Incyte Corporation (INCY) Earnings Call Transcript & Summary

Thanks for joining us for the next fireside discussion. My name is Derek Archila. I'm 1 of the senior biotech analysts here at Wells. I'm very excited to have the next company here, Incyte. From the company, we have Bill Meury, CEO; as well as Pablo Cagnoni, Global Head of R&D, if that's right. All right.

Gentlemen, so a lot of changes at Incyte from last year when you started as CEO, Bill. So maybe just talk a little bit about a year in the seat, priorities, and then we can kind of go through some of the key growth drivers here?

Yes. Thanks, Derek. At the beginning of the year, we laid out a framework for how to think about the company. And I think there's really 2 simple parts to the -- to our plan, to our strategy. The first 1 is we have a core business ex Jakafi, and how we should be judged on that core business is maintaining a double-digit growth rate for the next 5 years. And by 2030, we think that core business, what sets the floor for Incyte in many respects, is going to be $3 billion to $4 billion. Product launches is what will continue to drive our core business. And I think we are on track to do that. And you see that each quarter as we report on the performance of Opzelura and Niktimvo and Monjuvi and [ sinus ]. And then Part 2 is really executing against the pipeline, and that will drive the recovery. Our aim is to have a business post '29 that can grow at a 15% to 20% 5-year CAGR. And if you look at the unadjusted peak sales potential of the pipeline, you could see a business. We have to -- we don't have to be perfect, but we have to be successful. That has about $8 billion to $10 billion in top line potential. When you look at the pipeline, there are -- we have 3 therapeutic areas, as you know, hematology, oncology and immunology. There are 5 assets that I think have a high PTRS and will drive 80% to 90% of that recovery. In hematology, we have 989, our monoclonal antibody for MF and ET which is in Phase III. And we have [ Latarsapart ], which is a bleeding disorder, which we acquired at the beginning of the year. In oncology, we have a G12D inhibitor frontline PDAC, which is in Phase III and TGF-beta by PD-1 bispecific in frontline MSS CRC, which is also in Phase III. And then, of course, we have povorcitinib in immunology. And that's where our focus is right now. And this is an execution test. We have to convert Phase III studies into FDA approvals and those approvals into revenue, earnings and cash flow. And it's a 2-part story. Business development will be used to supplement what we have internally to Star Therapeutics deal for [ Latarsibartis ]. I think a textbook example of the type of deal that makes sense for Incyte. We have a clear framework for doing deals. We have criteria. If a deal meets those criteria, we act quickly. If it doesn't, we're comfortable being patient. And I think that framework makes a lot of sense, floor recovery.

Perfect. Good segue. So let's kind of talk about these kind of 5 growth assets that you're pointing to, and maybe starting with 734 and G12D just because ESMO is coming up. And maybe Bill or Pablo, if you can kind of set expectations on what we should kind of be seeing in that data set? And what gets you confident to build around and really invest around this given a lot of the competition that's out there?

Pablo, go ahead.

So it's a really important program for us, as Bill highlighted. And I think ESMO will be a very important meeting for all of you to understand why we're so excited about 734. What you're going to see are a couple of really important data sets. First, it's going to be a combination with 2 types of chemotherapy GemNab and FOLFIRINOX in patients with previously untreated pancreatic cancer. That's our lead indication. We haven't shown mature data in combination with chemotherapy. So this is going to be very important. Will be efficacy, will be a comprehensive update on the safety, including discontinuations, interruptions, dose intensity, et cetera, which I think everybody would like to see. The efficacy data is maturing very well. Importantly, we will not have yet a mature PFS, quite honestly, because we don't have enough events, not enough pace, not progress, but we'll have a landmark analysis that will give you an idea of the durability of these responses. So a very, very important data set to derisk the frontline Phase III study that is ongoing in patients with pancreatic cancer combination with chemo. That study is ramping up very quickly globally. We'll have more than 150 sites open at its peak, and we're very optimistic on the enrollment rate and how that study is going. So that's sort of the cornerstone, the foundational part of the G12D program. In addition to that, we will show data in combination with Erbitux in patients with late-line colorectal cancer. You can remember, Erbitux in those patients have a single-digit response rate. We're very, very enthusiastic about the data that we've seen in combination with a G12D agent, we'll show that data. We're having regulatory conversations with the agency to design a Phase III study in late-line colorectal cancer of our G12D in combination with Erbitux. So a very important part as we continue to expand the franchise into a different tumor type. Two more important things or 3 that we're not going to show data yet, but are important to keep in mind how the program is evolving. We are very interested in moving into adjuvant pancreatic cancer, a very important area for patients because it can drive a lot of benefit and obviously, an important part of the market. We have combined also with FOLFIRI and Erbitux in frontline colorectal cancer. That will not be at ESMO, but it's evolving very, very well. And the final point is we're going to give you an idea of the combination strategy. We realize that G12Ds combine well with other targeted agents. And that's also something we're building. So you'll see pancreatic and colorectal data, and you'll get an idea of how we're expanding the program going forward.

