Incyte Corporation (INCY) Earnings Call Transcript & Summary

All right. Welcome, everyone, to this session of the Morgan Stanley Global Healthcare Conference. I'm Judah Frommer, one of the mid biotech analyst here. We're very excited to have insight for this session, represented by Bill and Pablo. Maybe just a quick disclosure before we get into it. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. With any questions, contact your Morgan Stanley sales representative. All right.

With that, welcome back, Bill, you joined the company a couple of months before the conference last year. So maybe you can provide a brief overview of how the company has evolved, both strategically and in the clinic over the last 12 months or so.

Thanks for having us. I think the most significant change over the past 12 months since I've joined, to be fair, I inherited a lot of substrate is that the pipeline today looks fundamentally different than it did 12 months ago. And to put a fine point on that, when I joined, we had no proof of concept data on 989, our CAAR antibody for MF and ET. We had no proof-of-concept data on a G12D inhibitor for pancreatic cancer or TGF-beta-PD-1 for colorectal cancer. We didn't even have Phase III data for povacitinib, which is now under review at the FDA. And through the acquisition of Vega, we didn't have Litar support for an Willebrand's disease. And today, we have all of that. And I think the point here is that we have much greater visibility into the recovery phase or the growth phase of the company post 29 after we lose JAKAFI. Now it's our job to convert Phase III trials into FDA approvals and ultimately, revenue earnings and cash flow. And we think about this company right now in 2 simple pieces. And this, I think, is how we should be judged. The first is our core business ex JAKAFI, which is annualizing at roughly $2 billion in sales. Our job is to get it to $3 billion to $4 billion by 2030, which sets the floor for insight. And then the second job is to continue to advance the pipeline, which is more derisked now than it was a year ago, as I said, and launched these products. And if we do this right, it's got to work, we don't expect people to take our word for it. The company has the potential to grow at a 15% to 20% CAGR from 2030 to '35, and that would increase the value of the company. It will give us a great deal of sort of breadth and depth in terms of our product line, and we'll have dramatically reduced the LOE exposure of the company. And that's the basic framework floor recovery.

Okay. That's a good way to set the stage. And we're going to jump around a bit but figure we'll start with MPN. So for the JAKAFI franchise and XR specifically, what will determine whether conversion reaches the low or high end of the 10% to 30% pre-LOE target?

Yes, it's a good question. So we have this range of 10% to 30% take the midpoint of 20%. If we're successful there, we preserve almost $0.75 billion in sales as we go through the transition. I think there's 2 steps. The first is to get formulary coverage, and we'll provide an update on the third quarter call where we are. We are ahead of schedule. Formulary coverage for XR by the end of the year is going to approach 70% to 80%. We have all the major PBMs and health plans with XR on formulary at parity with IR and at a price that is acceptable to us and acceptable to them, which is part of JAKAFI. I think the '27 is going to be about conversion, and you can convert new patients and continuing patients. Both sources of conversion are important. And if you're converting at 0.5 point to 1 point a month over a 24-month period, we can preserve a significant portion of this business. It's a bridge Xeris not going to drive the value of insight, but it will provide support as we go through the transition.

Okay. That makes sense. And just talking about kind of some of those next-gen assets. So specifically for the Calera antibody 989, right, we'll have frontline Phase I data in MF, I believe, later this year. So maybe just help us with efficacy signals you're looking for? What would support further development of the monotherapy and combination approaches and then we'll have some more.

I'll turn it over to Pablo.

So let me recap real quick just to expand a little bit on your question. So 989 is currently in pivotal is already for second-line ET that has been initiated, and we disclosed the design earlier this year. We're in the process of implementing a second-line MF trial, we'll give you full details at the next earnings call in the design of that trial. But roughly speaking, the study will be in second-line in with the best available therapy control arm, and it will enroll all comers with a primary analysis probably around type 1, but just to improve the probability to success of that trial. But that's already in motion. when it comes to first-line MF, there's a couple of things that we need clarity on. One is, as you brought up, we're going to have a data set in prone MF patients at ASH. About 2/3 of the patients, single agent 989, about 1/3 with combination with ruxolitinib. So that data set, which is maturing as we speak, but we don't have yet, it's critical for us to make a decision. Whether we go into frontline or what the design of the frontline study is. We're convinced we have a drug here that will be developable in frontline MF and this is a path to an approval with a single agent combination with JAKAFI the data will determine. In parallel with that, we have a number of meetings scheduled with the agency here in the process of scheduling to continue conversations that I think we gave you some visibility on whether it's time to really redefine the endpoint for approval in MF drugs, particularly in frontline. The standard has been now for past 15 years since the introduction of JAKAFI has been TSS50 S3. We think that 989 has a different mechanism of action. It does different things for the patient. It normalizes hematopoiesis, which leads to a dramatic improvement in anemia in more than half the patients as well as eradication of the malignant clone. That has been reflected in improvements in 35 and TSS 15 second-line patients whether the TSS50 day in frontline is sufficient to give us confidence on beating JAKAFI is the question that we need to answer. So in parallel with that, we'll get the data. We'll continue the conversation with FDA. We have a constructive dialogue with them so far, and we'll bring those 2 pieces of evidence together and we'll give you clarity on the designer frontline. Our intention is in the early part of '27 to initiate a frontline MF trial with 989. The final piece of the story, if I may, is -- and we sort of alluded to this in the last earnings call, at ASH, will present preclinical data package with our next generation, you can call our antibody. We think based on what's publicly available that we have now in our hands, not only the first color antibody, but the best one with a longer half-life and much, much more increased potency against pro type 1 and type 2, we think it's going to reset the bar, and we look forward to sharing that data with you.

