Analyst Conference Summary

biotechnology

conference date: July 30, 2024 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2024 (Q2, second quarter 2024)

Forward-looking statements

Overview: Good sales growth, but keep in mind Jakafi patent expires end of 2026. Heavy profit losses due to IPRD expenses from acquisitions.

Basic data (GAAP):

Revenue was $1.044 million, up 19% sequentially from $881 million, and up 9% from $955 million in the year-earlier period.

Net income was negative $445 million, down sequentially from $170 million, and way down from $204 million year-earlier.

Diluted EPS was negative $2.04, down sequentially from $0.75, and down from $0.90 year-earlier.

Guidance:

Very slightly increased 2024 Jakafi revenue low end, also increased R&D expense ranges.

Conference Highlights:

Hervé Hoppenot, Incyte CEO, said "In the second quarter of 2024, total revenues grew 9% year-over-year, surpassing $1.0 billion for the quarter. The commercial performance during this period was driven by strong patient demand for Opzelura (ruxolitinib) and growth across all indications for Jakafi (ruxolitinib). In R&D, we completed a strategic review of our pipeline and have further intensified our focus on clinical programs that we believe can be transformational for patients. The $2.0 billion share repurchase completed during the second quarter, underscores our confidence in our commercial portfolio, clinical pipeline and Incyte's long-term value."

In Q2 2024 Incyte completed its acquisition of Escient Pharmaceuticals, strengthening its dermatology pipeline with MRGPRX2 and MRGPRX4. On the other hand Incyte will discontinue further development of oral, small molecule PD-L1 inhibitors, as well as its LAG-3 monoclonal antibody, TIM-3 monoclonal antibody, and LAG-3xPD-1 bispecific. That will not free up R&D expense until 2025.

In February 2024, Incyte announced the FDA accepted, for Priority Review, the BLA for axatilimab, an anti-CSF-1R antibody, for chronic graft-versus-host disease (GVHD) after at least two prior lines of systemic therapy. With Syndax Pharmaceuticals. Anticipates FDA decision 2H 2024.

In April 2024, Incyte had entered into an agreement to acquire Escient Pharmaceuticals. Its clinical development portfolio includes EP262, a first-in-class, potent, highly selective, once-daily small molecule antagonist of Mas-related G protein-coupled receptor (MRGPRX2). Also EP547, a first-in-class oral MRGPRX4 antagonist. Incyte acquired Escient and its assets for $750 million plus Escient's net cash remaining at the close of the transaction.

In Q2 Zynyz (retifnlimab) reported two topline positive results from Phase 3 trials. It in a PD-1 antibody, tested for squamous cell anal carcinoma and NSCLD.

In Q1 2024 the Phase 2, randomized, double-blind, placebo-controlled, dose ranging study evaluating povorcitinib in participants with PN data was presented at the 2024 AAD Annual Meeting. The study met its primary and secondary endpoints following 16 weeks of treatment across all dosing groups. A Phase 3 study in PN is planned.

In April 2024 povorcitinib, a selective JAK1 inhibitor, was licensed from China Medial System Holdings, for SE Asian countries including China.

n March 2024, Incyte presented data at the 2024 AAD Annual Meeting from its Phase 2 study evaluating Opzelura cream (ruxolitinib) in adults with mild/moderate hidradenitis suppurativa. At Week 16, patients had significantly greater decreases from baseline versus placebo in total abscess and inflammatory nodule count, the primary endpoint of the study. No new safety signals were observed. A Phase 3 study is planned for 2025. Phase 2 studies in lichen planus and lichen sclerosus have completed enrollment. Two Phase 3 trials evaluating ruxolitinib cream in prurigo nodularis (PN) are ongoing.

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

Product revenue was $907 million; royalties $137 million; milestone and contract revenue $0 million.

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

Non-GAAP numbers: Net income negative $396 million, down sequentially from $145 million, and down from $223 million year-earlier. Diluted EPS negative $1.82, down sequentially from $0.64, and down from $0.99 year-earlier.

Cash and equivalents ended at $1.4 billion, down sequentially from $3.9 billion due to acquisition of Excient and $2.00 in share repurchases. No debt.

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 $77 million. $1,138 million for research and development (including IPRD); $305 million for selling, general and administrative expenses; $0 million collaboration profit sharing; and a $1 million loss for change in value of a contingent consideration. Total costs $1.52 billion. Leaving income from operations of negative $478 million. Interest and other income was $50 million. Unrealized loss on investment was $39 million. Income taxes $55 million.

Q&A Selective Summary:

Pipeline restructuring? Zynyz (retifnlimab) data was not a factor in the restructuring. Driven by data reviews of the programs we terminated, plus positive data from earlier stage pipeline that we continue to develop.

Jakafi competition? Growing revenue and patients in MF. GVHD is now the main growth driver. We think the competing drugs are mostly being used in the second line setting.

Ovarian competitiveness? CDK2 program update as ESMO is a couple of months. Focus will be on ovarian, expect to show the optimal dose and schedule, support for continuing the trials.

MF can have disease-related anemia and drug-related anemia. We are escalating doses and hope for good results for both. We will have an updated data set at higher doses.

R and D spend plan? Our approach is project specific, what makes sense to develop. We have been gradually decreasing the percentage of R&D to revenue.

LAG3 discontinuation? It was the competitive landscape; we are behind in particular with our bispecific.

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