Deciphera Pharmaceuticals Q4 2023 Earnings Report

Deciphera Pharmaceuticals EPS Results

• Actual EPS: -$0.54
• Consensus EPS: -$0.58
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: -$0.60

Deciphera Pharmaceuticals Revenue Results

• Actual Revenue: $48.30 million
• Expected Revenue: $45.93 million
• Beat/Miss: Beat by +$2.37 million
• YoY Revenue Growth: +32.90%

Deciphera Pharmaceuticals Announcement Details

• Quarter: Q4 2023
• Date: 2/6/2024
• Time: Before Market Opens
• Conference Call Date: Tuesday, February 6, 2024
• Conference Call Time: 8:00AM ET

Deciphera Pharmaceuticals (NASDAQ:DCPH), a biopharmaceutical company, develops drugs to enhance the lives of cancer patients by addressing key mechanisms of drug resistance that limit the rate and durability of response to existing cancer therapies in the United States and internationally. Its lead drug candidate is QINLOCK used for the treatment of gastrointestinal stromal tumors (GIST), as well as in INTRIGUE Phase 3 study to treat second-line GIST. The company is also developing vimseltinib, an orally administered, potent, and highly selective switch-control kinase inhibitor of colony stimulating factor 1 receptor (CSF1R) for the treatment of tenosynovial giant cell tumor (TGCT); and DCC-3116 to treat RAS/RAF mutant cancers that is in the preclinical-stage. Deciphera Pharmaceuticals, Inc. was founded in 2003 and is headquartered in Waltham, Massachusetts.

Deciphera Pharmaceuticals Q4 2023 Earnings Call Transcript

Key Takeaways

• In 2023, Decipher delivered record annual revenue with Kinlock U.S. net sales up 25% to $121.5 M and international sales up 33% to $37.5 M, and 2024 growth is expected to continue as Kinlock remains the standard of care in fourth‐line GIST with rising average duration of therapy and unpromoted earlier‐line use.
• The company plans to submit an NDA for vimseltinib in tenosynovial giant cell tumor in Q2 2024 and an MAA in Q3 2024, following positive Phase 3 results on the primary and all six key secondary endpoints, positioning vimseltinib as the potential second approved medicine.
• A Nature Medicine publication of the ctDNA analysis from the INTRIGUE study showed a 78% reduction in disease progression and 66% reduction in death risk for Kinlock versus sunitinib in second‐line GIST patients with KIT exon 11/17/18 mutations, underpinning a pivotal Incyte trial to expand Kinlock’s label.
• International operations accounted for over 25% of total 2023 revenue, highlighted by a successful Kinlock launch in Italy and a new distribution agreement covering 14 Central and Eastern European countries.
• Decipher exited 2023 with $352.9 M in cash and marketable securities, providing a runway into the second half of 2026 to fund late‐stage filings and early‐stage pipeline advancement.

Presentation

[Operator]

Good morning, everyone, and welcome to Deciphera Pharmaceuticals Fourth Quarter and Full Year 2023 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Jenn Larson, Senior Vice President of Finance and Investor Relations. Jenn?

[Jenn Larson, SVP and Investor Relations at Deciphera Pharmaceuticals]

Thank you, operator. Welcome, and thank you for joining us today to discuss Deciphera's fourth quarter and full year 2023 financial results. I'm Jenn Larson, Senior Vice President of Finance and Investor Relations. With me this morning to discuss the financial results and provide a general corporate update are Steve Hoerter, President and Chief Executive Officer; Matt Sherman, Chief Medical Officer; Dan Martin, Chief Commercial Officer; Margarida Duarte, Head of International; and Tucker Kelly, Chief Financial Officer. Before we begin, I would like to remind you that any statements we make on this call that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include our expectations for our preclinical and clinical programs, our commercialization of QINLOCK and guidance.

