Incyte Corporation (INCY) Earnings Call Transcript & Summary

Welcome to the Cantor conference. My name is Eric Schmidt, and it's my pleasure to moderate the next session with my colleague, Imagen Mansfield, and delighted to have with us the insight team fresh off a big year and looking forward to a very eventful fall as well. We've got the company's Chief Executive Officer, Bill Murray, as well as the company's President, Head of R&D, Public and Oilwell, thank you for being here. Bill, it's been just about a year since you took the helm. So give us a lay of the land and what's worked well over that intervening period since we last saw you.

Yes. Look, I joined the company just about 14, 15 months ago. One of the things I observed from the outside looking in is that the pipeline, when I joined, was still in a proof-of-concept stage. We did not have Phase 1, significant Phase I data on non-A9,-G12D, TGF-beta by PD-1. Obviously, we didn't have our Proteins modulator for vanilla brands disease. And here we are about 18 months into the phase, and we're in Phase III in all those assets. So I think the pipeline has advanced in a way that is very reassuring, number one. Number two, I think it gives us much greater visibility into the recovery phase, the growth rate of insight post 29 after we lose Jakafi. I think we, as a management team should be judged on 2 things right now, and we laid this plan out at the beginning of 2026. The first 1 is getting the core business to $3 billion to $4 billion. That is essentially the floor for Insight. And that is supported by multiple product launches over the next 12 to 18 months, 2 of them are already on the market, XR, and we launched Opslora in Germany actually a couple of weeks ago. And then we're waiting for povacitinib and potentially frontline DLBCL for Monjuvi. So that's the core business. And we have to keep that product line moving and you'll get reports every quarter as we report on the performance of those launches. And then part 2 is the pipeline. And there are 5 assets in the company right now that will represent roughly 80% of our recovery, and that is 989, our Calor antibody for MF and ET, our G12D inhibitor, for pancreatic cancer or TGF-beta by PD-1 bispecific for colorectal cancer, the protein as modulated for von Willebrand and then povacitinib, which will be part of the core business as soon as it gets approved. we expect at the beginning of 2027. That is an execution test. And I think a lot of the biology risk has been removed. The Phase I program that supported our decision to go into Phase III were sizable Phase I programs. And now it's about making sure that we maintain study time lines, secure regulatory approvals and then convert those approvals ultimately to revenue, earnings and cash flow. And the last point I would make is business development, like in any company, is going to be used to supplement what we have internally, we're not going to buy our way through 2029, and we look for primarily for opportunities that can be highly accretive to the growth rate of the company when we get past the transition.

Very helpful. So as you execute on part 1, the execution on the core business and then part 2, the derisking and maturation of the pipeline, when is the right time to provide us with some guidance on that trough earnings and the growth coming out trough...

Yes, it's a really good question. I think sometime next year, as we get more clarity on the recovery. And while it is derisked in my opinion, there will be proof points between now and as we get closer and closer to the transition, and we'll start to provide a framework for how to think about the company in terms of revenue, earnings and cash flow during that period of time. I think we're set up very well right now, but there's 1 thing you can never underestimate in biopharma, and that's attrition, whether it's a delay or an underperforming launch or I don't believe in our case, is 0, but as we get more information, I think it's important we give visibility into how we'll manage the P&L of the company and what we think the long-term growth rate of insight can be. What we're targeting is top quartile growth. And if we can get this business to grow at a 15% to 20% CAGR from 23% to 35%, for example, just to pick a period of time, that will be really successful. And certainly, the assets that we have, and if you look at the potential without using heroic assumptions have the potential of 2x the business, but we don't expect people to take our word for it. We have to execute these programs, and we have all the pieces in place right now.

And then throughout this period of transition, if you want to call it, you've got a lot of cash on the balance sheet. You're generating a lot of cash each year. you referenced business development. Is that the right use of that cash, the reallocation of the cash? And what else are you looking for there?

Yes. I think the first call on capital is making sure that this R&D program that we have in place, which is heavily Phase III weighted is maximized. And I think Pavel will talk a little bit about what we're going to do with 989 and G12D because those are single assets. Our job is to systematically expand 989 into an MPN portfolio of multiple targeted therapies and then to do the same with G12D in terms of tumor types, lines of therapy and combinations. Second call on capital will be business development. And when we think about business development, I think the Star Therapeutics transaction was a textbook example of the type of deal that makes sense for Insight strategically and financially. It was a late stage or a Phase III asset in an area where we have differentiated knowledge and capabilities. We believe it has plus billion dollar potential, a relatively derisked asset, and it was a staged deal in terms of how we deployed capital and very accretive if we're successful to the post 29 picture. And then this case things you can do that are more near term, and that could be supportive of the company over the next several years. Those use a larger, more upfront capital. We'll be very selective if we do that.

Okay. And then speaking of the near term, as you advance toward the Jakafi patent expiration, we're about to talk, I'm sure, about this top 5 or so pipeline candidates where you're going to spend considerably and really expand the franchises and create some hopeful long-term shareholder value. How much do you care about your P&L in 2027 and 2028?

Yes. Listen, we have to manage it. We're not pursuing a growth at all cost strategy. I don't think anyone has the luxury of doing that. But to be clear, what we're solving for is not margin right now, we're solving for a growth rate. And if we can invest now and take care of the next decade, we're going to do it. We want R&D over the long term as a percentage of sales to come down, and that happens 1 of 2 ways. You grow your sales, that's the best way. And the other way is you moderate your spending. What I will say about R&D investment right now is that over 80% of our investment is focused, Eric, on the assets that we're talking about. So we don't have inside the company, I get Pablo a lot of credit for this. We don't have a lot of limbo projects or zombie projects or lottery tickets. We're investing in assets that we think will improve the risk-adjusted net present value of the company, full stop. And we have to continue to call balls and strikes as it relates to what we invest in, and I think we're doing that. And as we get closer and closer to this transition, we'll again provide more framework on that.

