Incyte Corporation ($INCY)

Good morning, everybody. Welcome back to the Bank of America Healthcare Conference. I'm Tazeen Ahmad. I'm one of the senior biotech analysts at the bank. It's my pleasure to have our next presenting company here, Incyte. Presenting for Incyte up here on stage with me is Bill Meury, who is, of course, President and CEO. Bill, thanks for making the trip out West to see us.

Thanks, Tazeen. It's good to be here. .

So it's been quite a year of transformation for Incyte. So I thought maybe we usually start off by asking for an overview of the company, but I thought I would switch it up a little bit with you. And have you tell me what it's been like to be at Incyte since you became the new CEO of way back last year?

Yes, thanks. It's a good question. It's been about a year and I can tell you that I did a lot of diligence before coming in, I had an opportunity to speak with the members of the Board for an extensive period of time. And there have been nothing but good surprises so far. One of the reasons I joined is I thought that the core business as well as the pipeline was somewhat underappreciated. I think there's a lot of substrate and potential for meaningful product flow over the next several years. And that's just going to be important in terms of replacing Jakafi and going beyond Jakafi with multiple growth drivers. Second is I was impressed with the R&D and commercial capabilities of the company. And I think the discovery group, there's a talented bunch of biologists and chemists and translational researchers, the development group. We have about 10 Phase III studies underway, and they had to execute. Commercial team is wired into the markets that we're in. And then financially, the company is in a good position. Right now, we have strong revenue growth and cash flow growing balance sheet. We're squarely focused on ACI and just going beyond Jakafi. And since I've I inherited a good business. I think the company has achieved most of its major milestones over the last 12 months. And I think the growth profile of Incyte post '29 is much clearer today than it was even a year ago.

Yes, and you've been very passionate about talking about that. So we'll go into some details. So maybe let's talk about the current commercial lineup, especially Jakafi. So I think it still manages to surprise people, the uptake that it gets every quarter, given that it's a very mature asset, we're actually approaching the LOE for it. Can you talk to us about what some of the drivers you've seen over the last year that allow us to keep bringing in new patients or circling patients back.

Yes, it is pretty remarkable. It's year 15 in the market. This quarter, as you know, sales were up about 7%, 6% of that was pure demand. We see broad-based growth across the 3 indications. So MF PV and GVHD. MF and GVHD are low to mid-single-digit growing indications, PV is plus 10%. And by the end of '26, it will be the largest indication -- it's a standard of care treatment. It's got a lot of support from prescribers, and it has excellent formulary coverage, and you put those 2 things together and you have a sustainable growth story. And this year looks strong, and we expect the same for the next couple of years when we lead up to 2028.

Okay. So how should we be thinking about the switch rate to Jakafi XR? You recently got that approved. How important is this for life cycle management?

Yes, it's a good question. XR is a bridge for the company. And in terms of conversions and there's models out there, as you well know, analogs, you can look at, we estimate that we can convert, let's call it, 20% of Jakafi IR. So on a relative basis, you'd say that's modest. But in absolute terms, that could be $0.75 billion in sales. It's a once-a-day version that was standard of care. We know that with a chronic symptomatic condition, when you miss doses, there can be a loss of control. When you go to a once-a-day formulation, the adherence rate is going to be 15% to 25% better than BID. The way I think about conversion right now in 2026 to think about measured early uptake with a step up in conversion tied to access in '27. So '26 will be about formula coverage, conversion rates will be in the low to mid-single digits. And then in '27 that when we expect to really accelerate the rate of conversion. And by the time you get to early '28, we'd like to see that number around 20%.

Okay. And is there a subgroup of patients that you think will be earlier in conversion?

There's definitely a subgroup of physicians, early adopters. We also believe that in the GVHD market where patients are on multiple therapies a once-a-day version of Jakafi may be more favorable. And there are also certain channels where we believe conversion can be accelerated. And the program is being launched right now. In fact, our sales organization, both on the East Coast and the West Coast, has launch meetings this week, interactions with health plans started, and the key metric, and we'll be talking to you about this on each quarterly call will be what does the formulary coverage look like how rapidly can we achieve it? And at that point, you can really start to drive conversion.

Okay. And then just in general, what is the sentiment and insight about the time it will take to get on to formulary coverage. Is there anything complicating about this that would make it longer than what you would think?