[Jenn Larson, SVP and Investor Relations at Deciphera Pharmaceuticals]

Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, and we cannot assure you that our expectations will be achieved. Such risks and uncertainties include those set forth in our most recent annual report on Form 10-K, as well as our other SEC filings. We assume no obligation to update or revise any forward-looking statements. Following this call, a replay will be available on the company's website, www.deciphera.com. With that, I will now turn the call over to Steve Hoerter, President and Chief Executive Officer of Deciphera. Steve?

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Thank you, Jenn. Good morning, everyone, and thank you for joining us today as we provide an update from the fourth quarter and full year 2023, review our financial results, and discuss our strategic outlook and planned corporate milestones for 2024. 2023 was a year of significant progress toward our goal of becoming a self-sustaining company with multiple approved medicines. Continued strong QINLOCK growth in the US and internationally drove record annual revenue, demonstrating the global capabilities of our commercial organization. With a highly successful phase III study in TGCT, we expect vimseltinib to be our second approved medicine.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

We believe that at peak, QINLOCK and vimseltinib will be able to generate over $1 billion in global revenue. With a long IP runway for both products, we are actively pursuing label expansion opportunities to create further value for patients and for our shareholders. Beyond these late-stage programs, we continue to strategically invest in key earlier-stage programs to help build a sustainable pipeline of potential new medicines to improve the lives of people with cancer.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Last month, we outlined our key strategic priorities for 2024. We expect 2024 to be a year of continued growth in QINLOCK sales, driven by strong demand both in the U.S. and internationally. Meanwhile, our clinical team is working towards our goal of expanding QINLOCK's label based on the ongoing phase III INSIGHT study in second-line GIST patients with mutations in KIT exon 11 and 17 or 18, which has the potential to double peak sales.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

A few weeks ago, we were thrilled to announce the publication in Nature Medicine of the exceptional results from the ctDNA analysis from the INTRIGUE study in second-line patients with mutations in KIT exon 11 and 17 or 18, showing that QINLOCK provided significant progression-free and overall survival benefit compared to the current standard of care, sunitinib. Publication in one of the world's leading medical journals highlights the clinical importance of this compelling data and serves as strong validation for the ongoing INSIGHT study. In addition to the Nature Medicine publication, we also recently presented the final overall survival results from the INTRIGUE study at the ASCO GI Symposium, which showed that the overall survival rate was similar for both QINLOCK and sunitinib, and that treatment with QINLOCK continued to show a favorable safety profile compared to treatment with sunitinib.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

We believe that these results demonstrate the strong clinical activity of QINLOCK in the second-line GIST patient population studied in INTRIGUE. For vimseltinib, building upon the exciting positive results of the MOTION phase III study in patients with Tenosynovial giant cell tumor, we remain on track to submit the NDA to the FDA in the second quarter of this year and an MAA to the EMA in the third quarter of this year. With the potential approval of vimseltinib in sight, we are also exploring potential indication expansion opportunities, including our plan to initiate a phase II proof-of-concept study of vimseltinib for the treatment of chronic graft-versus-host disease, or cGVHD, in the fourth quarter of 2024. In addition, we're making focused investments in our earlier stage pipeline, which we expect will fuel our future growth.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

For our ULK inhibitor, DCC-3116, our goal is to select a recommended phase II dose later this year and move to our first expansion cohort. For DCC-3084, our pan-RAF inhibitor, we expect to initiate a phase I study in the first half of this year. Finally, for DCC-3009, our new pan-KIT inhibitor, we expect to submit an IND with the FDA in the first half of this year and initiate a phase I study in the second half of 2024. We remain well capitalized with $352 million in cash at the end of the year and a cash runway into the second half of 2026. I'll now pass the call to Matt Sherman, our Chief Medical Officer, who will provide more detail on our development pipeline.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Dan Martin, our Chief Commercial Officer, will then share insights on the U.S. commercial performance and outlook for the year ahead. Margarida Duarte, our Head of International, will provide an update on the progress of the ongoing QINLOCK launch in Europe for fourth-line GIST and its continued strong momentum. We'll end with Tucker Kelly, our Chief Financial Officer, who will review highlights from the fourth quarter and full year 2023 financial results. Matt?

