Incyte Corp (INCY) — Q3 2024 Earnings Call Transcript

Thank you, Kevin. Good morning, and welcome to Incyte's third quarter 2024 earnings conference call. Before we begin, I encourage everyone to go to the Investor section of our website to find the press release, related financial tables, and slides that follow today's discussion. On today's call, I'm joined by Herve, Pablo, Christiana, who will deliver our prepared remarks. Barry, Matteo, and Steven will also be available for Q&A. I would like to point out that we'll be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. I will now hand the call over to Herve.

Thank you, Ben, and good morning, everyone. The third quarter of 2024 was a very positive quarter for Incyte with a good commercial performance, FDA approval of Niktimvo, and progress of our pipeline with several key data readouts for our clinical programs. In Q3, total revenues increased by 24% year-over-year to $1.1 billion, with net product revenues growing 23%. This growth was driven by the ongoing demand for Jakafi and Opzelura, which I will highlight in the following slides. In August, we, along with our partner, Syndax, announced the FDA approval of Niktimvo for patients with chronic graft-versus-host disease after failure of 2 prior lines of therapy, making it the first anti-CSF-1R approved to target the inflammation and fibrosis associated with chronic GVHD. To facilitate patient dosing and limit product waste following the FDA's approval of Niktimvo, we have submitted 2 smaller vial sizes to the FDA for approval. Following the potential approval of the new vial sizes, we anticipate launching Niktimvo in the U.S. in the first quarter of 2025. Additionally, the positive pivotal AGAVE-201 trial results were recently published in the New England Journal of Medicine. Niktimvo was also included in the latest NCCN Clinical Practice Guidelines in Oncology for chronic GVHD treatment, both highlighting the significance of this dataset and the transformative potential of Niktimvo. The sNDA for ruxolitinib cream in pediatric atopic dermatitis was recently filed with the FDA, and we are on track for a potential approval in the second half of 2025. During the quarter, we also provided important clinical updates at ESMO with encouraging data for our CDK2 inhibitor in ovarian and endometrial cancer as well as data from the Phase 3 trial of retifanlimab in SCAC. At a recent conference, we presented extensive data on both povorcitinib and ruxolitinib cream, including multiple leading presentations that showed the potential of this program to enhance treatment options for individuals with immune-mediated dermatologic conditions such as vitiligo, atopic dermatitis, hidradenitis suppurativa, and prurigo nodularis. Moving to Slide 6 and an update of the third quarter commercial performance of Jakafi. Jakafi net product revenues were $731 million, up 16% year-over-year, and paid demand increased 10%, driven by patient growth across all indications. Based on the strength in demand seen during the first 3 quarters of 2024, we are raising our full year 2024 Jakafi net revenue guidance to a new range of $2.74 billion to $2.77 billion. Turning to Slide 7 and looking at Jakafi total paid demand by indication during the first 9 months of 2022, '23, and '24. As you can see, unit growth remains robust. Myelofibrosis is stable year-over-year with some modest growth seen again this quarter, while the most significant growth is seen in polycythemia vera and graft-versus-host disease. We expect PV to become the largest contributor for Jakafi over time, supported by the data from the MAJIC PV study, which underscores the benefit of early intervention with Jakafi and its impact on thrombosis-free survival. Moving to Opzelura on Slide 8. Total Opzelura net product revenues in the third quarter were $139 million, up 52% when compared to the same quarter last year. In the U.S., the annual prescription trends for 2022 and '23, and year-to-date '24, as shown on the right of Slide 8, reflects continued year-over-year growth of Opzelura from both atopic dermatitis and vitiligo. During the third quarter, we continued to progress with the launch of Opzelura in Europe; $20 million in net sales during the third quarter were driven by France, where Opzelura is now reimbursed and available in retail pharmacies, and from Germany. Earlier this month, we also achieved approval for atopic dermatitis and vitiligo in Canada. On Slide 9, I want to highlight 3 products that are expected to begin contributing to revenue in the near-term. We anticipate that Niktimvo for third-line chronic GVHD, tafasitamab for follicular lymphoma, and retifanlimab for SCAC could collectively generate $800 million or more in incremental revenues by 2029. We anticipate all 3 products to be available in 2025, and this incremental sales will leverage the current commercial infrastructure used for Monjuvi, Pemazyre, and Jakafi. As illustrated on Slide 10, these 3 launches anticipated in 2025 will be followed by larger opportunities in 2026 and 2027, including povorcitinib, CDK2, and tafasitamab in first-line DLBCL. Between 2027 and 2030, we have multiple programs that hold transformative potential with data for each anticipated in 2025. I will now turn the call over to Pablo.

