Operator:

Hello, and welcome to the Incyte First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, the conference is being recorded. It's now my pleasure to turn the call over to Ben Strain, Associate Vice President, Investor Relations. Please go ahead, Ben.

Pablo Cagnoni:

Thank you, Herve, and good morning, everyone. In the first quarter, we continued to make solid progress across our pipeline, which is focused on 3 areas

Dingding Shi:

So for Opzelura, could you give us some more color on the gross-to net for the rest of the year? And what is the latest review you see in both AD and vitiligo? And I also have a follow-up.

Matteo Trotta:

And on the split of business between the 2 indications, when we look at the IQVIA data, triangulated with external and internal sources, we see a 40-60 split consistent over time, where 40% is non-segment of Vitiligo and 60% is atopic dermatitis. And we're very happy to see that both indications are growing at quite a healthy pace.

Steven Stein:

Yes. Thank you for the question. It's Steven. So the milder type of HS still represents about 100,000, 150,000 patients in the United States. It still has morbidity and unmet need, and these patients have abscesses and nodules that cause them discomfort and morbidity and lends itself to a topical treatment because it's not as extensive as the moderate and severe, which has fistulas, et cetera. So we conducted this PoC study and saw this data, which is extremely encouraging in this mild stage of HS in terms of abscess and nodule decreases. And as Pablo said in his prepared remarks, we're now working with regulators to get an appropriate endpoint in this entity for which no drug is approved and has this unmet need I spoke about.

Operator:

Your next question is coming from David Lebowitz from Citi.

Barry Flannelly:

Sure. As you saw from our guidance, $2.69 billion to $2.75 billion, we're very optimistic about the continued growth of Jakafi. Obviously, we benefit in the IRA because as we talked about before, we have the small biotech exemption.

Barry Flannelly:

No. We obviously said we're still confident about $3 billion plus by the time we hit 2028, so that's what we're still confident in. And so we think that '24 and '25 should be just fine.

Srikripa Devarakonda:

On Jakafi, Herve, you mentioned that you see very little impact on Jakafi's share from competitors. Can you talk a little bit about whether the competition has changed the average duration on Jakafi? They do go on to Jakafi in the frontline, but is there any -- are you observing people getting off of Jakafi sooner? And also for the BET inhibitor combination, there was a recent report of increased AML incidents in patients on the Jakafi/BET combo for a competitor. I just wanted to get your insights into how this may or may not impact your internal BET program?

Pablo Cagnoni:

Yes, thank you for the question. So I mean, obviously, I'm not going to comment on data from other companies. Our BET inhibitor program, as we've discussed, is going very well, and we'll discuss additional data over the course of the year, and we're planning a potential pivotal trial going forward, which we'll unveil later this year. Reviewing the data from our internal program, we have, at this point, no concerns over the safety when it comes to AML transformation.

Operator:

Next question is coming from Michael Schmidt from Guggenheim.

Pablo Cagnoni:

Yes, Michael, thank you for the question. Now we've seen the data. Obviously, it's an impressive data set. At this point, as you know, we have a number of studies ongoing with povorcitinib. We've had internal discussions about the potential to extending the trials of povo to atopic dermatitis. What I can say right now is we're encouraged by the data from RINVOQ. I think that it's an indication that povo could work very well in this disease. We have not made an internal decision that -- yet as to whether to develop povorcitinib in atopic dermatitis yet, but it's certainly something we're contemplating.

Marc Frahm:

Maybe just start. One, just following up on the prior BET question. Can you -- were your comments just based on the clinical data you're seeing in those concern of AML? Or maybe can you speak to preclinically because I believe that BET inhibitor from a competitor has shown genotoxicity in some preclinical assays. Has yours shown genotoxicity?

Operator:

Next question is coming from Brian Abrahams from RBC Capital Markets.

Barry Flannelly:

Sure. I think, in fact, the new competitors, let's take [indiscernible] and momelotinib as examples, there -- as far as we can tell from all of our market research, from all of our experience working with hematologists, they're all being used in the second-line setting or maybe in patients that have very, very low platelets, for example. So we anticipate because of really the overall survival benefit of Jakafi, because of the tolerability of Jakafi, because of the symptom release of Jakafi, it's a great drug, and it will continue to be very useful to patients who have myelofibrosis going forward.

Vikram Purohit:

So we had 2, one on LIMBER and then one on Opzelura. So on LIMBER, were the ALK2 PoC data set we're expecting to see by the middle of the year, could you just frame for us kind of what the scope and size of the data set is going to be? And what you would define as sufficient for continued development for that program based on what we see for that PoC data set?

Steven Stein:

Vikram, it's Steven. So on your first question, just reminding of ALK2's mechanism felt to work through hepcidin inhibition and then ameliorate anemia by releasing iron and make it available for hemoglobin production. As we've already shown in multiple presentations, we can decrease subsiding levels. The question you get into, does this translate to some sort of clinical benefit? Just to remind you of the study, it has 3 groups, treatment group A, B and C. A was monotherapy, B was in combination with RUX, but those were in later-line patients. And the real focus right now, as you can see on clintrials.gov is treatment Group C, which is the treatment-naive group of patients to see in combination with RUX will help make an effect that will be of clinical benefit to patients, either by raising hemoglobin or preventing the decrease that sometimes occurs with JAK inhibition.

Christiana Stamoulis:

Vikram, it's Christiana. I'll take the second part. As we discussed on our last call, before we provide guidance for Opzelura, we are looking to have more real world data on utilization, especially for vitiligo. And data that goes beyond that first initial phase of therapy, which may represent a phase of experimentation by patients. So we are still early into the launch. We are still going through that initial phase of patients on therapy. So we're waiting for more real-world data before we are in a position to give you guidance.

Derek Archila:

Just 2 quick ones from us. I guess, first, just on Jakafi. As you noted, the Jakafi growth coming from GVHD and PV. So I guess, what does this mean for future assumptions around myelofibrosis? I know you said stable, but how should we be thinking about that for the rest of this year?

Barry Flannelly:

I'll take the first part of your question, it's Barry. So for Jakafi, we continue to see myofibrosis -- the way I look at the myelofibrosis patient population, there's about 18,000 patients, prevalent patients with myelofibrosis. And because we're the market leader, because of the overall survival and symptom benefit that Jakafi provides, we will continue to think of patients as either being on Jakafi, which is most of the myelofibrosis patients or they have been on Jakafi or they will be on Jakafi. When they progress on Jakafi, then there's other options, fortunately, that are available to them. But going forward for 2024 and beyond, we continue to expect to be the market leader in first-line myelofibrosis. And I'll turn the call over to Pablo.

Operator:

Next question today is coming from Jessica Fye from JPMorgan.

Matteo Trotta:

Thank you, Jessica. I'll take the Change Healthcare on Opzelura. What we see at the end of February that there was this cyber-attack reported pretty much caused the network interruption for a few weeks. So as a result, the Change Healthcare was unable to process the claim for a few weeks. When we looked at -- when we deep dive in the data, we saw a softer March when you look at the entire atopic dermatitis market basket that we monitor, and that caused an estimate of $4 million to $5 million negative impact from Opzelura in Q1. The good news for us is that we're monitoring April, and we see demand, weekly demand back on track to the levels we saw pre-cyber-attack and the more recently.

Steven Stein:

And then just to address your question on povorcitinib in vitiligo, we have 2 identical Phase III studies ongoing STOP-V1 and STOP-V2 in patients 18 years or older with 5% or greater body surface area involvement of non-segmental vitiligo. It's a little tricky on the endpoints. But just to tell you, our primary end point for the FDA in the United States is actually identical. It's facial-VASI75 and Total VASI50. For other parts of the world, there may be a different primary endpoint. For example, in Europe, they're interested most in the Total-VASI50. So that leads to some of the confusion. But for our study, for the FDA, it's both Facial-VASI75 and Total-VASI50, together measured at week 52.

Tazeen Ahmad:

On Opzelura, can you -- and I'm sorry if I missed this in your prepared remarks, but can you talk about refill rates for patients maybe now that have been on therapy for a few quarters? Can you talk about how you're seeing their use of tubes? What's the average use of tubes is? I'm just curious that if patients are having good results with the cream, whether they're taking many drug holidays in between when they don't have as much itch, for example?

Matteo Trotta:

Yes. The only comment that I can add is on -- just in this quarter, we're launching a very promising adherence program that we we're confident will impact -- will continue to impact the refill rate growth that we see across both indications, AD and Vitiligo.

Salveen Richter:

Could you just give us an update on how the ex U.S. launch of Opzelura is progressing with the addition of France at this point? And how you're thinking about the pediatric uptake in 2025? And if I could also just ask 1 on business development. Post the recent acquisition, you still have significant balance sheet capacity. Could we see you do meaningful M&A in the near term on top of Escient?

Herve Hoppenot:

On the business side, maybe, Christiana, you can...

Operator:

Our next question today is coming from Eric Schmidt from Cantor Fitzgerald.

Herve Hoppenot:

I can take that. I mean it's -- we have been speaking about acquisition and external opportunities, which is obviously one very clear goal for the corporation is to diversify our revenue in the future and to increase to the growth coming from the current portfolio that we have. So that's one option. And obviously, as we are doing with our Board, there are discussions about alternatives to that. But today, as you have seen with Escient, I mean, there are opportunities that are very much in the range of what we are looking for in terms of timing and in terms of therapeutic areas, and that would be of an interest. So we are basically looking at both.

Jay Olson:

Congrats on the progress of your KRASG12D. It seems like Incyte is increasingly focused on targeted oncology versus immuno-oncology. Can you describe your strategy in oncology? And Also, how are you planning to leverage your oral PD-L1 for your targeted oncology programs, in combination with your KRASG12D, or do you plan to develop additional KRAS inhibitors?

Matthew Phipps:

I guess I'll ask about the CALR-mutant antibody and data in early 2025, will that be monotherapy or mono and Jakafi combo and also myelofibrosis only or also including essential thrombocytopenia? And I guess just from a high level, the combination with Jakafi, is that primarily to provide faster symptom relief? Or do you think it is just kind of necessary to achieve efficacy for the antibody?

Evan Seigerman:

Two from me. One, just taking a step back looking at P&L management. How do you think about being most efficient with your OpEx? And then kind of a follow-up there. Would you ever consider using some of your balance sheet to, say, do buybacks, especially with the stock in the [ $50s? ]

Herve Hoppenot:

Okay. So I think the first question was about the efficiency of the spending. So as you see, I mean, we have in our P&L, we had a relatively -- this quarter, we had a very flat SG&A and a relatively slower growing R&D. And that's what we have been speaking about for years now is basically growing the top line at a faster rate than we are growing both components of the expenses and increasing leverage. So that's sort of happening. They are depending on the event on the quarterly, it's not always at the same rate, but it's clearly the direction that we are taking.

Pablo Cagnoni:

I'm happy to comment. Look, I think what we're building is an important portfolio of first-in-class or best-in-class in some cases, best-in-disease medicines in the - I would expand the questions in the inflammation space.

Operator:

Your next question is coming from Reni Benjamin from Citizens JMP.

Gavin Clark-Gartner:

Just wanted to ask one quick clarification on the CALR data. Did you note that you're planning to show some of that data later this year? Or could that still be a 2025 event?

Operator:

We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Operator:

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Operator:

Hello, and welcome to the Incyte Fourth Quarter Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ben Strain, Associate Vice President, Investor Relations. Please go ahead, Ben.

Hervé Hoppenot:

Thank you, Ben, and good morning, everyone. So, on Slide 5, we achieved another strong year with 2023 product and royalty revenues growing 14% versus 2022 to reach $3.7 billion, continuing the strong performance we have delivered since 2018. We also achieved [a symbolic] (ph) milestone in the fourth quarter. Total product and royalty revenue reached $1 billion quarterly for the first time, driven by the continued growth of Jakafi and successful launch of Opzelura. So, moving to Slide 6, 2023 Jakafi net sales were $2.6 billion, growing 8% versus the prior year with growth across all indications year-over-year. And Opzelura saw strong momentum in 2023, growing 162% to $338 million, driven by new patient and refills in both AD and vitiligo. We expect Opzelura to continue to be a key contributor to growth in the next year. On Slide 7, our clinical pipeline has the ability to deliver transformative therapies to patients across multiple programs and provides the opportunity for 10 high-impact launches by 2030, as presented recently in San Francisco. Importantly, some of the programs highlighted on this slide are de-risked as they are post proof of concept, including axatilimab, which has been submitted to the FDA for approval, RUX cream in pediatric atopic dermatitis to be submitted to the FDA by mid-year, RUX cream in HS where we have randomized Phase 2 data, and povorcitinib, where we are in Phase 3 in HS, vitiligo and in PN, where we are on track to initiate a Phase 3 study this year. Each of these programs have the potential to address a significant market and provide an opportunity to contribute to the top-line before the end of the decade. I would also like now to highlight the recent transaction with MorphoSys on Slide 8. As described in the press release we issued last week, we entered into an asset purchase agreement with MorphoSys, which gave us exclusive global rights for tafasitamab, also known as Monjuvi or Minjuvi. This acquisition provides a number of benefits to Incyte in the short term. First, going forward, we will now record all revenues from Monjuvi in the US, while eliminating MorphoSys' share of the royalties ex US and all future milestone to MorphoSys. Second, we will realize significant operating efficiencies and cost synergies in US commercialization and in global development by removing redundant position and redundant external expenses and by simplifying the org chart. Therefore, in 2024, this deal will add to Incyte's revenue and will have a limited impact on operating income. For the future, while the currently approved indication of relapsed/refractory DLBCL represents a smaller opportunity for tafasitamab, we see upside potential in second line follicular lymphoma and marginal zone lymphoma with Phase 3 data expected later this year and in first line DLBCL, for which Phase 3 data are expected in 2025. These programs have been co-funded by MorphoSys until now and, if positive, Incyte will fully benefit from the upside from this indication. And this acquisition will be value accredit for Incyte in all scenarios. I will now turn the call over to Barry, who will discuss our commercial performance in more detail.

Pablo Cagnoni:

Thank you, Barry, and good morning, everyone. I want to highlight some of the key R&D milestones that we accomplished in 2023 and to provide a framework for how we are evolving our R&D focus with near-term goals to increase the rigor of our decision making, accelerate the progression of our pipeline and to optimize our resource allocation. As you can see on Slide 16, we have three areas of focus where we're building a robust and diverse portfolio of medicines for the treatment of MPNs and graft-versus-host disease, oncology and inflammatory diseases. We're advancing a pipeline to deliver impactful innovation with a focus on best-in-class and our first-in-class differentiated medicines in areas with large unmet medical needs. Our discovery process is targeting pathway-centric and leverages cross program knowledge and deep biology expertise in our established disease areas of interest to identify and prosecute novel targets as well as disease and genotype-specific dependencies with a mortality agnostic approach. In addition to our established small molecules expertise, we have expanded our drug discovery capabilities to include monoclonal antibody discovery in-house and have access to bispecific antibody discovery capabilities through our partnership with Merus. Turning now to Slide 17, we made significant advancements across all three priority areas of focus in the R&D portfolio in 2023. In MPNs and graft-versus-host disease, we submitted the BLA for axatilimab for the treatment in third line chronic graft-versus-host disease. We presented updates for our BET and ALK2 inhibitors in MF and highlighted our new potentially transformative therapies for MF, PV and ET, our mutant CALR monoclonal antibody, which is enrolling well in a Phase 1 study and our JAK2 V617F inhibitor for which we plan to initiate a Phase 1 study in the next month. In oncology, we initiated several monotherapy and combination studies with our small molecule oral PD-L1 inhibitor and highlighted early signs of clinical activity with our small molecule CDK2 inhibitor. Additionally, we unveiled a new program in development, our KRASG12D inhibitor, which entered the clinic earlier this year. Steven will provide more detail on the KRASG12D program in his prepared remarks. In dermatology, we continue to maximize the potential of ruxolitinib cream. In 2023, Opzelura was approved in Europe for vitiligo as the first and only approved treatment for repigmentation. We also presented positive Phase 3 data in pediatric atopic dermatitis and announced that the primary endpoint was met in a randomized Phase 2 study in patients with hidradenitis suppurativa. For povorcitinib, we presented a positive randomized Phase 2 data in vitiligo and initiated two Phase 3 studies for patients with extensive vitiligo. We also announced that povorcitinib had met the primary endpoint in a randomized Phase 2 study in patients with prurigo nodularis, and we initiated two randomized Phase 2 studies, one in patients with asthma and another in patients with chronic spontaneous urticaria. We believe that with ruxolitinib cream and povorcitinib, we'll be the only company with the ability to address a broad spectrum of patients from mild to severe, potentially providing both the topical and oral option for a number of indications, including prurigo nodularis, hidradenitis suppurativa and vitiligo. Apart from an exhaustive list of all the R&D achievements in the past year, this demonstrates that 2023 was a very successful impactful year for Incyte and it serves as a foundation for a number of pivotal trials that will deliver results in the next few years. As you can see from Slide 18, we anticipate that 2024 will be another very exciting year with multiple clinical and regulatory milestones. Steven will provide more details on these, but I would like to highlight certain events. Within our oncology pipeline, we believe that our potentially best-in-class CDK2 inhibitor is an active agent and we look forward to sharing data as well as our development plan later this year. In addition, the pivotal trial of tafasitamab in patients with follicular and marginal zone lymphoma, also known as inMIND, we'll read out later this year, and we look forward to sharing those results. We submitted a BLA for axatilimab late last year and we look forward to working with the FDA to make axatilimab available to patients with chronic graft-versus-host disease later this year and to initiate additional combination studies in patients with less pre-treated chronic graft-versus-host disease. Within our dermatology portfolio, we expect to submit the sNDA for Opzelura for pediatric atopic dermatitis and expect multiple data readouts throughout the year. With that, I would like to pass the call to Steven, who will provide further details on our clinical development pipeline.

Christiana Stamoulis:

Thank you, Steven, and good morning, everyone. 2023 was another year of strong financial performance with total product revenues of $862 million for the fourth quarter of the year and $3.2 billion for the full year, representing a 13% and 15% year-over-year increase, respectively. Total royalty revenues, which are primarily comprised of royalties from Novartis for Jakavi and Tabrecta, and royalties from Lilly for Olumiant were $150 million in the fourth quarter and $523 million for the full year, up 13% and 8%, respectively, compared to 2022. Total revenues grew 9% in the fourth quarter compared to the prior-year period, reaching the $1 billion mark, an important milestone for Incyte. For the full year, total revenues were $3.7 billion. Turning to Jakafi on Slide 30. Jakafi net product revenues were $695 million for the fourth quarter and $2.6 billion for the full year 2023. In 2023, Jakafi net sales grew 8% compared to the prior year. Jakafi sales were negatively impacted by a significant increase in free drug in the fourth quarter of the year, driven by an increase in the number of patients seeking support from Incyte's Patient Assistance Program. The impact of the increase in free drug was more than offset by an increase in channel inventory levels. This increase was in anticipation of patients moving into paid demand starting in Q1 of 2024. The increase in Q4 channel inventory levels represented $46 million in sales. Turning now to Opzelura, net product revenues for the fourth quarter were $109 million, representing a 78% increase year-over-year, driven primarily by increased patient demand. For the full year, total Opzelura net product revenues were $338 million, representing a 162% increase compared to the prior year. Moving on to Slide 32 and our operating expenses on a GAAP basis. Total R&D expenses were $444 million for the quarter, representing an 11% year-over-year decrease, which was primarily as a result of the $70 million upfront payment made as part of the Villaris acquisition in Q4 2022 and partially offset by the $20 million development milestone payment to former Villaris shareholders in the fourth quarter of 2023. For the full year 2023, total R&D expenses were $1.6 billion, representing a 3% year-over-year increase. This increase was primarily due to the progression of our pipeline and was mainly offset by lower upfront and milestone expenses in '23. Total SG&A expenses were $294 million for the fourth quarter and $1.16 billion for the year. The year-over-year increase of 8% for the fourth quarter and 16% for the full year were mainly due to increased sales and marketing activities for Opzelura in both the US and Europe, unfavorable effects and timing of certain G&A related expenses. Moving on to 2024, I will now discuss the key components of our guidance on a GAAP basis, which includes revenues and expenses related to the recent acquisition of the exclusive global rights to tafasitamab, but excludes any potential impact related to the accounting treatment of the $25 million purchase price paid. For Jakafi, we expect net product revenues to be in the range of $2.69 billion to $2.75 billion, on track to achieve our long-term guidance of over $3 billion in net product revenues by 2028. We expect net product revenue growth to be driven exclusively by continued demand growth, and be partially offset by lower net pricing as a result of IRA imposed price increase caps and continued growth in 340B volumes. As in previous years, we expect the gross to net adjustment to be higher in the first quarter of the year relative to the previous quarter and subsequent quarters due to the higher deductibles and our share of the donut hole for Medicare Part D patients, which are primarily impacting the first quarter of the year. While for Opzelura we will not be providing full year guidance at this point, in the first quarter, we expect to see again the effect of typical Q1 dynamics on net sales, including higher patient out-of-pocket costs due to the planned deductibles resetting at the beginning of the year and the impact of holidays, medical conferences and other events on dermatology product sales. As of a result, Q1 Opzelura net product revenues are expected to be below the previous quarter and the subsequent quarters and represent a smaller share of the full year net product revenues, consistent with what we saw in 2023. For other hematology/oncology products, which now include Iclusig, Pemazyre, Monjuvi and Minjuvi, we expect total net product revenues to be in the range of $325 million to $360 million, which at the midpoint represents approximately 47% growth over 23%. Turning to operating expenses on a GAAP basis, we expect COGS to range from 7% to 8% of net product revenues, which is in line with 2023. R&D expense is expected to be in the range of $1.72 billion to $1.76 billion, representing 7% growth at the midpoint versus 2023, primarily driven by the progression of our pipeline. We expect SG&A expense for the year to be in the range of $1.21 billion to $1.24 billion, representing 6% year-over-year growth at the midpoint, primarily driven by the inclusion of sales and marketing expenses associated with Monjuvi in the US under SG&A, whereas prior to the acquisition of full product rights, they were included under the collaboration profit or loss share. Operator, that concludes our prepared remarks. Please give your instructions and open the call for Q&A.