Okay. So maybe just a couple more on the ASH readout to help folks with framing those. So for the combination arm, I know you talked about legacy endpoints being utilized. But for efficacy and anemia, I guess, SVR35 range and anemia rates, does comparable to RUX sound like where investors should be anchored?

Yes. I mean, well, look, if you take the JAKAFI eligible cohort that we presented at EHA, which is technically frontline. It's just a different group of patients. The SVR35 data that we showed there 24 weeks was, I think, beat JAKAFI and frontline easily. If you look at not a ton of data sets, but if you look at JAKAFI, frontline, mutant callout patients, there is data from the COMFORT-II study and data from the pelabresib control arm study. And that data falls somewhere between 20% and 22%. We presented data upwards of 45%. I think that's clean. TSS50, our numbers were very strong in the jack and eligible patients we need to make sure that, that stays above -- in order to be JAKAFI head-to-head there, you have to hit 55% to 60%. So that's a little bit harder, which is why we think the dialogue with FDA, number one, or maybe focusing on just type 1 patients or combining with JAKAFI for a predefined period of time and tapering off JAKAFI. Any of those approaches, I think, could lead to an approval in frontline.

Okay. And then just for the monotherapy patients, I guess, sort of a similar question, but how important is the efficacy profile versus reducing that anemia?

So that, I think, is the reason why we think and we hope the FDA will get there when we continue to build the evidence that we have or present the evidence of them because the anemia improvement that we've seen in second line is dramatic. There were questions about washout. I think we've answered those and you'll see more data. It doesn't matter how long you follow patients for the hemoglobin keeps getting better. If you remove the patients that have [indiscernible], the NIM improvement is there. So it's very clear. And then when you look at the bottom and you look at markets of erythropoiesis like CD71, there's a clear improvement in those numbers. So this is a true restoration of normal blood -- red blood cell production. When you give JAKAFI, you're going to blend a little bit of that. So that's why even in the case that we need to develop this in comp 1 would provide the JAKAFI symptom improvement. In parallel with that, you see an improvement -- a growth of the benign clone and then you taper to JAKAFI, and you'll get anemia benefit. It could take a little bit longer, but you'll get the imibenefit eventually.

Okay. Great. And then -- and maybe just a bit more color on those FDA discussions around Emmons. Where do they stand on incorporating hemoglobin improvement disease modification measures like you said? And how could the regulatory affect uptake? And how important could this be kind of for the broader space going forward?

Yes. Great question. So let's take a step back in what we're trying to do here. So we've taken evidence generated independently of insight. And I think that's important. There's a publication response by ELN not that long ago. And they show that certain parameters and specifically, we're interested in hemoglobin platelets, blasts and spleen size are independently correlated with improved leukemia progression and survival in this patient. So we think on that and we built a model that we think is the basis for this composite endpoint. I think the FDA is receptive to the idea. The question is what's the evidentiary threshold that we need to clear here to convince them that we're ready to put it in a study. I think that's basically what needs to happen, honestly. And whether it's immediately or not, our goal, as we made clear a number of times is to provide a molecular targeted therapy for every single patient with NPN. So this is a journey that we're in it as long as it takes. We need to get there with FDA. Hopefully, it will happen in the next 3 to 6 months if it takes longer, it takes longer. We still have a path to approve we're playing the long game and really to try to change the standard of care for MPNs.

Okay. Great. And we wanted to touch on the Halozyme Corporation collaboration you announced relatively recently for an ENHANZE-enabled subcu formulation of 989. And I believe the Phase I initiated in this past quarter. So how important is that subcu dosing to the commercial profile? What would you call it a differentiator or a nice to have as you kind of progress here?