Thank you, Herve, and good morning. As we continue to execute on our pipeline of numerous potential first or best-in-class medicines, we remain on track to deliver more than 10 high-impact launches by 2030. In the next few slides, I will highlight a number of these programs. We continue to expand the opportunity of ruxolitinib cream with additional indications. Based on the positive Phase 3 data in pediatric atopic dermatitis, the supplemental NDA was recently filed. With the potential approval in 2025, we are excited about the possibility of providing an effective non-steroidal topical option for the 2 million to 3 million pediatric patients with atopic dermatitis in the U.S. Following interactions with the FDA, we have finalized the design for the Phase 3 study of ruxolitinib cream in patients with mild to moderate hidradenitis suppurativa. The study, which will have a primary endpoint of HiSCR 75, is expected to begin in the first half of 2025 and could represent a new treatment option for the approximately 150,000 patients with mild to moderate HS in the U.S. As a reminder, we're currently conducting a Phase 3 study evaluating ruxolitinib cream in patients with prurigo nodularis, a chronic skin disorder characterized by multiple firm nodules, commonly located on the extensor surfaces of the extremities and that are intensely itchy. This pivotal study is enrolling well, and we are now on track to report results in the first half of 2025, with a potential approval as early as 2026. With no topical therapies currently approved for prurigo nodularis and approximately 200,000 patients diagnosed in the U.S., we see this as an important additional option for patients and a significant opportunity for ruxolitinib cream. As shown on Slide 15, we're continuing to execute a broad development plan for povorcitinib, our oral small molecule, highly selective JAK1 inhibitor. Povorcitinib is currently being evaluated in Phase 3 studies in hidradenitis suppurativa, vitiligo, and prurigo nodularis, and in randomized Phase 2 proof-of-concept studies in asthma and chronic spontaneous urticaria with data for both expected in 2025. Povorcitinib has already shown encouraging efficacy and safety in a randomized Phase 2 study involving patients with moderate to severe hidradenitis suppurativa, a highly painful inflammatory condition. As a reminder, we reported that by week 52, up to 29% of patients achieved a HiSCR 100 response, indicating complete resolution of all symptoms. Additionally, povorcitinib demonstrated a rapid and significant reduction in pain, offering the opportunity to transform the current standard of care for this disease. The 2 Phase 3 studies, STOP-HS1 and STOP-HS2, are enrolling well, thanks to the strong Phase 2 data and the limited effective treatment options available. We expect to have Phase 3 data by early 2025. We have refined our guidance for the Phase 2 proof-of-concept study of povorcitinib in chronic spontaneous urticaria and now anticipate data in the first half of 2025. Chronic spontaneous urticaria is a mast cell-driven disease characterized by hives and severe chronic itching. The overactivation of dermal mast cells and basophils leads to increased serum levels of Th1, Th2, and Th17-related cytokines. We know that JAK1 inhibition can modulate mast cell activation, including the granulation and cytokine production, both of which contribute to chronic spontaneous urticaria. This randomized double-blind Phase 2 study is being conducted in patients who are inadequately controlled or have progressed on second-generation antihistamines, which represent a potential patient population of over 300,000 patients in the U.S. alone. As you can see on Slide 16, our updated inflammation and immunity pipeline continues to evolve. Recently, we presented promising data from a Phase 2 study of ruxolitinib cream in patients with cutaneous lichen planus. At this time, we do not plan to advance ruxolitinib cream into a registrational study for that indication and intend to publish the results of the study in the future. For lichen sclerosus, given the prioritization of other indications and programs, we are not currently planning to advance this indication into a registrational study. As a reminder, 262 and 547 are currently being evaluated in a number of indications, and we anticipate data for these studies in the first quarter of 2025. Moving to MPNs and graft-versus-host disease on Slide 17. We highlight here a number of ongoing programs where we have the goal of developing new therapeutic options to build upon the significant impact Jakafi has had on patients. Our BET inhibitor dose escalation is ongoing, both as monotherapy and in combination with ruxolitinib. As a reminder, we have reported reductions in spleen length in volume, as well as improvements in both symptoms and hemoglobin. We plan to advance this program into Phase 3 development and expect to provide an update later this year. Additionally, for zilurgisertib, our ALK2 inhibitor, we plan to provide an update later this year. And for ruxolitinib XR, we plan to share the bioequivalence data in early 2025. Moving to our oncology pipeline on Slide 18. We continue to build a robust portfolio with an increased emphasis on first-in-class and best-in-class novel immuno-oncology programs. For tafasitamab, we shared positive top-line results from the Phase 3 study in patients with follicular lymphoma and we are on track to file the sNDA with the FDA this year, which could lead to a potential approval in 2025. As a reminder, the Phase 3 data for first-line DLBCL in combination with R-CHOP is expected in the first half of 2025. During the ESMO conference in September, we shared positive top-line results for the pivotal Phase 3 study of retifanlimab in SCAC. Retifanlimab met the primary endpoint, demonstrating a clinically meaningful 37% reduction in the risk of progression or death with a hazard ratio of 0.63. The study showed that retifanlimab was generally well tolerated and no new safety signals were detected. At ESMO, we also shared promising evidence of clinical activity from our potentially first-in-class small molecule CDK2 inhibitor, which demonstrated a number of complete and partial responses as well as stable disease in patients with Cyclin E1 overexpressing tumors, most notably in ovarian and endometrial cancer. We believe our CDK2 inhibitor could be a foundational therapy for patients with ovarian cancer as well as other Cyclin E1 overexpressing tumor types, and we plan to move aggressively in initiating registrational studies in 2025. We will be meeting with the FDA in the coming months to discuss trial designs. As highlighted on the slide, we're considering different designs for the registrational program, and we will continue to update you on the regulatory strategy for this program in the coming months. In closing, Slide 20 shows a summary of the considerable number of milestones across the remainder of 2024 and 2025. These milestones will continue the transformation of our pipeline with a strong focus on new molecular entities with the potential to make an indelible impact on patients. With that, I would like to turn the call over to Christiana for the financial update.

