Analyst Conference Summary

biotechnology

conference date: February 8, 2022 @ 5:00 AM Pacific Time
for quarter ending: December 30, 2021 (Q4, fourth quarter 2021)

Forward-looking statements

Overview: Strong earnings growth.

Basic data (GAAP):

Revenue was $813 million, flat sequentially from $813 million, and up 20% from $790 million in the year-earlier period.

Net income was $564 million, up 210% sequentially from $182 million, and up 276% from $150 million year-earlier.

Diluted EPS was $2.54, up 210% sequentially from $0.82, and up 274% from $0.68 year-earlier.

Guidance:

Exclusing possible Oprelura revenue, full year 2022 guidance is for product revenue between $2.5 and $2.65 billion. No guidance on royalties or milestones. Cost of product revenue 5% to 7%. R&D expense $1.42 to $1.59 billion. SGA expense $0.88 to $1.00 billion.

Conference Highlights:

Hervé Hoppenot, Incyte CEO, said "Our launch of Opzelura has been very successful thus far. Nearly 19,000 patients were treated in the fourth quarter and feedback from both dermatologists and patients has been very positive. Importantly, we have also made significant progress towards ensuring optimal patient access to Opzelura."

In October 2021 Incyte launched its first dermatology product after the FDA approval of Opzelura, a novel cream formulation of the JAK1/JAK2 inhibitor ruxolitinib, in Atopic Dermatitis. Nearly 19,000 new patients started Opzelura in the fourth quarter and feedback from dermatologists and patients has been very positive. In addition Opzelura has been accepted for priority review for vitiligo with a PDUFA data of April 18, 2022.

Ruxolitinib (Jakafi) for the treatment of steroid-refractory chronic GVHD (graft versus host disease) was approved by the FDA in September 2021.

In January 2022, Incyte and Lilly provided a regulatory update on the sNDA for baricitinib in Atopic Dermatitis. Based on ongoing discussions with the FDA, Lilly announced that alignment on the indicated population had not yet been reached and given the FDA position, there is the possibility of a Complete Response Letter (CRL).

n December 2021, updated positive data from the Phase 1/2 trial evaluating axatilimab as a monotherapy in patients with recurrent or refractory chronic GVHD despite two or more prior lines of therapy were presented at ASH. A 68% overall response rate and broad clinical benefit across multiple organs were observed in the pivotal AGAVE-201 trial. Additional trials of axatilimab are planned in patients with steroid-refractory chronic GVHD, including a Phase 2 trial in combination with a JAK inhibitor.

QD (once daily) ruxolitinib NDA submission planned for 1H 2022. Clinical studies evaluating ruxolitinib in combination with parsaclisib, INCB57643 (BET) and INCB00928 (ALK2), are progressing as expected.

In January 2022, Incyte announced the withdrawal of the New Drug Application in the US for parsaclisib for the treatment of patients with relapsed or refractory follicular lymphoma (FL), marginal zone lymphoma (MZL) and mantle cell lymphoma (MCL). The decision to withdraw the NDA followed discussions with FDA regarding confirmatory studies that Incyte determined cannot be completed within a reasonable period to support accelerated approval. The withdrawal of the NDA is a business decision and is not related to any changes in either the efficacy or safety of parsaclisib.

In November 2021 announced that the FDA accepted an NDA seeking approval of parsaclisib for the treatment of patients with relapsed or refractory follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma. PDUFA is April 30, 2022. A Phase 3 trial of parsaclisib in adults with warm autoimmune hemolytic anemia is planned.

Capmatinib (Tabrecta) is under review in the EU for NSCLC. Partnered with Lilly.

Product revenue was $648 milion; royalties $165 million; milestone and contract revenue $50 million.

Jakafi royalty revenue is from sales by Novartis outside the U.S.

Non-GAAP numbers: Net income $23 million, down sequentially from $262 million, and down from $205 million year-earlier. Diluted EPS $0.10, down sequentially from $1.18, and down from $0.93 year-earlier.

Cash and equivalents ended at $2.35 billion, up sequentially from $2.3 billion. No debt.

Two Phase 3 trials of ruxolitinib in combination with parsaclisib as a first-line therapy for patients with MF (LIMBER-313) and as a therapy for MF patients with a suboptimal response to ruxolitinib monotherapy (LIMBER-304) are ongoing.

Incyte has numerous other trials in multiple therapies and indications underway, plus preclinical agents.

See also Incyte pipeline.

Cost of product revenue was $43 million. GAAP operating expenses were: $473 million for research and development; $226 million for selling, general and administrative expenses; $8 million collaboration loss sharing; and a $2 million charge for change in value of a contingent consideration. Total costs $752 million. Leaving income from operations of $111 million. Interest and other income was $5 million. Unrealized loss on investment was $4 million. Income tax benefit $444 million.

Growth opportunities include potential annual sales of $3 billion for GVHD, $750 million for monjuvi, and $1.5 billion for Opzelura (ruxolitinib) cream.

Q&A Summary:

Duration of Opzelura use? Patients are using on all areas of the body, including hand and face. Refills are coming in, but it is hard to determine duration yet.

Opzelura barriers to reimbursement; copay assistance? There are millions of AD patients, currently using a wide variety of treatments. Eventually we anticipate no barriers to reimbursement. If a prescription is written, currently the patient will be able to get it with our help, but as coverage comes online all barriers should be removed.

Opzelura, are the patients naive or switching? Most switches are off of steroids, but we are seeing switches off many therapies.

Geographic revenue diversification? We decided to build our own organizations in Japan and Europe. We are partnered in China. We are currently signing distribution agreements in other parts of the world.

Texture issue? We know it is due to Rux crystalizing. We are working on it. Some may require regulatory back and forth. When we have enough commercial supply we will manufacture samples.

[Many questions on payers and gross-to-net ratio for Opzelura]

About 20% of rux patients suffer from low hemoglobin, which the new myelofibrosis combinations might alleviate.

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