Yes, it's a good question. It's the right question. So we price Jakafi XR purposely at parity to Jakafi IR. And that was to enable fast formulary coverage. And I would expect that in a 6- to 9-month period, we're approaching 50% or more formulary coverage. And we'll focus on the top PBMs and the top plans, and I would hope we've made some meaningful progress by the end of the year, which gives us just over 6 months of time.

Okay. So let's talk about Opzelura. It's received phenomenal reviews when we talk to physicians about it. And all the survey work indicates like the drug is really efficacious. So efficacious that the amount of drug that patients need seems to be much smaller than we thought. So is that a good thing?

Is that a good thing? I think it's a good thing that when dermatologist thinks about a treatment for AD that it's topical. They know that Opzelura is superior to TCI and for long-term use is superior to a topical corticosteroids. Yes.

So for the -- I guess, the patients on the mild around of, let's say, AD, for example, do you think that you could make up for it with more patients over time as opposed to also counting the number of tubes per patient, which seems to be lower than what initially was thought.

I do. If you -- the business between now and 2030 has the potential to grow at a 10% to 15% 5-year CAGR, which means globally, we expect Opzelura to do almost $780 million this year, and we're just under $800 million. By 2030, we expect that number to be about $1.3 billion. Right now, we know that the underlying growth in the U.S. for AD and Vitiligo is very strong. And there's just 2 metrics that we looked at to get to your question, what is our share of new patient starts? That will be the measure of the health of any business in biopharma. We're at 46%. You also look at what are your new patient starts on a year-over-year basis. And so in the first quarter of '26, new to brand or new patient starts for [indiscernible] were up 30%. And so the fundamentals of the business are very strong, and I think it's because of what you said, it performs well. And we have 20,000 riders, and we have very good formulary coverage at this point. And so we just have to keep our foot on the gas and continue to drive the business organically. And then, of course, we would layer in the international launch of Opzelura for AD which is in the second half of this year, and we may have an indication for HS. And those are the 3 components of growth for Opzelura over the next 5 years.

Okay. Since you mentioned the West launch for Opzelura, how are you thinking about that?

Internationally, Opzelura is available for vitiligo. And in 2025, it did roughly $130 million in sales. We didn't have an indication for AD. We get the indication for AD in the second half of '26 and the AD market is about 5x the size of the vitiligo market. And so I expect it could throw off $200 million to $300 million in incremental sales over the next several years. The first country we're going to launch it in Germany where we have reasonable pricing, and we'll also launch in the other EU 4 countries.

Okay. What is the pricing differential between U.S. and Europe just directionally?

Depending on the country, it can be about 50%. But in Germany, it's better.

Okay. How should we be thinking about the rest of this core business? We talked about Jakafi, we talked about Opzelura. As we approach 2028, you've done a good job of letting people know where you think sales might go to, obviously, they're going to decrease because you're going to lose exclusivity. But is the floor? Maybe just remind us what you think it's going to be. How long it will be there, and then we can move in to talking about [indiscernible].

On a revenue basis.

Yes.

Yes. The core business, without heroic assumptions about the other products Monjuvi and [indiscernible], and we put Povo in there should be at least a $3 billion to $4 billion business. which is this core business growing at roughly, let's call it, a 20% CAGR. This quarter, our core business was up 63% year-over-year. And so it is in very good shape right now. What will be key is that when we launch Monjuvi for frontline DLBCL that we garner a reasonable percentage of that market. Now [indiscernible] but there will be a place for Monjuvi, and we'll share data on our frontline DLBCL study. There's only been 2 positive studies believing hours on top of R-CHOP at the ASCO meeting, and people will be able to see the PFS, which we reported in the press release, but also how the product does across subgroups, different sales of origin, ABC and GCB. This was an ipi 3 to 5 population, so a more severe population, more complex patient group, and from our perspective, a 10% share of the frontline DLBCL market, which is modest in relative terms, doubles the size of Monjuvi. Then the Pova launch is going to become very, very important, which we'll introduce in early 2027. We're currently discussing with the FDA the application. The business right now with those 5 assets, I think, reliably set as you put it, the floor for the company.

Okay. Maybe let's spend a minute on [indiscernible] so where do you think in that treatment regimen this can fall into? It's going to get crowded pretty quickly? And what do you think are the special attributes here that we should be aware of?