Thank you, Pablo, and good morning, everyone. Our third quarter results reflect strong commercial execution and continued growth with total revenues of $1.14 billion, up 24% versus the same period last year. Total product revenues of $963 million in Q3 were driven by strong demand growth for Jakafi and Opzelura and increased revenue contribution from Monjuvi as a result of the acquisition of commercial rights to tafasitamab earlier this year. Total royalty revenues were $157 million, up 20% compared to the third quarter of 2023, driven by increased demand for Jakavi and Olumiant. Turning to Jakafi on Slide 24. Jakafi net product revenues were $741 million for the third quarter, reflecting continued demand growth with total demand up 10% year-over-year, driven by growth in all indications and a $9 million gross-to-net favorability as a result of true-ups to prior quarter estimates. At the end of Q3, channel inventory was up 2% year-over-year and stable quarter-over-quarter and within normal range. Turning now to Opzelura on Slide 25. Net product revenues for the third quarter were $139 million, representing a 52% year-over-year increase driven by growth in new patient starts and refills across both atopic dermatitis and vitiligo in the U.S., as well as continued contribution from the commercialization of Opzelura for vitiligo in Europe. In the third quarter, Europe contributed $20 million of Opzelura net product revenues, driven by continued uptake in Germany and broader access in France where Opzelura is now reimbursed and available in retail pharmacies. Third quarter net product revenues in France include a $2 million stock build-up at wholesalers. Finally, in the third quarter, we made significant progress in including Opzelura on regional formularies in Spain and Italy. Moving on to Slide 26 and our operating expenses. Total GAAP R&D expenses were $573 million for the third quarter due to the $100 million milestone payment made to MacroGenics during the quarter and continued investment in our late-stage development assets. Excluding all one-time expenses, ongoing R&D expenses for the third quarter increased 26% compared to the same period in '23 due to continued investment in our late-stage development assets, additional R&D expenses resulting from the Escient acquisition and timing of certain expenses. For the 9 months ended September 30, 2024, ongoing R&D expenses increased 15% compared to the prior year period as a result of increased investment in the Phase 3 studies of povorcitinib and Opzelura. As we wrap up the clinical development of axatilimab in third-line chronic GVHD, tafasitamab in relapsed refractory follicular lymphoma, and retifanlimab in SCAC and non-small cell lung cancer, as well as the development activities of discontinued programs, we anticipate the reduction in investment in those programs to partially offset the increased investment in other programs, which would allow us to control future R&D expense growth. Moving to SG&A. Total GAAP SG&A expenses were $309 million for the third quarter, representing a 15% year-over-year increase primarily driven by the timing of consumer marketing activities and certain other expenses. For the 9 months ended September 30, total GAAP SG&A expenses increased 6% year-over-year. Finally, total ongoing operating expenses for the first 9 months of the year increased 11% versus a 14% increase in revenues, leading to an increase in operating leverage and margins. Moving on to our guidance for 2024. Based on the strong performance of Jakafi in the first 9 months of the year, we are increasing our full year 2024 guidance to a new range of $2.74 billion to $2.77 billion. We are also updating our full year guidance for other hematology/oncology products to a new range of $310 million to $320 million to reflect the first 9 months actual demand and the unfavorable impact of foreign exchange rates. In addition, we are updating the full year GAAP R&D guidance to include the $100 million milestone payment to MacroGenics. The full year GAAP R&D guidance is now $2.54 billion to $2.59 billion, which includes $791 million in one-time expenses related to the $691 million of upfront consideration for the acquisition of Escient and the $100 million milestone payment to MacroGenics. Ongoing R&D guidance remains unchanged. Finally, we are reiterating our full year 2024 guidance for COGS and SG&A. That concludes our prepared remarks. Please give your instructions and open the call to Q&A.

Congrats on a great third quarter. I have a question about povorcitinib. Looking ahead to the upcoming Phase 3 data in hidradenitis early next year, beyond just the top-line success, do you have any thoughts on the efficacy levels you're aiming for to compete with Humira and other market biologics? Is there a specific placebo-adjusted effect size you are targeting with povorcitinib?