Kripa Devarakonda:

Hey, guys. Thank you so much for taking my question. On Jakafi myelofibrosis, thank you so much for providing the market share details on patients and share of new patients. I was just wondering if you anticipate stabilization of Jakafi share at these levels. And if collaborative were to be approved in combination with RUX, presuming it happens sometime next year, should we expect to see an inflection point? Thank you.

Kripa Devarakonda:

Great. Thank you so much.

Andrew Berens:

Hi. Thanks. Wondering if you guys could expand upon the development of Jakafi XR in light of the recently announced bid by Novartis for MorphoSys. Does Novartis' control of Jakafi outside the US impact how you're thinking about developing your BET inhibitor? Do they have any direction or say in any of the directions of the XR version of Jakafi? And then also just wondering if you think that an add-on drug to Jakafi in MS still requires a symptomatic improvement as an endpoint for regulatory endorsement, or do you think that there's been a material change in thinking at the agency?

Steven Stein:

And then, Andy, I'll take the other part of your question. So, for RUX XR, as Pablo communicated at the ASH Investor event, we have now clear feedback from the FDA that we need to do a new formulation strength, which are already developed, which are slightly higher and then demonstrate the EBA with those primarily around Cmin and AUC. That's the clear guidance from the FDA. And we estimate this should be completed in a two-year process, so well before the LOE. It doesn't affect our development of FTCs, fixed-dose combinations, with any of our products. So that continues. For our BET inhibitor, again, we showed data at ASH and alluded in my prepared remarks, we have clearly an active compound showing very good rates of spleen reduction, both volume and length, very good symptom improvement and occasional hemoglobin increases, just like seen with the other BET inhibitor. We have been operating like other companies under the assumption that at least in first line, you need SVR35 and symptoms to date to get approvals. I can't comment on where they are in their regulatory progresses or how the FDA may change in that regard. But that has been the standard to date. Thank you.

Operator:

Thank you. Our next question today is coming from Michael Schmidt from Guggenheim. Your line is now live.

Steven Stein:

Michael, hi, it's Steven. I'll start with your question. Thank you for the question. So, povor in HS, we think we have outstanding efficacy data, which we've now updated with a 52-week data that shows prolonged effect that's maintained. And so remember, this is a JAK1 specific agent, about 50-fold selective for JAK1, has a long half-life and a very high volume of distribution, which may translate to more penetration in the skin, which is why we see this degree of efficacy showing to date. Both Phase 3 STOP-HS1 and HS2 are enrolling very, very well. So that probably speaks to also some of the belief out there in the agent, and that is clearly our lead indication as you alluded to. It's hard to always cross-compare with many caveats to other studies where the drugs aren't directly compared and you spoke about the IL-17 here and the biologics, and clearly, there's some variable activity there. You have to look at placebo corrected rates. But I think ours tackles multiple aspects of the disease pathophysiology, not just one interleukin. And as I said, the drug profile with a long half-life and high volume of distribution may lend itself to increased efficacy here. Obviously, time will tell with the Phase 3 data. It will be a once daily oral tablet, which offers that sort of convenience. In PN, what patients suffer from primarily is intense itching. And again, our Phase 2 proof of concept data is very strong in terms of the itch relief here and the ability to eliminate that symptom pretty quickly, as well as over time, disease resolution in the actual skin manifestations. There is, as you allude to, an approved agent there in Dupixent, but that has provided us the regulatory pathway on the way to go in terms of itch resolution and skin change resolution. And again, we'll offer the once-daily oral convenience. We think we'll have a really good agents in terms of high efficacy there. So, we're excited about this program as well. Thanks.

Vikram Purohit:

Hi, good morning. Thanks for taking our questions. We had two on the pipeline. So first, for the ALK2 program, you've guided to POC data by mid-'24. We were just wondering what we can expect to learn with this update and what you will be reviewing specifically to decide what the next step of development could be for this program. And then secondly, for the mutant CALR antibody, when can we expect to see initial Phase 1 data there? And what are you hoping to establish to get conviction that the program is headed in the right direction? Thank you.

Vikram Purohit:

Got it. Thank you.

Unidentified Analyst:

Good morning. This is [Anumeet] (ph) on for Salveen. Thank you for taking our question. We had one question on Opzelura. Outside of the 1Q dynamics that you spoke to, can you help us understand the forward launch trajectory in AD and vitiligo in the context of reimbursement and access and also gross to net in order to be fully able to capture the opportunity as you have additional indications coming in, in the coming years? Thank you.

Christiana Stamoulis:

So, in terms of gross to net, first of all, when you look 2023, the average gross to net was around 55%. Our goal is to maximize the value of Opzelura and maximize net sales. If going forward we make the decision to provide any additional discounts, it would be because we expect that this will improve access and we'll have a disproportionate impact on volume and thus lead to higher net sales. So, as such, our comments are going to be focused on net sales versus gross to net in isolation.

Operator:

Thank you. Our next question is coming from Derek Archila from Wells Fargo. Your line is now live.

Barry Flannelly:

So, as far as breaking out AD versus vitiligo, I think we've said before, it's about 60% currently for AD, 40% currently for vitiligo. It could be changing a little bit. Ultimately, we expect vitiligo total tubes perhaps surpass AD. AD patients are many new patients always come on for atopic dermatitis, and in vitiligo, it's about continued use and refills. As far as Monjuvi tafasitamab goes, obviously, we're looking forward to, hopefully, positive data in follicular lymphoma, indolent lymphoma and in first-line diffuse large B-cell lymphoma. So, we think there's great opportunities ahead for these two indications. We think it's a great drug for lymphoma. Obviously, it's a crowded marketplace, but we think the profile of the drug and the trials we put together for those two new indications are going to serve us well in the future.

Barry Flannelly:

Well, there's [29,000] (ph) patients in first-line diffuse large B-cell lymphoma. There's about 13,000 patients in second-line plus in follicular lymphoma in the United States.

Operator:

Thank you. Our next question is coming from David Lebowitz from Citi. Your line is now live.

Barry Flannelly:

So, to answer the first question, in Q4, we saw a significant increase in patient seeking assistance from Incyte in the form of free drug, of course. We know that these were paid patients who had Medicare Part D and our assumption is these patients were receiving financial assistance from independent charitable foundations to cover their out-of-pocket expenses. This assistance was no longer available to them apparently at the -- towards the end of the year. And of course, they came to us and they met our eligibility criteria for free drug. With the changes in Medicare in 2024, as you know, the out-of-pocket in 2024 for Medicare Part D is greatly reduced. Therefore, we expect these patients to return to being paid patients. And in fact, we know already that many of these patients already have. In terms of 2024, 2025 and the changes to Medicare Part D, we think it's been very positive. We've been saying it for a long time that these co-pay out-of-pocket cost for patients -- cancer patients who are in Medicare Part D was very much too high and should be reduced. And in fact, they probably are still too high. But because of the way it happens in 2025, $2,000 maxim out of pockets, they can spread that out over throughout the year. So, they pay about $167 per month for a 12-month period. We think that there's lots of patients perhaps over the years who have walked away who have abandoned drug because they could not afford these out-of-pocket cost. We think that there's an opportunity at least for those patients who abandon drug or just thought they could not afford the drug now that the Medicare Part D is greatly reduced, they could come back -- so come back or option into drug therapy now. So...

Operator:

Thank you. Our next question is coming from Jessica Fye from JPMorgan. Your line is now live.

Barry Flannelly:

Okay. I'll try to answer the first and third question, maybe ask Hervé to talk about Europe. So, the expectation for free drug is easy for Jakafi. It's been 3% to 4% of our volume for years and years and years. We expect it to go back. We think this is a one-time exceptional thing that happened because of the changes coming from Medicare Part D. So again, no more than it has been historically, which is around 3% or 4% of our volume. As far as what we talked about seasonality, we do expect that the first quarter to be down mostly because of because of out-of-pocket expenses, because of deductibles, because of the resetting of the co-pays, but then we should go back to our acceleration in volume in second quarter, third quarter and so on. And Hervé, Europe?

Jessica Fye:

Thank you.

Tazeen Ahmad:

Hi, good morning. Thank you for taking my questions. I was just curious as to the payer mix differences, if there are any for Opzelura between the AD indication versus vitiligo? And then secondly, as both of these launches start to mature a bit, do you have a better sense of how you're going to land a number of tubes on average use per patient for a full year? Thank you.

Operator:

Thank you. Next question is coming from Marc Frahm from TD Cowen. Your line is now live.

Barry Flannelly:

Sure, Marc. Barry first. So, quantified a level of script abandonment for Jakafi, we don't actually know. We know that it's at least 10% just because we know when we go to specialty pharmacies -- the patients who go through specialty pharmacies, it's a little -- we have a little bit more data there or clarity there and it's at least 10%. But we don't know. People who scripts never get sent to a pharmacy, we don't know about that. So, we're not exactly sure, but we think there's a significant portion of patients that could benefit from these -- from Jakafi specifically that aren't because of the out-of-pocket cost, and that's getting better and better all the time, we hope, in 2024 and 2025. As far as Opzelura goes and formulary wins, for example, CVS Aetna, that got changed this year to preferred status with one-step therapy for AD, no step therapies for vitiligo, it's a little bit too soon to see anything because, obviously, when CVS makes a decision with us, it takes a while to funnel down to the various plans at the local level. Okay?

Operator:

Thank you. Next question today is coming from Ren Benjamin from Simpsons JMP. Your line is now live.

Hervé Hoppenot:

Yeah. Maybe on the first question, as I said, I think the tafa acquisition for us is an excellent deal. It's, in fact, very, very asymmetric, because it's, as I said, with all of the synergies we can realize in the short term, it can compensate for what is left in terms of development costs in these two indications or in fact, most of the development has already been paid for in the past year. So, it is a case where the actual impact on the bottom line will be very minimal in the short term and very positive in the long term, whatever the scenario of the new indication. Now, if any of this new indication is hitting and its positive then it becomes obviously a super deal because we get all the benefit in terms of top line. So that's the aspect. Now, in the field of myelofibrosis, as you can see from our pipeline, we have a number of projects that we are pursuing ourselves. We have our own BET. There is still the ALK2 program where, as Pablo was saying, there is some additional data that we need to get certainty, but it's very promising. And obviously, we have the 617F and CALR program on top of the XR formulation. So all of that is giving us a very full pipeline in the field of myelofibrosis. So that would not be the first priority for acquisitions.

Ren Benjamin:

Thank you.

Unidentified Analyst:

Hi, everyone. This is [Navin] (ph) on for Brian. Thank you for picking us in. We just had a couple of questions on our part. So, on Opzelura, what is the latest that you're kind of seeing on patient retention so far? How many patients persisted through the six to 12 months so far to kind of see the benefit versus how many are kind of dropping off or perhaps seeing early efficacy? And then if you could speak to a little bit of the education around the retention strategies as well. And then a second question on the MF space. So, as you kind of see the entry of additional competitors into the space, do you potentially foresee an expansion of the market as these competitors enter? Thank you.

Operator:

Thank you. Our final question today is coming from Matt Phipps from William Blair. Your line is now live.

Pablo Cagnoni:

Yes, thank you for the question. We have not. We are happy with the safety profile so far, which is consistent with the mechanism of CDK2 inhibition. And we have not seen ocular toxicity, which, as you know, led to a clinical hold in one of our competitors. So, we're very excited about the early data of our CDK2 inhibitor, as we mentioned. And we look forward to sharing data over the course of the year as well as our future development plans for the CDK2 inhibitor program.

Ben Strain:

Thank you for participating in today's call and for your questions. The IR team will be available for the rest of the day. Thank you.

Operator:

Hello, and welcome to the Incyte Third Quarter Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ben Strain, Associate Vice President, Investor Relations. Please go ahead.

Herve Hoppenot:

Thank you, Ben, and good morning, everyone. In the third quarter, we continued to deliver our double-digit revenue growth, important successes in pricing and reimbursement and continued progress of the pipeline. Product and royalty revenues were $914 million in the quarter with an 11% growth year-over-year, driven by Jakafi and Opzelura. Jakafi net sales in the quarter were impacted by inventory variation, which Christiana will detail in her prepared remarks. As you see in the first nine months, Jakafi growth continues at a rate of around 8% this year. The growth trajectory of Opzelura continued in the third quarter with net product revenue of $92 million driven by both new patients and refills in AD and vitiligo. In the first nine months of 2023, Opzelura revenues contributed $229 million, and we expect Opzelura to continue to be a key contributor to the growth of Incyte in the next years. On Slide 6, we made important progress this quarter on two fronts related to pricing and access. First, as the IRA is implemented, we secured Small Biotech Exception status for ruxolitinib. This has two impacts on Jakafi pricing and gross to net in the coming years. One, we expect that Jakafi will be exempt from negotiation until 2029, making it de facto neutral to our initial business plan. And two, as you can see, we expect to benefit from the specified small manufacturer phasing schedule for Part D catastrophic coverage versus the startup benefit, which will have a meaningful impact in the years 2025 to 2031. For Opzelura coverage in the U.S., starting in 2024, Opzelura will be listed as a preferred brand on the CVS Caremark and Aetna formularies, which would benefit roughly 30 million commercial lives. This achievement will move Opzelura to preferred brand from non-preferred brand tier and will result in increased access by reducing both [staple] requirements, patients copay for many patients while maintaining Opzelura's favorable utilization management criteria. Turning to Slide 7. We continue to make progress in our clinical development efforts across our portfolio. Just last week, we obtained new topline results from the Phase II randomized study assessing the efficacy and safety of povorcitinib, our oral JAK1 inhibitor in patients with prurigo nodularis. The study met its primary endpoint across all three treatment dose groups and povorcitinib was generally well tolerated. There are approximately 100,000 treated patients in the U.S. with prurigo nodularis with limited treatment options, and we are excited to move this program forward based on the Phase II data. Steven will provide additional details. During the quarter, we had a significant presence at EADV, where we presented the full Opzelura atopic dermatitis data in the pediatric population and positive long-term extension data in vitiligo. We also shared new positive data from the Phase IIb clinical trial of povorcitinib in adults with extensive vitiligo. By the end of the year, we anticipate providing additional data from other key programs, including an update on our Oral PD-L1 program, additional combination data of ruxolitinib plus ALK2 and BET and full disclosure of a novel preclinical program targeting the JAK2V617F mutation, which has the potential to be a disease-modifying therapy for many patients with myeloproliferative neoplasms. I will now turn the call over to Barry, who will discuss our commercial performance in more details.

Pablo Cagnoni:

Thank you, Barry, and good morning, everyone. As you may recall, earlier this year, we made the decision to increase our focus on eight high potential programs. Consistently with this, our near-term goals for the R&D organization will be to increase the rigor of our decision-making, accelerate the progression of our pipeline and increase our efficiency to optimize our resource allocation. Before I hand the call over to Steven for an update on some of our later-stage programs, I would like to spend a few minutes highlighting some of our key earlier-stage programs to give a more clear picture of the depth and quality of our pipeline. During the third quarter, our TGF-beta receptor 2 by PD-1 bispecific antibody into the clinic and the Phase I dose escalation study is progressing well. It has been designed with high selectivity for the PD-1 receptor combined with TGF-beta receptor 2 inhibition and it has the potential to enable a synergistic approach to target multiple immunosuppressive pathways across a number of cancers. INCA34460 is a novel humanized anti-IL-15-receptor beta monoclonal antibody that's designed to target and deplete autoreactive tissue resident memory T cells, has demonstrated efficacy as a treatment for vitiligo in preclinical models and received IND clearance last quarter. We have since initiated the Phase I single-dose ascending study. We also dosed the first patient for the Phase I study of our novel anti-mutant CALR targeted monoclonal antibody with the potential to eradicate the malignant clone in certain patients with myeloproliferative neoplasms and significantly modified disease outcomes. CALR mutations are responsible for disease development in approximately 25% to 35% of patients with MF and ET. We are disclosing today for the first time, a program targeting the JAK2V617F mutation, the most common somatic mutation in myeloproliferative neoplasms. The JAK2V617F mutation is located in the JH2 domain of the JAK2 receptor and is present in 55%, 60% and 95% of patients with MF, ET and PV, respectively. Unlike ruxolitinib, which inhibits both wild-type and V617F mutation positive cells, INCB160058 selectively binds to the JAK2 JH2 site, disrupting the V617F induced confirmation and thus, allowing selective inhibition of mutant activity in the JAK2 receptor while sparing wild-type. We expect to file the IND by year-end 2023 and enter into the clinic in 2024. Together with anti-mutant CALR program, there's two potentially disease-modifying programs, represent a fundamentally new approach to addressing MF, ET and PV and solidify our leadership in MPN. With that, I would like to pass the call to Steven, who will further highlight some of our key achievements this quarter with our Mode Advanced programs. Steven?

Christiana Stamoulis:

Thank you, Steven, and good morning, everyone. Q3 total product revenues were $783 million, representing a 10% year-over-year increase. In the first nine months of 2023, total product revenues were $2.3 billion, representing a 16% year-over-year increase. Total royalty revenues, which are primarily comprised of royalties from Novartis for Jakafi and Tabrecta and royalties from Lilly for Olumiant were $131 million in the third quarter and $374 million in the first nine months of the year. Turning to Jakafi. Jakafi net product revenues were $636 million for the third quarter and $1.9 billion in the first nine months of 2023. In the first nine months of the year, Jakafi net sales grew 8% compared to the same period last year. While Jakafi demand net sales have continued to steadily increase quarter-over-quarter, in the first two quarters of 2023, we saw more notable fluctuations in channel inventory levels which resulted in some variability in the quarterly reported net sales. As we had previously shared, at the end of Q1, channel inventory levels fell below the low-end of the normal range, recovering in Q2 and ending the second quarter towards the high-end of the normal range. At the end of Q3, channel inventory levels returned to the midpoint of the normal range. In the third quarter of 2023, the decrease in inventory had a $14 million negative impact on reported net sales. Turning now to Opzelura. Net product revenues for the third quarter were $92 million, representing a 141% increase year-over-year, driven by increased patient demand and expanded coverage. In the first nine months of the year, total Opzelura net product revenues were $229 million. Moving on to Slide 32 and our operating expenses on a GAAP basis. Total R&D expenses were $376 million for the third quarter, representing a 2% year-over-year decrease, driven primarily by the decrease in one-time collaboration-related expenses partially offset by continued investment in our late-stage development assets and timing of certain expenses. Total SG&A expenses were $268 million for the third quarter, representing a 1% year-over-year growth. Moving on to our guidance for 2023. We are tightening our guidance range for Jakafi to a new range of $2.59 billion to $2.62 billion. We are reaffirming our other hematology oncology revenue, COGS, R&D, and SG&A guidance for the year. Operator, that concludes our prepared remarks. Please give your instructions and open the call for Q&A.

Unidentified Analyst:

Good morning. This is [indiscernible] on for Salveen. Thank you for taking our questions. First, could you help us understand Opzelura gross to net trends during the quarter and your expectations on the forward? And then just a quick question on the combo data with Jakafi, ALK2 and BET, that's expected in 4Q. I guess, in the context of where the once-a-day dosing stands and the overall combination strategy and the positioning of each asset. Can you just help us understand your thinking on how this could play out from a life cycle management standpoint? Thank you.

Steven Stein:

[Indiscernible], in terms of your second question and the life cycle management of ruxolitinib in myeloproliferative neoplasms and beyond, including graft-versus-host disease. Just to take the components of your question separately, the once-daily dosing, we continue to work with the FDA on a response. And one of the efforts involves modeling that maybe a little shorter in terms of time line and one may require some further work. Regardless of the effort we undertake, both will be delivered way before the LOE for ruxolitinib. So that we'll pursue and continue. In terms of ALK2 and BET, both very important combinations, we're showing further monotherapy and combination data at the American Society of Hematology meeting in December. So you'll have to wait for those abstracts and the meeting itself to see the data. But it's more data in terms of monotherapy and combination. Your question relates to how they may play out. ALK2 is principally addressing hepcidin inhibition and then resulting in hemoglobin improvement, and the idea there would be to treat both the anemia from myelofibrosis as well as potentially the drug-induced anemia from RUX, and we'll see how that data evolves. That is already a mechanism that has demonstrated the ability to shrink spleen, spleen volume reduction to improve symptoms and also through epigenetic means improve hemoglobins. And we've already shown quite substantial efficacy with our own program. We'll see how other competitive programs play out in the short-term. We'll show you data at ASH, and then we'll direct you towards our registration-directed efforts here. It could be place in the first-line setting in combination with RUX in the suboptimal setting in combination with RUX and even as monotherapy post-JAK inhibitors, there's substantial efficacy with the BET program. And then just to round out lumber, let me remind you, axatilimab, a positive Phase III this year with really excellent data in third-line graft-versus-host disease, and that submission is going in and we'll progress that through the regulatory cycle. Thanks.

