Incyte Corporation (INCY) Earnings Call Transcript

Great. Good morning, everyone. My name is Jess Fye. I'm the large cap biotech analyst at JPMorgan, and we're delighted that you're all here in person for the health care conference this year. We're kicking off this morning with Incyte, and I'm joined by the company's CEO, Herve Hoppenot. So I'll pass it over to him.

Thank you, Jess, and welcome to everybody in person here. So what I will do, I think the format for this year will be a 20-minute presentation, and then we can have a Q&A for the following time. So let's move to the next slide. And obviously, I will be making forward-looking statements in my presentation. So I refer to the SEC document we have on our website. So to start, what I would like to do is a reminder of who is Incyte and where we are today. As you can see on the slide, I mean, it's really a fully integrated company from discovery to commercial. We have 3 different platforms we are working with in drug discovery. We're obviously in small molecule, which is historically where we come from. And you can see the list of products that have been now put in the clinic and some of them commercially available. And we have now a monoclonal antibody development team and bispecific antibody development team with a partnership with Merus. On the clinical development side, there are 3 teams working in parallel, one for MPN, which is -- GVHD, which is basically the life cycle management of Jakafi; one for cancer and hematology; and one for dermatology, which is one of the key points of the past few years is our expansion into dermatology. And on the commercial side, we have 6 products coming from our pipeline approved in the U.S. and in Europe, 4 commercialized by Incyte in the U.S., 3 the in Europe, the other being partnered. And in Japan, we have 4 approved products and 1 commercialized by Incyte. So that's sort of the picture we are starting from. On the revenue side, if you look at the past 5 years, you can see that we have been growing at a fairly high rate between 10% and 20-some percent per year. And we are now in 2021, around $2.93 billion, in fact. And for 2022, we will be on the same type of growth rate as you can see from the guidance. And today, I will be speaking about Q3 '21. I'm not going to speak about Q4, but a very dynamic growth of our revenue over the years. And at the same time, as we have been investing in R&D and continue to invest in R&D, investing in the commercial side of the business, we have been able to create leverage in the P&L with the growth of the top line year after year as we are growing expenses at the lower rate than we are growing our revenue. So that's the sort of the picture we are starting from. Now what I would like to do is to zoom on 2022 which is a very important year in some way, it's a sort of a pivot of the entire portfolio, where, as I said, we had 16% growth of revenue after 3 quarters. We had a number of regulatory approvals around the world. Some of them for small indications, some of them for very important indications like Jakavi, ruxolitinib in GVHD outside of the U.S. and Europe and Olumiant, our partner product with relief for alopecia areata, where it is the first product to be approved for that indication. And we'll speak about it, obviously, Opzelura for vitiligo in the U.S., being the 3 most important. We have 2 files under review. One is our vitiligo submission in Europe and the other one is the QD ruxolitinib in the U.S. So that's sort of the picture for '22 of what's important. And obviously, Opzelura being one of the new component of the portfolio and being very successful with around 150,000 patients treated after 3 quarters, which, as I will describe it, is a very good number and a very important perspective for the long-term, future of our portfolio. On the pipeline, in 2022, the important part are povorcitinib, it's a long half-life, very selective JAK1 inhibitor oral where we have positive data in HS. So progress with our oral PD-L1 program, which, as you can imagine, is very important, has a large potential and has moved now to the next step and a number of presentations that we have done at ASH on PI3-kinase delta, parsaclisib, our ALK2 inhibitor and a new monoclonal antibody CALR going into the clinic this year, and it was part of the plenary session at ASH. So it's certainly an important step. So key highlights of '22 and now looking forward, and that will be what I would be trying to describe quickly in the next few minutes is how are we going to maintain the growth. And at the same time, diversify -- continue to diversify our portfolio. We have basically 4 components of revenue that are impacting the growth rate. It starts with MPN and GVHD, so Jakafi today and all the expansion of that portfolio that we call LIMBER. And as you can see, we have a number of projects there. Then we have a hematology/oncology portfolio that is made of different products, starting with Monjuvi. We have a program in autoimmune hemolytic anemia and our oral PD-L1 small molecule and then 2 programs that are early coming from our own research with 2A/2B CD73 and the CDK2 inhibitor. The third component is dermatology. And you will see the list here, and I will go in some details on that and then the royalties we are receiving through our partnerships. So let's start with our MPN and the Jakafi. I think looking backwards, looking at the past history of Jakafi, it's really important to realize that it's a great example of what we tend to do at Incyte. In many ways, you can think of it as something that is sort of a blueprint for some of the other products that we are developing today, including where it's a sequence of indication, sometimes in a relatively small indications, each of them taken individually. In all cases, in indications where there was no other FDA-approved product available at the time when Jakafi was approved and obviously growing a franchise to become our guidance is north of $3 billion in the next -- at peak. So it's an example on how over a long period of time, we can create meaningful franchises with good science and good clinical development. And obviously, the ability to commercialize in this type of indications that are relatively specific. I must say on