HS is one of the most difficult dermatological conditions you can have other than maybe advanced skin cancer. There's no FDA-approved oral inflammatory -- or anti-inflammatory. It's a multi-cytokine disease. Pova is a multi cytokine inhibitor. I think we're going to capture patients at 2 inflection points, prebiologic and post-biologic. If you look at the data from our Phase III, you have biological efficacy, iScore 50, 75, 90 and 100, pain relief, draining tunnel clearance. And so I think that the market is structurally set up for an oral anti-inflammatory and for sequencing oral to biologic. Now that's not to say that it's only going to get huge prebiologic. I think it will source patients from both the pre-biologic setting as well as the post biologic setting. We know that IL-17s work. They don't work for everybody. There are patients on those drugs with active disease, not getting pain relief. There can be some wear off. I think they would cycle right off of [indiscernible] on to an oral anti-inflammatory in this case, povacitinib. And so -- our job right now is to get it approved broad label and why are the launch for success.

What is the proper range of pricing to assume?

It's a good question. There's a corridor in the market, if you just talk about WAC prices for a minute. At the low end, it's about $7,000 a month at the high end. It's north of $10,000. We will work within that corridor as we get closer to launch, understand what the label looks like, we'll decide what the final price point is. But this will be about volume and establishing Povo as a legitimate option in both of those populations.

Okay. And do you get to leverage the sales force from a Opzelura for this?

Yes, it's a good question. We get a lot of leverage out of it. We'll expand the sales force to call on some HS specialists, but most of the infrastructure is in place and there is a lot of overlap.

Okay. And from the time it gets approved, how quickly can you start marketing it?

So we expect an approval at the end of 2026. I would say we'd have a launch all rearing by first quarter of 2027. And one other point is Opzelura, if it gets positive data in HS. in mild to moderate HS, which will get those results in the fourth quarter of 2026, we had topical to oral solution and the leverage point that you just made is highly relevant to both products.

Okay. We'll come back to Povo later, but I wanted to spend some time and color. So this became -- data you started presenting data for this a couple of years ago, and it became a little bit more prominent last year. So I think when we have conversations with investors, and that I think largely, people understand what role it could play, we could talk about that for a minute, but I also want to spend some time on the potentially bigger indication, which is ET. So maybe let's start with ET and then we can go back to MF.

So we'll start the Phase III trial in the next several weeks. We have agreement with the FDA on a Phase III study design. I think the important thing when you think about ET is to stratify that market. And you have patients, half of 20,000 patients that are doing fine on hydroxyurea, but you have the other half of patients, which is about 10,000 patients who do not achieve a complete hematological response. Not because hydroxyurea is not an effective cytoreductive agent, but because it's very difficult to get to the 1,000 milligram dose where you can get those complete responses. Those patients have residual symptoms, residual thrombotic risk and albeit low residual transformation risk. Those are patients in their 40s or 50s, they'll live with ET for a good portion of their life. So 989 achieves a complete hematological response, as you know, it varies by type, but roughly 80% and has a disease-modifying benefit in terms of the reduction in VAF. This would fundamentally change the way ET is treated from hydroxyurea, which is a trade-off drug, to a disease-modifying mutation-specific targeted therapy in 989. And I think that it will reshape the way hydroxyurea is used today. assuming we take what we produced in Phase I and replicate that in a Phase III study, and we've talked about the design of that study, as you know.

Yes. So for physicians when we talk to them, they say that, that specific patient population may not feel the need to be on therapy because they're not as advanced as an MA patient is. So what's your market data research telling you on that?

Yes. If you look at patients with a CALR mutation AT, they have very high platelet counts. And they're not achieving a response with hydroxyurea. And so the reason why a physician would say, well, it's a small number of patients is, think about all the people with ET, it's like over 100,000. But if you look at the car population, it's roughly 20,000, and we're saying half of that 20,000, 10,000 is the target market for 989. And I don't -- I haven't met anybody that has not commented that ET for CAR patients is like a ticking time bomb. The disease does have the potential to cause thrombosis and transform, and they want to get platelet counts into a normal range. In this case, it's less than 400. And so I think if you stratify it the right way, this targeted therapy has utility in that part of the market.

Okay. So you're going to start your facing. How long do you think it will take to enroll that study?

From first patient in the last patient, you're probably looking at a 24-month period for enrollment and then you have, of course, 6 months treatment.

Okay. In the meantime, do you have plans to show any follow-up data from previous data set of medical meetings?

Yes, it's a good question. So at the EHA meeting in the middle of this year, the last data set we had was 55 patients at week 24 and at the EHA meeting, we will have $110 million, and so you'll see more patients at week 24.

Okay. And so what metrics should we be looking at there?