Tazeen Ahmad:

Good morning, and thanks so much for taking my question. Just one for me. I just want to get a sense of how you're thinking about the evolution of the competitive landscape as it relates to Jakafi. There's been a recent new approval for momelotinib for a subset of patients that might be on Jakafi. How are you thinking about marketing Jakafi in relation to this newly approved drug? And do you think that there's any risk of that drug taking market share? Thanks.

Operator:

Thank you. [Operator Instructions] Our next question is coming from Brian Abrahams from RBC Capital Markets. Your line is now live.

Barry Flannelly:

Sure, Leonid. Barry again. So in terms of Caremark, CVS Caremark, in particular, it's very important in terms of access for the patients. We're trying to make it as easy as possible for dermatologists to prescribe the drug and then for patients to receive it. So in this particular situation, we're going from a double step for atopic dermatitis. So patients would have had this to go through topical steroids and topical calcineurin inhibitors before they get to Opzelura, and in Vitiligo also had to go through multiple steps. Now in Vitiligo as it should be because of the label and the only drug approved for vitiligo that repigments the skin for vitiligo, having no steps to go through. So first line therapy is excellent. And just having to go through one step because most patients will have, in fact, use topical steroids when they have AD, so that makes it much easier. In terms of contracting and concessions, there's always a negotiation, of course, with the PBMs and the payers over rebates and fees and so forth. So it might cost us a little bit more on the rebate and but in fact, then the co-pays generally go down. And most importantly, what we're really trying to achieve is volume. And then I suppose your last question is the negotiations with payers always continues. We don't really have to have any further negotiations unless we choose to until 2025 for Opzelura. But there's always the – there's always a chance that we come back and decide to do something slightly different in terms of getting in terms of making access easier for patients. Most of the contracts that we have in place currently in fact, allow plans to step up and change their step therapy from two to one and so forth.

David Lebowitz:

Thank you very much for taking my question. Would you be able to give us insight on the current – I guess, rate of the number of tubes per patient in AD and vitiligo you were expecting? Have there been changes in expectations and where you think stand right now?

Operator:

Thank you. Next question is coming from Jessica Fye from JPMorgan. Your line is now live.

Christiana Stamoulis:

So Jess, I'll take the first part of the question regarding the Opzelura guidance. As we've shared with you in the past, in order to provide guidance, we want to have a few quarters of real world experience with Opzelura, especially for vitiligo, given that a disease in new market. And be able to see how in the real world utilization is how many tubes on average vitiligo patients use, and also how quickly and at what rate in active patients can get in to see their physicians and get on therapy. So we are still very early in the launch of Vitiligo, and we continue to monitor the progress and I want to say a few more quarters before we are in a position to provide guidance.

Operator:

Thank you. Next question is coming from Marc Frahm from TD Cowen. Your line is now live.

Barry Flannelly:

Mark, I'm [indiscernible] sure, to be honest with you, we'll have to see what the volume is and what the improvement in co-pays is to see how it affects our gross-to-net. But anyway, we'll see, but there's always a chance that we could actually benefit a great deal from net sales by making it much easier for patients to be able to access our drug.

Gospel Enyindah-Asonye:

Good morning. This is Gospel on for Vikram. We have two questions for Jakafi. I mean due to the recent approval of GSK for Ojjaara. The first one is what portion of MF patients using Jakafi do you estimate are using a sub optimal dose due to anemia. And in this patient population have you seen an increased rate of discontinuations as prescribers and patients potentially move towards Ojjaara. And secondly, have you observed a decrease in Jakafi new patient starts in MF since Ojjaara was approved. Thank you.

Operator:

Thank you. Next question today is coming from Matt Phipps from William Blair. Your line is now live.

Steven Stein:

Matt. Hi, it's Steven. Thanks for the question. So in terms of vitiligo, as we showed you the data in more extensive nonsegmental vitiligo, we saw a really good effect in terms of facial VASI, facial VASI 75 and above. And then total VASI as well, body repigmentation of 50% or above. We will disclose when we go on to clintrials.gov what the endpoints are and what doses we'll be using such premature to point you towards that, other than just broadly tell you that the population we target in is people with more extensive body surface area involvement when you compare it to the cream, which is indicated for people who are 10% or below. This would open up the vitiligo community with people with much more extensive body surface area involvement where it becomes a little pragmatically hard to apply cream across the body and an oral JAK can be used in that setting with the right therapeutic ratio. And as we guided to, we want to get this study going by the end of this calendar year. Povorcitinib is relatively JAK1-specific. You saw the program in HS, both STOP-HS1, HS2 enrolling really, really well based on the – what we think is excellent Phase II data, including that HiSCR100 response. But as you alluded to, we have now data in prurigo nodularis, that's excellent, and we want to progress that into Phase III. And then ongoing efforts beyond dermatology in asthma and chronic spontaneous urticaria, where the biology points to this kind of JAK1 agent potentially showing substantial benefit in patients with more severe asthma who on inhaled corticosteroids, long-acting bronchodilators and still having early exacerbations. That's a Phase II proof-of-concept study and then standard endpoints in chronic spontaneous early carrier. So this drug has demonstrated thus far remarkable activity in those areas where we study in Phase III now, and we'll see what happens in asthma and CSU. So thanks for the question.

Paul Jeng:

Hey. Good morning. This is Paul on for Michael. Thanks for taking our question. I just wanted to build on the prior question. Can you talk about how you plan to position povorcitinib [indiscernible] in the planned Phase III relative to sort of how you design the ongoing Phase III studies for Opzelura. Is there a meaningful difference in the target patient populations? And how should we think about the specific addressable opportunities within the end for the two programs? Thank you.

Operator:

Thank you. Next question is coming from Mara Goldstein from Mizuho Securities. Your line is now live.

Barry Flannelly:

Sure. So in part as Medicaid patients for Opzelura goes, it's about 14% of paid patients. As we said in the past, we had such good coverage for Medicaid throughout all 50 states that it was sort of grew faster than perhaps the commercial patients. So I think that answers part of your question. For Jakafi in PV, I guess if you're looking at the slide that we had there, PV, it continued in terms of the patient share is about 35% or so. At any given time, for example, this year, year-to-date, there's more than 8,000 patients on PV. But PV patients stay on the drug for a long time. So we're talking about what we think now the average is about 41 months that patients are staying on Jakafi for PV. So that's important. So every new PV patient becomes that more important. And we think that there's lots of patients who are currently on other therapies, including hydroxyurea, that would benefit from moving to Jakafi earlier. And now that we have a study where there was no crossover so that you can actually evaluate the long-term thrombosis free survival and in fact, progression-free survival for patients that, that's really an indicator that you really should start earlier with an effective therapy like Jakafi. And we think that's really where the upside is here is that each and every PV patient is viable and we can provide them with really effective therapy to manage their disease long-term. So that's what our growth expectations are. Thanks.

Andrew Berens:

Hi. Thanks. Can you remind us how you see 33989 fitting into the treatment paradigm for MF relative to the JAK agents? And then do you see the regulatory pathway leveraging surrogate endpoints for approval? Or would you want to show a decrease in malignant transformation in this subgroup?

Andrew Berens:

Yes. Just I'm trying to understand how you see that fitting into the treatment paradigm relative to the JAK agents?

Operator:

Thank you. Next question is coming from Jay Olson from Oppenheimer. Your line is now live.

Pablo Cagnoni:

So this is Pablo. Let me take the first part of the question. So as Steven mentioned and I explained in my remarks, it's early days for both programs. I think that when you start thinking about how to position them and the potential combination with Jakafi, I think we need to get through a few cohorts in the Phase I studies, understand the profile of these two new medicines, and then we'll start building a combination strategy. I think potentially that could be the case, particularly as you start thinking about symptom resolution with Jakafi early in the treatment paradigm and then using either V617F or the mutant CALR antibody to then try to eliminate the clone and potentially transform the outcomes in these diseases. The second part of your question, I think, was related to whether these are mutually exclusive and they are. And that's actually an important point in understanding how to position them in the future. And then I think you had a question about AD, which I'll pass over to Barry.

Unidentified Analyst:

Yes, that’s script split between AD and vitiligo. Thank you.

Operator:

Thank you. Next question is coming from Reni Benjamin from JMP Securities. Your line is now live.

Steven Stein:

I'll start and then hand it over to Steven. So let me remind you povorcitinib is a oral agent. In both entities, you're talking about are becoming very interesting in terms of the science, a lot of targeting with different modalities, but they're mostly intravenous IV large molecules that target things like IL-17. So a very specific biology, whereas in these entities, there's more broad biology, and that's why we think JAK may be important here both in PN and HS. An oral agent, now we've shown what we think is very strong proof-of-concept data in both entities. HS, we have ongoing two Phase IIIs and PN will be proceeding there. Sure, the landscape can always change. As part of any assessment we do, we look at the competitive landscape and what may occur. But in terms of an oral agent, we think that's the big differentiator here, and then I'll hand it over to the second part of your question.

Operator:

Thank you. Next question is coming from Derek Archila from Wells Fargo. Your line is now live.

Steven Stein:

So thanks for the question. Absolutely, that's the case. So I'll be a little repetitive. The XR program, we're busy in terms of response to the FDA now, and the idea is to get the XR approval prior to the loss of the LOE for RUX. Both BET and ALK programs, we want to declare where we go in if we go into registration studies end of this year, early part of next year, and it will give us enough time to execute a Phase III program and get across the finish line there. So that's absolutely intent. The mutant CALR and V617F, as Pablo said, are early but great promise of disease-modifying agents. And so it's a little unclear the regulatory part there, and it will depend on demonstrating safety and efficacy. But we'll see if that keeps going well, you could potentially execute a rapid Phase III program, but it's really too early to say.

Operator:

Thank you. Our final question today is coming from Evan Seigerman from BMO Capital Markets. Your line is now live.

Steven Stein:

It’s Steven. So we don't guide to you when we have the actual meetings, but the only nuance in peds is some safety requirements to demonstrate under maximum use conditions that there's no increased levels or untoward side effects. We've completed that work. We're satisfied with the results and we're discussing with the FDA. So that will put our submission sometime hopefully, in the first half of next year in terms of having that complete data set and submitting it then, and we're very comfortable with the data. Thanks.

Ben Strain:

Thank you all for participating on today's call and for your questions. The IR team will be available for the rest of the day. Please don't hesitate to reach out. Thank you.

Operator:

Hello and welcome to the Incyte Second Quarter Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Greg Shertzer, Investor Relations for Incyte. Please go ahead, Greg.

Herve Hoppenot:

Thank you, Greg, and good morning, everyone. So, we had another quarter of strong performance with product revenues growing 25% year-over-year and driven by Jakafi, Opzelura and launches in Europe. Jakafi net product revenue grew 14% compared to the second-quarter of 2022. For Opzelura, the growth trajectory continues with net product revenues in the second quarter of $80 million, driven by new patient flow and growth in [indiscernible]. Additionally, the launch in Europe is underway and Opzelura is now available to patients in Germany and Austria. However, other hematology and oncology net product revenues were $64 million for the quarter, up 30% year-over-year, driven by the growth of Pemazyre and Minjuvi in ex-US market. Now turning to Slide 5. We continue to execute on our development efforts. Recently, we announced positive top line results from two of our high potential programs. The TRuE-AD3 study evaluating ruxolitinib cream in pediatric atopic dermatitis and the AGAVE-201 study evaluating axatilimab in chronic GVHD met their respective primary end point. Steven will discuss these results in more detail during his prepared remarks, as well as provide updates on the important progress we made across many of our high-potential program as shown at the bottom of the slide. We also strengthened our research and development organization by appointing Pablo Cagnoni as President and Head of R&D. And in this position and as member of the executive team, Pablo will lead Incyte’s R&D activities. This new role aligns chemistry, biology and early and late-stage clinical development with the goal of maximizing speed and productivity in our research and development efforts. I will now turn the call over to Pablo for few word.

Herve Hoppenot:

Thank you, Pablo. And with that, I would like to pass the call to Barry for commercial update.

Steven Stein:

Thank you, Barry. Starting on Slide 11. As Herve mentioned, we have two exciting program updates we want to highlight from this quarter. First for ruxolitinib cream, the primary endpoint was met in the Phase 3 TRuE-AD3 trial in pediatric atopic dermatitis patients aged two to 12. The top line results showed that significantly more patients achieved Investigators' Global Assessment Treatment Score or IGATS with ruxolitinib cream 0.75% and 1.5% and with the vehicle control. No new safety signals were observed and the overall safety profile is consistent with previously reported data. The long term safety portion of the trial is ongoing and data will be submitted for presentation at an upcoming scientific meeting. We also plan to discuss these data with regulatory agencies, and we anticipate a submission in the first quarter of 2024. We are excited about the potential relief ruxolitinib cream can bring to the roughly 2 million pediatric atopic dermatitis patients in the United States. Moving to Slide 12. In partnership with Syndax, the AGAVE-201 study, a global pivotal trial evaluating axatilimab in patients with chronic graft versus host disease after two or more prior therapies met its primary endpoint of overall response rate across all three treatment cohorts with the 0.3 milligram per kilogram every two week dose achieving a 74% overall response rate. In the 0.3 milligram per-kilogram cohort, 60% of responders maintained their response at one year, and 55% of patients achieved at least a 7 point decrease in their modified Lee symptom scale indicating that responses were both durable and with symptom improvements. Axatilimab was well tolerated, and the most common adverse events were consistent with on target effects. The full dataset is planned for presentation at a scientific meeting later this year with a potential BLA submission by year end 2023. We are excited about the potential of axatilimab in chronic graft versus host disease and in this heavily pretreated and severe patient population. A Phase 1/2 trial of axatilimab in combination with ruxolitinib is also being planned. Moving to Slide 13, and updates on our broader dermatology pipeline. For Opzelura, in addition to the positive top line pediatric AD data, three Phase 2 studies for lichen planus, lichen sclerosus and hidradenitis suppurativa have completed enrollment. For Povorcitinib, the Phase 2 study in prurigo nodularis has completed enrollment, and we expect to have data in this indication later this year. Additionally, we previously announced the expansion of Povorcitinib development into inflammatory and autoimmune diseases beyond dermatology, and now have initiated two Phase 2 trials in asthma and chronic spontaneous urticaria, CSU. On Slide 14, I want to provide a little more detail on our studies in asthma and chronic spontaneous urticaria. Asthma is a chronic inflammatory disease with two endotypes. Type 2 eosinophilic asthma, the most common type is primarily driven by TH2 cytokines, whereas non Type 2 asthma is characterized by a neutrophilic response. Many asthma patients have disease progression despite therapy with inhalers. Povorcitinib appears to have efficacy in both Type 2, and non-Type 2 endotypes. In preclinical data, Povorcitinib results in a reduction of eosinophal activation, and may potentially reduce neutrophil activation as well. The Phase 2 study has been evaluated in moderate to severe uncontrolled Type 2 and non-Type 2 asthmatic patients. Unlike monoclonal antibodies that target a single cytokine, Povorcitinib inhibits the actions of multiple cytokines, potentially providing superior efficacy in both endotypes. CSU is a mast-cell driven disease, presenting with hives and severe chronic itch. Overactivation of dermal mast cells and basophils results in increased serum levels of TH1, TH2, and TH17 related cytokines. We know JAK inhibition can modulate mast-cell activation, including degranulation and cytokine production, both of which are drivers of chronic spontaneous urticaria. The Phase 2 study has been evaluated in patients who are inadequately controlled or progressed on second generation antihistamines. Moving to hematology and oncology. We achieved multiple clinical milestones across our high potential portfolio during the second quarter. We continue to make progress in myeloproliferative neoplasms or MPNs where we presented updated clinical data at ASCO for our OP-2 and BET program. We also initiated a Phase 1 study of INCA033989, our mutant CALR antibody, and as previously discussed, axatilimab met the primary endpoint in chronic graft versus host disease. For oncology, both of the Phase 3 studies evaluating Tafasitamab in first line diffuse large B-cell lymphoma and in relapsed or refractory follicular and marginal zone lymphoma are fully enrolled. And the small molecule oral PD-L1 program continues to advance with multiple new studies initiated. Turning to Slide 16 and an update on our small molecule oral PD-L1 program. Immune checkpoint inhibitors have transformed cancer treatment for patients. Despite the remarkable clinical benefits, intravenous formulations have disadvantages and there is ample opportunity for innovation and improved outcomes in this space. As the first company to demonstrate clinical activity with an orally available PD-L1 targeted agent we have a unique opportunity for differentiation. As an oral small molecule, INCB99280 has a short half-life, which can reduce the burden of managing immune related toxicities and provides a switch off option if needed. Which may offer improved overall safety, especially when combined with other agents. Additionally the convenience of an at-home oral administration is often preferred by patients and may offer the potential for an improved quality of life. On the right you can see the current studies of INCB99280. We've initiated monotherapy Phase 2 studies in both checkpoint inhibitor naive patients, and in cutaneous squamous cell carcinoma. We also initiated two Phase1/2 combination studies with axitinib and ipilimumab. A third Phase 1/2 study in combination with adagrasib is in preparation. We also announced last night that in partnership with Replimune, we are starting a neoadjuvant study to evaluate 280 in combination with RP1, a tumor derived oncolytic immunotherapy in patients with cutaneous squamous cell carcinoma. RP1 is Replimune's lead oncolytic immunotherapy product and is based on a proprietary new strain of herpes simplex virus engineered for a bus tumor selective replication and is genetically armed with the fusogenic protein and GMCSF. RP1 has already demonstrated substantial activity in cutaneous squamous cell carcinoma. At ASCO, we presented data for zilurgisertib, our ALK2 inhibitor in patients with myelofibrosis. Initial data from 36 patients demonstrated early signs of clinical activity through hepcidin reduction and anemia response in monotherapy and in combination with ruxolitinib. Zilurgisertib was well tolerated with a favorable safety profile allowing for continued dose escalation. We've added an additional treatment group in first line JAK naive myelofibrosis patients with anemia and we plan to have updated data later this year. Additional data presented at ASCO for our BET inhibitor, INCB57643 demonstrate improvements in spleen volume and symptoms in both the monotherapy arm and in combination with ruxolitinib. It was generally well tolerated with two dose limiting toxicities observed in the higher 12 milligram once daily monotherapy arm. We believe we have an active compound with encouraging early data. Dose finding work is ongoing with 10 milligrams once daily as monotherapy, as well as continued dose escalation in the combination arm. Turning to Slide 19. We continue to make progress in other development programs. During the quarter, INCA33890, a TGFβR2 by PD-1 Bi-specific antibody entered the clinic and a Phase 1 study was initiated. Additionally, ouremolimab, our IL -- our anti IL-15Rβ antibody received IND clearance, and we plan for it to enter the clinic later this year. Retifanlimab, which was recently approved in Merkel cell carcinoma, has completed enrollment in the Phase 3 non-small cell lung cancer study, and in the squamous cell anal carcinoma study. Finally, on Slide 20, we have a number of upcoming data readouts and other exciting milestones expected, and we look forward to sharing additional details throughout the remainder of this year. With that, I'd like to turn the call over to Christiana for the financial update.

Operator:

Certainly. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Brian Abrahams from RBC Capital Markets. Your line is now live.

Steven Stein:

[Leonard] (ph), thanks for the question. It's Steven. Yes. And for acknowledging, ruxolitinib’s incredible activity in terms of both spleen responses, but especially symptom improvement. And as you point out, it's a very high bar to beat. In terms of our own thinking, one has to be obviously careful in study design, inadequate powering in terms of endpoints and also making sure that you maintain adequate JAK inhibitor dose intensity going forward. And so, both just to point out in terms of our combination programs we talk about ALK2 first. You can see where it's heading. Clearly, we have an increase in hepcidin reduction with increasing doses, and we're starting to see very encouraging hemoglobin responses. So the thinking along those lines would be potentially looking at, in the first line setting an ability to prevent anemia development and thus maintain very importantly RUX dose intensity and get the maximum benefits in terms of JAK inhibition in spleen and symptoms. And so that's where that's heading. And hopefully, as we've said repeatedly, by next year we'll complete the dose escalation and be able to declare where we want to go. It's incredibly safe in terms of tolerability. So we're able to continue to dose escalate at the moment. In terms of the BET program, it's a little bit of a different thing in terms of tolerability. There's no one on target toxicity in terms of thrombocytopenia, in terms of going in higher doses. So in monotherapy, at the 12 milligram, we saw dose limiting toxicity there and we're back at the 10 milligram dose in terms of monotherapy. We're seeing, again, extremely encouraging spleen response, symptom response, and also occasionally hemoglobin improvement. But to your point, we have to think carefully about where to go, in terms of first line or suboptimal study. And, obviously, there's also there's a competitor reporting our BET data later this year, which we're going to watch carefully. And, again, to be repetitive, powering in terms of symptoms, you have to be very careful in the first line setting because ruxolitinib is so good. So that program as well, we'd like to declare by the end of year timeframe next year, earlier part of the year where we go in, in terms of registration directed efforts. And then also just to remind you completely different efforts, the CALR antibody is in the clinic now. Potentially disease modifying dash even curative in the 30% of CALR patients that are in the MA population and in the ET population. And that could be a completely different way of thinking if you can eliminate the clone and change the disease trajectory completely. And you wouldn't even be thinking then in terms of spleen and symptom response, you'd be eliminating the clone. So that's where we are with the program at the moment. Thanks.

Operator:

Next question today is coming from Kripa Devarakonda from Truist Securities. Your line is now live.