this slide also that in December, we received approval in pediatric ALL for Jakafi in the U.S. which is, in fact, the official trigger for the pediatric exclusivity for Jakafi. So now we are officially speaking of the first possible loss of exclusivity for Jakafi would be in end of December 2028. So it will be for 2029. Now when you look at MPN. So MPNs are 3 disease that you see here, myofibrosis, polycythemia vera and ET, essential thrombocythemia. The current situation with Jakafi is that we have around 55% of patients being treated with Jakafi in MF and around 25% in PV. And Jakafi is not approved in ET. And obviously, it gives us a lot of potential to continue to expand. And the list of projects that you have at the bottom of the slide is basically trying to address how we can go beyond what is the current Jakafi patient pool and also improve over Jakafi in terms of safety and efficacy over time. So RUX XR is a simple project. It's basically QD formulation of ruxolitinib. It's very important for combination and fixed-dose combination. And then you have BET, CALR, PI3 kinase delta and ALK2, and I will speak about that and CK0804. And CK0804 is a project we have with Cellenkos. It's an umbilical cord T reg that is used in MF, where the first patients are now being treated. So if you zoom to myelofibrosis, what you see is that 18,000 patients who are the available pool of patients for the U.S., we said 55% of them are on Jakafi, you have different population of patients on Jakafi, some of them being well controlled, and that's the best scenario. Now remember that in myelofibrosis, all patients at some point are going to have progressive disease. So we are in a situation where some patients will be controlled for years. So we have patients who have been like 6 years on Jakafi and being fully controlled. But at some point, it will become a problem again. And you have a number of people who are suboptimal responders to Jakafi but staying on Jakafi because of the only options that they have and you have patients who are on the subtherapeutic dose of Jakafi mostly because of anemia. And I'll speak about it because it's very important. And then you have a number of patients who have been previously on Jakafi. So they are basically refractory in some way to the treatment or they had to stop because of side effects, mostly anemia. And then there are around 25% of patients still today who are in the watch and wait and watch kind of mode where basically there will be -- a physician would be waiting a little bit before they would start treatment. And what you see in our LIMBER program is that we are trying to address each of this population with very specific approaches where ALK2 will be certainly helping all the patients were anemia from MF or anemia from the Jakafi could be a problem where delta and BET have exactly the same profile of improving efficacy for patients who are not fully controlled and where CALR will be creating a completely new way to think about treatment of this disease with identification of the patients who have the mutation and treatment with targeted products that can have a disease-modifying effect. 25% of patients are in that situation. So speaking more specifically about ALK 2, because I think it's a very important project in this portfolio. You can see here, patients who have been treated with RUX plus a low dose -- low-ish dose of ALK2 100-milligram QD. And basically, what it shows is that from the mechanism of -- that was expected, which is hepcidin reduction, you can see it happening in these patients. And now in the last data that we just presented at ASH, you can see that, in fact, hemoglobin in some patients, it's 2 patients out of the 4 patients that were treated at that dose, hemoglobin is moving up, which will not happen spontaneously. So we are in a mode now where we believe, in fact, the mechanism is what we were hoping and expecting, and we are moving to the next step of development of continuing to increase the dose and potentially move to pivotal studies. In the case of CALR, it's a preclinical project, what makes it very interesting, it's a little approach to mutant cells. So it can have a disease-modifying effect, as you can see on the left. And on the right, if you look at the model of mice, where we are basically injecting mutant CALR cells, you can see that by using that product, you can have a sort of normalized bone marrow for this mice, which is obviously what we expect -- hope to see in human and we'll have a very deep effect on the treatment of not only myelofibrosis, but also ET, essential thrombocythemia where there is a large number of patients also with CALR mutation. So that's for LIMBER for 2023. As you can see, we have a number of expected events for the year. The approval of XR is, the PDUFA date is March 23. We will get what could be pivotal data for axatilimab in GVHD in third line around mid-'23. And we have all the progress we are making with axatilimab, ruxolitinib in earlier line of therapy with CALR, with parsa ruxolitinib and BET and ALK2 over the year. So a very important year for the LIMBER program. Now moving to the hematology, oncology, other hematology oncology beyond the LIMBER program. You can see some of the programs that we are running here with very interesting studies being done in warm autoimmune hemolytic anemia with parsaclisib, 2 large program with tafasitamab and still in the proof-of-concept stage, I would point out the CDK2 program, which is coming from our own research and now in the clinic and the PD-L1, oral PD-L1 program that, as I said, is making a lot of progress. So I would spend a minute on it trying to answer the question of why would anybody be interested than oral PD-1, PD-L1 type of product because that's, I guess, what a lot of people are asking. And as you can see on the right, it's an active product. So we know it has activity. We know the safety profile is very good for that molecule. If you remember, we had another one where there was an issue with peripheral neuropathy. And we are now in the mode of looking at how we can apply that to where it is needed and the first and most important feature of that new product is the ability to switch off because of the short half life. There are a number