Yes, complete hematological response is namely the and you look at VA, and you'll see that unlike in MF, which is a much more complex aggressive condition, the VAF reductions in ET are more pronounced and are stronger than even what we showed at ASH.

Okay. So that's it. So let's now go to MF. So you've shown impressive data for that subset of the population already. Remind us what part of MF patients have the MCLR mutation.

Yes, it's a good question. About 35% of patients with MF have CALR mutation, Roughly speaking, it's probably almost 10,000 people.

And so how easy are these patients defined. Are they already type gene types?

Yes. That is pretty routine these days. It's a good question. And we have not had any challenges in enrolling patients in our Phase I trial. I think the MPN community, is especially focused on moving away from broad pathway nonspecific treatments to just like in other areas of oncology to mutation-specific targeted treatments.

Okay. So for car patients that have been on Jakafi, what are additional challenges that they've had relative to the patients who don't have the mutation?

Yes, it's a good question. This isn't widely known. There is data in the literature, and we will share data response rates with JAK inhibitors in CAR patients are lower than what you see in the overall population. So for example, if you look at the label for Jakafi, it achieves SVR at 35% of between 30% and 40%. I think it's 29% and 40%, but in a CALR patient, it could be like 20%. And so it is a unique population of patients where we think 989, our monoclonal antibody can have a lot of utility.

Okay. So it does look like other companies, larger companies are also looking at this subset of patients. What do you think that is?

I think -- well, it goes to what we believe is a trend in MPNs, which is the JAK-STAT pathway has been -- is fully understood and exploited. But more and more, they're looking to segment the population match therapies with the biology. And so I think we will see more and more work being done across MPNs, whether it's 989 with CALR or our 6.1F, so that precision oncology enters the area of MPNs.

Okay. Are there other mechanisms outside of JAK-STAT that you think could have efficacy on CALR patients as well?

Not -- that's not a broad pathway blocker. I mean this is a mutation specific targeted approach. And 1 of the features of 989 is it's exquisitely selective. And you see that in the benefit risk profile. We focus a lot on spleen volume reduction, symptom relief, anemia response to translational data, notice every other novel mechanism for MPNs or most novel mechanisms for MPNs are associated with cytopenias and other toxicities. But the benefit risk profile of a monoclonal antibody like 989 is pretty impressive.

So what is the next data update for MF?

So at EHA, we will provide an update. At ASH, we showed data at week 24 in a second-line setting 36 patients, and when we get to the EHA meeting, it will be roughly 60 patients.

Okay. And trend-wise, numbers do you want them to look the same as they did last year?

Yes. You're looking for consistency in terms of spleen volume reduction, symptom relief and anemia response, and we'll also share where we are with translational data.

Okay. Now what about combination of Jakafi with 989.

Yes, it's a very, very good question. It should be complementary I think hematologists look at that combination is potentially very interesting. We're going to have data at the end of the year at the ASH meeting in 2026, looking at 989 in the frontline setting as a monotherapy and as a combination therapy. There is a concept, a use case of induction and maintenance where you work with 989 and with Jakafi and then make -- perhaps maintain with 989. That's a concept. We would have to produce data and, of course, secure approval for that. But Jakafi is dealing with spleen volume reduction in symptoms, but no other part of the disease. 989 is dealing with those 2 things, plus anemia, platelets neutrophils and as well as all the translational data that you've heard Pablo talk about, which is megakaryocytes and C34 positive progenitor cells. And so it's a much more holistic approach and is focused on restoring bone marrow function, not just a quality of life endpoint.

Right. And what about the survival benefit that Jakafi has? How do you think that could be complementary in combination.

It should be additive, but those are data that we have to produce in long-term studies.

Okay. So let's maybe go back in a few minutes behave, I wanted to touch on Polvo again. Outside of HS, what other indications do you think are going to be compelling to look out?

Yes, it's a good question because we spend all of our time on HS because we have an NDA submitted to the FDA. But we will get data this year in the middle of the year, well, we just got the Vitiligo data and we will update at the end of the year in PN. And so you're talking about 3 indications. I think the primary driver for Povo will be HS. But when you look at Vitiligo, it's the largest market of the 3, HS and Parago nodularis. The key with Vitiligo is to medicalize the treatment. And the more and more patients and physicians see it as a chronic inflammatory condition, chronic immune condition, the more likely you can unlock more and more patients. I think that's key, whether it's AbbVie with their product or Pfizer with their product or insight with povacitinib. One of the benefits that we have in vitiligo is we already have a topical solution. with Opzelura. And so we will have a topical to oral option. And what Povodoes is it unlocks those patients with vitiligo who are not taking Opzelura who have a PSA of greater than 5%. We're applying a topical on your body is not always that practical. And then paragonodulors, the way I look at it, that's an itch disease. And there's 1 thing JAK inhibitors are really good at it. I think JAKs were made for PN, and they work very fast. And so between the 3 indications, we think we have a product that could do between $1 billion to $2 billion in sales.