Steven Stein:

Perfect, It’s Steven. I'll start off with your axatilimab question. So the AGAVE-201 study had three doses and a schedule difference as well. So the first two are 0.3 milligram per kilogram Q2, 1 milligram per kilogram Q2, and the third dose level was 3 milligram per kilogram Q4. And you're right, we had a pleasant surprise in having excellent activity across all the dose level in patients who had actually a medium of four prior therapies and including prior [ROK] (ph) inhibition, you're getting that with a 0.3, a 74% best overall response, the 1 milligram per kilogram is not really different, just to be clear, when you're up at 67% on best overall response and then if you look across it some other ways of looking at responses in a very similar territory, so we don't think there's a difference in response rate, but there is a difference in terms of tolerability, in terms of on target effects likely on liver [indiscernible] cells and transaminitis. That gets worse with increasing dose. And certainly at the 3 milligram per kilogram, there's clearly more transaminitis and that is likely not the regulatory dose. So it'll be -- the discussion with the regulators on the 0.3 versus the 1, both showing excellent activity in terms of overall response rate and tolerability. And we're still in the early days of working that out with regulators, but we'd like to get that submission in the early BLA in by the end of this calendar year 2023. I'll turn it over to Barry for your second question.

Kripa Devarakonda:

Great. That's very helpful.

Kripa Devarakonda:

Thank you. Next question today is coming from Allison Bratzel from Piper Sandler. Your line is now live.

Christiana Stamoulis:

Hi, Allison. It's Cristiano. Let me take the first part of your Opzelura question and then I will turn it to Barry to discuss the mix. So in terms of the gross to net, in Q2 the average gross to net discount was 55%. So that was down from 60% in Q1. As we're expecting, Q1 has the highest gross to net given the higher co-pays and deductibles at the of this year that we have to pay down and that then comes down through the year. So we are at 55% average gross to net in Q2. In terms of dynamics, one thing that we saw in Q1 and we continue to see in Q2 was an increase in Medicaid utilization. And that has continued in Q2 with Medicaid increasing as a percent of the total payer mix.

Steven Stein:

Thanks, Barry. So, Allison, in terms of cutaneous squamous cell carcinoma, it's an entity that's not very well captured by the groups that capture cancer statistics just because of the way it's treated, variability, often with surgery alone, et cetera. But it could be common enough that there may be upwards of 1 million cases across the board of cutaneous squamous cell carcinoma in the United States and actually north of 10,000 deaths. So it's clearly a medical problem with a lot of morbidity. For 280 itself, we have now, as we've outlined for you, cutaneous cell squamous carcinoma study ongoing up on clinicaltrials.gov, that's doing some dose ranging work with 280, and then we'll expand with a declared dose going forward and could potentially serve on its own as a registration effort, but that's down the pike and to be determined. Why Replimune? Why RP1? It's a tumor oncolytic virus with actually outstanding efficacy already demonstrated in cutaneous squamous cell carcinoma that's advanced with checkpoint inhibitors, activity in terms of response rates in the 70% range, complete responses in a 47% range. So really outstanding activity with checkpoints are really demonstrated, but with intravenous. Given how this is administered with intratumoral injections, it really lends itself to combine in with an oral agent like 280 and we view this as an exciting potential going forward. This is a proof of concept study, though, in the neoadjuvant setting, and then we'll determine if there is a registration path afterwards. So thank you for the question.

Operator:

Thank you. Next question today is coming from Vikram Purohit from Morgan Stanley. Your line is now live.

Christiana Stamoulis:

Hi, Vikram. It's, Cristiana. So first of all, in terms of your inventory question. As you may recall, inventory at the end of Q1 was below the low end of the normal range and that was because of the timing of an order. What we saw in Q2 was an increase in inventory that brought inventory back within the normal range. And, I would say, towards the higher end of the range, but that variability you see it from quarter-to-quarter within that normal range. So we are back at the normal range. And as I commented during my remarks, the inventory increase during Q2 represented $35 million in net sales. Let me turn it to Barry for the second part of the question. [indiscernible]

Vikram Purohit:

Got it. Thank you.

Salveen Richter:

Good morning. Thanks for taking my question. You will share more combo data on the Jakafi ALK2 and BET combo in the second half, but in the context of where QD stands and the overall combination strategy here, can you just help us understand what your thinking is and on how this could play out from a life cycle management standpoint?

Salveen Richter:

Just a follow-up here? So then how does CALR and CK0804 kind of fall into this strategy as well?

Operator:

Thank you. Next question today is coming from Evan Seigerman from BMO Capital Markets. Your line is now live.

Barry Flannelly:

Hi, Conor. It's Barry. So we obviously have patients that have been seeking treatment all along for their vitiligo. And then, new patients that learned about Opzelura and go in to see their dermatologists. I can't give you any numbers at all about the number of patients who were, in fact, inactive. But we do want to -- part of our entire effort for any direct to consumer activity is really just to let those patients who want to have their vitiligo treated to know that there is a treatment available for the very first time that can actually help them to repigment their skin. So that's what we'll continue to do to drive the patients back to the office. Thanks.

Operator:

Thank you. Next question is coming from Jay Olson from Oppenheimer. Your line is now live.

Herve Hoppenot:

I can take the European -- I'll do the European part of this today. So the approval and the launch in Germany and Austria took place at the end of the quarter. It was in the last days of June. So we are in the process. Now we have 1.5 months, we see a good uptake. In fact, we see adoption in Germany, where it's obviously the most important market, and it will continue to be the most important for the year, because we anticipate the next reimbursement to take almost that long to become effective in other countries in Europe. So what you can anticipate there is another 10 months where Germany and Austria would be the only or the main countries where Opzelura is being used. And what we see, I mean, there was -- in Europe, when the approval was – the lable in Europe is excellent. It's different from the label in the U.S. in terms of the entire safety profile. In fact, it has no equivalent of whether Black Box in Europe. So all of this issue of systemic exposure to JAK has been looked at by the European authorities very differently from than what the FDA has done in the U.S. And the media impact of the approval has been very visible on TVs and everywhere across Europe, we had number of patients and physicians speaking about the importance of treating repigmenting vitiligo. So the awareness of Opzelura is already very high. We have a lot of demand, we have programs we are trying to put in place to help patients where we can. And we are fairly optimistic that it will be a good product for Incyte, and it will have a reasonable potential. And the second part of your question is about guidance for Opzelura. I think you can .

Jay Olson:

Great. Thank you for taking the questions.

Unidentified Participant:

Hi. This is [indiscernible] on from Mara Goldstein. Thanks for taking our question. Starting first with Opzelura with the free drug program and the IQVIA projection, are you seeing a difference between AD and vitiligo? And can you comment on the moving forward rates for the rest of 2023? And then looking towards axatilimab, could you share how Incyte and Syndax are planning responsibilities for the upcoming BLA filing and maybe potential commercialization as well? Thank you.

Steven Stein:

Jerry, it's Steven. In terms of the BLA, obviously, both companies have worked really well together. The study was executed well, brought in well, high quality, et cetera. But Incyte will be leading the filing activities, with Syndax appropriately helping along the way. On the commercialization question, I'll ask Herve to address it.

Operator:

Thank you. Next question is coming from Eva Privitera from TD Cowen. Your line is now live.

Steven Stein:

Eva, it’s Steven. Yes, the provorcitinib prurigo nodularis Phase 2 enrolled really well. It's complete, we'll have data later this year. The central problem for those patients is a very intense and severe itch and then obviously, the actual skin lesions. But what the patients really want is the itch-relief and that's why we feel an oral JAK inhibitor is appropriate in these patients with more severe prurigo nodularis. There is already approved drug in terms of [duplicant[ (ph) in PN in general. So the regulatory path is pretty well established. This study, there is a Phase 2 proof-of-concept study. If we get the profile we want in terms of itch relief and the lesion resolution, then we'll advance to Phase 3 development, but we'll talk about that later this year. Thanks.

Steven Stein:

Yes. Thank you. So we don't give numbers as we progress. We have two Phase 2s up and going. They're enrolling really well. We obviously started before them. I think across dermatology, in general, when you go back to RUX cream, AD, vitilago, et cetera, our operational execution has been excellent. So we've got really good at knowing the derm space and how to conduct these studies. But we don't provide patient-by-patient enrollment updates. Thanks.

Operator:

Thank you. Next question is coming from Michael Schmidt from Guggenheim Securities. Your line is now live.

Steven Stein:

Kelsey, it's Steven. So the AXA data I won't go through again. I had them in my prepared remarks, but the eligibility criteria was for two or more prior therapies. The median on the patients is actually four. So we'll have to be discussing with regulatory agencies as to what line of therapy that will be given in terms of a label. It's likely to be at least in the United States somewhere in the third-line territory given the data set. But as I said in my prepared remarks, that efficacy of 74% were seen across the board, including in post-res rock patients. And obviously, those were predominantly in the United States given that's where that drug is approved. But it's premature to comment on the exact line we're getting labeling until we have those discussions. In terms of the combo work, I assume you're talking about graft versus host disease again. And in combination with ruxolitinib, there's theoretically a huge appeal because, one, you have a small molecule with a large molecule and no theoretic concern in terms of drug-drug interactions, non-overlapping MOA, a JAK inhibitor with a macrophage monocyte targeted drug, so we don't expect to run into tox. And then we want two very -- now very active drugs in graft versus host disease it's really appealing. Can you move up the treatment paradigm. So we're going to start that combination as soon as possible with [Ruxinaxa] (ph), tested likely in the first, second line setting and then we'll work out, see that activity and see where we want to go. There is appeal to go first line because steroids are dominantly used there are active but have a lot of long-term toxicity, but there's also appeal in second line as well. So we'll see where the data leads us at an exciting time for that combination.

Operator:

Thank you. Next question is coming from David Lebowitz from Citi. Your line is now live.

Barry Flannelly:

Sure. So David, it's Barry. So basically, I mean, where they're driven from is we said that the total RXs grew by 16%. So that's across AD and vitiligo and refills grew by 23%. So we expect refills to continue to grow and be more than 50%, in fact, going up much higher than that over time. As far as the growth from AD and vitiligo, both are growing, new patient starts in both vitiligo and AD continue in the right direction in terms of refills for each. I discussed it before, that we expect, in fact, that two to three tubes for the AD patients, and we hope to get to an average of 10 tubes per patient for vitiligo. We think we're headed in that direction now, and we'll continue to reinforce how to use the drug both with dermatologists and with patients, and we think we'll achieve at least that number.

Operator:

Thank you. Next question is coming from David -- I'm sorry, Derek Archila from Wells Fargo. Your line is now live.

Herve Hoppenot:

You want to take the HS.

Herve Hoppenot:

Maybe I can say a word about M&A. I mean, we are in a position where, as you can see, I mean, the growth of our existing business is very strong. The pipeline is very promising. We have a number of very good products that we are now developing at late stage, and we didn't speak very much about some of the early stage projects, but they are also very interesting. So we are looking at what could be the best use of the cash that we have, we have north of $3 billion now and how we could add to this diversification and growth that we are doing with our organic portfolio. It could be M&A or it could be licensing, business development. You see axatilimab was a license from Syndax and it's clearly helping us strategically with the portfolio and the Lumber program and also adding mechanisms that we can combine with Jakafi. So this type of agreement could continue when we see them, when we find them or acquisitions that could be in dermatology or oncology, assuming that these products that we would be acquiring have the potential to contribute to the growth in the year 2025, 2026 and beyond, because that's where really we need to add to the portfolio at that point. So that's really the criteria we are using. And we are sort of agnostic of onco versus derm, I think the question is the quality of the science, the quality of the product and the timing and the potential of products we would be adding to our portfolio.

Operator:

Thank you. Next question today is coming from Ren Benjamin from JMP Securities. .

Steven Stein:

Yes, Ren, it's Steven. So prurigo nodularis is often not diagnosed or underdiagnosed. It's hard to be precise on the epidemiology, but they're probably around 200,000 or north of that patients in the United States with PN. And as I said earlier, their biggest morbidity is itch, and it's a massive impact on quality of life. So that's what we're looking for in terms of povorcitinib. The regulatory part has already been defined by the DUPIXENT approval and how to get there. And it's premature to talk about sizing and powering until we see our Phase 2 proof-of-concept data there. Just by the way, ruxolitinib cream, Opzelura in more mild PN is also very active, and it's something we're obviously interested in studying and seeing the outcome of as well. In terms of the second question, I'll turn that over to Herve.

Operator:

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments. .

Operator:

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Operator:

Hello and welcome to the Incyte First Quarter 2023 Earnings Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead, Christine.

Herve Hoppenot:

Thank you, Christine, and good morning, everyone. So we'll be moving to slide four. And so in the first quarter, product revenue grew 14% year-over-year. The growth for the quarter does not fully reflect the strength of the underlying patient demand for Jakafi and Opzelura, which I will discuss in the next slide. In hematology and oncology, the ongoing launches of Pemazyre and Minjuvi ex-US drove the 17% year-over-year growth. We also received additional approval, including our first indication for Zynyz in Merkel cell carcinoma in the US. And more importantly, the approval of Opzelura for vitiligo in Europe with an excellent level. Zynyz is available commercially in the US and Opzelura will be launched in Europe in the next few months, starting with Germany. Moving to slide five. Taking a closer look at the Q1 dynamics that affected net sales in the quarter for Jakafi and Opzelura. Jakafi Patient demand was strong across all indications, growing 7% on a year-on-year basis. On gross to net, we had the typical Q1 negative effect with higher deductions due to an increase in medicare coverage, gap rebates and patient deductibles. We also had an increase in 340B purchases. Separately, channel inventory fell below normal levels, resulting in an 11 million impact. Given the strong underlying patient demand, we are confident in our full year outlook and are raising the low end of our guidance to a new range of $2.55 billion to $2.63 billion for the full year. Turning to Opzelura, there are three components to fully understand the dynamics of the first quarter. First, we saw a continuation of strong trends in weekly prescription growth in the quarter. 60,000 new patients were treated with Opzelura. Second, as you can see in the TRx graph on the right. Refills were being pulled forward in December and this resulted in lower volume in the first two months of the year. And third net price in the quarter was impacted by an increase in commercial co-pay and a higher medicaid utilization. So the outlook is strong for both Jakafi and Opzelura as we expect to drive further growth throughout the year. Moving to slide six. With our R&D pipeline growing and advancing, we have recently decided to concentrate our resources behind the project with the highest potential to drive our revenue growth in the next few years. This eight program of first or best-in-class candidates have large potential with multiple indications such as Opzelura, Povorcitinib and oral PD-L1 or alternatively they address a significant unmet need in an existing franchise like the LIMBER program with ALK2, BET, axatilimab, mCALR. We are discontinuing six programs, including parsaclisib in MF and warm autoimmune hemolytic anemia, AXL/MER, two adenosine program and GITR. This concentration of our internal and external resources will increase speed and efficiency for the eight high potential programs and allow us to further accelerate our promising early clinical programs like CDK2, TGF-beta PD-1 bispecific and Auremolimab. With that, I would like to pass the call to Barry.

Steven Stein:

Thank you, Barry. On slide 15 is a snapshot of a few of our programs, including our high potential programs as depicted in the red and blue boxes segmented by estimated launch timing. Over the next six to 18 months, many of these programs will be expanded into new indications, new combination studies and into pivotal trials. By focusing resources on these assets, it could allow for an acceleration of certain timelines and increased efficiency as we bring these innovative therapies to patients. We are well positioned for growth and diversification with multiple launches expected in the near to mid-term. Moving to slide 16, we made significant progress across our high potential dermatology programs. Opzelura was approved for vitiligo in Europe and we presented new data for both Opzelura and Povorcitinib at two major dermatology conferences. We also progressed into new indications, including prurigo nodularis with Opzelura and asthma and chronic spontaneous urticaria with Povorcitinib. Now to highlight our dermatology portfolio in more detail, starting with Opzelura and the recent European approval on slide 17. The label was very favorable with regards to both efficacy and safety. The full indication is for the treatment of non-segmental vitiligo with facial involvement in adults and adolescents from 12 years of age upwards. This encompasses the majority of vitiligo patients in Europe, where roughly 85% of all vitiligo patients have non-segmental disease and where around 60% to 80% have facial involvement. Regarding safety, the most common adverse reaction was application site acne. No black triangle was placed on the label, and the regulatory agency determined that the class effect identified for the oral class were not considered relevant for Opzelura. And as such, the label does not include any special warnings or precautions as seen with the oral JAK inhibitors. Turning to slide 18. We recently initiated two Phase III studies evaluating Opzelura in prurigo nodularis, a disease driven by inflammation and characterized by hard nodules and an intense itch. TRuE-PN1 and PN2 of 52-week studies where patients will receive ruxolitinib cream or vehicle for 12 weeks followed by a 40-week open-label extension. The primary endpoint is WI-NRS which is defined as a four point or greater improvement in worst itch numerical rating scale score from baseline to week 12. There is a strong rationale for Opzelura in prurigo nodularis where we have seen promising early data and where there is already a regulatory precedent for approval with clearly defined endpoints. With no topical or oral therapies approved, we have a significant opportunity to help a large population of patients who are suffering from this disease. Turning to slide 19. We continue to expand the development of Opzelura into new indications, it has the potential to provide significant value as either the first approved therapy or first topical therapy for patients living with these dermatologic conditions. Moving to Povorcitinib on Slide 20. We recently presented positive Phase II results at the American Academy of Dermatology Annual Meeting, highlighting the effect of Povorcitinib on repigmentation in patients with extensive vitiligo. Substantial repigmentation was seen with Povorcitinib treatment and continue to improve with longer duration of therapy with up to 36% of Povorcitinib-treated patients achieving a facial VASI75 by week 36. Based on these positive Phase II results, we plan to move into Phase III development. Being able to provide patients with an effective oral therapy to treat their vitiligo is part of our strategy to strengthen our leadership in vitiligo and to be able to provide multiple treatment options for patients across the entire disease spectrum. On slide 21, at the European Hidradenitis Suppurativa Foundation Conference, we presented Phase II data showing that 52% to 56% of patients treated with Povorcitinib achieved a HiSCR50 at week 16. Perhaps even more impressive was that up to 29% of patients on Povorcitinib reached HiSCR100 at week 52, which is a 100% reduction in abscess and nodule count with no increase in abscess or draining tunnels relative to the baseline. This is a very high clinical bar of efficacy. We are the first to ever present the achievement of HiSCR100 in HS. Based on the Phase II results, we initiated two Phase III trials

Operator:

Certainly. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Salveen Richter from Goldman Sachs. Your line is now live.

Christiana Stamoulis:

Hi, Salveen, it's Christiana. Let me take the first two questions on gross to net and IQVIA, and then I will turn it to Steven. First of all, regarding Opzelura gross net, there were two main factors that impacted gross to net in Q1. First one is the higher co-pay and deductibles at the beginning of the plan year and this is typical. We see it every -- for every product. In the first quarter, those deductibles and co-pays are higher and we are paying them down, which are impacting gross to net. The second is an increase in medicaid utilization and that was driven by the very rapid uptake that we saw for Opzelura across all 50 states. That increase in medicaid utilization had two components that impacted Q1. The first one was the utilization that we saw for medicaid in Q1. And the second one is related to the actual claims for Q3 and Q4 received during Q1 which were higher than we were expecting. And therefore, there are certain true-ups related to those claims for Q3 and Q4 that are reflected in Q1. So the average gross to net for the quarter was 60%, but as we look at the average for the year, we continue to expect this to be at around 50%. The first factor, the higher co-pays and deductibles that we saw in Q1 are expected to come down through the course of the year. And in terms of the medicaid, even though the utilization will be higher, the true-ups that we saw in this quarter are not expected to continue at the same level in subsequent quarters. So that's in terms of the gross to net. Regarding IQVIA, as we have discussed in the past, the IQVIA data is not fully reflective or accurate relative to our actual numbers. So it's good to look at it directionally, but there are a couple of things that are happening with the IQVIA data. One is it includes free drug. And as we have discussed in this past, I expect that, that is at around 20% of the total scripts that you are seeing. The second is that there is an overestimation. We were expecting this to be at around 5% to 10%, which is typical for newly launched products, but we see some variation in the level of our estimation during the quarter and that can be as high as 20%. So it's better to look at the IQVIA data more in terms of the trend.

Steven Stein:

And then, Salveen, in terms of your question on the CRL for ruxolitinib XR, as I said in my prepared remarks and the FDA was clear that we had met the area under the curve criteria for rux XR versus IR, but had concerns on the lower [indiscernible] theoretical concerns that it may potentially impact efficacy. In terms of the base case, it's hard to say right now how long it will take, but we're absolutely marching forward the intent to get rux XR approved, and we'll work with the FDA on the various options, which may include modeling or some other work that needs to be done, we'll update you as soon as we know. It does not impact either the BET or the ALK2 program that continue to march forward, again, as I said in my prepared remarks. And in terms of moving into pivotal studies, you are correct, we will proceed with the rux IR with the intent to do bridging work on the back end to an FDC. Just to mention that the fixed-dose combination work is not impacted by anything to date, and that continues to move forward for both BET and ALK2 as well. Thanks.

Operator:

Thank you. Next question is coming from Eva Privitera from TD Cowen. Your line is now live.

Christiana Stamoulis:

Hi, Eva. It's Christiana. The medicaid utilization or the uptake was faster than we were expecting. So now we have Opzelura available under medicaid in all 50 states. So the increase is not expected to be at that same level, but we would expect to continue to see those levels of medicaid utilization. So it go to the levels that we're expecting eventually, but the uptake was faster than what we were expecting.