Michael, it's Steven. Just taking your question. And thank you for the question on hidradenitis suppurativa. Our feeling is if we replicate the Phase 2 data, which was incredibly strong, and as Pablo said in his prepared remarks, that includes HiSCR 100 of up to 29%, then we'll have an extremely favorable efficacy profile that will really benefit patients with HS. You couple that with the other symptomatology, particularly the pain from the lesions, and we were able to get in that Phase II data set to demonstrate pain relief, and that will add to what we think will be a differentiated profile that will really benefit patients. Obviously, it's hard to predict how Phase 3 will read out. The other thing Pablo alluded to in his prepared remarks is extremely good enrollment on both studies, which is probably a testament to the Phase II data driving investigators wanting to put patients on the study.

I had a few on the pipeline. I believe earlier this morning, Novartis announced the longer follow-up time is needed to determine the regulatory path forward for their BET inhibitor. Curious how that impacts at all your thinking or development strategy for your BET? And then can you help us think about the potential development plans for povorcitinib and 262 in CSU? And just kind of where you see both molecules best fitting in the treatment paradigm?

Yes. Jess, this is Pablo. Let me take the first one. So our BET inhibitor, as we presented over the past year, and we will provide an update later this year, we're very happy with the data that we've seen so far. We've seen spleen reduction and volume reduction. We've seen a pretty impressive improvement in symptoms, obviously, with the caveat that this is not randomized blinded data, but a very important effect on symptoms. We believe that the ability of our BET inhibitor to be dosed continuously, as opposed to the way pelabresib has to be dosed with a break of a week every 2 weeks, could potentially make it an important difference in our ability to control symptoms. So our plan remains the same. As I said in my prepared remarks, we'll provide an update on the data before the end of the year, and we intend to advance into a Phase 3 study, and we will provide details on those designs when we provide an update on the data. So that plan remains the same. On povo 262 for CSU, both are in different stages in a way. Povo, as you know, is in a randomized Phase 2 study for proof of concept. We believe there's a potential for povo in this indication because of the very strong anti-inflammatory effect that it has. So we look forward to sharing data and future plans after that. 262 is in a randomized Phase 2 study with 2 dose levels at 50 and 150 compared with placebo. We also initiated a study with a lower dose of 25 milligrams compared with placebo. And the idea here is to explore a full range of doses for 262 to potentially, once we have the results, assuming positive results, to be ready for pivotal studies. In terms of how both fit, I think the difference here is probably the sequencing on how these medicines could potentially be used in patients with chronic spontaneous urticaria. As you know, first line of therapy antihistamines, about 50% to 60% of the patients do not respond or progress on antihistamines. This is a multi-year disease, and so patients need a sequence of treatment to see which one controls best the symptoms for that particular individual. The mechanism is different. Povorcitinib has a broad inflammatory effect. 262 is exquisitely designed to block MRGPRX2 in mast cells in the skin. So we believe that, that selectivity will lead to an excellent safety profile. So once we have data for both programs, we'll share a little bit more on how we think those can potentially be sequenced in the treatment paradigm.

Just regarding the Escient portfolio. Could you just help us understand how you're thinking about development strategy here when you think about the different mechanisms addressing some of these diseases and how you see the differentiation playing out?

Yes. So we have 2 programs that were acquired with Escient, MRGPRX2 and MRGPRX4. So MRGPRX2 is currently being developed in 3 indications. Chronic spontaneous urticaria. And I just highlighted where we are with that indication. We have an ongoing study with 2 dose levels versus placebo, 50 and 150 and the second study of 25 milligrams versus placebo. Once we have all that data, we'll decide on next steps for chronic spontaneous urticaria. For the other 2 indications are chronic inducible urticaria, particularly focused on 2 of those, dermographism and cold-induced urticaria, and atopic dermatitis. The reason why we like MRGPRX2 as a target is the excellent selectivity, not just for cell type, mast cells, but also mast cells specifically in the skin and connective tissues. We think that should lead to an excellent safety profile and make this, perhaps in some of these patients, the first therapy after patients progress on antihistamines in the case of urticaria, chronic urticaria, for example. So good evidence of efficacy, together with a very, very clean safety profile, we think it will make this a very important option for patients at that stage of the disease. The second program is MRGPRX4. This has been developed in patients with cholestatic pruritus, specifically primary biliary cholangitis and primary sclerosing cholangitis. We know that X4 is a receptor to which bile acids and bile salts bind, and this is an important way in which these patients have intractable pruritus. We are conducting a randomized double-blind study in those indications. We'll have data in the first quarter of 2025, same as for the MRGPRX2 program. And once we report all the data early next year, we'll give you clarity on the next steps.

Congrats again on all the updates. Maybe a commercial question for Matteo on Opzelura and the potential upcoming launch for pediatric AD in the second half of next year. How do you think you're doing with regard to formulary access and efforts to ensure reimbursement in what could be a pretty sizable marketplace?

Yes. Thanks, Eric, for the question. On the pediatric side, we're very excited about the potential for us to bring this new tool to patients ages 2 to 11 years old in atopic dermatitis. The unmet need is very clearly there. We have 2 million patients in terms of sizing. They're still cycling vastly on topical corticosteroids and topical calcineurin inhibitors, and there remains a high unmet need for us to potentially get into that. In terms of the formulary coverage for 2025, we look at the formulary position for the entire Opzelura brand for next year. Right now, from the feedback that we're receiving, we're confident that we will have competitive overall coverage also for next year. And that will include, obviously, the pediatric indication if we are able to bring it to fruition.