Okay. We've talked about this. In terms of vitiligo, so if you pursue profile with indication, how does Opzelura fit in going forward?

I think they're complementary and they work together. And that's true whether you're in HS or whether you're in Vitiligo. Opzelura is very good for people that have less skin involvement. Polo is much more practical for patients who have more extensive skin involvement. I expect very little cannibalization. And whatever cannibalization we get is more than manageable.

Okay. What have you learned from the Vitiligo launch so far with Opzelura, outside of it tends to be more popular and less surface area portions of the body, face, or hands.

Yes, I think that there's a lot of education that is required, educating about the condition, also educating about the time it takes for treatments, whether they be topical or oral to repigment the skin. And I think the patients who are willing to live with it. And I think that's a choice. And I think there are other patients that are really looking to manage it, especially when your vitiligo is affecting your hands and your arms and your face and your neck, which are very sensitive areas. There is a major consumer activation component in a condition like this. So that pads are aware of the availability of the treatment. And I think with povacitinib and Opzelura, we can leverage both assets tour because I do believe you could unlock diagnose and treatment to a much greater extent with approved orals, hours and others that we haven't been able to do before.

Okay. So how should we be thinking about the catalysts over the next 12 months? So we've talked about upcoming data for BadASCO,what should we be thinking about for ESMO?

So 2 important data updates at ESMO. One is we have -- we'll have an update on our frontline study with G12D in combination with standard of care chemo. So our G12D plus FOLFIRINOX and Genmab. We're very reassured by the data in terms of the objective response rate. The most important component here at this point is durability of response and an estimate on PFS. But we have a model...

[indiscernible].

That's in [indiscernible] that's exactly right. We have a novel G12D inhibitor, very active combinable with both FOLFIRINOX and GEM NAV, and we started a Phase III study, as you know. I believe it's an underappreciated asset. I think it's going to start to declare itself and could be an anchor for our solid tumor oncology portfolio and insight. We will also provide an update on our TGF-beta by PD-1 bispecific in colorectal cancer. You'll see those data on top of FOLFOX EV, BEV and cetuximab. And that is also an interesting opportunity for us. As you know, PD-1s have almost no efficacy in MSS CRC. We showed in our late in second and third-line Phase I study, an objective response rate of about 15%, 23%, no liver mets, 12% liver mets. This is a really unique product. No one's cracked the code on TGF-beta by PD-1. The program is still maturing. We are in a Phase III study. It was a calculated risk. It has the potential to be an outlier opportunity for the company. Let's watch the data mature, and we'll see if we have something.

Okay. So that covers ESMA, then we talked about EHA and we've talked about ASH. So that covers 2026, did I miss anything?

No, you didn't. Good job. .

Okay. And then what data readouts just summarize top level to expect next year?

Good question. In 2027, well, we'll have updates on the 989 program on JAK2 617 and anything coming out of discovery. And we'll probably also have some updates on the solid tumor oncology program. What will be in launch mode in is all of our immunology business.

Okay. Perfect. And then last question for me really quickly. Your views on business development, bringing in SS?

Look, it's going to be an important part of our growth strategy like every company -- and we're focused on the 3 therapeutic areas that we're in today. I think a deal for Insight can come in 1 of 2 sizes. -- a smaller transaction, somewhat derisked, less upfront capital or something maybe a little bit larger that requires more upfront capital. And our balance sheet is a strategic asset right now. What we're solving for in BD is not a revenue gap. It's constructing a portfolio of multiple growth drivers so that Insight could be a top quartile growth company post '29.

So is it important for you that anything you bring in already generates revenue? Or do you prefer it not yet be closer to it, but not yet.

It doesn't I think business development for revenue stage assets, there's not a lot of return left for the buyer, as you know the flip side is we're not looking to buy a lot of unbounded downside risk. I think we're looking for things that can contribute to top quartile growth when we hit 2030, '31, '32, which would be entering Phase III somewhat derisked. I think those make the most sense for Incyte.

Okay. Perfect. All right. Thank you. With that, we're out of time. Thanks, guys, for joining.