Christiana Stamoulis:

You would expect the gross to net to gradually come down through the course of the year.

Operator:

Thank you. Next question is coming from Vikram Purohit from Morgan Stanley. Your line is now live.

Christiana Stamoulis:

Hi, Vikram. Let me start, and then I will turn it to Barry. In terms of the guidance for Opzelura, we want to see more quarters of the uptake before we can provide guidance for -- annual guidance for Opzelura. We are still early in the launch for vitiligo. We still want to see how fast patients will be activated and have more information on the refills before we are comfortable to provide guidance. So let me turn it to Barry for the scrip question.

Vikram Purohit:

Understood. That's helpful. And then for a follow-up, we had a question on the LIMBER ALK2 combination data expected in the second half of this year. Could you just help us kind of characterize how many patients, what level of follow-up we could see and what you would consider to be a good outcome here? Thank you.

Vikram Purohit:

Thank you.

Kripa Devarakonda:

Sorry about that. Thank you for taking my question. So I have a couple of big-picture questions. When I look at the pipeline mix right now, it seems like maybe this time of the timeframe, but there seems to be a gradual switch towards inflammatory diseases maybe it'll shift away from oncology. And even within oncology, the earlier stage programs seem to be more focused on biologics with at least a few of the small molecule programs being discontinued. Is this just a dynamic shift or is it intentional? And then a question on the proposed EU legislation. I just would love to get your thoughts on it. And if you think that it could potentially impact Incyte or if Incyte could be immune from it because of the market you target? Thank you.

Kripa Devarakonda:

Okay. Thank you so much. That's really helpful.

Jessica Fye:

Okay. Great. Good morning. Thanks for taking my question. Couple on Jakafi. First, where does duration of therapy with Jakfi and MF stand historically? And have you seen that evolving at all? Is there any change in duration of therapy baked into the 2023 guidance? And then I think you mentioned the change in inventory year-over-year. Was there a sequential change in inventory relative to the fourth quarter?

Christiana Stamoulis:

So Jessica, regarding the inventory, we ended Q1 with channel inventory levels that were slightly below the low end of the normal range. The normal range that we see is 2.5 to 3 weeks of hand of channel inventory. And that had to do with the timing of certain customer orders. In terms of the impact, when you look at this relative to Q1 of last year, the impact is at around $11 million. Q4, both this past year and the year before ended up being at the higher end of the range, but within normal levels. And again, this quarter, we fell slightly below the low end of the range.

Operator:

Thank you. Next question is coming from Brian Abrahams from RBC. Your line is now live.

Barry Flannelly:

Sure. This is Barry. So Opzelura and Jakafi. So Opzelura just in terms of, yes, in March and April, refills have normalized. So we've said in the past and it seems to be holding up that refills account for at least 30% of the TRxs, so that will continue. In terms of the number of tubes for patient, it differs, obviously, between AD and Vitiligo. In AD, when we can follow a cohort of patients for at least 12 months, we can see that they average currently about two tubes per patient or a little above two tubes per patient. For Vitiligo, we fully anticipate that patients will, in fact, be using many more tubes. We've projected or forecasted about 10 tubes per patient over time. We haven't been able to follow a cohort of patients for vitiligo patients to see exactly what the refills are, but we know they'll continue to increase. And as far as Jakafi goes, the dynamics are there. I mean, in fact, we're growing at a good rate in terms of demand in the first quarter and going forward. I think as we said before, in terms of new patient growth, it's been the best that we've seen since the launch of the brand. So we're very encouraged by that, and that generally carries through to the rest of the year. So we're growing total patients and total demand in MF, PV and GVHD. So that's what led to the tightening of the guidance.

Herve Hoppenot:

Yes. Brian, on the refill, I think it is a key question for Opzelura. To put it in perspective, we had -- when we launched this calibration, I would say, it would be two to three tube for atopic derm, it could be up to 10 for vitiligo. What we are observing is that we are now north of two for atopic derm. So that's the good thing. And it's evolving. It's a number that is increasing. And frankly, for vitiligo, we don't have enough patients treated over a 12 months period to know where it is. But it is when you do the modeling, it is the one thing that is giving the curve a very different shape. So a lot of the commercial effort we do today is obviously bringing new patients to their dermatologist asking for Opzelura. But the other side is refills and getting the refills done for vitiligo because that's what's going to impact the revenue for the next year.

Tazeen Ahmad:

Hi. Good morning. Thanks for taking my questions. I have two. Just to go back for a minute to gross to net. Is it still your expectation to exit the year at 50% gross to net? I know that you're expecting GTN to improve as the year progresses. But given where you started off with the 1Q results, how are you thinking about that guidance for the rest of the year? And then secondly, as it relates to the LIMBER program, just with the retirement of your pursuit of parsa how should we be thinking about LIMBER going forward? And can you highlight some of the potential catalysts for that program in the nearer term? Thank you.

Steven Stein:

And Tazeen, in terms of LIMBER program. So as I said earlier, both BET and ALK2 will deliver a recommended Phase II, Phase III doses in combination with rux by the end of this year and then we'll declare registration intent programs for both very important programs with different intents, just BET both in terms of spleen reduction and symptom response and then ALK2 to the additive hemoglobin response from that. CALR will enter the clinic in the middle of the year and will declare itself in terms of safety and efficacy relatively quickly given its mechanism of action and we can follow CALR allele burden reduction. And then in graft versus host disease, axatilimab, the AGAVE-201 results will come in as well and will hopefully be a filing opportunity in third line graft versus host disease. We'll continue the rux XR work and work with the FDA on the path forward and continue the FTC work. So still a very active program underway with LIMBER. Thanks.

Steven Stein:

Yes. No, I think the idea is to get to the right therapeutic ratio in terms of BET. So we know that the on-target toxicity thrombocytopenia and in combination with rux to declare what the right dose is to use in combination. You may see a dosing paradigm evolve that is platelet count directed and different doses being used depending on patients' platelet counts maybe the right way forward for a best combination. Stay tuned on that. Thanks.

Operator:

Thank you. Next question is coming from Reni Benjamin from JMP Securities. Your line is now live.

Herve Hoppenot:

For Jakafi?

Reni Benjamin:

Got it. Okay. And then just switching gears to both Monjuvi and Pemazyre. I'm trying to get a sense as to -- sticking with Monjuvi, the upcoming sort of inflection points, when these trials might ultimately read out? And at what point you kind of look at, call it, the new indications and either kind of assess whether this will be a commercial success or it's something that you ultimately write off? And we saw some great data, I thought, at Pemazyre at AACR, I'm kind of curious what your plans are in terms of either doubling down on Pemazyre and some other tumor indications or do you kind of feel the commercial opportunities maxed out?

Barry Flannelly:

So just in terms of the commercial potential for Monjuvi, obviously, the first-line diffuse large B cell lymphoma is extremely important to us. We think we have a good chance of succeeding there. So those patients are in the curative setting. So it's extremely important to us. So the opportunity there is large. We're studying in a particularly high-risk population, which I think will benefit everyone in indolent lymphoma or follicular lymphoma. Again, they're in combination with R-squared Rituxan and Revlimid compared to our drug Monjuvi. And R-squared I think we have a good chance of succeeding there as well, and we have the opportunity to really take over that market share. As Steven said, for Pemazyre, it's a good product. There's a few cholangiocarcinoma patients. Now we have an MLN indication. We don't really know how many MLN patients there are. It's a very rare tumor type. But in fact, as we have more physicians, clinicians testing for FGFR1 rearrangements, we'll find out exactly how many MLN patients are. And as Steven says, we have ongoing work with Pemazyre and we have hope that we can bring some relief to patients with GBM.

Operator:

Thank you. Next question is coming from Evan Seigerman from BMO. Your line is now live.

Herve Hoppenot:

Yes. So I mean, the EU, I mean, one of the news today is the quality of the label for Opzelura in Europe. It's a very good level. It's for vitiligo. So the sequence is very different from the U.S. where we started with AD followed by vitiligo. There, we are vitiligo first and then additional indication will come in the future. We have a team in Germany for the next year or so, like 12 months, most of the activity in Europe will be in Germany because that would be the place where we have reimbursement. So it is, in fact, the coverage of the approval was excellent on multi TVs and the newspaper, it was something fairly noisy there and the team is getting prepared for a launch that could be happening in July. So that's the timing. In terms of SG&A or resources, we have them in place. So you should not anticipate an increase in the next quarter that will be related to the launch of Opzelura in Europe.

Jay Olson:

Hey congrats on the progress and thank you for this update. We have a question about the LIMBER program. What are some of the lessons learned from the parsaclisib studies? And is ALK2 now the top priority in your LIMBER program? And then what kind of patient numbers and duration of follow-up should we expect at ASCO on the ALK2 program? Thank you.

Jay Olson:

Thank you.

Michael Schmidt:

Thanks for taking my question. Maybe just another follow-up on LIMBER. Steve, as you think about the ALK2 and the BET combinations. How do you think those could be positioned perhaps relative to the emerging competitive landscape in the MS space, where we have the Navitoclax combo going on as well and then potentially momelotinib coming in later this summer? Thanks so much.

Herve Hoppenot:

Maybe I can say a word on the picture is really JAK inhibitors are the backbone of all the combinations. So -- and there, you see ruxolitinib is obviously the most important JAK to combine with because it has all these benefits and survival. So there, ALK2 and BET, the question is where do you start introducing a combination versus a single-agent JAK inhibitor. That's what we looked at with our suboptimal responder studies we were doing with parsaclisib. And you can imagine that with the BET inhibitor, you could do the same type of positioning of just letting patients start on Jakafi alone and then go to the combination. With ALK2, there is another dimension, which is that it could be a very good combination partner in the first line by definition because it's not adding to the safety profile or the toxicity profile, and it could help, in fact, in terms of anemia. So BET and ALK are not really exactly at the same stage of disease progression in MF, and ALK2 could be used earlier than BET in many of the patients. Now we'll see -- we'll do the experiments, we'll do the clinical trial. But at the end of the day, that's what we are looking at. And then there is a question of can you treat patients with MF who are refractory to Jakafi with a non-JAK based type of treatment and that's also something that for a BET inhibitor, we could test in the late-stage setting.

Mara Goldstein:

Great. Thanks so much for taking the question. I just had two questions. And the first, I'm curious about your thoughts on any potential change from a clinical either enrollment or trial process in the HS arena, given the pending approval for Cosentyx, at least in the U.S., I know it was just approved outside the U.S.? And I'm curious about the planned study for povorcitinib in asthma. And can you speak to where you think the potential opportunity is from a clinical context there?

Operator:

Thank you. Our final question today is coming from Gavin Clarke-Gartner from Evercore ISI. Your line is now live.

Barry Flannelly:

All I can say is that, 5-milligram, so I don't know exactly for how many myelofibrosis patients around 5 milligram. What we do know is that maybe about 25% of the bottles that we dispense are 5-milligram tablets. But as you can imagine, most of those are actually PV and GVHD patients. Now what's at risk in myelofibrosis as well. We continue to grow strong in myofibrosis. We continue to go up in the treatment paradigm, meaning that newly diagnosed patients more often are coming on Jakafi, and therefore, they're better, they're less anemic and they're better able to gain a spleen response and a survival advantage in that particular setting. So regardless of whether patients were anemic or not to survival benefits, spleen benefit and symptom benefit remains the same as patients who were not anemic. So that's what's most important. We're not -- we think that any competitors that are coming will mostly be moved to the second-line setting. We've seen that with fedratinib and pacritinib, and we think that will continue just because of the advantages that Jakafi has for all patients regardless of dose.

Christine Chiou:

Thank you all for participating in the call today and for your questions. The IR team will be available for the rest of the day for follow-up. Thank you and goodbye.

Operator:

Hello, and welcome to the Incyte Fourth Quarter and Full Year Financial Results Conference Call and webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead, Christine.

Hervé Hoppenot :

Thank you, Christine, and good morning, everyone. 2022 was another successful year in which we delivered strong commercial performance and made significant advancements across all stages of our oncology and dermatology pipeline. Revenues from our current portfolio of commercialized products grew 18% year-over-year, both in the fourth quarter and for the full year to $764 million and $2.7 billion, respectively. Total revenues for the year, which include our royalty, grew 14% to $3.4 billion. As we look across our portfolio, the drivers of this double-digit growth are the continued commercial execution for Jakafi, net sales of which increased $275 million in the year to reach $2.4 billion and initial contributions from recently launched products and indications, including Minjuvi and Pemazyre in Europe and Japan and Opzelura in the U.S. I want to touch briefly on Opzelura, which we believe will be a significant growth driver for Incyte. Opzelura was approved in September 2021 for atopic dermatitis. And this past July, we received approval and launched Opzelura in vitiligo as the first FDA-approved therapy for repigmentation. The approval was well received by dermatologists, patients and patient advocacy group and the launch has been very successful. Strong patient demand and increasing formulary access drove net sales of $61 million in the fourth quarter and $129 million for the full year. In 2023, we expect an approval for Opzelura in vitiligo in Europe, which adds another layer of growth for the franchise. Turning now to our regulatory and R&D achievements. Our clinical development pipeline is focused on three therapeutic areas

Steven Stein :

Thank you, Barry, and good morning, everyone. We made significant progress across our clinical development portfolio in 2022. We had multiple clinical and regulatory achievements throughout the year and I would like to use the next few slides to highlight a few of the key programs. Starting with our LIMBER program on Slide 18. Key data were presented at the 2022 American Society of Hematology Annual Meeting where we had 57 abstracts accepted for presentations. Highlighting two of those presentations, starting on the left, we presented initial results of the Phase 1/2 study evaluating our ALK2 inhibitor zilurgisertib in monotherapy and in combination with ruxolitinib, which demonstrated improvement in anemia and hemoglobin responses in patients with myelofibrosis. Additionally, we disclosed our discovery of 989, a novel anti-mutant calreticulin monoclonal antibody, which has been shown to selectively inhibit the proliferation and differentiation of cells harboring mutant CALR, while not affecting wild type or normal healthy cells. On the right is a list of key updates across LIMBER that are expected this calendar year. Starting with ruxolitinib XR, we have a PDUFA date of March 23 this year, and the expected approval is an important step towards fixed-dose combinations with parsaclisib, zilurgisertib and our BET inhibitor. In terms of data, we expect pivotal Phase 3 data of ruxolitinib plus parsaclisib in suboptimal responders as well as more mature data sets of ruxolitinib with ALK2 and BET in the second half of this year. Depending on what we see with our ALK2 and BET combinations, we could potentially see the start of pivotal trials with one or both of these compounds. Early in the pipeline is our anti-mutant CALR monoclonal antibody, which will enter the clinic this year. With regards to graft versus host disease, we are expecting pivotal data midyear from AGAVE-201, a study evaluating axatilimab in third-line chronic graft versus host disease. Moving to the rest of our hematology and oncology portfolio. Key data for the small molecule oral PD-L1 program were presented at the Society of Immunotherapy of Cancer Annual Meeting. Both 280 and 318 demonstrated clinical activity with tumor shrinkage and were generally well tolerated and we expect to share more mature data set in the second half of this year. In addition, we plan to initiate combination trials of 280 with adagrasib, CTLA-4 and an oral VEGF inhibitor in the first half of this year. INCB123667, our novel potent and selective oral small molecule inhibitor of CDK2 entered Phase 1 clinical development. Yes, we could see utility in cyclin E amplified or overexpressing cancers as well as in cancers that are resistant to CDK4/6 inhibitors. Now looking at our dermatology franchise on Slide 20. In July of last year, Opzelura gained its second indication in vitiligo. This was a huge achievement for the vitiligo community and people living with the disease. As we continue to maximize the potential with ruxolitinib cream, we initiated multiple Phase 2 studies in different conditions, including lichen planus, lichen sclerosis and hidradenitis suppurativa. In each of these diseases, there are no topical or oral therapies approved. We have many important milestones in dermatology upcoming in 2023, ruxolitinib cream, the CHMP opinion in vitiligo is currently on track for the first quarter of this year, while data from the Phase 3 vitiligo maintenance and withdrawal study and the Phase 3 pediatric AD study will be available in the first and second half, respectively. Turning to povorcitinib. We expect Phase 2 data in both vitiligo and prurigo nodularis later this year. And additionally, I want to highlight that later this week at the European Hidradenitis Suppurativa Foundation we have an oral presentation of the updated 52-week data from our Phase 2 study in HS, which should provide some additional insights into the durability of response with this agent. And lastly, auremolimab our newly acquired IL-15 receptor beta monoclonal antibody is expected to enter the clinic for vitiligo. As you can see on Slide 21, we're looking forward to another busy year with multiple regulatory and clinical updates. With that, I would like to turn the call over to Christiana for the financial update.

Operator:

[Operator Instructions] Our first question today is coming from Salveen Richter from Goldman Sachs.

Barry Flannelly :

Sure. Salveen, I'll answer the first part of the question -- or the first question and get it to Steven afterwards. So just in terms of duration of therapy for Opzelura in vitiligo, it's obviously very early in the launch. So as far as continued duration of therapy, you know what, the study had continued through 52 weeks and beyond. And the tubes per year, we've said before that the average tubes per year, we think will be about 10 for vitiligo patients. In terms of inventory at the end of the year, it's actually very low. The inventory was more like two to three weeks, just standard inventory that we would have on hand. Steven?

Operator:

Your next question today is coming from Brian Abrahams from RBC.

Barry Flannelly :

Brian, it's Barry. So thanks for the question. Yes, I mean, as you know, that Jakafi is really the #1 treatment for myelofibrosis, the #1 treatment for polycythemia vera in the second-line setting and for GVHD in both the acute and chronic steroid-refractory setting. Jakafi is the #1 drug. But in terms of our guidance, the appropriateness is we think it's perfectly appropriate for right now, given the fact that we'll have actually a third competitor in the middle of the year for MF, there's two competitors for GVHD now. If you remember last year, in terms of GVHD, we had bolus of growth in the fourth quarter of 2021 as patients transitioned from our expanded access program, about more than 300 of them transferred from our expanded access program to commercial drug. So seeing that kind of growth again is not likely to happen this year, but we'll continue to see the drug grow quarter-over-quarter, year-over-year in terms of new patients, total patients in MF, PV and GVHD. But again, the guidance at this point is appropriate.

Jessica Fye :

Great. Looks like you hit the 50% exit rate on Opzelura gross-to-nets in the fourth quarter. Can you talk a little bit about how we should think about gross to nets in 2023 for that product and any quarter-to-quarter variability we should look out for?

Operator:

Your next question is coming from Tazeen Ahmad from Bank of America.

Christiana Stamoulis :

So I can take the first part of the question. No, we don't expect any difference in gross to net between the two indications.

Tazeen Ahmad :

And have you noticed any seasonality during holidays?

Operator:

Next question is coming from Vikram Purohit from Morgan Stanley.

Steven Stein :

Vikram, hi. It's Steven. So the pediatric atopic dermatitis study, as Barry said in his prepared remarks, addresses a population from two years of age up to 11 years of age. So outside the label currently, so -- and that it's important. That's about 2 million patients in the U.S. in terms of epidemiology and the opportunity there. Safety-wise, we expect -- so efficacy-wise, firstly, we expect it to be the same as in adults. There's no reason -- the pathophysiology of the disease is the same, and we expect the same outcomes. And then safety-wise, we don't expect anything unusual either. They separate the populations out for obvious reasons like this is a time when bone growth, et cetera, is occurring. So there are other things that are monitored from a safety perspective. But from our preclinical data and then data with oral RUX, which is at much higher exposures in pediatric patients, we don't expect anything unusual there. In povorcitinib, your second question in vitiligo, it's a different population to the RUX cream population. There is a slight overlap, but the povorcitinib indication that we go in after it is for patients with body surface area involvement of 8% or above. The current vitiligo label is 10% or below body surface area involvement, which compromises about 80% of vitiligo patients. Because of the slight overlap, it's not straight math, but the 8% or above is about 30% of vitiligo patients. And there, we think because of the more extensive vitiligo there, there will obviously be a different tolerability profile that would be accepted by patients and regulators in terms of therapeutic ratio. Every expectation of substantial efficacy, given the mechanism of action and also, we know this will be likely be treated as an oral JAK inhibitor in "inflammatory condition" from a safety perspective. And so, we’ve eyes-wide-open on that. So again, substantial efficacy expected. The safety labelling, we'll deal with at the end.

Operator:

Your next question today is coming from Kripa Devarakonda from Truist.

Barry Flannelly :

Sure. Kripa, this is Barry. So again, in terms of patient candidacies or surveys that we do of dermatologists, of healthcare professionals who treat these diseases, we think it does rapidly turn into increased prescription volume. For vitiligo, it just may take a little bit longer because remember, we're encouraging patients to come back because now there is a treatment for vitiligo where there never was. So to go back and see their dermatologist so that might take a little longer period of times in patients who are actively being treated for eczema but aren't getting results that they expect. So is there more enthusiasm in vitiligo? I think there's enthusiasm for patients who are suffering with atopic dermatitis to use a drug that's as effective, particularly in terms of itch and inflammation as Opzelura. And, obviously, there's people who are very excited about using Opzelura for vitiligo and potentially changing how they feel potentially about themselves. In terms of the guidance, I'll turn it over to Christiana.

Operator:

Next question today is coming from Eva Privitera from Cowen and Company.

Christiana Stamoulis :

So the 57% is the average Q4 gross to net rate.