Just curious for the Phase 3 trial of ruxolitinib cream in mild to moderate HS. What is the rationale for using the most stringent primary endpoint on HiSCR 75 over typically used HiSCR 50?

Thank you for the question, Kelly. Firstly, there is a significant unmet need in patients with mild to moderate HS, characterized in our study by individuals with abscesses and nodules, numbering between three to ten, without draining tunnels. These patients can exhibit a considerable placebo effect due to their disease profile. Therefore, targeting HiSCR 75 as the primary endpoint will help account for this effect. It sets a higher standard to address the unmet need and aims to minimize the placebo impact, ensuring we can successfully meet our goals. This approach has been discussed and agreed upon with regulatory agencies, and we are moving forward with the program.

I had another question on 262. The clinical trial recently showed the addition of a 25 mg arm to that CSU trial. Can you give us any rationale for that? I assume that is maybe not going to be included in the Q1 update? And also just thinking about the profile here. Should we think most about I guess, competing with the recent BTK data as far as another oral? Or do you look at maybe some of the more effective treatments like the kit inhibitors as far as efficacy goes?

Yes, Matt, thank you for the question. So the reason for the 25 is to explore the full range of doses. As you point out, there's an ongoing study of 50 versus 150 versus placebo. That's the data that we're going to have in the first quarter of 2025. We decided in the meantime to start a second study with 25 milligrams versus placebo in order to have the full range of doses explored. So if we have positive data in the ongoing study, then we'll be ready with the 25 already running to be able to get to a Phase 3 study faster. So that's the rationale for the 25-milligram, to explore the full range of doses of 262 in patients with CSU. In terms of competition, I mentioned a few times before that we don't necessarily expect to match the same level of efficacy that you may have with the kit antibody. When you deplete all mast cells, which is what kit antibodies do, obviously, the efficacy is very strong. In our opinion, that comes with a series of side effects that have been well reported. I think with BTK inhibitors, it's a little bit cleaner in terms of safety profile. We think 262, if it shows positive data in CSU, will fit perfectly after antihistamines. Once patients progress in antihistamines, we expect to offer a very clean safety profile for a convenient daily pill, ideal for those patients before they need to try more aggressive alternatives. So we continue to believe that this is the right fit for 262 in CSU.

For ruxolitinib cream's HS Phase 3, what time point is the HiSCR75 being assessed? When I look at the pipeline slide, it shows the approval range starting around mid '27 timeframe. So is Phase 3 HS data for RUX cream expected in '26?

Yes, it's Steven. It's hard to provide much precision beyond what we showed for the moment because the study has to start and be underway and then see how it enrolls. The endpoint is HiSCR 75 as agreed with regulatory agencies. We'll provide an update at a more appropriate time and try to give more precision on the endpoint. We expect, given the unmet need, the lack of competition in the space, and the excitement around this, that it should enroll well, but we'll see how it goes at a later time.

So we had one on the oncology pipeline. For the Phase 1 data sets expected for the mutant CALR program and then also for the JAK2V617 programs in 2025. Could you help us understand just the scope of those data releases that we could expect to see and how you'll be gauging success for these initial data sets? And if I could squeeze a question in on the base business. For Opzelura, could you just give us a sense of how utilization is tracking in terms of tubes per patient per year for both AD and vitiligo versus your last update?

Let me take the first one on the pipeline. So the mutant CALR antibody program is ahead of the JAK2V617 program. As we disclosed previously, our JAK2V617 program this year started in healthy volunteers to understand the formulation better and then we advanced it into myelofibrosis patients, and it's now in patients, but it's a little bit behind the mutant CALR antibody. We expect both to have meaningful data available next year, but that data will be comprised of a fairly large number of patients with single agents, particularly for the mutant CALR antibody and some of the data also in combination. I think it's difficult to start putting numbers around what success looks like. What we've been consistent about is that what we expect to see in addition to obviously addressing some of the signs and symptoms of myeloproliferative neoplasms is to see some evidence of decrease in VAF for allele reduction with these medicines. We expect that we will have that data next year when we decide the right timing to disclose to provide an update.

On Opzelura utilization, for atopic dermatitis, we still see over 2 tubes per patient per year. For vitiligo, we're optimizing the cohort we're following over time to ensure that the data is meaningful enough and that we follow long enough for a very reliable number. On the prescription side, the growth rate is actually coming from new patients as well as refills. So we continue to improve over time. At the same time, we're increasing the focus on overall adherence, and we have quite exciting programs kicking off this quarter and the first quarter of next year to place more emphasis on this support for our patient population.

Congrats on the quarter. Just 2 quick ones. Just on 262. I just want to know if you've characterized the tryptase reduction you've seen with the agent in the earlier-stage trials. And then just on the base business, just in terms of what we've seen with Jakafi in the MF market, it looks like you're still driving new patient volumes. Just was wondering if that's more share gains or just the overall market growing?