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

Thanks, Steve. Together with our commercial success, we continue to make great strides with our development pipeline that we believe will provide continued growth for Deciphera over the coming years. First, I'd like to start with our recent QINLOCK updates. As Steve mentioned, in January, we presented the final overall survival results from the INTRIGUE phase III study at the ASCO GI conference. As you may recall, in the INTRIGUE trial, 453 patients with second-line GIST were randomized 1:1 to receive QINLOCK or sunitinib. The final analysis included 18 months of additional follow-up based on the data cut in March 2023. Median overall survival in the intent-to-treat population was very similar, with QINLOCK at 35.5 months versus sunitinib at 31.5 months, resulting in a hazard ratio of 0.86.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

The long-term safety profile was consistent with the primary analysis, showing fewer patients with grade three, four TEAEs and a lower rate of treatment discontinuation due to TEAEs with QINLOCK versus sunitinib. We also looked at whether treatment in the second line with QINLOCK versus sunitinib had any differential impact on clinical outcomes after third-line treatment. Irrespective of treatment with QINLOCK in the second line, the results show that the patient outcomes in the third line were similar. Median PFS on the next line of therapy was 7.7 months for QINLOCK versus 7.4 months for sunitinib. These final results for INTRIGUE demonstrate that QINLOCK offers similar efficacy versus sunitinib in the second-line GIST population studied in INTRIGUE.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

The Nature Medicine publication last month was another major achievement for Deciphera, showcasing the potentially practice-changing results from the exploratory ctDNA analysis from INTRIGUE in one of the world's leading medical journals. In second-line GIST patients with KIT exon 11 and 17, 18 mutations, treatment with QINLOCK resulted in a 78% reduction in the risk of disease progression and a 66% reduction in the risk of death compared to sunitinib. Median PFS was 14.2 months for the QINLOCK patients, compared to only 1.5 months for the sunitinib patients. Median overall survival for QINLOCK was not reached versus 17.5 months for sunitinib. QINLOCK showed an objective response rate of 44%, compared to 0% for sunitinib. Together, the data represents a striking clinical benefit to these second-line GIST patients when treated with QINLOCK.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

We're excited that our INSIGHT pivotal phase III study in the same patient population is now actively enrolling patients. If positive, we believe the results of the INSIGHT study will support an expanded label for QINLOCK and significantly improve clinical outcomes for patients based on the precise understanding of their GIST tumors. We are also working hard to get our second potential approved medicine to patients as quickly as possible. We remain on track to submit an NDA for vimseltinib for patients with TGCT in the second quarter of 2024 and an MAA in the third quarter of 2024.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

These filings are supported by the outstanding success of the phase III MOTION study, which achieved its primary endpoint of ORR at week 25, as well as all six key secondary endpoints. In a disease such as TGCT, the secondary endpoints are critical measures of clinical benefit. These outcomes of how patients feel and function play an incredibly important role in treatment decisions, as well as for patients' interest in starting and staying on drug therapy.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

TGCT can be a difficult chronic condition associated with severe pain, swelling, stiffness, and loss of mobility. All of these can severely limit patients' daily activities and quality of life, including their ability to continue to work or function independently. Without an effective treatment, a TGCT diagnosis can have a profound impact on their ability to lead a normal, active, and healthy life, and we look forward to making this important new medicine available to these patients as quickly as possible. We plan to present results from the MOTION study at a major medical meeting in the second quarter of 2024, as well as updated results from the ongoing phase I/II study in the second half of this year.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