Christiana Stamoulis :

So free drug is not included in the calculation of revenues and it's not a part of the gross to net. So you need to look at paid demand and apply the net price, which would be the 2,000 -- around 2,000 gross price times the 1 minus 57% gross net discount.

Christiana Stamoulis :

Yes. So we'll continue to work on bringing down the co-pay, which over time, would continue to improve gross to net. Obviously, getting further improvements now is more difficult. That's why we are saying for 2023, a 50% average gross to net is a good assumption for the year.

Steven Stein :

Thank you. It's a good question. Mechanistically, as I was saying in my earlier remarks, it works through hepcidin inhibition, that is the main mediator, if you will, of anemia, of inflammation and chronic inflammation, which occurs in many chronic conditions. So there's potential across the board in some of those conditions including chronic renal failure. So we're starting some early work in some of these settings to see if there's potential there. We are encouraged by recent regulatory movement in the U.S. from the FDA in improving products to treat anemia in areas like chronic renal failure, which has been difficult in the past. So that may make us look a little further. But for all those indications and the look there, it's still very early days.

Evan Seigerman :

Thanks so much for taking my question and congrats on the progress. It's clear that there are really no supply issues for Opzelura, but maybe talk to me about kind of what the sales team is focusing on this year to accelerate growth even further? I mean, you had a good 2022. You are getting gross to net more normalized. What is your commercial organization focused on to get sales to the next level and ensure that you have the highest number of paid scripts over the year?

Operator:

Your next question is coming from Jay Olson from Oppenheimer.

Steven Stein :

Okay, it's Steven. Thank you. So the lumber program, obviously critically important to us and to patients and we really are happy with the movement, particularly towards the end of last year in our combination work. So to start off with your RUX plus parsaclisib question. Just a reminder, there are two pivotal studies ongoing there. The first one is the suboptimal study in about 212 patients which we will get a readout on this year. That's on patients who've had at least three months or longer of ruxolitinib and at least eight weeks of stable dosing and are having an adequate response in terms of spleen or symptoms. We showed the final Phase 2 data at ASH last year, both in terms of spleen response and symptom response and very encouragingly the symptom response was even -- from a quantitative point of view and magnitude was even better than the spleen response, which is really encouraging. Additionally, the safety profile in MF looks very clean thus far with quite a long-term follow-up. So it's not what's seen in lymphoma, probably because the underlying disease is different. There is no B cell suppressive therapies given long term in MF. And also additionally, used in combination with RUX may ameliorate some of the side effects. We're very encouraged by the profile there. It's a randomized study that will report out this year in suboptimal responders. If we replicate the Phase 2 data, we really think the Phase 3 will be positive and is set up to be positive there. And then it will be exactly for those patients who are being on RUX for a few months, stable doses and not having benefit and then that would be the indication there. The first-line study will take about a year longer to read out, 440 patients. And that's an all-comer first-line standard in terms of endpoints, a spleen volume response of 35% or greater and improvements in total symptom scores, you need both. You mentioned the BET program that's earlier. As I said in some comments earlier, we're continuing to dose escalate this year and push the dose as high as we can. We know we'll run into thrombocytopenia that will be dose-limiting. And that's why we think it may be best suited more to a suboptimal population. And again, it will be similarly to both improve efficacy and make sure it's tolerable in that setting. And then the populations will segment based on the data there. The rest of the ALK program, as I said earlier, we will declare towards the end of this year, what programs we're going after there. Again, very encouraged by the hemoglobin responses we’ve seen. We really have proof of mechanism and want to chase that very aggressively because we're leaders in that field.

Mara Goldstein :

So firstly, on the covered prescription rate, you mentioned you anticipate about 20% free drug. So that would indicate you're at 70% covered at this point in time or 71%. How quickly do you expect to get to that incremental difference? And is it consistent among vitiligo and atopic dermatitis? And secondarily, can you talk a little bit about the expectations for the rollout of RUX QD and how we should think about how that will affect Jakafi?

Operator:

Next question is coming from Ren Benjamin from JMP Securities.

Barry Flannelly :

Sure. This is Barry. So in terms of the split between acute and chronic, there's about 1,500 patients in steroid-refractory acute GVHD. As I said before, we're the #1 drug used there in steroid-refractory acute GVHD. But there’s much less patients and they're treated for a shorter period of time. So it might be, for example, six months for acute GVHD. For chronic GVHD, there's 14,000 patients, maybe 7,500 that are steroid-refractory. So most of the growth is coming from chronic GVHD and the persistence in chronic GVHD. Now most of the time, the claims that would come in don't really differentiate between acute and chronic. But as far as we can tell, the vast majority of scripts that are coming in now are all for chronic GVHD. And as I said, in terms of resistant population, their physician population is much, much bigger than any acute space. In terms of ibrutinib and Rezurock, for example, these drugs are used perhaps in the third line setting. As far as we can tell, ibrutinib usage is declining and Rezurock uses third line after Jakafi. But in terms of axatilimab's opportunity, we think it's a great opportunity. In fact, even the success of Rezurock in the third-line setting, I think, bodes well for the success of axatilimab in that setting. And I think it's a uniquely different drug. And when we talk to people who treat bone marrow transplant docs who treat GVHD, they're looking forward to this product very much. In terms of tafa -- in terms of tafa-len combination. It's a great combination in the second-line setting. You've seen the results in terms of overall response rate, complete response rates of 40%, a non-chemotherapy option in the second-line setting. I think the issue there is really that the second line and the whole diffuse large B-cell lymphoma marketplace has changed dramatically with increased competition, particularly with the CAR-T therapies moving into the second line setting, it becomes a challenging place for us to break through, but it's absolutely a very good product that has -- can have complete responses with long durations of response and we're continuing to try to expand the use of this drug because we think patients will really benefit from it. And it's really just the competition and the increasing competition in that particular setting in the second line plus setting, that's somewhat of a challenge.

Allison Bratzel :

One for me on Opzelura. I know a determinant of the ultimate size of the vitiligo opportunity is going to be activation of patients who aren't currently seeking treatment. I know it's clearly early days in the launch, but just wondering if there's anything you can say about how patient activation is tracking against your expectations? Or is this not really expected to be a driver until vitiligo specific DTC is underway? And then just a separate question on the other hem/onc franchise, just that 2023 guidance range seems to imply somewhat limited growth compared to '22. So just could you expand on the growth areas for that franchise for the year? And any sort of pushes and pulls you considered in the 2023 guidance range?

Christiana Stamoulis :

So in terms of the guidance for other hem/onc, the guidance range that we have provided is $215 million to $225 million with primary driver being Minjuvi, of the increase, yes.

Matt Phipps :

Barry, you cited additional competition in MF this year is a reason for the appropriateness of your guidance today. But I guess, I don't really expect those labels to directly compete with Jakafi. So I wonder if you're starting to see maybe patients who were kind of suboptimal responders switching a little earlier or now having another option to switch off of Jakafi than they would have prior. If that is kind of the impact you're talking about?

Operator:

Thank you. We’ve reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Operator:

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Operator:

Hello and welcome to the Incyte Third Quarter 2022 Financial and Corporate Update Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead.

Hervé Hoppenot:

Thank you, Christine and good morning everyone. In the third quarter, our product revenues increased 20% year-over-year to $713 million benefiting from strong Jakafi sales growth as well as an increasing contribution from Opzelura net sales. Jakafi net sales grew 13% to $620 million driven by robust growth in chronic GVHD as well as new patient growth in MF and PV. Opzelura net sales more than doubled versus prior quarter to $38 million and we continue to execute on the successful launch in AD and vitiligo, driving increased demand while also significantly improving formulary access. The ex-U.S. launches of Pemazyre and Monjuvi, which are both still in early stages contributed to the 19% growth coming from other hematology and oncology products. Turning to Slide 5, we have multiple opportunities for significant growth in both oncology and dermatology with our recent approvals on the potential for multiple new products and new indication over the next several years. For our oncology franchise, recent launches in new indication and new markets provide further growth opportunities for Jakafi, Pemazyre and Monjuvi. In LIMBER, pivotal data from two programs, axatilimab in chronic GVHD and ruxolitinib plus parsaclisib in MF are expected next year. And we expect that data for BET, ALK2 in 2022 and 2023 to define the path forward for these programs. Outside of MPN and GVHD, we have multiple early and late stage clinical programs, including our oral PD-L1 program, which was the first to show clinical activity as an oral PD-L1 and we have updated data at SITC next week. In addition to oncology is our dermatology franchise, where Opzelura is a key near-term driver with launches currently underway in atopic dermatitis and vitiligo. Our dermatology pipeline is expanding, with new indications being developed for ruxolitinib cream as well as povorcitinib and auremolimab in areas of high unmet medical need. This positions us well for significant growth and diversification. With that, I turn the call over to Barry.

Steven Stein:

Thank you, Barry and good morning everyone. We recently presented positive Phase 2 data of povorcitinib in hidradenitis suppurativa at the 2022 European Academy of Dermatology and Venereology Congress, which demonstrated that patients on povorcitinib had significantly greater decreases in total abscess and inflammatory nodule count versus placebo from baseline to week 16. In addition, HS Clinical Response or HiSCR, which is defined as a greater than or equal to 50% reduction in the total abscess and inflammatory nodule count and no increase in abscess count or draining fistulas compared to baseline was achieved in a greater percentage of povorcitinib patients than placebo at week 16. Hidradenitis suppurativa represents a significant opportunity, where there are more than 150,000 patients with moderate-to-severe disease in the United States. In October, our pivotal Phase 3 data of ruxolitinib cream in vitiligo was published in the New England Journal of Medicine. And these data highlight the positive efficacy and safety profile of Opzelura as a treatment for repigmentation in vitiligo. The MAA for Opzelura and vitiligo is under review and we expect a regulatory decision in the first half of next year. Moving to Slide 16, last month, we announced our agreement to acquire Villaris Therapeutics and their lead asset, auremolimab, a highly potent and selective, anti-IL-15 receptor beta monoclonal antibody. IL-15 signaling occurs upstream of the JAK-STAT pathway and demonstrates a strong scientific rationale for the evaluation of IL-15 blockade in vitiligo and other dermatologic conditions. In vitiligo, preclinical data suggests that maintenance and relapse is driven by resident memory T-cells or TRM in the skin. IL-15 is critical for the survival of TRM and IL-15 blockade may result in the depletion of resident memory T-cells, leading to a longer and more durable repigmentation effect. The addition of our auremolimab to our dermatology portfolio bolsters our commitment to patients living with vitiligo and potentially offers optionality based on severity of disease as well as different dosing options that may allow for combination therapy, all of which is complementary to our JAK franchise. We are planning on entering clinical development with auremolimab in 2023. On Slide 17 is an updated table of our extensive clinical development pipeline in dermatology. With regards to ruxolitinib cream in hand eczema, after discussions with the FDA it was deemed not necessary to run larger Phase 3 clinical trial in chronic hand eczema as the indication is covered by the current label. We have also added two new indications in the development plan for ruxolitinib cream, with two Phase 2 trials in preparation for lichen sclerosus and lichen planus. Additionally, auremolimab in vitiligo has been included, which is expected to enter clinical development in 2023, as I mentioned earlier. Turning to Slide 18 and axatilimab, as a reminder, the Phase 1/2 study in chronic graft-versus-host disease, this was an open label study evaluating axatilimab, an anti-CSF-1R antibody in patients 6 years and older with active chronic graft-versus-host disease in the third line plus setting. In this heavily pretreated patient population, axatilimab monotherapy resulted in a best overall response rate of 68% across both doses of 1 milligram per kilogram every 2 weeks and 3 milligrams per kilogram every 4 weeks. 53% of patients reported a clinical meaningful improvement in their symptoms via the least symptom scale. Axatilimab was also well tolerated and demonstrate an acceptable safety profile with no viral reactivations in the study. Looking ahead, we anticipate data from the ongoing AGAVE-201 pivotal trial in chronic graft-versus-host disease in mid-2023 and thus the potential BLA filing later in 2023. In addition, a combinational trial of axatilimab and ruxolitinib in steroid-naïve chronic graft-versus-host disease is in preparation with an expected initiation in the first quarter of next year. On the next slide and our progress in myeloproliferative neoplasms in graft-versus-host disease in general, we continue to advance our LIMBER pipeline and expect to achieve many important milestones in the remaining months of 2022 and into 2023. The Phase 1 study of ruxolitinib in combination with Cellenkos’ CK-0804 in myelofibrosis is initiated with the first patient dosed in October. Later this year, we expect to present initial data from the BET and ALK2 programs. The target action date for once-daily ruxolitinib is March 23, 2023. And we expect top line results from the Phase 3 study of parsaclisib plus ruxolitinib in inadequate responders in 2023 as well. Turning to Slide 20 and our oral PD-L1 program, we continue to progress the development of our oral PD-L1 program with two compounds, 280 and 318, which have been prioritized based on observation of tumor shrinkage and to-date, no evidence of peripheral neuropathy with either compound. We will be presenting updated data on both compounds at the Society for the Immunotherapy of Cancer Annual Meeting in Boston next week. The third quarter was successful for Incyte across regulatory, clinical and business development and we are looking forward to an exciting close to the year. I’d like to turn the call over to Christiana for the financial update.

Operator:

[Operator Instructions] Our first question today is coming from Salveen Richter from Goldman Sachs. Your line is now live.

Barry Flannelly:

Hi, Salveen, this is Barry. So as far as the uptake in vitiligo goes, we’re very happy. As you see from the prepared remarks, our dermatologists are excited about having this new therapy – first ever therapy to repigment the skin in patients with vitiligo. We know that as soon as the launch, which really we began in August, vitiligo scripts began to accelerate, and we know they’ll continue to accelerate. As we’ve told you before, there is about 150,000 to 200,000 patients that are actively being treated for vitiligo now. There may be 1.3 million or more patients that have vitiligo that may choose to come back to their dermatologists now that they have an active therapy that can help them there. So we’re very happy. We can’t really break out the actual number of percentage of vitiligo versus atopic dermatitis for you just at this point, just because the – we’re uncertain about the actual number since many of the claims that we can look at are really don’t have diagnostic codes associated with them, so where we know that atopic dermatitis, for example, because we have more data with that it’s growing at least double digits quarter-over-quarter. We know that vitiligo is accelerating week after week, and we assume that’s going to continue to occur. In terms of reimbursement and the dynamics there, of course, most patients have to go through a prior approval process, those patients that have commercial insurance. But as we’ve said, is the coverage has continued to get better and better over time so that the vast majority of commercial patients do have access to therapy. As far as problems go, prior approval is something that dermatologists deal with all of the time. Most of the AD utilization criteria do, in fact, include one or two step therapies that they have to go through, but dermatologists are used to doing that now. There may have been a little period of time where they were getting used to their prior approval process, the step therapy process. But certainly, since July 1, it’s really taken off. And if there were barriers, they are mostly removed. Sometimes there is geographic barriers. One region of the country may be easy. Another area of the country may be a little bit more difficult. But with our own people that are out in the field, we try to help as best we can. We have an excellent market access team that can help the dermatologists and pharmacists go through the prior approval process so that most patients now and into the future should have little problem accessing Opzelura for both AD and vitiligo.

Operator:

Thank you. Next question is coming from Tazeen Ahmad from Bank of America. Your line is now live.

Barry Flannelly:

Tazeen, it’s Barry again. Yes. So our gross to net, we do plan on having it get better as we exit the year. The most important factor is we are changing over from what we call a full buy down program where it was a very generous program at the beginning of the year at the beginning of launch, where it was the very easiest thing to do for patients and for dermatologists so that they could go to any pharmacy. And even when there was really limited coverage because of NDC blocks, they were able to access the drug because we were paying for the drug for full buy down. Now that we have increasing coverage and the vast majority of commercial patients do have access to the drug, we’re switching over to a more typical bridging program where patients will be able to – that have commercial insurance, and they go through the prior approval process and for whatever reason, they are, in fact, denied coverage, then they would end up getting through our bridging program free drug at cost of goods for us so that, that has a big impact on gross to net. But that number will continue to go down over and over. As we’ve said, 70% of the claims currently are going through and being paid, and that will increase as we go through the year and towards the end of the year. So that will improve as well. So we will continue to improve our gross to net just through that switching our programs, but also we’re continuing to increase coverage for those payers out there that we still have some work to do, and we will increase our – will improve our gross to net by working with each of the plans to improve the utilization management criteria so that we are in the proper tiers where we should be so that co-pays are lower. So those things will affect the gross to net and bring it down to the targeted range that we’re looking for.

Jessica Fye:

Hey, guys. Good morning. Thanks so much for taking my questions. A couple more on Opzelura. You mentioned you’re still working to increase coverage. And I know you gave the percent of covered claims. What’s the current percent of lives covered today? And where do you want that to go? And then second, how good is your visibility on patient retention and, say, annual tubes per patient in each of these settings? Where does that stand now? And how do you see that evolving? Thank you.

Jessica Fye:

Thank you.

Unidentified Analyst:

Hi, guys. This is Keith on for Evan. I guess first one, it just looks like looking at the numbers by some measures, we could be seeing ex-U.S. growth later in 2022 and then 2023, but we’re seeing this quarter lower royalties. Just want to get a sense of how this – you are seeing this evolve in 2023 given regulatory progress? And then secondarily, if you could comment on the differences between the two oral PD-1 inhibitors that are in parallel development and at what point would you decide to focus on one versus the other? Thanks.

Steven Stein:

Keith, it’s Steven. I’ll answer your second question on the oral PD-L1 franchise. Firstly, just to say, it’s an extremely important franchise to us. We are first in class here, and this is a very important program. The initial compound 550 was dropped because of the peripheral neuropathy signal, which we have not seen with either 280 or 318. 280 is slightly ahead of 318. There are differences structurally in terms of the chemical structure and there are slight differences in terms of the PK. But for now, both continue to progress, both are enrolling well. And we continue to accumulate efficacy and safety data that we want. You’ll see next week at SITC, poster presentations on both compounds. In terms of going forward, sometime next year, we will probably declare registration directed-wise, which compound will be taken, but all I can tell at the present time we will keep both going. They both look good. And we want that optionality given the importance of this program.

Operator:

Thank you. Next question today is coming from Vikram Purohit from Morgan Stanley. Your line is now live.

Christiana Stamoulis:

So, Vika, in Q2, we saw IQVIA overstating the level of Opzelura prescriptions, and that’s something that we discussed last quarter. However, at that time, the trend in prescriptions was pretty representative of the actual trend. So if you were to look at the trend lines, they were moving in parallel, the IQVIA line in parallel with AXL. What we have since seen is that the gap between the level of actual IQVIA reported scripts has been narrowing. But the trend line is no longer representative of the AXL trend line. So for example, when you look at the IQVIA data over the last few weeks of the quarter, you saw that it was flattening while this was not the case. As we now transition from the full buy down program to the more traditional free drug bridging program, there is actually a high level of uncertainty as to how IQVIA will be capturing the script. And it’s unclear whether that would result in an overestimation of scripts or an underestimation. So as a result, we expect that for a period of time, at least through the fourth quarter, the IQVIA data would not be representative of actuals, both in terms of the level of scripts as well as the trend line.

Steven Stein:

Yes, Vikram, it’s Steven. Thanks for the question. We just showed that data at EADV recently from our Phase 2 proof-of-concept work. And there was a very good reaction from people in the field and opinion leaders in the field as to the potential for povorcitinib to treat patients with unmet need in HS. The morbidity from the condition comes from abscesses, nodules and fistulas, and there is a large inflammatory component speaking to probably why JAK-STAT inhibition is important there. The regulatory endpoint that was established from the initial approval of the first drug in the setting is, as I mentioned in the prepared remarks, something called HiSCR. It’s a composite endpoint that looks at absences and nodules and then the lack of further fistula formation. It’ll – it’s an endpoint that’s captured at 16 weeks. We will go into this population with two doses. And you can see from our Phase 2 work, there was a dose response generally speaking, but there wasn’t a great differentiation between the two higher doses tested in the Phase 2 setting. So both will be taken into Phase 3. And then otherwise, a standard endpoint from a HiSCR point of view. The current approved therapies don’t seem to give patients a benefit they desire and aren’t used a great deal in HS. So there is a lot of unmet medical need here. Thanks.

Mara Goldstein:

Thanks so much for taking the question. I just wanted to understand a little bit better on the gross to net exit rate. When you say around the end of the year, does that include the possibility of that figure slipping into the first quarter? And then secondarily, on the hidradenitis suppurativa, can you talk a little bit about the market and where povorcitinib could fit into that space right now?

Steven Stein:

Yes, it’s Steven. Thank you for the interest in the condition, and it’s the same thing we hear and of we presented the data. So it’s estimated that if you look at moderate to severe HS in the United States, there are about 150,000 patients in terms of prevalence of the condition. Again, with a lot of unmet need that’s not been currently addressed by the current approved therapy. So the study will be focused on those moderate to severe and then will include control arm plus two doses, as I mentioned earlier. It’s in preparation. We’d like to begin towards the end of this year, perhaps early next year. And then we’ve already demonstrated probably because of the excitement in the area and the unmet need that these studies enroll really, really well. So that’s the population we go in after and that’s the current prevalence figure that we want to address with this particular study. Thanks.

Operator:

Thank you. Next question is coming from Brian Abrahams from RBC Capital Markets. Your line is now live.