I think a key takeaway from what Pablo just talked about is we should be judged when it comes to G12D. I think the data are very competitive, and you'll see that at ESMO is on systematic expansion so that this moves from or transitions from a single asset story to a franchise. And that type of breadth is how we extract as much value out of G12D as anything else.

Got it. And I mean, I guess, when you think about the need to be differentiated, as you said, you believe the data is very strong, and we kind of know where that competitive benchmark is. But maybe talk to the development strategy as you kind of outlined, Pablo, how you can differentiate around that and ultimately maybe [ be person ] areas? And then just a follow-up to that is, how do you think the market evolves commercially, like, again, with the options that will be out there?

So I think when I look at the [ eras ] G12D space, right, I think it's fair to say that there's 2 companies, us and our main competitor are ahead of the pack. Let's call it that when it comes to executing frontline pancreatic cancer. I think 1 area of different -- and I think when you see the data at ESMO, hopefully, you will agree with us that -- I think getting into who is 2 percentage points higher or lower on response rates or nausea or -- I don't think it's a very productive use of time. I think you'll see that the 2 programs or the 2 drugs are basically comparable. And I think that's okay. In terms of who's going to finish first in pancreatic cancer, I think, again, we're neck and neck, and the 2 studies are likely to finish pretty close to each other. So for us, the differentiation here is going to come by combination strategy. And that's why we think colorectal cancer is very important because I think we're going to -- we have generated data that you'll see at ESMO that is fairly mature, showing that we can combine with Erbitux and we can really significantly improve the response of single-agent Erbitux in late-line colorectal cancer. And then taking that, which is in itself an important market, and moving that to frontline colorectal with Erbitux, and chemo is a really important area of growth for the program. So that's the approach we're taking. Obviously, the combinations are going to come as well. But the key for us in this point is to accelerate as much as possible colorectal cancer, we think it's a critical area of differentiation from our competitors.

Got it. And as you think about kind of the opportunity from a TAM perspective or commercial opportunity, like I know, Bill, you were saying last night kind of like framing out this kind of GI, oncology, like where do you think that -- what could that be? What could that look like?

Well, we know the size of the PDAC and CRC markets. In PDAC, G12D is about 40%. If you look at CRC, it's roughly 15%. You could estimate a TAM of $7.5 billion to $10 billion just in the United States. I firmly believe, and precedent proves this, that the -- this will be a multi-asset, multibillion-dollar category. You look at other areas of oncology like HER2 and BCR-able and PD-1 and CDK4/6 and eGFR, there are first generation, second generation, third generation, multiple lines of therapy, multiple tumor types and multiple combinations. Right now, as you and I have talked about, there's only 2 companies in late-stage development with a G12D inhibitor in Phase III, and that's Incyte and, of course, RevMed. And so I believe that we're set up to build a vertical inside of Incyte that has the potential to be as relevant and as big as our hematology business, which in many respects is the central identity of the company. And executing against the plan that Pablo just talked about is the priority. And if we focus on that, this will help drive the recovery of Incyte post-2029.

Got it. Continue to move on down the list of assets here. So we talked a little bit about TGF beta as well. So I guess, how does this fit in and ultimately part of that CRC story as well and maybe even the combinability of G12D and TGF beta, but maybe a little bit more higher risk, but maybe you can kind of give us your sense of like how we should be thinking about that program in the portfolio?

I think Pablo does an excellent job of describing the scientific hypothesis behind TGF-beta by PD-1, which -- we're in a one-on-one situation, 1 of the largest wide open white spaces in oncology. It's a higher risk program. But if we're right, it could have a profound impact on the future value of the company. And I'll let Pablo talk about the hypothesis. I think he's spot on.