Let me take the first one on 262. So we are measuring tryptase in the ongoing trials. A word of caution, I think that the degree of the magnitude of tryptase reduction that we expect to see is not the same you'll see with depletion of mast cells by using a kit antibody. I mean it's just in the sense that if you deplete mast cells regardless of their location, you're going to have pretty dramatic reductions of tryptase in circulation. What we address with 262 is MRGPRX2 in the mast cells in the skin. As a result of which the decrease in tryptase that we may see is not going to be quite as dramatic. But we are measuring that and we will report it.

Derek, yes, as far as the myelofibrosis market goes, Jakafi, as we said, continues to grow. Total patients increased 4% in myelofibrosis. But in fact, yes, the overall market is growing. Patients are getting first-line treatment and starting earlier because now, you have multiple agents to go to after Jakafi, and patients are being treated in the second, third, and even fourth-line setting, which we had not seen before.

Just following up on the Jakafi question. I understand that the step down in the catastrophic out-of-pocket costs will be at their lowest $2,000 per year next year. Has that played any role in the uptick in Jakafi growth in the current quarter? And then looking forward to later in the year, could you outline what type of data we might actually see at ASH?

So I'll take the first question and hand it over to Steven or Pablo. So yes, Jakafi, well, what we always believe that Medicare Part D patients who are cancer patients, out-of-pockets should really not be a barrier to use. Getting rid of the catastrophic coverage for patients on Medicare Part D was a very good thing, and going to $2,000 out-of-pocket next year is a very good thing, especially smoothing over the whole period of time. Patients' out-of-pocket costs in any given month are better. But really, the growth we see is coming from demand, and mostly, as we've said, from polycythemia vera. That's because physicians are starting patients earlier on Jakafi and polycythemia vera because of the results largely from the MAGIC PV study, which demonstrates that patients will see thrombosis-free survival improvements when they start Jakafi earlier. Steve?

Yes, David, it's Steven. Unfortunately, it's premature to comment on what will be seen at ASH. We have to wait for the acceptances, and then we will provide the update at that point.

Just on 262, back to adding the 25-milligram dose. Can you just talk about what led to adding that? And was it informed at all by the AD trial, which I believe this market has completed as of over the summer? And then just when you get the data from those different dose levels in CSU, you obviously don't necessarily need to match the kit antibodies from an efficacy perspective given the potential for improved safety here. But what is that minimum bar that would justify use of a branded drug after antihistamines in your mind?

So first of all, the decision to start with a 25-milligram dose is indeed a new study. It was the ongoing study, but it is a totally separate cohort with 25 milligrams versus placebo. That had nothing to do with any data that we've seen from the program. We made that decision early in the process, very soon after the transaction closed. It was based on our desire to be ready for a Phase 3 study as soon as possible once we have data. That decision was made at that time. In terms of the bar, look, all the patients in the ongoing study are refractory to antihistamines. So basically, after that, the question is what's the best option for these patients? We believe in that context, showing efficacy over placebo and what we believe will be an excellent safety profile will be sufficient for 262 to be the first option after antihistamines in some of the patients with chronic spontaneous urticaria. We remain convinced that, that is the right place for this drug to be used, assuming, of course, positive efficacy in the randomized trial.

Congrats on the quarter and all the progress. Maybe on the CDK2, I'm curious if there's any updates on the aspects that you're considering as you think about the next steps and pivotal plans in the upcoming FDA meeting and sort of how you're thinking about the balance between exploring late line versus maintenance? And then any more color around the companion diagnostic for that drug?

Yes, Brian, it's Steven. Thanks for the question. So as Pablo said in his slides, there are numerous areas we're interested in. But broadly speaking, the ovarian cancer settings are divided into a platinum refractory and a platinum-sensitive setting divided by a time period of approximately 6 months, although that's getting gray in terms of retreatment. There are different unmet needs in each population, and we're interested in both. You saw the data update at ESMO. We got upwards of north of a 30% response rate, but the data is still maturing and there may actually be late responses where it may go up. So we really like the profile we've seen. We've done 200 plus patients of dose range in work. So we think we're in a very good place to pick both a dose and schedule. In the platinum-refractory ovarian cancer setting, there are potentially 2 ways of thinking about it. For the U.S., primarily the FDA, one could do a single-arm study in that setting, looking at response rate and durability of response to get it across the finish line as a potential confirmatory study. For ex-U.S. approvals, that will require a randomized study in that setting. And as it was on the slide deck that would be against investigator-choice chemotherapy with a time-to-event endpoint, like progression-free survival. We like the profile of the drug there. The other setting that's of extreme interest to us, and we spoke about it at ESMO quite a lot, is the platinum-sensitive ovarian cancer setting, particularly where bevacizumab maintenance is used. The disease gets a little complicated because you look at HRD-proficient and HR-deficient patients in terms of the use of PARP inhibitors. But if you just focus on the majority population there, the HR-deficient patients, the majority of those are Cyclin E1 positive. We're doing safety work now with CDK2 and bev maintenance. And that's of enormous interest to us. There's a need there, and we can potentially improve cure rates, and it would be a pretty simple construct in terms of design, it will be bev maintenance plus placebo versus bev maintenance plus CDK2, and we're doing the enabling work for that now. That is obviously a longer study and we'll deliver that later. But we like the profile of the drug there that we've seen so far in terms of its therapeutic ratio. So those are the areas of interest in terms of study designs. As for the companion diagnostic, we haven't given details per se on what our cutoff is, but there's 2 ways of looking again at this population. You can look at the gene in terms of amplification, the CCNE1 gene, and others are doing that, or you can look at protein expression by IHC, Cyclin E1 expression, and that's where we have focused. That is a much bigger population. Without cutoff, it's probably more than half of ovarian cancer right now. But we need to have more discussions with regulators and CDH on our companion diagnostic and the cutoff we use in.

