Johnson & Johnson (JNJ) Earnings Call Transcript & Summary

Good morning, everybody. My name is Alex Hammond, and I'm the biopharma analyst here at Wolfe. So it's my pleasure today to have J&J. So we have Candice Long, Worldwide VP, Immunology, Global Commercial Strategy; and we have David Lee, Global Immunology Therapeutic Area Head. Thank you guys so much for joining us.

Thanks for inviting us.

So obviously, a lot going on at J&J. Maybe starting off with icotrokinra. So obviously, we know that there is a submission to regulators. How should we kind of think about next steps? When could we see approval? And have you guys started preparing for launch as of today?

Sure. Well, I maybe will start. Let's start with icotrokinra. It's the first targeted oral peptide to the -- highly selective to the IL-23 receptor. We see this as a transformative next-generation therapy for the field. And we see that because it is the only asset that provides the unprecedented combination of complete skin clearance, favorable safety, of course, with the simplicity of a single pill once a day. Now our development program has been robust to inform questions, and we see this profile as now becoming first-line systemic therapy for psoriasis. We say that because of the data that we have provided in our large Phase III studies with adults with moderate-to-severe psoriasis, with adolescents with moderate-to-severe psoriasis, as well as in our special area study, those hard-to-treat areas like groin, scalp and others where we see that profile. We continue that development to inform with head-to-head studies against a leading other oral psoriasis option, of course, showing superiority there. And we are continuing our robust program by going head-to-head with a standard of care biologic therapy with STELARA, seeing that readout. And what we see with this asset is increasing the impact of our portfolio, informing people who -- and we know that the minority of patients actually go on advanced therapy. Reluctance often being needed to go on a biologic. And here, we will show that you don't need to compromise to go on a biologic, and therefore, we think that will expand. Now you did ask about timing of approvals and things like that. Submission went in, in July in the U.S., and we're very confident in a 2026 launch. We won't speculate on the exact date because interactions with health authorities aren't highly -- aren't completely predictable. Maybe I'll do one last comment on the momentum of that icotrokinra program. We're now beyond psoriasis and we've launched our pivotal studies for Crohn's and colitis. And we see that momentum continuing informing that unprecedented combination of efficacy, safety and then, of course, the convenience of a once-a-day pill.

Perfect. That's a great introduction for an asset that we're also very excited about. And I guess this goes to you, Candice. As you think about Street numbers for icotrokinra, do you think that they're under-appreciating how big this opportunity could be, particularly, I believe, is it 5 million Americans with either psoriasis or IBD that are not on a biologic?

So yes, we think it's -- there's a disconnect. It's actually 5 million moderate-to-severe in psoriasis, IBD, PSA that are eligible not using these therapies. So why do we think there's a disconnect? In the first quarter of this year, we actually took an opportunity to reference the consensus. And we're seeing it as being significantly higher for the reasons that David just chose to call out: the unprecedented combination, what that has an opportunity to do for a significant number of individuals that are eligible. And quite honestly, we see that they're making trade-offs. They're not stepping into therapies, they're not getting that outcome. And as a result, we have indicated that we think the consensus is too low.

That makes sense. I believe we're quite a bit higher than consensus. So how do you think about -- David, you mentioned the head-to-heads as well. So you guys are running the head-to-head versus STELARA. So how can you kind of frame your confidence there in that trial?

So at several levels. We, of course, all the deep profiling we've gotten on the studies we've seen so far and the efficacy levels that we've already seen in the pivotal studies that are part of our submission package. That gives us a lot of confidence that we will be showing those superior attributes to STELARA and beating in a head-to-head biologic standard of care. And I think beyond just simply beating, we're a global company, we want and we will drive global access. And so these head-to-head studies are also part of our core strategy to bring this asset worldwide, not just to get approvals, but to get access and adoption having informed those key questions.

And I guess from a global launch perspective, so this is a drug that has a higher API necessary, right? It's a small molecule. So how should we kind of think about the manufacturing capability that you guys have in-house?