Barry Flannelly:

Sure. Well, I’ll try to answer your last question first. The 2023 contract – the contracts that anybody – that the payers are working on now is for 2024. For 2023, there is no changes that will occur. As far as – I didn’t – don’t think I mentioned anything about abandoned prescriptions at pharmacies at all and not coding correctly. No, the only thing we said was that as we were changing over from mostly free drug to now mostly paid drug, dermatologists and pharmacies had to go through a prior approval process that before they were essentially just getting free drug because there are NDC blocks in place. So, now moving forward – in fact, we should have less and less problems with prior approvals or used to any step therapies that the utilization management criteria has. And obviously, like I said before, we have our market access people that tried to help any dermatology offices or pharmacies that are still having problems with that. But we think we are through those challenges. There is always going to be prior approvals for drugs like these. So, that’s part of our system that we are currently dealing with. So, I think we said before that most of the claims that are going through now are being paid, and that’s only going to get better as we move into the future.

Operator:

Thank you. Next question is coming from Jay Olson from Oppenheimer. Your line is now live.

Steven Stein:

Yes. Steven, thanks for the question again on HS. So, just to be somewhat repetitive, these patients have a lot of morbidity, particularly in skin falls like the armpit, the axilla and other parts of the body in terms of abscesses and nodules that drain and cause a lot of morbidity to these patients. It looks like the currently approved TNF inhibitor doesn’t fully address that unmet need. And again, that speaks to the interest in new mechanisms of action here that look like from our Phase 2 proof-of-concept may be addressed very well from – in terms of povorcitinib and a JAK inhibition. So, that’s the reason we are excited about the data. That’s the reason we want to go fast into a Phase 3. There is a very good – in the slide in the prepared remarks, response in terms of abscess and nodule formation. And we will be testing, as I said earlier, two doses there. It’s about somewhere around 0.1% of the U.S. population, but we estimate approximately – excuse me, upwards of 150,000 patients in U.S. prevalence-wise and maybe about 50,000 currently get treated. But if you have a therapy that addresses that need, then that will be a really important thing to develop. In terms of auremolimab and its IL-15 receptor beta monoclonal antibody, as I have said, this addresses resident memory T-cells in the skin which are felt to cause the melanocytes not to produce the pigment and then to keep the disease present. So, by addressing this and there is a very good preclinical model, you can potentially result in “cure” or at least prolonged responses in terms of repigmentation. So, we view this completely complementary. Just to go over the entirety of our vitiligo studies, our first indication with Opzelura is in patients with 10% or below body surface area involvement and requires long-term treatment to get the effects that improve over time. If you look at the data, if you look at the 24-week data, it goes up by another 20% absolute points when you get to 50 weeks. And then with povorcitinib, our vitiligo program is looking at patients with more severe vitiligo, more body surface area involvement, so 8% or above. And again, we have data there that’s really encouraging, and we will be presenting it early next year at a major meeting and then make go-forward decisions for porvacitinib there in terms of an oral therapy with a different therapeutic ratio. And then just to round it out, now with the anti-IL-15 receptor beta antibody, we get their entirety, and we expect that will have activity on its own based on the preclinical models, and that’s how we will start testing it initially. But you can imagine a world going forward where these therapies will complement one another and be used interchangeably depending on the disease and how it evolves. And we really want to address the unmet need here. We are excited about our vitiligo franchise and what it can do for patients who require and want repigmentation. Thanks. Sorry, your last question. Other indications, I think it’s pretty early, but the mechanism may be important in areas like systemic sclerosis, sarcoid, etcetera, but it’s very early in that journey. So, we will just see how this program goes going forward. Thank you.

Operator:

Thank you. Next question is coming from Michael Schmidt from Guggenheim Securities. Your line is now live. Our next question is coming from Matt Phipps from William Blair. Your line is now live.

Steven Stein:

Yes. Hi, it’s Steven. The LIMBER program in terms of combinations is again key to how we want to address unmet need in patients with myeloproliferative neoplasms. We are looking very much forward to the ASH meeting, and it to be a really important meeting for us. In terms of each of the programs, ALK2 is a little more advanced than the BET program. We have already showed data from a translational point of view that we get the hepcidin inhibition. We want the iron kinetics favorable in terms of the way they move in, and we expect to follow with hemoglobin increases. I can’t – you will have to wait for the actual presentation at a meeting at the end of the year to show the entirety of the data, but we expect to show a reasonable number of patients with monotherapy and some in combination with ALK2. BET, as I have said, is a little bit behind that, given the abstract cutoff for the particular meeting and the poster presentation. There will be a little less data quantitatively with BET at that meeting, mostly in the monotherapy setting and not yet combination data to show given the cutoffs. In terms of decisions, this will be in 2023 on where to go with these programs. Once we have established safe doses and schedules, we will look at the particular populations that need to be addressed. Of interest with ALK2 are obviously patients potentially with anemia given its mechanism of action, but it could be beyond because it will result in ability to maintain RUX dose intensity. And with BET, we will see also given the competitive space where that is on where to go in terms of first-line and suboptimal populations. But those decisions to answer your questions will be in 2023.

Operator:

Thank you. Our next question today is coming from Michael Schmidt from Guggenheim. Your line is now live.

Barry Flannelly:

Sure, Kelsey. So, in myelofibrosis, as you know, Jakafi has been approved now for about 11 years in myelofibrosis. Two other JAK inhibitors, Pacritinib and fedratinib have been approved. Fedratinib from BMS, as you probably know, really has been flat to declining, mostly used in the second-line setting, if used at all. As far as VONJO is concerned, at least the data that we look at, we don’t really see much VONJO usage, but it must be being used in the second-line setting, and that’s the way that it seems to be positioned for those patients that have low platelets. Evolving over time, I mean obviously, there could be some combination data in the future with other products for momelotinib, we will have to wait and see what the label says. But because of the survival advantage that Jakafi has, because of the unprecedented symptom improvement that Jakafi has with low GI toxicity, we think it will be the standard of care for a long time. We do not see any changes in – or noticeable changes at all in the duration of therapy for patients. We – as I have said before, that we continue to grow new patients in MS after all of this time. So, we grew 8% in terms of new patient growth for myelofibrosis. And we continue to position Jakafi as first-line, and we believe it should be started as soon as possible before patients have a possibility of progressing and getting worse. So, we are confident in our position. We will have to wait and see what the momelotinib label says, but we think that Jakafi will still be the standard-of-care because its efficacy and safety profile.

Eva Privitera:

Thank you and thanks for taking our questions. Can you give an update on the progress made towards establishing utilization management criteria in vitiligo? Approximately what percentage of plans now have in place?

Eva Privitera:

Thank you for that. And a quick follow-up. When do you expect to start running DTC ads for vitiligo?

Operator:

[Operator Instructions] Our next question is coming from Andrew Berens from SVB Securities. Your line is now live.

Barry Flannelly:

So, as far as inventory levels go, Andrew, I am not really sure what you mean. I assume you mean for Opzelura. I certainly don’t see – our inventory levels have maintained about two-weeks-period of time. It’s actually a little lower than we really thought it was going to be when we first got into this endeavor. And as far as the guidance goes, we are confident that with the almost 30 million patients in the United States that have atopic dermatitis and the 5.5 million that are actively being treated now, that $1.5 billion guidance is certainly within our range – our possibilities.

Operator:

Thank you. Next question is coming from Gavin Clark-Gartner from Evercore. Your line is now live.

Barry Flannelly:

So, Gavin, what I said was that on average, over time, we will see that – we believe that two to three tubes per year per patient with atopic dermatitis is what it will work out to be.

Barry Flannelly:

Well, quite frankly, we will find out as we move forward into the coming years because it takes time for refills to be clear. And plus, as I was sort of alluding to before, sometimes you can’t tell a difference between a new-to-brand prescription, meaning that’s the first time the patient got the drug and a new prescription that might be for a patient that already had it, but it came from either a different prescriber or went through a different pharmacy. So, sometimes those are hard to match up. So, over time, we will see whether it’s two to three, three to four. But also the drug is great, and it works really well. So, I think that if there is any difference, it’s because that patients come in, they get the drug, it clears their skin up, clears their itch up. But we will see over time what the real usage is going to be. And like I said, we really have to sort out which is truly a new patient and which is a patient that’s just getting a new script that may have gotten a different script three months, four months ago.

Kripa Devarakonda:

Yes. Hi. Thank you so much for taking my questions. A question on vitiligo, now that you have launched and you have an early idea of how it’s being received and the awareness amongst doctors and maybe even patients, when do you think you will be able to provide how big of an opportunity this could be in line with the $1.5 billion opportunity, talked about AD in the U.S.? And then you have $3 billion in cash. As a competitive landscape in myelofibrosis with all the different combinations that are currently under investigation, it was – any changes in your thinking around capital allocation and the size, you did the Villaris acquisition recently, but the size of deals? Thank you.

Operator:

Thank you. We have reached end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments.

Christine Chiou:

Thank you all for participating in the call today and for your questions. The IR team will be available for the rest of the day for follow-up. Thank you and goodbye.

Operator:

Hello, and welcome to the Incyte Second Quarter 2022 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead, Christine.

Hervé Hoppenot:

Thank you, Christine, and good morning, everyone. In the second quarter, revenues increased 29% year-over-year, reaching $911 million. JAKAFI net sales grew 13% to $598 million, benefiting from growth in new patient start in all three indications. The contribution from our other hematology and oncology products continued to increase at the launches of PEMAZYRE and MINJUVI progress in Europe and Japan. We also made significant progress with the launch of OPZELURA in atopic dermatitis where we now have the third PBM GPO contract signed. This is a key milestone in achieving broad formulary access and an important step towards accelerating the growth of OPZELURA net revenues. As we shift from free drug to paid prescription, we are seeing some temporary delays in the filling of prescription, which had an impact on second quarter revenues. However, patient demand and satisfaction remains strong and improvement in reimbursement are translating to an increase in covered claims with a significant increase seen in July. These metrics are pointing to a continuation of a successful launch in atopic dermatitis. Turning to Slide 5. Two weeks ago, OPZELURA was also approved for the treatment of nonsegmental vitiligo, becoming the first and only therapy for repigmentation for these patients. The approval of OPZELURA was a momentous occasion for the millions of people living with the disease and generated a tremendous amount of excitement in the dermatology community with advocacy groups and patients. Turning to Slide 6. We also had multiple approvals this quarter with our partnered products. Jakavi was approved as the first post steroid systemic treatment for both acute and chronic GVHD in Europe. Olumiant was approved as the first and only systemic treatment for alopecia areata in the U.S., Europe and Japan; and Tabrecta received European approval for a subgroup of patients with non-small cell lung cancer. Together, this approval provided insight with $130 million of milestone revenues and will contribute with royalties to our future revenue growth. Finally, looking at some of the additional highlights of our pipeline on Slide 7, for baricitinib, formerly known at 707, is now in preparation for a Phase III study in HS following the positive results from our Phase II trials. As part of the LIMBER program, IND clearance was received for CK0804, Cellenkos cord-blood-derived Treg cells as adoptive therapy to ruxolitinib for the treatment of myelofibrosis. We also received FDA clearance – FDA acceptance of the NDA submission for QD ruxolitinib with a PDUFA date of March 23. And lastly, in early development, we expect to initiate a clinical program later this year with 459, a LAG-3 PD-1 bispecific antibodies developed in partnership with Merus. We have multiple ongoing studies across dermatology, LIMBER and hematology/oncology, as you can see on the right, where each represents a meaningful opportunity and puts us in an excellent position for future growth and diversification. With that, I'll turn the call over to Barry.

Steven Stein:

Thank you, Barry, and good morning, everyone. We are making significant progress within our dermatology pipeline. As you know, OPZELURA received FDA approval in vitiligo a few weeks ago and has now obtained two important FDA approvals in less than a year. We will continue to pursue other indications that may expand the use of ruxolitinib cream to more patient populations in need. Additionally, we are developing our oral JAK1 inhibitor, Povorcitinib, formerly INCB54707 in hidradenitis suppurativa, vitiligo and prurigo nodularis, all of which are in Phase II. And as Hervé mentioned earlier, we are preparing a Phase III in hidradenitis suppurativa. There is significant potential with each of these indications where there are limited treatment options, in some cases, no FDA-approved treatments. One of the interesting studies we are doing with ruxolitinib cream is the long-term extension of the TRuE-V studies where we are evaluating the duration of response following the withdrawal of OPZELURA. On the left, you can see the study design for the TRuE-V studies. At 24 weeks, after the primary endpoint has been reached, patients could roll over into the long-term extension study for an additional 28 weeks. At 52 weeks, patients who achieved at least a facial VASI90 response are then randomized 1:1 to receive 1.5% ruxolitinib cream BID or vehicle. Additionally, those patients who did not achieve at least a facial VASI90 response at 52 weeks are maintained on therapy with 1.5% ruxolitinib cream BID. The primary endpoint of the study is time to relapse in those who are placed on vehicle with numerous secondary endpoints. Moving to Slide 19. We are announcing today the most recent compound moving into clinical development, INCA32459, a LAG-3 PD-1 bispecific antibodies. INCA32459 has been shown to be superior to independent LAG-3 and PD-1 blocking in the LAG-3 PD-1 dual receptor assay and has increased cellular activity compared to a combination of the monoclonal antibodies. Additionally, in a humanized mouse model, 459 controls tumor growth better than the combination and gives us confidence that it may provide differentiated pharmacology and a clinical profile relative to current treatments. On the next slide, we have a number of opportunities within LIMBER to expand our leadership in MPN and GVHD with multiple programs reaching important milestones in the second half of 2022 and into 2023. The NDA was accepted by the FDA for QD ruxolitinib. And later this year, we expect initial data from the BET and ALK2 programs in combination with ruxolitinib, and we plan to start a Phase I program evaluating the combination of CK0804 and ruxolitinib in myelofibrosis. The second quarter was a very successful quarter for Incyte with multiple products and partnered product approvals, and we look forward to a busy second half of the year. I'd now like to turn the call over to Christiana for the financial update.

Operator:

Certainly. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Salveen Richter from Goldman Sachs. Your line is now live.

Barry Flannelly:

Sure. I think the – well, what we're saying about the revenue is really was mostly a gross to net situation that Christiana pointed out that that's what we forecasted in the beginning from Q1 to Q2 is consistent where our gross to net was going to be. And then our demand, as you see in the sort of middle of the quarter, we ran into a little bit of a bump in the demand when we switched from the free drug program to a fully covered for patients that are covered under the contracts that we signed. And as you can see, and that's why we showed you the graph on Slide 10, is that we believe that we've overcome these situations that we have most of the NDC blocks removed. They are continuing to be removed as we move into the third quarter here. And it will only get better, but our last week of demand was in fact, the biggest week of demand that we had in the last week of July. And we believe that that trend line for demand is going to continue. The second question, as far as the [indiscernible], maybe Steven.

Barry Flannelly:

Thank you.

Tazeen Ahmad:

Hi, good morning. Thanks for taking my questions. With regards to your guidance to 40% to 50% growth to net by the end of this year, I know you've talked about, you are happy with the launch trajectory this far, but what are you feeling particularly confident about, what absolutely needs to happen for you to reach that target? Is it more penetration into formulary? Is it a strong launch for vitiligo out of the gate? Just help us try to understand how, because you're still at 81%, which is definitely an improvement, but a steep climb to get to where you want to be. And then secondly, for vitiligo I'm just wondering in the days of the launch, are you able to compare how scripts have been relative to the early days of when AV was launched? Thanks.

Operator:

Thanks. Our next question is coming from Brian Abrahams from RBC. Your line is now live.

Hervé Hoppenot:

Sure, Brian. So our expectations are for where we're placed on formula again is the utilization criteria that downstream plans end up putting into place for ADs. So most of the plans can have one prior therapy or two prior therapies at TCI or TCS. All of our contracts are written so that the downstream plans can take advantage of rebates by deciding to put it after one step or two steps. But most of them are just there, they are at one step or two step. And we think that will evolve over time and only get better. There is not necessarily miscoding at pharmacies, there certainly was a little bit of maybe an unexpected slow-down that we believe is fixed now that when people were switching from the free drug program to the prior approvals, it was easier for some pharmacies to continue to get free drug rather to go in through the prior approval process. But in this marketplace prior approvals are the norm. And in fact, dermatologists are used to doing prior approvals all the time. Most of them are electronic prior approvals that occur very quickly and if not they might take one or two days to get through the prior approval process. So we did have a slowdown but it really picked back up again. And I'm really proud of our market access team that was able to step in and solve these problems. For the gross-to-net, I might hand it over to Christiana.

Brian Abrahams:

Got it. Very helpful. Thank you.

Jay Olson:

Great? Oh, hey, thanks for taking the questions. For the LIMBER program, can you talk about the potential for myelofibrosis disease modification with all the different combinations of rux with PI3K, ALK, BET, BCL 2 and whether or not you've seen any pre-clinical or clinical evidence of fibrosis improvement with any of those combos? Thank you.

Jay Olson:

That sounds great. Thank you.

Operator:

Thank you. [Operator Instructions] Our next question today is coming from Marc Frahm from Cowen. Your line is now live.

Steven Stein:

So Marc, your first part of your question, I guess what you're saying our gross-to-net is determined by the overall number of units that we sold and obviously the amount of reimbursement we're getting or payments we're getting for that. So right now our gross-to-net, as you can see, is what we expected to continue to improve. 55% of claims are being covered now, every single day that's going to get better and better. Gross-to-net at the end of the year, of course, is going to be in the range that we said. So they are not material different, but the gross-to-net will be better for each tube that we sell by the end of the year. So, we're very confident of the guidance that we've given so far in terms of gross-to-net. And I'm very confident that our demand is going to continue to increase week after week, particularly now with the vitiligo approval as well as the AD approval.

Marc Frahm:

Okay. That that's very helpful. And then maybe just on the pipeline, Steven, the decision to move forward in hidradenitis, one is the Phase 2 data just available internally this year, or should we expect to see it? And then as you go towards Phase 3, what's kind of – given the safety labeling of the JAK class, kind of what's the clinical profile that you think you need to be able to establish on the efficacy side in order to be a good option for hidradenitis patients?

Marc Frahm:

Thank you.

Evan Seigerman:

Hi guys. Thank you so much for taking my question. So, earlier on the call, you had mentioned some of the commercial dynamics that you saw during second quarter were temporary. I'm just wondering how temporary they were. And now that we're a month into the third quarter, have you seen some of these trends reverse? And then looking ahead, with the gross-to-net around 40% to 50% for Opzelura, is that what you should be expecting come 2023 and 2024? Is that really the steady state kind of in the years beyond 2022? Thank you.

Evan Seigerman:

Okay, great. Thank you.

Michael Schmidt :

Hey, thanks for taking my questions. I had another one on Opzelura, just maybe talk about your confidence in script data and the increase in demand in the third quarter. Yes, it sounded like you said that prescription data was overestimated in a second and when I look at your gross sales, it looks like that declined slightly from ninety-one in the first quarter. Just wondering how confident you are in those in those forecasts.

Michael Schmidt:

Okay. Super helpful. And then there was another tropical approved yesterday in the dermatology space that could enter the AD market next year. And the black price was at a significantly lower than what were Opzelura’s price? And I was just wondering how you think that might impact competitive dynamics longer term?

Michael Schmidt:

Super helpful. Thanks so much.

Kripa Devarakonda:

Hey guys, thank you so much for taking my question. One question on Opzelura, just wondering how long do you expect the copay assistance to continue? And then on the chronic GVHD looks like the uptake is pretty strong. I was just wondering if the strong launch is due to a bolus of available patients. Do you expect the growth to continue in a similar manner? Also any additional color you can provide on when we can see data from the – from axatilimab the Syndax collaboration? Thank you so much.

Steven Stein:

Thanks Barry. Thanks for the question Kripa. With our partner Syndax, the AGAVE study is ongoing and is enrolling excellent. It should complete enrollment this year. Then we wait for the primary endpoint and we'll present the data in 2023. That's a registration directed study in third line chronic graft-versus-host disease with monotherapy axatilimab. In addition, we will start combination work with a JAK inhibitor, which is now going to be ruxolitinib. And that'll be to get a safe dose and schedule and then we'll move that up. The treatment paradigm, look at earlier lines – earlier settings with the non-overlapping mechanism of action, plus the likelihood that there's no overlapping toxicity makes it a potentially exciting combination. So just to repeat data in 2023 on the pivotal registration study which has gone really well. Thanks.

Operator:

Thank you. Next question is coming from Andrew Berens from SVB Securities. Your line is now live?

Hervé Hoppenot:

That's a lot of questions. But we'll try to answer them one at a time. So who's prescribing? So dermatologist and dermatologist offices are prescribing, but that's dermatologist physicians assistants and nurse practitioners of which there are many, and they're all prescribing. There's some allergists who are prescribing as well. So that's what's happening there. Breakdown of copays it's sort of all over the place. We do expect an average copay that that a patient might have once they're – once their plan covers Opzelura either for AD or for vitiligo and could settle somewhere around $40. Unfortunately at the beginning of the year many patients also have a deductible that they have to meet before they get to their copay, so we pick that up as well. And yes copay assistance is part of the gross to net that's a factor in our net sale. So any copay that we pick up versus removed, but it's relatively low compared to – compared to a full buy down or something like that. And number of scripts turned away by patients due to copays, I don't know? Like I said, there shouldn't be any due to copays because we'll help them to pick up the copay if they have. Copay that is difficult for them to afford, but how many scripts that people walk away from, because of that I think, it shouldn't be any to be honest with you. Like we said, we did have a little bit of a hiccup there where patients might have not been getting their prescriptions as fast as they should have or may have walked away because it was taking too long to get them filled. We think we have that completely fixed now. And there's always going to be problems in this marketplace that we have, in this healthcare system that we have of patients running into barriers. But in fact we do everything we possibly can to make sure those patients get the scripts that they need.