This is a question for Andy. With the upcoming HS straight out for povo, I have a question regarding the commercial dynamics. The efficacy seems strong compared to other agents being developed for HS, especially since it's oral now. I'm curious about the safety of povo and if the concerns regarding the JAK class will be reflected on the label. How could that affect the drug commercially? Are you expecting a black box warning similar to other JAK agents?

Yes, it's Steven. I'll address that. I mean we've spoken a bit about how well the studies are going. The Phase 2 profile we saw with the HiSCR 100 upwards of 29%. And in fact, enrollment is going very well. It is an inflammatory disease, so there is a reasonable chance or more than a reasonable chance that it will have class effect labeling in terms of a black box. We do expect that to be the case going forward. If you look at the profile of a JAK-STAT inhibitor versus a biologic, which will only attack one pathway by definition, for example, IL-17, here, we can have broader coverage of different interleukins, and then potentially that could result in better disease control as we saw in the Phase II data, and that's the data set we'd like to rate.

I'm curious if you can remind us the size of your sales force and how it's spread across heme and derm and others? I'm trying to figure out if your SG&A will trend up as you get your topical into pediatric AD into PN and also your JAK inhibitor. Are you going to double down on the derm sales force or are you going to capitalize on the existing synergies?

So I guess in the U.S., Matteo can speak about that. I mean the big picture is that we have established around the world, in fact, now in most of the European countries, in the U.S., and in Canada, we have dermatology IAI teams that are in place and are sized in a way where we anticipate that they will be able to do most of the work required for the launches of the new indication, absolutely clearly for Opzelura. When povo comes up, it may be a marginal increase, but nothing that is very, very high. I mean how many people do you have now in the U.S., Matteo?

The total number of people across all teams is approximately a couple of hundred. We see this as being on par with our competitors. We have also observed that competitors are building a full field force specifically for HS. We are eager to review the Phase 3 data next year. However, based on current insights, it appears that we will be balancing an increase in staffing capacity while leveraging synergies with our existing footprint.

Congrats on the quarter. Since you have a number of catalysts in the near term that could reshape the future top-line growth, can you talk about which 1 or 2 catalysts are most important? And are there any gaps in your portfolio? And how are you thinking about business development strategy over the next year?

Yes, I can address that. Referring to Slide 10, it's clear that recent trends indicate an increase in the likelihood of success for Niktimvo being approved in the third line and for retifanlimab in SCAC. As I mentioned in my presentation, if we combine these, they could generate approximately $800 million. Each of these projects is relatively modest on its own, but together they represent a significant contribution to our revenue by 2030. Looking ahead, we have upcoming developments with povo, CDK2, ruxolitinib XR, and tafasitamab in first-line DLBCL. These projects have shown an improved probability of success due to recent developments. The data for CDK2 is promising, and we have strong Phase 2 efficacy data for povorcitinib. Additionally, the follicular lymphoma data for tafasitamab, part of the CD19, CD20 combination, enhances our success potential in the first-line setting. Next, we are working on mCALR, X2, 617F, and zilurgisertib, among other early pipeline projects, which are progressing well. In terms of our business development strategy, we are considering early technology deals that allow us to acquire and learn new capabilities. We might also explore very late-stage commercial products of quality, though such opportunities are rare and costly in oncology and dermatology. Currently, our internal pipeline, along with recent acquisitions, positions us well to offset the Jakafi patent expiration expected around 2029. We are not focused on immediate acquisitions that would entail high R&D costs and are instead looking for early or late-stage opportunities that can provide quick contributions to our top line.

Also had one on 262 in CSU. I'm just wondering how many patients are treatment naive versus experienced in the study? And if you think there could be any potential subgroups with greater efficacy, such as IgE low patients?

So thank you for the question. So we're not going to provide any details on prior therapy in the study, other than to say that all patients have refractory to antihistamines. In terms of the potential for certain subsets to have better efficacy, I'd rather not speculate at this point in time. Obviously, it's a very different mechanism than those, which is, as you know, an anti-IgE antibody as opposed to 262, which works in a different pathway. But I'd rather not speculate at this point into the future results of the study.