I'll take that one too. I'm the R&D guy. That's a really key question. We are leading in oral peptide use in autoimmunity. Look, I would underscore that we're an innovator company. We invest in innovation, the targets we choose, how we develop them, and here's what's key, how we formulate and manufacture them. And there is just as much innovation that happens in the formulation and manufacture as there is in the discovery and development process. We've been investing heavily in the manufacturing approach for icotrokinra since we entered the clinic. So now we have that years of experience. We also see this as a big market. So we know that the demands on our manufacturing are going to be substantial. I will say with a lot of confidence that we are fully capable to meet the needs with our global manufacturing footprint, both for psoriasis and for anticipated subsequent large launches in IBD as well.

Do you see this as a funnel across the board for higher utilization of biologics, particularly of TREMFYA as well?

So actually, as an organization you probably heard us say before, any time there's a new therapy that gets approved, we actually think there's a really positive set of circumstances. First and foremost, there's a different conversation that tends to happen with clinicians and with patients when new options are available. That conversation can really highlight things that have been holding back the ability to consider different types of therapies. Perhaps they just haven't had such a transparent conversation in particular. So the ability to actually talk about this, what we anticipate actually happening with icotrokinra is this elevation of the trade-off that people have been thinking about. And very specifically, that trade-off often comes between "I can get efficacy if I want, and I'm willing to use an injectable biologic." We have a lot of experience with those. But they do come with safety-related concerns. That route of administration causes some hesitancy. Or I can choose to use something that's not a biologic, lower efficacy. And what we're really seeing is those aren't connecting with a lot of individuals in terms of what they are seeking. So absolutely, we think that the introduction of icotrokinra, it represents a significant step forward, both in terms of the treatment options there, the dialogues that will be happening. But probably more importantly, we think that there's going to be an expansion as a result of this. Now you asked specifically on biologics. Our expectation is there's going to be a market expansion in terms of the utilization of this because you're not making those trade-offs that have historically been there.

That makes complete sense. And I guess, you guys ran, was it, the ENCOMPASS study. Can you kind of frame what you saw and how that can kind of impact patient utilization?

Sure. I'll comment on that. So one of our, I'd say, differentiating strategic approaches of J&J is we have these disease area strongholds where we invest deeply to understand patient insights, unmet medical need. This is an example of that. So what we did was we -- it's actually a global study in our dermatology group, where when we released the data in the U.S. cohort, so far, we pulled 400 adults with moderate-to-severe plaque psoriasis, 200 adolescents and 200 providers. We both confirmed many of the things we knew, deepened our insights and we saw some new things. On the confirm side, psoriasis has a huge impact on quality of life. We knew that. We also now, with more efficacious therapies, seeing the really dramatic impacts -- meaningful impacts of restoring life to living. It's even more impactful for adolescents. And you can imagine why at that time of life with that going on in your skin, how that is impacting that quality of life. I will underscore that our development program included adolescents in our registrational studies that are part of the submission. It's based on those insights. So bad disease. How do they -- what is important to patients and providers? Efficacy, first and foremost. But in this space, very close second is safety. Have to have a safety -- a superlative safety profile. And then, how do they want to take a medicine? The substantial majority are looking for an oral. Say that again, substantial majority are looking for oral. Some are looking for parenteral, some are looking for topical. But the substantial majority are looking for that simplicity of a once-a-day pill. We even did a double-click on that and asked, if you're on a biologic, how many of you would switch to an oral that has the attributes that we described? We didn't name the compound, just attributes of the compound. 90% of people on an injectable therapy said they would want to switch to an oral that doesn't compromise efficacy, safety and it has that simplicity. So that actually was a bit of a surprise for us. We thought it'd be around 70%. That's what we've been communicating. It's actually over 90%. And so it's that -- those kind of insights that are giving us confidence about what this will bring to the market. And we look forward to continuing. We've got the rest of the global population data coming in and we'll continue to get insights.

And we're really excited to kind of see what else you can share with us. And I guess one last follow-up as well, Candice. How should we kind of think about the present on sampling drug? So is that something that can kind of help kind of pave the way for what we anticipate to be a very successful launch?

We are really excited about the 2026 potential for the introduction of icotrokinra. And while I won't get into specifics of what that commercial specific strategies will do -- will include, what I will say is if you look at Johnson & Johnson overall, look at the immunology business, it is broad, it is comprehensive. The capabilities will all be brought forward. And we're really building on this ongoing legacy that we've had in immunology. That connection into this community allows us to understand what's meaningful and important. We build those into the launch strategies. And at the end, we're really excited to actually make this a reality for individuals when we think about those unmet needs, as David just were highlighting, that exists, first in psoriasis, and then as we have those additional readouts, hopefully going beyond that space as well.

