Analyst Conference Summary

biotechnology

conference date: November 1, 2022 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2022 (Q3, third quarter 2022)

Forward-looking statements

Overview: Rapidly growing net product revenue offset by a lack of milestone payments in the quarter.

Basic data (GAAP):

Revenue was $823 million, down 10% sequentially from $911 million, and up 1% from $813 million in the year-earlier period.

Net income was $113 million, down 30% sequentially from $161 million, and down 38% from $182 million year-earlier.

Diluted EPS was $0.50, down 31% sequentially from $0.72, and down 39% from $0.82 year-earlier.

Guidance:

Tightened full year 2022 guidance for Jakafi net product revenue to $2.35 to $2.40 billion, other product revenue to $210 to $240 million.

Conference Highlights:

Hervé Hoppenot, Incyte CEO, said "Our total net product revenues grew 20% year over year led by strong Jakafi (ruxolitinib) performance and an increasing contribution from Opzelura (ruxolitinib) cream. Over 62,000 units of Opzelura were shipped in the quarter with growth fueled by both atopic dermatitis and vitiligo. This strong demand, coupled with an expansion of reimbursement coverage, positions Opzelura to become a meaningful long-term growth driver for Incyte. Additionally, our pipeline is progressing across Oncology and Dermatology, and we continue to execute on our strategy for growth and diversification with multiple updates on key programs expected over the next several months." The y/y decreases were mainly caused by a lack of milestone payments in the quarter, vs. $35 million year-earlier. Net product revenue was up 20% y/y. International expansion significantly helped revenue growth, but fx hurt.

In October, Incyte announced an agreement to acquire Villaris Therapeutics, a biopharmaceutical company focused on the development of novel antibody therapeutics for vitiligo. Its lead asset, auremolimab (VM6) is a novel, ultra-humanized anti-IL-15Rß monoclonal antibody designed to target and deplete autoreactive resident memory T cells (TRM). It demonstrated efficacy as a treatment for vitiligo in preclinical models. Incyte will receive exclusive global rights to develop and commercialize auremolimab for all uses, including in vitiligo and other autoimmune and inflammatory diseases. IND-enabling studies are currently underway, with clinical development expected to begin in 2023. The acquisition is subject to clearance by the U.S. antitrust authorities.

In July 2022 Opzelura received FDA approval for nonsegmental vitiligo; also under review in EU. 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. Initial sales were strong, and percent reimbursed is improving.

In Q2 the FDA accepted the NDA for once-daily ruxolitinib. The FDA set the PDUFA at March 23, 2023. Partner, Cellenkos, announced the FDA clearance of its IND application to initiate a Phase 1b, open-label study of CK0804 as an add on therapy to ruxolitinib in patients with myelofibrosis who experience a suboptimal response to ruxolitinib. Combination trials of parsaclisib, INCB57643 (BET) and INCB00928 (ALK2) with ruxolitinib are also ongoing.

In August, 2022, Pemazyre was approved by the FDA for myeloid/lymphoid neoplasms (MLNs) with FGFR1 rearrangement. MLNs with FGFR1 rearrangement are extremely rare and aggressive blood cancers. Phase 2 open-label studies evaluating pemigatinib in glioblastoma and relapsed or refractory advanced non-small cell lung cancer are ongoing.

In August 2022 Incyte announced it no longer plans to develop itacitinib.

Povorcitinib (INCB54707) is currently in Phase 2 trials for hidradenitis suppurativa (HS), vitiligo and prurigo nodularis. Based on results for HS released in August 2022 from the Phase 2 trial, Incyte intends to initiate a Phase 3 study in HS later in 2022.

INCB123667, a novel, potent and selective oral small molecule inhibitor of CDK2 which has been shown to suppress tumor growth as monotherapy and in combination with standard of care, in Cyclin E amplified tumor models, began a Phase 1 dose-escalation and dose-expansion study in adults with selected advanced or metastatic solid tumors.

Product revenue was $713 million; royalties $110 million; milestone and contract revenue $0 million.

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

Non-GAAP numbers: Net income $134 million, down 41% sequentially from $226 million, and down 49% from $262 million year-earlier. Diluted EPS $0.60, down 41% sequentially from $1.01, and down 49% from $1.18 year-earlier.

Cash and equivalents ended at $3.0 billion, up sequentially from $2.72 billion. No debt.

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

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

See also Incyte pipeline.

GAAP operating expenses were: cost of product revenue $55 million. $384 million for research and development; $266 million for selling, general and administrative expenses; $2 million collaboration loss sharing; and a $22 million gain for change in value of a contingent consideration. Total costs $685 million. Leaving income from operations of $138 million. Interest and other income was $11 million. Unrealized loss on investment was $1 million. Income taxes $36 million.

Q&A Selective Summary:

Opzelura trajectory? We are happy with the vitiligo uptake. There may be up to 1.3 million people who have vitiligo. We can't break out by atopic dermatitis v. vitiligo yet.

Opzelura reimbursement? Prior approval process, but coverage is improving, most commercial patients now have access. For AD there are often one or two prior therapies needed.

Gross to net for opzelura? Changing from a full buydown program to a bridging program for commercial insurance. 70% of claims currently are being paid and should continue to improve. Over time we will reach the target gross-to-net range.

Opzelura patient retention? Most scripts are new patients, so we don't know the refill rate yet, but we believe 2 to 3 refills for AD, 10 tubes for vitiligo.

Foreign sales? Royalties were about flat y/y because of fx impacts, end of covid 19 related sales.

HS? Moderate to severe in US, about 150,000 patients with a lot of unmet need. New study could begin late in 2022 or early 2023, focus on moderate to severe patients. [wm: adalimumab/Humira is the only current FDA approved med for HS]

Limber updates? Looking forward to ASH. ALK22 is more advanced than the BET program. Once we have established safe doses and schedules we will make decisions on how to go forward in 2023.

Myelofibrosis (MF) competition? 2 other JAK inhibitors have been approved. The BMS product sales seem flat. We do not see much Vangos use, but it must be second line. Jakafi still has considerable advantages over the competitors and is positioned for first line use.

Vitiligo commercials will start in either December of January.

Cash use? Still looking for assets that fit well. Villaris fits well with that.

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