I'm just thinking about the ALK program readout in 4Q. I know you don't want to speculate too much, but maybe comment on your confidence in the readout. It feels like this program has a few ups and downs despite the mechanistic rationale. Can you maybe highlight what gives you this confidence in the update and really in the program overall going forward?

Yes, Evan, it's Steven. As we've been alluding to over the last year, we've sort of had to go to higher and higher doses to try and achieve the desired effect of the program, which just to remind you, would work potentially through inhibiting hepcidin and then relieving that break so that iron gets released and patients' hemoglobin improves from the underlying disease and then potentially from drug-induced disease. At this point, we haven't seen sufficient efficacy to trigger a go for a future registration program. We'll update more data at the end of the year at an appropriate meeting and give you more color on that. Just to remind you, though, we do have an ongoing program that continues to enroll with ALK2.

As you think about the HS opportunity, can you clarify for us how you think it would be different for RUX cream versus povo? And also, do you have a sense, I know it's still a little bit early, but in terms of the usage of tubes for RUX cream in HS, how do you think that will compare relative to what you have seen so far for AD and vitiligo?

So it's Steven. On your first question, there’s a spectrum of disease that goes from mild to moderate to severe in HS. They're called Hurley stages, classified by the number of abscesses and nodules, the number of draining tunnels and fistulas. Just to address the mild to moderate for which the cream is targeting, as I said earlier, the abscess nodule count there is limited to less than 10. To get into our particular study, you have to have a count of 3 to 10 abscesses and nodules. There are no draining tunnels or fistulas in the mild to moderate population, and the HiSCR75 will be the endpoint. There are approximately 100,000 to 150,000 patients with this, with a lot of unmet need. These patients tend to be underdiagnosed and tend to have disease for a long time before getting appropriately diagnosed and seeking treatment, and they may need chronic treatment. It's hard to determine now until we conduct the study and get the readout as to how long that would be. In terms of povorcitinib, it's looking at the right spectrum of the disease, focusing on the moderate-severe population with higher abscess nodule counts with the presence of fistulas and draining tunnels. The endpoints can go towards complete resolution of everything, abscess and nodules and removal of draining tunnels and fistulas, which will be called a HiSCR100, obviously addressing a huge unmet need and managing a lot of morbidity. Again, chronic treatment and how many tubes will be needed will come from the Phase 3 study readout, but it will tend to be long therapy, if you want to ballpark it at the moment.

And congrats back on the quarter. I had a question about the CDK2 program. I know some of the questions were already answered. But one of your peers just announced the discontinuation of their CDK2 program. I was wondering if you can help us understand how you see the competitive landscape given your data. Before you have the conversation with the FDA or before you move into pivotal trials, should we expect to see any additional data from either ovarian cancer or any of the other indications that you're investigating the drug?

Let me take that question. In terms of competitive landscape, the landscape for CDK2 is a little bit beyond the mechanism. We think when it comes to ovarian cancer, we are ahead in terms of developing a CDK2 program. We disclosed the data, as you know. We have over 200 patients treated. We explored a range of doses. We've seen clear evidence of efficacy and a very manageable safety profile. We intend to start registrational studies next year, which I think puts us in front when it comes to CDK2 inhibition in ovarian cancer and perhaps also in endometrial cancer. We're doing additional work in other indications. Now the company landscape is a little bit more complicated than just CDK2 because there are a number of ADCs being developed in ovarian cancer. Obviously, bevacizumab is approved for certain patients with full receptor alpha expression. There are other ADCs with the same target and additional targets for ADCs. I think the 2 points I would make are, number one, there isn't complete overlap when it comes to populations, at least now with receptor alpha-positive patients. Perhaps for some of the others, the overlap will be more pronounced. But one of the reasons why we believe the maintenance study in combination with bevacizumab is very important for us in the long run is because that might be the perfect setting for an oral, convenient, well-tolerated molecule such as our CDK2 inhibitor. While we intend to move aggressively into platinum-resistant patients to have a faster market strategy there, we believe the maintenance will differentiate our CDK2 program, not only from other entrants in the same target but also against ADCs.

Congrats on the quarter. I guess just when we think about the potential for positive Phase 3 data from STOP-HS1 and HS2, do you need even longer-term follow-up data? Or do you feel that you can file right away? Assuming an approval in 2026, how do you see this being used in relation to currently approved therapies? And what kind of market share do you think you might ultimately achieve? I know Steven has talked about greater than 300,000 patients, but how many patients do you think you might be able to treat?

So Ren, it's Steven. I'll at least do the first part of your question. Obviously, we can't speak about a lot of the regulatory aspects, but it is an NDA, a first filing. There'll be safety data needed, and we'll provide updates at the appropriate time, but we continue to guide to a 2026 approval for that time. In terms of use, it will really depend on the efficacy profile versus other orals or biologics in terms of use. There are a lot of patients with the disease, a lot of unmet needs, and there will be a lot of cycling through therapy. I think the numbers we give are between 150,000 to 300,000 patients with this moderate to severe in total, in terms of seeking therapy potentially, and then the use of biologics versus orals, etc., will depend on the profiles of the drugs from the Phase 3 setting.

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