So I guess, looking to IBD, should we kind of use the proxy of what the drug does from a psoriasis launch perspective and kind of use those same learnings and apply it to IBD as well?

So I think there's a couple of things. So first, when we look at IBD overall, what we do recognize is that there is a continued need. Less than about 40% of people are using the current therapies that are out there and available. And icotrokinra, the ANTHEM data, and maybe I'll turn it over briefly to David, were really exciting in ulcerative colitis, to give us initial perspectives of what to expect. But at the highest level, you heard David talked about the combination, unprecedented combination, of these efficacies, the favorable safety and that route of administration, that is being shown again in the ulcerative colitis space, which has informed the approach that we've taken in terms of moving forward in both ulcerative colitis as well as Crohn's disease. So David, I'll turn it over to you.

Yes. So based on those ANTHEM results, and we're deeply embedded in the ecosystem with patients, providers, opinion leaders, who are all highly enthusiastic about that profile and have given us a lot of input into the design of our pivotal studies, and those are launched. So we've launched Phase III in both Crohn's and UC. They are recruiting at pace. We're very pleased already with the way -- like we saw with the psoriasis studies. In fact, many of those finishing less than half of the time we've ever seen. I would also underscore, because of our confidence, we're also running an adolescent substudy in the ulcerative colitis study so we can bring at launch those insights not just to adults, but to adolescents.

And Alex, I think you had asked a question around the ability to transfer information over. So when we look at STELARA, when we were hitting the peak sales there, about 75% of the STELARA sales were actually coming from IBD. And we actually think that is, while not a precise number to use, we think that that's highly likely to be the case for TREMFYA and as we look into other spaces, that there's going to be robust utilization in IBD overall. So certainly, we'll get some insights and perspective from what happens as we now have the TREMFYA asset out there for both ulcerative colitis as well as Crohn's disease. We'll see how the data plays out overall. But again, a really amazing portfolio that we have that allows us to address these needs in a more all-encompassing way than we've been able to do.

I'm very excited to get to TREMFYA, but I have one quick question. One pushback that we've gotten on icotrokinra has been the food restriction. How do you guys kind of think about that based on your discussions with clinicians?

Yes, great question. So like many oral peptide molecules, there is a food effect with icotrokinra. We deeply assessed this in our clin-pharm studies in our comprehensive package. And we're very pleased that our food requirement means taking a pill on an empty stomach and waiting 30 minutes before high caloric food. What does that mean practically? For a patient, you take your pill when you get up in the morning with a sip of water. You go make your cup of coffee. You drink your cup of coffee or tea. You make your bed, brush your teeth. By the time you're done with that, it's time for breakfast. So it's present, but it's a very modest 30-minute effect. The other reason we have a lot of confidence in that is we looked at what was the utilization in our large pivotal studies. And for drugs that are hard to take or not as well tolerated, what you typically see is, over a 52-week study, you start seeing loss of efficacy and dropout of subjects. We saw none of either. So we saw very durable responses. We didn't see patients dropping out. And when we talk to patients and providers -- and the trialists that were doing this, nobody had any inconvenience with the approach.

Yes, we hadn't heard any kind of pushback from the clinician side either, but you know how investors are, so I have to ask. So I guess with that, on TREMFYA, how should we kind of think about continued growth in psoriasis and psoriatic arthritis? Obviously, we're now focusing on IBD, but would love to initially kind of think about those 2 indications.

Yes. So it's been an exciting year. We're seeing growth across TREMFYA overall in the PsO, PsA indications. What is underpinning that growth is a couple of things. So one, in the psoriasis space, the durability of skin clearance, that we've seen the continuity of that safety profile that we've seen before. Nothing new coming up, just really reinforcing that ability. And in the PsA, some new data did come out this year, meaningful. Oftentimes, one of the key things that is assessed when looking at PsA is inhibition of structural damage. So earlier this year, we showed the APEX results where actually TREMFYA is the only IL-23 that is able to provide the inhibition of that structural damage. And as we've spoken previously, what's really important about that is once that structural damage happens, you can't get it back. So you want the ability to inhibit that from the beginning. Now overall, TREMFYA is different than other IL-23s. It's blocking that IL-23 receptor, it's binding to the CD64. We're seeing continuity of those robust results. And we are seeing growth across the board in PsO as well as PsA.