of patients who are suffering from immune-related AEs from treatment with checkpoint inhibitors and having a short half life with an oral product gives you the opportunity when you stop taking it, to see these side effects having a very much shorter duration. So it's very important -- and sometimes even helping patient recover from them. So that's what we are looking at. Obviously, it means in many cases that we will be doing studies in combination with other products in that field, like CTLA-4. The other thing is that we can do oral-oral combination. So we have studies ongoing in -- with [ itacitinib ] and with KRAS inhibitor from Mirati. So that's an important feature. It can have the same benefit of being able to manage potential toxicities and obviously, the convenience and the dosing flexibilities, lack of cost of infusion, the time saved in terms of chart time, et cetera, et cetera. So that project is now moving well, and we will have, I think, a number of updates during the year '23. Now moving to the dermatology which is obviously the new part of the organization. The launch of Opzelura has been very successful. I spoke about the 150,000 patients being prescribed in the U.S., the launch in vitiligo took place in Q3. So it's still very fresh. So we are seeing the growth in atopic dermatitis, still growing at a good rate, and now we see the addition of vitiligo to that. And as you can see on the right, the profile of Opzelura is very unique there. It's all in atopic dermatitis about efficacy and the speed of each reduction. If you have eczema, you know somebody with eczema you can literally try it, and you will see. It does something very different from many of the other topicals or all of them. And then in vitiligo, it's obviously the first and only product with a repigmentation endpoint approved by the FDA. And you can see from a clinical study, what -- how it can change the life of patients suffering from vitiligo. And in that field, if you want to follow the launch of Opzelura, I recommend going to the -- on the Internet in many of the sites like Reddit and TikTok and others where you start seeing and these are taken from this site, you start seeing on social media, you start seeing patients, basically the community working together and following their own progress while treated with Opzelura. And as you can see, it's fairly striking and relatively fast, in fact, even compared to what we had in our pivotal study. So in addition to the U.S., we are planning to launch vitiligo in Europe this year in 2023. And we believe, in fact, Opzelura in atopic derm and vitiligo in the U.S. in vitiligo in Europe has the potential to be one of the large products in our portfolio. And we just recently were issued a method of use patent for Opzelura in atopic dermatitis and vitiligo based on our unexpected high clinical success in the Phase III. And that data is included in the label. So what we are now expecting is that the generic -- the first generics of Opzelura could be available, not before 2040, which is obviously giving us a very much longer life for this important product. And the development of Opzelura is not stopping now. We have these 2 indications. As you can see from the slide, we are planning to get pediatric atopic dermatitis as the next indication and the study should be completed this year. And we have 3 indications we have disclosed where we are starting Phase II in lichen sclerosus, lichen planus and HS in the subpopulation of HS. So it's a product, it's a franchise with a long life from the commercial standpoint, and we are very optimistic about how it's going to evolve. Now it's not the only thing we have in dermatology. As you can see, Opzelura is a big part of our program, but we have 2 additional products. One is povorcitinib. It was called 707. It's a JAK1 inhibitor. It is now in Phase III for HS, a severe form of HS, and we have 2 studies in vitiligo and prurigo nodularis Phase II, randomized Phase II that are ongoing and a new product that maybe I will say a word about in the minute I have left, which is also an important part of vitiligo. So this povorcitinib, JAK1 which is a product now that has been in the clinic for a number of years. So that if you are not familiar with HS, it's a very debilitating disease, it's a chronic disease. It's very painful. It has a lot of impact on the life of patients who are suffering from HS. There is no oral treatment available for treating HS and now povorcitinib is in Phase III. We are speaking of around 150,000 HS patients with moderate or severe form. And as you can see on the right, it's a Phase II study in over 200 patients. There is a very clear efficacy coming from povorcitinib on the AN count in that study. And you also see that there is maybe a plateauing of the efficacy for doses above 45 milligrams. So the Phase III, we have ongoing is 45 versus 75 versus placebo, and it will be -- it is starting, and it will be available in the next year. The last thing I would say about our dermatology portfolio is auremolimab. It's a new monoclonal antibody against IL-15 beta receptor, and it is now entering the clinic. And it has a very interesting mechanism. You can see on the right studies that have been done, where it would be addressing what is cause for relapse in vitiligo, which is the memory T cells and it will be shutting down this aspect of vitiligo. So it would be very complementary to what we are doing with the JAKs, both as a cream and as a systemic treatment with povorcitinib. So a new component of our vitiligo. We are very committed to vitiligo patients and, frankly, make this disease of the past in many ways. And that will be one of the components of our portfolio. So I will stop here. Just a reminder on what's coming over the next few years. It's a long list. It's fairly exciting. The team's working on each of these projects, and I truly believe there is certainly a very bright future for Incyte in terms of growth over the years. In each of these categories, so the Jakafi, the life cycle management, the new product in cancer and the dermatology franchise. I will stop here with a slide of the news flow that you can expect from this project in 2023, and I thank you for your attention. So we are moving to the Q&A.

