, if you look at the pain relief in the studies with povo, about 30% of people had a 30% improvement in pain. Half of that benefit came in the first 3 weeks on the drug. And so it's a much more intuitive sequencing approach to go antibiotic, JAK, IL-17. Now we'll have to deal with policies at the health plans. But if you use psoriasis as an analog, Otezla was a stepping stone before an IL-23. And I think in this case, povo has better efficacy on a relative basis than, for example, Otezla did versus the IL-23s. I think there's a real opportunity here. There's certainly going to be a lot of trial of the compound given the lack of treatment options in HS right now. This is going to get used. And we expect data on Opzelura in HS in the fourth quarter, which is not really on a lot of radars right now, but we'll have a topical to oral backbone for the treatment of HS if we can get positive results with Opzelura and povo approved by the FDA. So I think we have a competitive advantage going into that category.

Okay. Let me see if there's any questions from the audience before we wrap up the session. Anybody have a question for Pablo or Bill? All right. Well, thanks, gentlemen. Congrats on all the progress.