Perfect. And then IBD. Obviously, it's very exciting. I believe, are you getting -- is it over 50% of the new patient starts in the IL-23 class?

Over 50% of the new starts for ulcerative colitis, yes, which is just about a year out from when we initially introduced the product and we didn't have the subcutaneous option for induction available yet.

How do you kind of see that subcu induction kind of shaking out from a new patient -- I mean that's really exciting.

It is. What makes it meaningful is what this means for clinicians, what this means for patients. So subcutaneous, we think, is going to be a very significant component of what TREMFYA is able to offer. When we look at ulcerative colitis, you highlighted the 50% new to brands. When we look at Crohn's disease when we actually introduced that indication with both options for induction subcutaneous as well as injection, we saw even faster adoption than what we had seen in ulcerative colitis. And it's actually when you look launch aligned, the Crohn's disease launch is surpassing many other recent introductions into this space. The reason it's meaningful has to do with the simplicity, not only in terms of how it's administered, but what this means for offices, the speed at which you can do that. You don't have to try to schedule the infusion time. Oftentimes that's a couple of weeks out. And that is something that a lot of clinicians are experienced doing. And that subcutaneous option creates that alternative that they haven't had before to get that medication to a patient earlier than what they would have been able to do before. So we absolutely believe it will continue to be a really important component because of that simplicity that it's offering for all those that are involved.

Yes. No, that makes complete sense. Very exciting. And I guess too, you guys have another head-to-head, you guys like those, versus SKYRIZI. So can you kind of like walk us through how we should think about that clinical trial design and also your confidence in that trial?

So we're not going to release results on -- or details on that design. We've announced we're doing it, but we're not releasing details yet. Speaking to the confidence though, look to the head-to-head study that we've already done with STELARA and the other attributes that we've already demonstrated -- superiority attributes that we've already demonstrated with TREMFYA. Deepest level of tissue clearance and endoscopic responses seen to date, demonstrating that unequivocally against STELARA standard of care. Now one of the one-liners I like to use internally is tissue is the issue. And so when we talk about remission, and we are also -- remission is our mission, and raising the bar on remission. What we now know, and we've been instrumental in leading these new endpoints, is that clinical remission is a pretty blunt instrument on assessing degrees of remission. You can still have ongoing inflammation that the clinical instruments -- clinical assessments can miss. That's where the visualization with endoscopy, that's where the biopsy or what we call the histo-endoscopic response is so important. And that's where TREMFYA has shown its superiority. And it's insights like those that have guided our design of that study. And it's insights -- and those results are what give us the confidence in what that outcome of that study is going to be.

And Candice, how important will that be from a commercial perspective, if you are? Because I believe it's superiority, right? The tests are able to show superiority. What does that mean from a commercial perspective?

It's obviously meaningful. We're looking at a competitive set of choices. And what David was highlighting, as an organization for immunology, we've been really focused on the restoration of health for people living with immune diseases. Again, translating it to something quite simplistic, remission is the mission. What we want to do is continue to raise that bar for ourselves, which is actually improving the outcomes that we can expect for individuals. So the more that we're able to deliver against these expectations of doing head-to-heads, it provides meaningful clinical insights that help inform choices for patients.

And then I guess on your path to remission, how should we kind of think about the, is it JNJ-4804, I think we're waiting for results in PsA. When should we see those results? And how important will those be to inform kind of next steps without agent?