Okay. Let's transition to the pipeline. You've highlighted your top 5 candidates. I think 2 of them in particular are very timely in terms of the discussion. Pablo, do you want to start with G12D that -- we go there, given the updates at ESMO that we'll expect.

Absolutely. Okay. So we call a G2 program, 734, -- those are the 3 numbers. We're working on a name. But for now, let's stick with 734. So what you're going to see at ESMO, which is just in a few weeks, it's an update on 2 tumor types, 2 different lines of therapy for the 734 program. The highest priority is for online pancreatic cancer. And in that area, we're going to present a larger data set that you've seen so far. close to 50 patients, half of them of 734 in combination with Folfox and half in combination with Genmab. So frontline, chemotherapy-based in pancratic cancer. will provide a comprehensive update on efficacy and safety. And I think the data that's going to be revealed at ESMO, not in the abstract, and not some of the data that has circular, but the data at ESMO, I think, are very competitive in this space in terms of frontline combination with chemotherapy in pancreatic cancer. That gives us a lot of support, I think, for what we're doing in the background, which is we launched the Phase III trial in the indication. That's going very well. We're expanding that globally. We conducted in 200 sites around the world, and we feel very good about the way that trial is enrolling and progressing so far. So that's the core of the center piece of the G12D strategy for us. Around that, we're building within pancreatic cancer. We're going to move in the adjuvant setting. We're designing and implementing a trial for patients post surgical resection in pancreatic cancer. And you will also see data in colorectal cancer. We believe that that's an opportunity for us to move quickly in that space. We have generated data in combination with cetuximab. We will present that data at ESMO, and we will tell you what we're going to do next. We have a meeting scheduled with FDA to get regulatory clarity, but we intend to pursue that indication. We have also done work in combination with chemotherapy in frontline colorectal cancer. We will not present that data at ESMO not mature enough, but you should keep that in mind. So that's how we're expanding pancreatic frontline first adjuvant Next, colorectal late line first frontline next. And we're also putting in place a combination therapy strategy for 734 -- we obviously -- those are external collaborations we're working on. You'll hear more about the next few months, hopefully, at ESMO, but sometime around that time frame and how we're thinking about that. So that's the whole 734 program that you're going to hear more about at ESMO, which we think substantially derisks the program at least I hope you agree with that.

In the most recent update, we saw in the Gema combo and 75% of NOx. -- what more could we learn at ESMO? And where do you...

Yes. So this came from an reducted protocol filed in Europe. The numbers have gotten a little bit better. So you'll see better numbers than that. We'll have to wait for ESMO to reveal that. Those are the same numbers you'll see in the abstract. The numbers in the presentation are a little bit better, and that's what I alluded to. Look, when I look at the data that we'll present at ESMO, I think it's fair to say that it's comparable because the best data set that has been put out there, which I think everybody is aware of. I'm not going to clean were better, but I don't think we're worse. Again, safety numbers up and down a little bit, efficacy number, a couple of percentage points here and there. I think the data sets are comparable. We feel very good about where we are from the competitive perspective, in terms of quality of the data and in terms of time line to first-line approval.

And it's a very competitive field. So how do you about differentiation here and within the G12D class, but then also with Paneras inhibitors on the scene as well or combination.

Yes. I think the differentiation with Panretinhibitor is pretty clear. It's been -- it's not a question who is better or not, I think time will tell in frontline therapy, which approach is better or whether both approaches are comparable. They're different safety profiles are very different from a panRES inhibitor from G12D-specific inhibitors. One thing we noticed with 734 and you'll see this at ESMO is the GI adverse events get much better after the first cycle, and we'll show this data that way. So the headline number for adverse events is x and it's higher than I would like. But it gets much better in subsequent cycles after cycle 1. And I think that's going to be pretty clear, I think, to everybody during the ESMO presentation or in the investor event. I think the question of whether it's better to give frontline -- first line at Panas versus a mutation-specific inhibitor, that can only be answered with data. But when you ask experts, and we've done that extensively, Bill and I over the last few weeks, I will tell you that in general, the more mutation-specific approaches will get used first. Obviously, if there's a dramatic efficacy difference that supports that thesis. But will general, you give them more specific drug first, when patients progress, you gave a broader inhibitor next. So our ability will also come into question, considering some of the side effects of PANRAS inhibitors. But I do think that data will probably guide those decisions [indiscernible].

I would just add 1 comment about competitive intensity. I agree with everything that Pablo said. There are very few markets in oncology where it's winner take all. You can look at BCR-able CDK4/6 or EGFR. And if we're 1 of 2. And right now, there are only really 2 companies in late-stage development with a G12D inhibitor in frontline PDAC. And that's Rev Med and insight. It's a first-world problem. I think this will be -- we're in a good spot if we're 1 of 2. I think the most important point, and Pablo just made it is, how do you maximize this asset by studying it in all lines and tumor types. And if we do that, that becomes a form of differentiation.

Yes. I think more important than for us to try to convince you that we're better than next or why the most important thing for us is to execute on the plan and expand the indications. And that's what we're doing.

Not to focus too much on the competition, but 1 advantage they have is combinations. They've got a TV, they're working in collaboration with. They've got a PANRAS when will we see some collaboration partners in Insight.

Soon. -- those conversations have started and they're coming, I think, to fruition pretty soon. So you'll hear more about that, hopefully, by ESMO.