Great. So there are going to be mic runners in the room. If you want to ask a question, feel free. And I think we can have a couple of other members of the management team come up here. Christiana, the CFO and Steve, the Chief Medical Officer.

Do you want me to stand or?

It's up to you.

It's fine. I'll sit with them.

Great. [Operator Instructions] I guess maybe just to start off, you took a look back at Jakafi's growth. It's obviously continue to grow year after year for quite some time. But how should we think about the growth rate from here looking forward? And kind of the existing indications, where do you see the greatest growth opportunity?

So what we see for Jakafi twice a day, which is Jakafi that is available commercially today, we are seeing growth in MF, and it's entirely driven by the new patient flow is that Jakafi is the standard of care for patients newly diagnosed with MF. And in fact, as you see, there is a reservoir of patients there that are in a wait and watch or kind of situation. And part of it is because there is no good second-line therapy. So people will be waiting a little bit for patients who have symptoms that are fairly limited and say, maybe it's better to wait a little bit and then we'll start treatment when it's necessary. And part of it could be because they don't want to face potentially some of the side effects. So I think there is, in the dynamic of the next 5, 7 years, where we will be developing a number of options as a second-line treatment for suboptimal responders. We and other companies will do that. Then there will be an earlier treatment in MF and that will continue to grow our Jakafi business. In PV, there is a lot of room. Many patients are not being treated with Jakafi for multiple reasons. It's a little bit of the same saying, does it justify the treatment and the potential side effect. It's also, frankly, with a co-pay. And I believe Medicare, the new Medicare IRA capping of the co-pay for patients in the U.S. will be helping PV because that's the case where we know -- we don't know how many, but there are patients who are not getting treatment because of that. And then GVHD, there is a lot of room to grow in GVHD, where we are still in the launch mode for chronic GVHD. And as I was describing, we have a number of products with axatilimab that will be helping in the third line. And frankly, we are expecting to grow in the first line with a combination of Jakafi axatilimab that will be a steroid-free first line for GVHD, which obviously, will be very valuable. So we see that. And then we have the entire expansion of what this portfolio will do. And you can imagine that if we are able to treat patients with a suboptimal response to Jakafi with one of our new combination, it could be a could be parsa, it could be BET. The parsaclisib Phase III will be available at the end of this year. So it's coming relatively soon. Then we will extend the duration of treatment, and that will have an effect on the overall revenue here. And if you think of something like CALR, it's a disease-modifying type of approach. Now it's preclinical. So we need to be careful. We need to do the study. But if you assume that this is successful, it will expand the market, if there is such a word, the number of patients who can benefit from this treatment in a very meaningful way in MF and in ET, where today, we don't have a lot of use from Jakafi. So the way we see it is a number of years of expansion and in many ways, transformation of the standard of care in a way that will give the entire franchise a long life.