So JNJ-4804, I'll give a little bit of background and then respond on the PsA. So actually, going back to 2019, at the Enterprise Business Review, we declared one of our core future strategies was to lead in advanced combination therapies. And the reason we were investing there is because of the monotherapy efficacy ceiling that we're seeing again and again now in these complex diseases. The way to break through that monotherapy efficacy ceiling is to go for combination treatments. These are complex diseases that are going to require more than 1 mechanistic interruption. Now we -- JNJ-4804 is our lead asset in that, now having just completed large Phase IIb studies in Crohn's and colitis and a Phase II study in psoriatic arthritis. The reason we chose IL-12 and 23 is not because we have them in our portfolio. It's because we deeply profiled the tissues from these diseases and we were looking for molecular evidence of what remains active if you're an inadequate responder to, say, a TNF. And we're looking for synergy if you combine mechanisms. And the mechanisms that demonstrate that, not all did, were TNF and IL-23. So we co-formulated golimumab and guselkumab, and I will say that was not an obvious event that could happen either. Both of these now are in the same formulation, in the same auto-injector and we're bringing forward a posology that will be a single injection as what the patient experienced, fixed-dose combination. Now advanced therapy combinations had been tried [ in autoimmune ] before, and you all remember, they didn't go well. There were issues with not as much efficacy, but also issues with infectious safety. So we've already seen our VEGA results where we've combined that no increased safety signals above what we would expect with the TNF alone. So we're very pleased with the efficacy results that we've seen so far, but also on this really important -- the safety that this asset is demonstrating. So where we are now is we finished the Phase II study in psoriatic arthritis. That's at a journal now. We should be seeing the publication, we anticipate, by the end of the year. And we communicated that, about midyear, that we would be getting internal results on the DUET studies. These are these large Phase IIbs in Crohn's and colitis, and we have those. And like any large Phase IIb data set, we're moving along at pace understanding the totality of the data. And they will be talking a lot about that, I think, in 2026. I will underscore, we committed to the refractory population with this asset. So inclusion criteria for our large Phase IIb studies was bio/IR only. You had to have failed a biologic to get in. No naive population here. And so we're enthusiastic about informing dose, safety and patient population and how those will deeply inform our next steps in development.

And maybe if I can just build, this is one of the first times we're going to see clinical studies in that population. Most of the time the studies are done early despite the need that we know exists in that patient population that has already tried and, unfortunately, that therapy has failed to achieve those outcomes. And when in ulcerative colitis, in Crohn's disease, that cycling of therapies, often it ends in surgical interventions. And we don't hear very much discussed about what that actually means, from a quality of life perspective, it's incredibly meaningful, in terms of not only the surgical procedure itself, but what that means in terms of how you carry out your life from that point forward. There's a lot of job, life choices that are made already having IBD, but it is exacerbated when and if that surgical intervention is necessary.

Does that mean that there's a chance that you could also kind of expand this beyond just refractory in the Phase III? Or do you think more than likely based on what you find, you'll kind of stay in that patient population, just have the armamentarium, being able to touch every different type of patient population globally?

We're thinking more of the latter. Again, we're still formulating our pivotal study approach. But our entire strategy thus far and what we've informed thus far is that refractory population, where that huge unmet need exists and options are pretty limited.

Understood. Moving forward on IMAAVY, how should we kind of think about that launch so far? We haven't really heard a lot, but I think it's really exciting. I think -- are you in 10 different indications across the board? Something really spectacular. So I'd love to kind of hear how that's moving forward.

Yes. So IMAAVY, first, maybe I'll talk about some of the things that make it unique and different. So it's the first and only FcRn that actually has this breadth of patients that can benefit AChR-positive, MuSK-positive adults, adolescents. The symptom fluctuations are very problematic in myasthenia gravis. And when we look at specifically what IMAAVY is doing, we're getting that IgG level down, you don't have off-target effects. And unlike many others, you're seeing sustained disease control. Meaningful, because we want to mitigate those ups and downs to the best of our ability, get them down, stay down. And we saw that in 24 weeks, the longest study that's been done. But you also then have the open label that was added in there. So for adolescents, about 40 additional weeks; for adults, about 60 weeks. And David, you highlighted before just the importance of that maintenance overall, but we're seeing the sustained disease control maintenance over time. You highlighted this is the first of many indications that we expect, so we are enthusiastic. In fact, we're the only FcRn that's looking at this in 3 different segments: maternal fetal, really meaningful and important, rare, as well as rheumatology. And some of the rationale in both the maternal fetal, the rheumatology space, there's no approved therapies or there's been no new therapies for upwards of 50 years, so we're not seeing the progress that we've seen in a lot of other areas. It underpins our enthusiasm based on the clinical outcomes thus far that we think this is a $5 billion-plus asset and that this first indication with myasthenia gravis is just the start of what we have the opportunity to do. In terms of launch, the early signs are very promising. So there was some recent surveys done with neurologists that indicate their desire and interest in utilizing IMAAVY, but specifically, about 1/3 of them wanting to use it first line. And as we move from '25 to '26, permanent J code will be there, the access going above 90%, to really build on that foundation of what we've had in terms of the accounts that are using it, the clinicians that have those experiences. So very enthusiastic with what's happened and also the potential that we have moving in the future.

