Analyst Conference Summary

biotechnology

conference date: May 2, 2023 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2022 (Q1, first quarter 2023)

Forward-looking statements

Overview: Revenue growing

Basic data (GAAP):

Revenue was $808 million, down 13% sequentially from $927 million, and up 10% from $733 million in the year-earlier period.

Net income was $21 million, down 25% sequentially from $28 million, and down 45% from $38 million year-earlier.

Diluted EPS was $0.10, down 23% sequentially from $0.13, and down 41% from $0.17 year-earlier.

Guidance:

Updated 2023 gudiance: slight increase in Jakafi product revenue to $2.55 to $2.63 billion.

Conference Highlights:

Hervé Hoppenot, Incyte CEO, said "Our first quarter results demonstrate continued year-over-year double-digit revenue growth driven by Jakafi, which grew across all indications, and Opzelura, which is on track to become one of the most successful dermatology launches in recent years. In addition, we further expanded our commercial portfolio with several regulatory approvals including Opzelura for vitiligo in Europe. Furthermore, in Q1 we made a decision to focus our development efforts on eight programs that have high potential value for us and discontinued six other programs. This allows us to optimize our allocation of resources on programs that can have a high impact for patients and for Incyte." Poduct revenue grew 14% y/y. Sees Opzelura as a significant growth driver in 2023, helped by an EU approval. Declining earnings due to increased operating expense. Streamlining pipeline, dropping the least promissing 6 programs to focus on the 8 high-potential programs.

In Q1 2023, Zynyz, a humanized monoclonal antibody targeting programmed death receptor-1 (PD-1), received accelerated FDA approval for the treatment of adults with metastatic or recurrent locally advanced Merkel cell carcinoma (MCC). This represents the first regulatory approval for Incyte's PD-1 inhibitor, which is also being evaluated in pivotal trials in non-small cell lung cancer (NSCLC) and squamous cell carcinoma of the anal canal (SCAC).

Opzelura was approved by the European Commission for the treatment of non-segmental vitiligo with facial involvement in adults and adolescents 12 years of age and older. The label is very favorable.

In Q1 2023 the FDA issued a complete response letter or CRL for ruxolitinib extended-release (XR) tablets for once-daily (QD) use in the treatment of certain types of MF, PV and GVHD. Incyte will work with the FDA to determine appropriate next steps. But A Phase 3 trial of ruxolitinib cream in pediatric AD has completed enrollment with results expected by end of year. There are an estimated 2-3 million pediatric AD patients ages 2-11 in the US. Phase 2 trials evaluating ruxolitinib cream in mild to moderate hidradenitis suppurativa (HS), lichen planus (LP) and lichen sclerosus (LS) are ongoing. Additionally, two Phase 3 trials evaluating ruxolitinib cream in prurigo nodularis (PN) were initiated.

In Q4 2023 Axatilimab for chronic GVHD, third-line, Phase 1/2 positive results were released. More results are expected in mid-2023, and a combo trial with rux will start in 2023.

Ruxolitinib cream marketing authorization application is under review at the EMA with a CHMP opinion expected in the first half of 2023. Trials to expand the cream to other indications are ongoing.

Povorcitinib reported positive Phase 2 results in sidradenitis suppurativa and in a separate vitiligo Phase 2 trial. Incyte is planning 2 other phase 2 trials in asthma and chronic spontaneous urticaria.

Jakafi patent protection now expected to expire towards the end of 2028. But Opzelura protected until 2040.

Product revenue was $764 million; royalties $ million; milestone and contract revenue $ million.

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

Non-GAAP numbers: Net income $85 million, down % sequentially from $140 million, and down % from $123 million year-earlier. Diluted EPS $0.37, down % sequentially from $0.62, and down % from $0.55 year-earlier.

Cash and equivalents ended at $3.1 billion, down sequentially from $3.24 billion. No debt.

INCA33989 (mCALR) is on track for initiating first-in-human study in MF (myelofibrosis) and essential thrombocythemia in 2023.

In Q1 2023 The Phase 3 LIMBER-304 trial, evaluating parsaclisib in combination with ruxolitinib BID in suboptimal responders in MF and the Phase 3 LIMBER-313 trial, evaluating parsaclisib in combination with ruxolitinib BID in first-line MF, were discontinued following results of interim analyses that indicated that the studies were unlikely to meet their primary endpoints in the intent-to-treat patient population. The studies were not stopped due to safety.

In December at ASH final Phase 2 parsaclisib with ruxolitinib for myelofibrosis results, in patients with suboptimal responses to rux, were positive. The Phase 3 trial results are expected at the end of 2023. Zilurgisertib with rux for MF Phase 1 initial results showed improvement in anemia.

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 $57 million. $407 million for research and development; $315 million for selling, general and administrative expenses; $1 million collaboration profit sharing; and a $6 million loss for change in value of a contingent consideration. Total costs $784 million. Leaving income from operations of $25 million. Interest and other income was $33 million. Interest expense <$1 million. Unrealized loss on investment was $5 million. Income taxes $30 million.

Q&A Selective Summary:

Gross to net issue? Opzelura affected in Q1 was a higher copay and deductible in Q1, which is typical. But increased Medicaid utilization, which included Q3 and Q4 claims received and their true-ups. Those true-up levels should decline going forward. Opzelura now available under Medicaid in all 50 states, uptake should continue to increase, but not as fast as in Q1. Expects gross to net to gradually come down during the course of the year.

We will need to see more quarters of Opzelura uptake before we will provide revenue guidance. Currently 30% vitaligo, 70% dermatitis.

Gradually switching from oncology to inflammatory in pipeline? Yes, we have been moving resources into inflammation. We are not moving away from oncology. There are a lot of synergies in the research.

Duration of therapy in Jakifi with MF? It is about 21 months, but many patients go longer. That does not seem to be changing. The growth for MF this quarter was the highest we have ever seen.

Monjuvi trials enrolled incredibly well. Pemazyre is showing activity in glioblastoma multiforme.

See the Seeking Alpha INCY Q1 2023 transcipt for greater detail.

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