You mentioned the QD rux. And I think it as there was an allusion to the possibility of maybe not launching that sort of like the day it's approved. How are you guys thinking about when it's optimal to launch that product and kind of how it fits into your portfolio?

No, yes, it came a little bit as a -- it was a little bit of a surprise from the IRA in that from the new Medicare system. So we had to sort of look back and how -- what was the consequence of this new rule on something that is in the writing of the regulation part of the line extension. So we have to make sure, and it's -- some of it is not totally clear yet. I mean the way we think about QDs first, it's better to have a QD than twice a day, but frankly, it doesn't make a huge difference. There may be some effect of having a smoother PK curve that we need to establish and it's not done yet, but that will be some work to do. And then obviously, the QD is extremely valuable because when you combine once a day with once a day in cancer, it is far safer than combining once a day with a twice a day, oral drug. So think of twice a day Jakafi combined with parsaclisib, or BET or any of these product, they're all once a day, in fact, all the new products are once a day, it can create a lot of issues. And then the ultimate goal of the whole program is to do fixed dose combination, where we will have a pill that contains ruxolitinib once a day and parsaclisib, ALK2, BET. Each of these products can be combined in a fixed dose combination, and that will obviously give a very clear commercial advantage like we have seen in HIV, in many different type of disease, where being able to do it when others cannot do it is going to be a big advantage. So that's the 3 things is make it available, do the combination work and then do the fixed-dose combination and all of that is going to happen over the next 5 years. The exact date of the QD launch -- yes, I told you the PDUFA date is in March. We are looking at more specifically and maybe we'll need clarification on what would be the impact on the catastrophic coverage discount that we have to give because that's not yet fully, fully clear.

Okay. Maybe switching to Opzelura. I think you guys have talked about pulling back on the full buydown program in order to kind of help gross-to-nets. Has there been any disruption to volume as you've kind of worked down that program?

It's not to help gross to net. It's basically the plan -- the Biden program was a program we put in place at launch, with the idea in atopic dermatitis that if you use it, you will love it. That was literally -- because we knew from patients who have been treated in the studies, the feedback was, I cannot be -- it has -- this product has a soothing effect on eczema. It's removing the itch, the scratch and it has an anti-inflammatory effect that has long-term maintenance. I mean, I showed the slide, you have 80% of patients will never need to go to any other treatment. After 50 weeks of observation. So what we did is telling physicians, this is a new product. It's completely different from what you have had in the past, you try it, and we will cover the cost if your insurance company is not covering it, which is most of them at the beginning. And so from the beginning, the plan was to do that and then when coverage is increasing to stop it, and that's exactly what's happening. So the buydown program is not happening anymore. We still have a patient support program that is basically when patients, unfortunately, are not covered by the insurance company, we will take care of them, but it goes through a different process with a free drug process. So that's where we are. And it's -- I think it has been a very important part of the perception of Opzelura at launch was the feedback from patients to their physician was very -- in eczema. In vitiligo, it's different. You saw the picture. So the question is how fast can people see the repigmentation take place. In eczema, it's literally patients going back to the physician and saying, wow, this is really different .

And it looks like at least the data that we can see Opzelura scripts are continuing to grow nicely. But I know you said the data might not be as reliable. So it's -- so how are they doing.