So TGF beta is arguably the second most important mechanism of tumor evasion and solid tumor. Obviously PD-1/PD-L1 access is the key, and we figure out how to drug that now for the past 15 years. The challenge is if you give a systemic TGF-beta inhibitor is systemic toxicity. And those have been tested multiple times, antibodies and small molecules. [ Traps ] don't work as well because catching enough [ like in ] to make a difference is problematic, so those have been ineffective instead of toxic. So what our team did is come up with a completely different idea, which was take an antibody against the TGF beta receptor 2, only 1, which we think is the most important one and attach to anti-PD-1 arm. Now the TGF beta receptor 2 antibody only engages when PD-1 is fully engaged. So what that does is basically drives a bispecific to the key side of action, which is a tumor microenvironment. And in the Phase I study, what we've seen mostly up to doses of 900 milligrams were PD-1 related side effects, which you would expect. I mean at the end of the day, I would call it a better PD-1. Very little, if any, TGF beta side effects. Now if you exceed the doses, there's a point when you start to get a little bit of that, but that's not the dose we're taking for further development. So that's the scientific concept. The data that we've generated, which is in hundreds of patients, we have now well characterized the safety of this molecule is in patients with late-line colorectal cancer, MSS colorectal cancer, including more than half the patients with liver [ mets ], a very clear evidence of single-agent activity, which you don't see with anti-PD-1. [ Citepe ] PD-1s have been tested in MSS colorectal, the response rate is 0. And we showed a 15% response rate, including more than half the responders where patients with liver [ mets ] and the responses were quite durable. That was the data that really set up the chain of events or where we are today, which is we decided then to combine it with chemotherapy, which we've done, companion with all folks bev. And then we started generating a larger data set, which you will see at ESMO in frontline MSS colorectal combination with [ FOLFOX bev ]. In parallel with that, we took what it's -- I would say, a risky approach. We launched a Phase III study in frontline colorectal, high risk, high reward. That study is going very well. It's expanding globally rapidly. And you will see at ESMO, the data that we have now in hand that hopefully helps significantly derisk the program. A 40-plus patient data set, frontline colorectal MSS, including about 2/3 of the patients with liver mets. And the response rate and some idea of the durability, again, not a lot of progressions yet in combination with [ FOLFIRINOX bev ]. So that's the data that we've generated. In parallel with that, we did a couple of other things, we're combining with our G12D inhibitor. That's a very intriguing combination. When you have 2 novel drugs that work well, you try to see if you can give them together. That work is ongoing. And we're moving the TGF-beta program also into the adjuvant setting in colorectal cancer, which we think it's also a very important indication for our patients and a big market. If you take patients with surgically resected MSS colorectal, you give them chemo. After chemo, patients that have circling to A have a very high risk of recurrence. We think we can fix that by giving them a TGF-beta by PD-1 in combination with chemo. So that's the plan for TGF beta. We also update other tumor types. We won't talk about that at ESMO. We want to focus on most in GI cancers at ESMO.

Got you. When would we learn more about potential other areas or other tumor types that you want to...

I would call it, first half of next year. We're generating some more proof-of-concept data. We have presented some of that. We showed data in ovarian cancer, head and neck and lung. 20% to 30% response rate, including post PD-1. So clearly, the drug is active in other settings. And the question now is a development plan, and we are laying the foundation for that, and you'll see more next year.

Got you. Maybe shift gears to 989. So this is 1 basically helping replace the current business with Jakafi and myelofibrosis MPN. So we should get a couple of updates, but the main 1 around kind of the Phase III for MF. So maybe just talk about some of the options that are on the table there? And I know with a more targeted therapy like this that could be disease modifying, your push to the FDA as maybe more novel endpoints. But where do you think we'll net out in terms of that relative to more traditional endpoints?

I'll set it up and let -- Pablo will expand. First -- and we've talked about this -- there's a base case scenario here. Second-line MF conventional end points. That's SVR35, TSS50, will collect information on anemia with a focus on type 1, although we'll study non-type 1. And then there is an ideal scenario, you could argue, which is we convince the FDA that a composite endpoint makes sense given the attributes of 989. It's a more complete way to look at the benefit of the product in MF. Base case, we get conventional endpoint with a focus on type 1, and we turned the composite endpoint into a key secondary. And then continue our conversations with the FDA as it relates to a composite endpoint, which could be relevant to a first-line program or to our next-gen antibody. We'll provide an update on the third quarter call. We have not finalized the protocol, but those are the 2 paths, the same 2 paths we talked about several months ago. We know that with the conventional endpoint in a base case scenario, that 989 is going to be best available therapy if you look at the data from our Phase I. So we're very confident about that. When you go into the frontline setting, what's going to be relevant as the data we share at the end of the year, which is we'll have data in monotherapy and combination therapy with ruxolitinib. Roughly 50 or 60 patients split 2/3, 1/3 monotherapy in combination. And those data are going to help instruct what our approach is in the frontline setting. If the data in our ASH update looks like the data from the JAK ineligible cohort that we shared in the middle of the year at EHA, we have a real line of sight even on conventional endpoints to going into a frontline study. And we'll provide as complete an update as we can at the third quarter call.