No, I think it's a need to have. And Pablo can walk through the aspects of the program. But we expect at this point that at least within the first 6 to 9 months of the ET launch, will have an on-body subcu twice a month. I think it's especially relevant in ET. And there are several work streams in place, and we'll have more information on the third quarter call about our discussions with FDA. But that program, I think, is in a good place right now.

I completely agree. And we have a clear plan, some of which -- I mean we've vetted with FDA. We continue to advance it. The Halozyme collaboration, it's an important part of it, but it's not a necessary element. We have in parallel and novel formulation, we're having an increased concentration formulation. We have a Halozyme formulation that will all be tested. And then we'll select the best one for the next step. We also, as you know, we have a collaboration for a own-body infusion device. To be clear, this has to be applied only every other week just for 20, 25 minutes. It's not something the patient has to work continuously. And we think that provides a solution for the higher doses that we need to provide to some of the patients on the subcu. So that's ongoing. And over time, as the JDA gets generated, we'll provide additional clarity, but we have a very clear plan to get there.

Okay. And just to round out, 99, just remind us of timing for top line for second-line ET, the Phase III data there. And in your mind, what's kind of supportive of expansion to frontline?

We have not provided a time line. The study is just getting initiated that has got going a few more months, and then we'll start as we usually do as we -- as enrollment goes well, which we hope it will certainly will provide additional clarity. The frontline question, there's 2 components that are important. One is we're not 100% convinced. You need a frontline indication in order to build this business. I think that the standard front line, as you all know, is hydroxyurea. It's a poorly tolerated drug that requires multiple dose adjustments, and it does not lead to disease modification. So we think we have a fundamentally different value proposition for patients. And I think that the shift from front line to second line therapy will be faster once a great second-line therapy is available. Then we have the next-generation antibody, which is coming pretty soon, and we think that might be just a better tool to first for online ET, and we'll just do that with a new antibody.

Okay. Great. And maybe switching gears for a minute to -- so you've talked about our next-gen JAK2V617F inhibitor. What should we be looking for in terms of preclinical translation what advantage of the clinic? What would you tell investors on that front?

So a very important target for us. We remain fully convinced that this is a critical target for a big subset of patients with FNET and almost 90% plus of the patients with PV. We terminated the earlier program. We had expressed at the time, I think all of you heard, that while we were optimistic about it, the therapeutic window for that compound 058 was relatively narrow. It didn't have also activity. It was the best effort we had at the time, and we thought it was important to test in the clinic. The program has been terminated. The next-generation program, which you will see preclinical package, RAS is a completely different chemical scaffold -- so that's really important. Number two, we started with an ASD formulation from day 1. So that should not be a problem. And perhaps most importantly, is much more potent than 058, and it has a much wider selectivity window. This is a much better tool for the job. We're convinced of that. Whether, it's the perfect tool time will tell, but it's certainly much better than 058.

Okay. Great. And maybe just a competitive landscape question within kind of the more targeted MPM therapies for JAK2V617F, there are clearly some competitors. I think even for mutant Kellar, we're seeing more upstart. So I guess just in terms of differentiation versus those programs, time lines and beyond, how are you thinking about the competitive set there?

I think first on the Calor antibody, it's tough to compare a clinical asset to a preclinical asset until you have human data. we look at it right now, we're 2 years ahead on one and maybe several or a few months behind on the other. I think the way we have to look at, and Pablo mentioned this he just talked about 4 targeted therapies, 2 Calor antibodies, 6 17F, we have a T cell engager. And if we're going to win, it's going to come from breadth, covering the 3 MPNs, MF and PV, multiple driver mutations, multiple lines of therapy. And it's hard when you're in a horse race and it's a single asset versus another single asset, usually, breadth is what's going to what's going to decide who's successful long term? And did you build a real franchise? Or is it a single asset franchise? You can answer that.

No. I mean, I have nothing to add to the general point. I -- we look at everything that is public in that space. As Bill said, I think with Calor if we execute on our plan, I think we're optimistic that everything is going to be fine, and we're going to dominate that space. We've got the first one. We have the best one. I think execution is key now. On V617F, I mean the number of programs out there. We keep an open mind. The best ideas are not always ours, which is why we put a collaboration in place with Prelude, and we have an option deal to their programs that we'll decide with the 2 exercise next year. And everything else is out there. We try to keep an eye on it. Right now, I am confident in our next-generation program and the collaboration of Provide are the 2 ways to address this problem.