Analyst Conference Summary

biotechnology

conference date: May 3, 2022 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2022 (Q1, first quarter 2022)

Forward-looking statements

Overview: Continued good revenue ramp, lots of pipeline opportunities.

Basic data (GAAP):

Revenue was $733 million, down 10% sequentially from $813 million, and up 21% from $605 million in the year-earlier period.

Net income was $38 million, down sequentially from $564 million, and down 30% from $54 million year-earlier.

Diluted EPS was $0.17, down sequentially from $2.54, and down 29% from $0.24 year-earlier.

Guidance:

Reaffirmed full year 2022 guidance excepting raised Jakafi revenue slightly to $2.33 to $2.40 billion.

Conference Highlights:

Hervé Hoppenot, Incyte CEO, said "Our double-digit growth in the first quarter reflects the strong performance of Jakafi (ruxolitinib), supported by the successful launch in chronic graft-versus-host disease in the United States, as well as continued growth for Pemazyre in Europe and Japan and, importantly, the fast uptake of Opzelura cream in atopic dermatitis in the United States. Opzelura is an important growth driver for Incyte and the U.S. launch is off to an excellent start with over 38,000 patients treated during the first quarter and significant progress with payers on securing access for patients. Later this year we have the potential to launch Opzelura in a second indication in the U.S. and we expect a regulatory decision in Europe for the treatment of patients with vitiligo who currently have no approved therapies for repigmentation. Our strong product growth and robust pipeline position us well for long-term growth and diversification." R&D expense increase rsulted in y/y profit decreases.

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. Over 38,000 new patients were treated with Opzelura in Q1 and feedback from dermatologists and patients has been very positive. Payer access is improving. In addition Opzelura is under review for vitiligo in the US and EU. Gross to net discount is expected to approve over time.

Developing an oral PD-L1. INCB99280 and INCB99318 have shown tumor shrinkage; data readout in 2022.

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).

Two Phase 3 trials evaluating ruxolitinib cream in chronic hand eczema are being initiated (TRuE-CHE1 and TRuE-CHE2).

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, with initial data expected in 2022.

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. A Phase 3 trial of parsaclisib in adults with warm autoimmune hemolytic anemia is planned. Combination trials with tafasitimab and rux are in Phase 3 for B-cell malignancies and myelofibrosis, respectively.

Capmatinib (Tabrecta) is under review in the EU for NSCLC. In April 2022, Incyte and Novartis announced a positive opinion from the CHMP.

Product revenue was $606 milion; royalties $122 million; milestone and contract revenue $5 million.

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

Non-GAAP numbers: Net income $123 million, up sequentially from $23 million, and down from $149 million year-earlier. Diluted EPS $0.55, up sequentially from $0.10, and down from $0.67 year-earlier.

Cash and equivalents ended at $2.54 billion, up sequentially from $2.35 billion. No debt.

INCB54707, a JAK1 specific inhibitor, is in Phase 2 studies for hidradenitis suppurativa, prurigo nodularis and vitiligo.

In March, 2022 Incyte and Eli Lilly presented 52-week data at the American Academy of Dermatology annual meeting demonstrating that nearly 40% of adults with alopecia areata and who were taking baricitinib 4mg saw at least 80% scalp hair coverage. There are no approved treatments for AA.

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: $353 million for research and development; $210 million for selling, general and administrative expenses; $5 million collaboration loss sharing; and a $6 million charge for change in value of a contingent consideration. Total costs $617 million. Leaving income from operations of $117 million. Interest and other income was $0 million. Unrealized loss on investment was $47 million. Income taxes $33 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:

Opzelura manufacturing update, texture issue? Cause of texture issue is known. Already implemented a process change with FDA approval. Initiated a second manufacturing sight, will produce units in the next couple of weeks. Will have samples available again in about one week. Very few actual complaints due to the issue.

Vitiligo approval? Is different from atopic dermatitis, which had an established market. There are no effective therapies for vitiligo, so patients are not typically in treatment, and the ramp might take longer.

We believe patients will get 3 to 4 tubes of opzelura per year for atopic dermatitis.

We believe the NSCLC submission by Lilly used only patients in China, whereas ours was global, so their being rejected by the FDA should not be an issue for us.

Despite the parsaclisib issue, we think it may still be a strong combination agent, with up to 100% response rates. We will have to consider the safety issue carefully before going forward with any larger study. Combined with Rux for myelofibrosis, the dose is different, we have regulatory approval for the trials, trials are enrolling well.

The A2A/A2B and CD73 programs are going well and should produce initial data in 2H 2022.

PD-L1 molecules? The FDA wants a focus on getting doses correct. We do have a biomarker that works well. We are seeing responses in hot tumor types. It is oral, could have better therapy, but we are not ready to say which histologies we will pursue. We do not yet know if we will take one or both forward.

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