I guess another head-to-head trial you guys are also running against Argenx as well. So kind of walk me through what has been shared there and maybe when we could see the data for that.

We've shared that we're going to do it. We haven't shared details or timing, and we're not going to share that today.

Fair. I'm trying to get something, guys. So I guess, moving forward, where do you think like the new indication or new kind of mechanism would be very interesting, whether that be from like M&A or internal in your pipeline that maybe isn't appreciated?

Yes. So I will say maybe as opposed to a new business development perspective, what I will say is what we did do in 2024. So last year, we made a decision to carefully assess, and ultimately we're able to secure multiple assets that would allow us to step into that atopic dermatitis and respiratory space. Atopic dermatitis and respiratory have a couple of similarities, specifically very large populations, atopic dermatitis specifically, the largest inflammatory disease that's out there. Unfortunately, not therapies that yet are penetrating the market and achieving these rates of remission. So if we look at atopic dermatitis, while we are seeing some advanced therapies, the vast majority of individuals aren't achieving remission. So there's got to be more that we can do in that space. You look into the respiratory space, asthma, COPD, unfortunately, it's very mirrored. High-need therapies that are not meeting those outcomes. And as an organization, we feel like there's significant potential if you can bring forth assets or a portfolio of assets that help to really address these needs. These are often heterogeneous populations, therefore, there are some distinct mechanisms that are probably going to be needed to really address what's underpinning these outcomes, but also elevate those overall remissions. So very excited that over the course of '24, we were able to secure these deals, which is providing them opportunity. And David, maybe you can speak a little bit more about some of the assets.

Sure. I'll put some more color on that. Let's start with -- pick up what Candice was mentioning. I'm going to say again, remission is our mission. Standard of care today in atopic dermatitis is an EASI 75% response. That's not remission, that's 75% better. We're achieving that in about 30%, 35% of people off steroids. That's a long ways away from EASI 100 of 100%. Now these are complex, and I'll focus on AD, similar for asthma and COPD, these are complex heterogeneous diseases. We already know that there are different subsets. You're going to be hearing the term endotype in the future. Different disease mechanisms are driving in these different subsets. A lot of them will share this IL-4/13 that's already seeing efficacy. And we already know, we've been deeply profiling now for years, we already know other mechanisms that are driving. It was those insights that led us to do the acquisitions we did last year. So on the one hand, IL-31 is a big driver of itch. It's on neurons. It shows efficacy -- some modest efficacy in monotherapy already in atopic dermatitis. And we know that there's a subset and endotype where that is prominent. That's why we acquired Numab or the NM26 asset that's now well along in Phase IIb study. So we're excited to see how that delivers for that endotype. We also know that there are other endotypes where the inflammation, there's a broader inflammatory component in the skin beyond the T2 or TH2. And that TSLP is a very important driver for those. IL-13 TSLP bispecific is one of the main reasons that we acquired Proteologix last year. And that, of course, is progressing at pace hitting -- getting into the clinic. And we're enthusiastic about what that will bring for that next level of efficacy in that endotype of patients. There were more that we acquired with Proteologix, we're not releasing those yet. I'm just saying there's more coming soon. Then, of course, on the oral side. So last year, we announced a collaboration with Kaken on an oral STAT6 inhibitor. Now STAT6 is a below-the-membrane signaling pathway that is very important for the IL-4/13 plus, and that plus is important. We're optimistic that by inhibiting STAT6, we'll get an even increased efficacy signal than just with IL-4 and 13. Also, I do think that everybody knows that orals are an important part of our strategy going forward. So we're very enthusiastic about that collaboration with Kaken and how fast that's moving at pace to be among the leaders with that mechanism. So that's a whirlwind tour of the newer area, how we're entering to lead in atopic dermatitis. And of course, asthma being very adjacent with the same, and COPD with the same mechanisms.

Thank you guys so much. This has been incredibly helpful. And we clearly know what your mission is. So excited to hopefully see it in the commercial landscape. So thank you guys very much.

Thank you so much.

Thank you.