Mara Goldstein:

Thanks for taking the question. So I just wanted to circle back on the Opzelura physician survey that you showed. Do you have any insight I guess no pun intended there as to the driver behind the increase in that proportion of treated patients that are considered candidates for the drug? And then also, I'm hoping you might talk a little bit about rux QD and the potential positioning for that once approved or so assuming approval next year? Thank you.

Mara Goldstein:

Okay. And if I could just ask povorcitinib in vitiligo; can you just speak to that difference in the body surface area criteria and how that aligns with how physicians treat vitiligo or current standard of care for vitiligo?

Mara Goldstein:

Thank you.

Matt Phipps:

Good morning. Thanks for taking my questions. I guess on that fixed – on the QD rux and then the BET and ALK data coming, is the next step after we see the data in the second half to move right to a fixed dose combination with the QD rux or is there an additional Phase 2 trial or something that will happen? And then separately I on Monjuvi, I'm just wondering if you still see this as a $500 million to $700 million opportunity, given the rollout and in particular the broader label of [indiscernible] to include transplant ineligible patients, if that impacts your kind of long-term opportunity for Monjuvi?

Steven Stein:

Yes. So Monjuvi, we certainly still have confidence in Monjuvi. We certainly still think that we're going to get to in the relapse refractory setting we can get to $500 million; obviously it's taking us longer than we anticipated. The marketplace has changed in diffuse large B-cell lymphoma. Over time it's a very dynamic market. Obviously there's more data with the CAR-Ts. There's more data with frontline [indiscernible], there's more products entering that are the bispecifics, but Monjuvi and LEN is an excellent combination for patients who have failed R-CHOP therapy are relapsed on R-CHOP. And we really believe that there's really only a couple of options for patients who aren't going on to transplant and that could be CAR-T but the vast majority of patients should be eligible for Monjuvi LEN. So we just need to keep on doing a better job of educating, because this is a product that really has great a CR rate, and the duration of response is 44 months, a three-year follow-up. There's really not much better data or any better data in that particular setting for duration of response than Monjuvi LEN. So we really anticipate that this is a product that can serve a lot of patients in the relapse refractory setting. And then of course, we'll wait for data in little lymphoma and in the first-line setting because that's where the ultimate real value of the product will come from.

Stephen Willey:

Yes. Good morning. Thanks for squeezing me in. So just a quick one on Opzelura. So I guess following the initial approval in AD, I know your guidance implied about three to four tubes per 80 patient per year. Just wondering how the reiterate that you're seeing at this point in the launch still informs some of the persistency and utilization assumptions that are that are embedded within that that unit guidance on a per patient basis? Thanks.

Stephen Willey:

All right. Thanks for taking the question.

Gavin Clark-Gartner:

Hey, thanks for taking the question. So just on the LIMBER program for the BET and ALK2 Phase 2 combination data that's coming in the second half of this year, could you stop with some expectations for what data exactly we'll see. So I know you mentioned it'll be the initial and somewhat limited efficacy data. But just wanted to clarify, like what exactly you're planning to show? Thanks.

Operator:

Thank you. We reached in of our question-and-answer session. I'd like to turn the floor back over to Christine for any further closing remarks.

Operator:

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator:

Hello and welcome to the Incyte First Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead.

Hervé Hoppenot:

Thank you, Christine, and good morning, everyone. Incyte’s strong momentum in 2021 continued into the first quarter with product and royalty revenues up 20%. Jakafi grew 17% year-over-year with patient demand driving growth in MF and PV as well as in GVHD following the successful launch in the chronic indication. Our hematology and oncology portfolio grew 24% year-over-year, driven by our new product uptake consisting of multiple new launches, including Pemazyre in Europe and Japan and Monjuvi in Europe. The Opzelura launch continued to be very successful with strong uptake by dermatologists, high satisfaction reported by both patients and physicians and significant advancements with payers, which Barry will address in his remarks. We made progress across all stages of our pipeline with important updates that include positive 52-week data for ruxolitinib cream in vitiligo, the prioritization of 280 and 318 in our oral PD-L1 program and the start of our CDK2 clinical program. Our royalty revenue remained strong, growing 23% year-over-year, contributing to our growth profile. Turning to Slide 5. As you can see on the left, we are still in the early phase of launch for many of these products, including Opzelura in atopic dermatitis, Pemazyre and cholangiocarcinoma, where we are expanding geographically; and Monjuvi, which is just starting to launch in Europe and Jakafi where we recently launched in chronic GVHD in the U.S. There is ample room for growth with each of these new launches. On top of that, we have new potential indication that we’ll be providing additional growth opportunities with Opzelura in vitiligo and with our partner product where we have new indication being planned over the next few months for Olumiant, Tabrecta and Jakavi. In addition to these launches, there are a number of programs in our mid- and late-stage pipeline, as shown on the right that could have a meaningful impact on our revenue. Before handing the call to Barry, I would like to provide an update on Opzelura manufacturing. We have recently received FDA approval and have implemented the new manufacturing process to improve the dissolution of API for Opzelura. In addition, consistent with best practices, we have received FDA approval for a second manufacturer of Opzelura to support our successful launch. We are also preparing to reintroduce samples in the U.S. Now to share more details on product performance and outlook, I will turn over to Barry.

Steven Stein:

Thanks, Barry, and good morning, everyone. Starting with ruxolitinib cream on Slide 13. Last month, we presented updated 52-week data for ruxolitinib cream in vitiligo at the American Academy of Dermatology Annual Meeting. As a reminder, during the 24-week double-blind period, patients were randomized 2:1 to receive ruxolitinib cream 1.5% BID or vehicle. After the 24-week visit, all patients crossed over to active therapy. At 52 weeks, approximately 50% of the patients initially randomized to ruxolitinib cream experienced at least a 75% improvement in their VASI score from baseline, and nearly one third of patients experienced at least a 90% improvement in facial VASI. No new safety signals were seen and ruxolitinib cream was well tolerated with no serious treatment-related adverse events reported. These data demonstrate the potential for substantial improvement in repigmentation with a longer duration of treatment with ruxolitinib cream. Also at AAD, we presented data from our population-based VALIANT study, which aim to better understand quality-of-life burden faced [indiscernible]. In studies, anxiety and depression were reported in up to 68% and 62% of patients with vitiligo, respectively. The psychological impairment that may result from vitiligo can be similar to that of other skin diseases such as psoriasis or eczema and can impact patients of all types, indiscriminative skin color, percentage body surface area involvement or the area affected. Many patients with vitiligo have stopped seeking treatment due to a lack of approved therapies. We are excited the potential to bring the first FDA-approved therapy for repigmentation to people with vitiligo and to be able to offer them a new choice of therapy. Ruxolitinib cream is under review both in the United States and in Europe with the PDUFA date in the United States of July 18. Moving to Slide 15. We are initiating a study in vitiligo to evaluate the benefit of adding phototherapy to ruxolitinib cream treatment. This is a 48-week trial where patients will receive a 1.5% ruxolitinib cream twice daily for 12 weeks followed by ruxolitinib cream plus or minus phototherapy. Rounding out dermatology, INCB54707, is in Phase 2 studies for vitiligo, hidradenitis suppurativa and prurigo nodularis, where there continues to be high unmet medical need and the lack of effective therapies or in some cases, no approved therapies at all. We expect to present data for vitiligo and hidradenitis suppurativa in the second half of this year. Turning to Slide 17 and our oral PD-L1 program. Last year at SITC, we presented data on the three compounds in our oral PD-L1 program, where we demonstrated the first clinical activity with an oral PD-L1 inhibitor. We saw evidence of tumor shrinkage with all three compounds, and in the case of 86550, an increased rate of peripheral neuropathy. Based on clinical data from ongoing studies and positive therapeutic ratios seen for 280 and 318, we have opted to move forward with these two compounds. Enrollment is progressing well in both studies with 280 and 318. We continue to observe tumor shrinkage with both compounds and to date, no evidence of peripheral neuropathy has been seen. There are several benefits to an oral PD-L1 including the potential for better management of immune-related adverse events due to a shorter half-life, the opportunity of developing oral-oral combinations and the ease of dosing with an oral agent. We expect to provide a data update from our oral PD-L1 program in the second half of this year. Moving to early development on Slide 18. We are initiating a Phase 1 dose escalation and dose expansion study in advanced solid tumors with our novel, potent and select of oral small molecule CDK2 inhibitor, INCB123667. CDK2 in complex with Cyclin E is a cell cycle regulator, which, when inhibited, has been shown to suppress tumor growth, mainly in Cyclin E amplified tumor models. Cyclin E is an amplified oncogene in multiple aggressive cancer types, including ovarian and endometrial cancer. To close, we expect multiple regulatory and key clinical data readouts this year as shown on Slide 19. Specifically for lumbar, the once-daily RUX NDA will be submitted in this half of 2022. The BET and ALK2 combination trials with ruxolitinib are progressing well with data expected in the second half of 2022. The ruxolitinib cream PDUFA for vitiligo in the United States is July 18, and we expect an EMA decision in the second half of this year as well. For our partnered products, ruxolitinib in acute and chronic graft versus host disease and capmatinib in non-small cell lung cancer, both have received positive CHMP opinion. With that, I would like to turn the call over to Christiana for the financial update.

Operator:

Thank you. [Operator Instructions] Our first question today is coming from Vikram Purohit from Morgan Stanley. Your line is now live.

Steven Stein:

Vikram, it’s Steven. I’ll take your question, and I’ll just reaffirm some things we said on the actual prepared remarks. And just to reiterate, we know that the texture issue is due to a very small amount of active pharmaceutical ingredient that has come out of solution. And that has obviously been the focus of all our efforts. As Hervé said upfront, we have implemented a recent process change via a regulatory process called a CBE-30 that improved solubility. We’ve received FDA approval for this and that process is underway and is improving the decision of API. In addition, as Hervé said on his prepared remarks via a longer regulatory process called a prior approval supplement and as his best practice, we’ve initiated a second manufacturing site and that is coming on board as we speak to answer your question specifically. So those units from that second site will – in the next couple of weeks will be out in the field and with patients. We absolutely expect also within the next week or so, as Barry said in his remarks, to begin the sampling program as well, given that now we have a batch made for that. We don’t give specific numbers on percentages, but as we have already said in the call, 68,000 prescriptions, with a very small amount of complaints, the rate is obviously coming down, and we expect it to do so now with these improvements as well going forward.

Christiana Stamoulis:

So Vikram, hi, it’s Christiana. In terms of the vitiligo peak sales potential, I think it’s a little bit of a different situation than AD. In the AD, AD is an established market where it was easier to have a sense of not only the size of patients that are affected by AD, but the number of patients that are actively seeking treatment today and how this market looks like and how it may evolve. In the case of vitiligo, we have discussed in the past, there are no effective therapies now. And as a result, the patients – the majority of patients are not currently seeking treatment. So it’s a little bit harder to have right from the beginning a sense of how quickly that will change. And therefore, we may not be in a position from the beginning to give you the peak sales estimates that we did for AD. Actually, if you look at vitiligo, you run the numbers even for the current number of patients that seek treatment you can see that you can very quickly get to very big numbers like in the billion-plus type of numbers. So, we want to see a bit more of how this evolves before we come out with the peak sales potential for vitiligo.

Operator:

Thank you. Our next question today is coming from Kripa Devarakonda from Truist Securities. Your line is now live.

Barry Flannelly:

So Kripa, this is Barry. So yes, when we initiate, reinitiate the samples for AD, we anticipate we’ll still have samples and continued samples throughout the launch of vitiligo. As far as duration of therapy, it’s too early in the launch. I mean we’ve launched for six months now. We see new patient growth continuing to accelerate. We see the refills at 23%. We think that’s pretty good for right now. And so – as far as the duration of therapies, we don’t know. As far as gaps between tubes, for example, we also don’t know. We’d have to go back to the clinical trial to see exactly what those patients did, but it may not be the same in the real world for duration of therapy. What we’ve said in the past, of course, is that – once we stabilize over a period of time, as we get into launch, we anticipate that patients will generally get three tubes to four tubes of Opzelura per year for atopic dermatitis.

Barry Flannelly:

No, I can’t say that community doctors are any different than academic doctors. In fact, in dermatology, there’s very – there’s very big practices that treat many, many patients and their uptake of Opzelura. So our highest decile prescribers, for example, continue to use it. They’ll tell us sometimes that individual patients might have more questions about the black box, but they’re very used to explaining black box or side effects or potential side effects that any drugs they use may have. So they’re comfortable walking patients through that, but we really haven’t seen it as a barrier.

Operator:

Thank you. Your next question is coming from Matthew Phipps from William Blair. Your line is now live.

Steven Stein:

Matt, hi, it’s Steven. Thank you for your questions. So just for everybody else, POD1UM-304 is our IV checkpoint retifanlimab in non-small cell lung cancer. It’s a replication, if you will love the initial pembro approval in that indication at its combination with chemotherapy versus checkpoint inhibitor alone. And as you point out, it’s a global study with sites all over the world, including in the United States. So, we think that is the central difference from the Lilly issue they had with their checkpoint inhibitor where it was China-only data. So, we have representation across Western Europe, Eastern Europe, Asia and a small amount of U.S. sites. So, we think from a diversity of subject point of view, we’re well covered with that. The modeling of the study is exactly from a statistical point of view, in keeping with what we’re seeing in the initial pembro approval in that indication, that was discussed with regulators and feedback was given and aligned with them. So, we feel we are in a completely different position to what was the central complaint against the Lilly submission with their checkpoint inhibitor in non-small cell lung cancer, given the diversity of our population across the world, the size of the study, replication of the statistics to achieve the same end points, which again, wasn’t exactly the case with the ODAC reference. For tafasitamab in combination with parsaclisib, we remain interested despite some of the negative halo on PI3 delta inhibitors for a number of reasons. Firstly, because – we know this is a tremendously active doublet from work that Morphosys have done before with tafasitamab with idelalisib in that having upwards of 100% response rates. So we are absolutely see, continuing to look at our data in top line, which is ongoing across different disease segments, including lymphoma, including chronic lymphocytic leukemia. But you are right. I mean, there is a large increase in the safety of delta inhibitors, and it’s something will have to consider very carefully before going forward with any bigger study there. We hope in the second half of this year to have decent data sets for the different subgroups of diffuse large B-cell lymphoma, low-grade lymphomas, chronic lymphocytic leukemia with that doublet and then we’ll have to make decisions in keeping with the context you allude too. I’m glad you also brought up the myelofibrosis program because, again, it’s RUX in combination with parsaclisib in two different settings. So there’s a first line study, which is enrolling very well. It’s a goal enrollment of around 440 patients, and it’s a very clean study in that its RUX plus parsaclisib versus RUX alone in that indication with the SVR 35% decrease primary endpoint. So the differences again, given the milieu you talk about the PI3 delta inhibitors is that this is a randomized study at a different dose of a delta inhibitor. There’s no induction therapy, it’s a standard constant dose. It’s a defined treatment period. The studies were agreed to and signed off with regulatory authorities and does has – as you point out, also the ability to capture overall survival. So we think we’re well covered in that indication. The suboptimal study there is in about 220 patients also enrolling very well. Should complete next year different endpoints, again a randomized study and in capture, a primary endpoint as well as secondary endpoints that will include safety. So again, a different dose, and we think we’re well covered there as well. But we’re not immune to the fact that the road for delta inhibitors will be extremely safety focused as they should be. Thanks.

Operator:

Thank you. Our next question is coming from Brian Abrahams from RBC Capital Markets. Your line is now live.

Barry Flannelly:

So Leonid its Barry. So on the gross to net, so as we said, as we continue to get better coverage as the NDC blocks are removed or gross to net as Christiana said, is going to improve in the second quarter, in the third quarter and in the fourth quarter. So we have 146 million lives that are covered now, so they have access to the drug and are as far as our full buy-down program goes, we knew from the very beginning when we launched this drug that we wanted to have a generous program patient assistance program, where if a dermatologist wrote the prescription, the patient would be able to get it regardless of NDC blocks. As those NDC blocks are removed and utilization criteria are written, then we take down those full buy-down programs and that actually does improve our gross to net over time because it’s just unnecessary. Now insurance companies are going to pay for it. As far as coverage goes, I mean, just as I said, the prescribing is not impacted. We did not want it to be impacted because we had a generous patient assistance program in place and there really hasn’t been any barriers. As prior approvals, of course come into place, dermatologists and their offices are very familiar with going through the prior approval process every prescription for psoriasis, every prescription for atopic dermatitis for branded drugs all have to go through prior approvals. So there really isn’t the barriers and we tried to remove those barriers as much as we could. So people could get great experience with Opzelura and we know that they’re really having great experience with Opzelura. Physicians, dermatologists are telling us they’re having great experience with Opzelura. So we think the uptake that we’re experiencing now is going to continue throughout the end of the year and beyond.

Unidentified Analyst:

This is Gavin Hau [ph]. Thank you for taking our question. There’s been a lot of focus on Opzelura so stay away from that. But just on the pipeline, I guess, the adenosine program and CD73, this has been an increasingly competitive area of development. Perhaps you can just bring some expectations for us on the initial data we’re expected to see later this year. Thank you.

Unidentified Analyst:

Thank you.

Mara Goldstein:

Great. Thanks so much for taking question. I just wanted to ask, I know you talked a lot about Opzelura. But I just wanted to get a little bit of clarification on the gross-to-net steady state at 40% to 50%. And is that also anticipated in a post-vitiligo commercialization, that would be sort of the long-term steady state? And then also, is there any update on the NDA filing for RUX QD?

Steven Stein:

Yes. Mara, it’s Steven. So our RUX once a day filed it’s going in now this half of 2022. The critical path was stability, which is complete. We expect a standard 10-month review period – so it should be first quarter of 2023 that we’ll be expecting that approval. The reason we expect it to be successful is that from a bioavailability, bioequivalence point of view, we met the criteria that’s in the FDA guidance for area under the curve. So we’re within that range that’s required for the multiple dose strengths. And now that stability has been complete, we have confidence in that submission and should have it action around the first quarter of 2023. Thanks.

Operator:

Thank you. Your next question is coming from Marc Frahm from Cowen and Company. Your line is now live.

Barry Flannelly:

I mean, I’ll turn it over to Steven. I’ll try to give you an answer to your question. I actually think the most important thing is just that this is the first and only drug approved for repigmentation of vitiligo. And it’s – there really should be no barriers really other than that if Steven has other viewpoints about what should be included or not included in the label, I’m not sure.

Marc Frahm:

Okay. That’s helpful. And then maybe, Steven just for 707, the updates coming in the second half across some of the other dermatology indications. I guess what do you view as kind of meaningful responses in hidradenitis to move forward with this type of mechanism given kind of all of the labeling concerns around JAKs? And then on the vitiligo side, is the long-term plan there with that to kind of have people on oral therapy chronically? Or is it more of just get them to a place where Opzelura becomes a better option for them and then they transition to Opzelura?

Marc Frahm:

Okay, thank you.

Unidentified Analyst:

Hi, this is Cheng on the line for Jay. Thanks for taking the question. I guess on the oral PD-L1 program, I am just curious any learnings like dosing optimization or tumor selection that you can apply to the development of the follow-on molecules you are prioritizing right now? And also between the two following molecules, would you further prioritize one over the other? If so, when will that happen? Thank you.

Unidentified Analyst:

Great. Thank you.

Leon Wang:

Hey, thanks. This is Leon Wang calling for Tazeen Ahmad. I guess one more question on Opzelura gross to net. You previously mentioned that one of the benefits of talking to payers relating to vitiligo that when your current negotiations and when vitiligo is approved, you don’t have to necessarily go back to payers to negotiate brand-new contracts. Now that’s the case and would you say some payers are waiting for the label of vitiligo to be approved before kind of finalizing the payer coverage negotiations. So I’m trying to understand the cadence of when you might see that next basically percent lives covered an improvement from that dynamic? And my second question is previously, you mentioned the gross to net range could normalize in where between the 30% to 50%. Today, you said expect that to be around 40% to 50% by the end of 2022. But just as a clarification, going forward beyond 2022 NDC, I guess, potentially gross net discounting to be somewhere lower, perhaps in the 30% to 40% range? Thank you.

Operator:

Thank you. Our next question today is coming from Andrew Berens from SVB. Your line is now live.

Barry Flannelly:

So Chris, I’ll take the first part and then hand the second part over to Steven. But as far as – there’s about 8,000 dermatologists in the United States or so, and general practitioners, no, we don’t really see any – I mean they could obviously write for Opzelura, but we really don’t see any all of our detailing, all of our educational work goes towards dermatologists and their offices. But remember, especially in dermatology, nurse practitioners and physician’s assistance are very important their prescribers. There’s tens of thousands of them. So when we call on dermatologist offices, we of course, call on the nurse practitioners and the physician’s assistants are very important. In fact, the medical assistance as well that are very important, particularly when it comes to reimbursement. So it’s all direct education and we’re working very well and have reached all of our top prescribers and we’ll continue to educate all of the dermatologists, nurse practitioners, PAs and the offices as we move forward for the product manufacturing changes. I’ll turn over to Steven.

Unidentified Analyst:

Got it. Thank you very much.

Christine Chiou:

Thank you all for participating in the call today and for your questions. The IR team will be available for the rest of the day for follow-up. Thank you, and goodbye.