Deciphera remains committed to ensuring that the full therapeutic potential of our medicine and product candidates are explored. To that end, we plan to initiate a phase II proof-of-concept study of vimseltinib in chronic GVHD based on its potential as a best-in-class CSF1 receptor inhibitor. Chronic GVHD affects 30%-50% of allogeneic hematopoietic stem cell transplant recipients, with an estimated 14,000 prevalent patients in the U.S. There is a significant unmet medical need in this setting, with 50% of patients being refractory to treatment with steroids and an overall desire to move towards combination therapy. Inhibiting CSF1 receptor expressing pro-inflammatory and pro-fibrotic macrophages has been clinically validated for patients with GVHD based on a recent pivotal study with an antibody targeting the CSF1 receptor.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

As an oral agent, vimseltinib may offer a best-in-class CSF1 receptor option as a single agent or in combination with other oral therapies. We expect to initiate a proof of concept study by the end of this year, putting us on the path to potentially expand the utility of vimseltinib for patients in the future. Beyond QINLOCK and vimseltinib, we remain very excited about the potential for our clinical and research pipeline to fuel Deciphera's growth. As Steve mentioned earlier, we expect to select a recommended phase II dose for DCC-3116 in 2024 to move into our first expansion cohort.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

We also expect to initiate a phase I study for DCC-3084 in the first half of 2024. Finally, we expect to submit an IND for DCC-3009 with the FDA in the first half of 2024 and initiate a phase I study in the second half of 2024. I will now turn the call over to Dan Martin to discuss our U.S. commercial updates. Dan?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Thanks, Matt. 2023 was a very successful year for QINLOCK in the US, with net product revenue growing to $121.5 million, a 25% increase over 2022. In the fourth quarter, US net product revenue was $35.3 million, a 38% increase over Q4 2022. These record results were driven by strong demand in our core fourth-line business, increasing average duration of therapy, and contribution from unpromoted earlier-line use. In Q4, the percentage of total demand that was fulfilled through our patient assistance program, or PAP, was at the high end of our 20%-30% expected range, and gross to net was between 15% and 20%.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Looking at 2023 as a whole, consistent with prior years, PAP was between 20%-30%, and we expect the PAP percentage to be similar in 2024. Gross to net in 2023 was between 15%-20%, and we expect it to be in a similar range in 2024 as a result of the Medicare inflation rebates required by the Inflation Reduction Act. We expect continued QINLOCK revenue growth in 2024, driven by its position as the standard of care in fourth-line GIST, potential unpromoted off-label use in earlier lines of therapy based on the physician decision, as well as increasing average duration of therapy. Further, we expect quarterly revenues this year to follow a similar pattern to what we have seen in prior years, including Q1 seasonality, consistent with industry dynamics.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

We remain confident in the strength of our business and the potential for another record year for QINLOCK in 2024. Now, I will turn to the exciting opportunity we see in TGCT with vimseltinib, our potential second approved medicine. Based on our analysis of U.S. claims data, we believe the total addressable market for TGCT in the U.S. is approximately $700 million, based on the estimated 1,400 treatment incident patients who are diagnosed, receive systemic therapy, and have recently engaged with an oncologist. This U.S. opportunity does not include the estimated 9,000 treatment-prevalent patients seen by oncologists or the estimated 1,300 treatment incident patients seen by surgeons. We believe there is a comparable number of patients in the five largest European markets where there are no approved treatments.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

We recently provided additional insight into the treatment landscape for these 1,400 treatment incident patients in the U.S. that has increased our confidence in the market opportunity and in our commercial team's ability to reach these patients, given our deep experience in GIST. Based on our claims analysis, we believe there is a 70%-80% overlap in the prescriber base for GIST and TGCT, and that we are uniquely positioned to drive awareness and use in both the academic and community settings. We have tested a blinded product profile of vimseltinib versus pexidartinib, which is approved in the U.S. but not in Europe, and versus imatinib, which is commonly used off-label to manage patients with TGCT.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

The results from the qualitative market research show that vimseltinib is rated the highest across the key measures of efficacy and tolerability that physicians tell us they view as most important when selecting a TKI to treat their TGCT patients. In the same market research study, 100% of physicians surveyed selected the vimseltinib profile as their preferred agent for managing patients with TGCT. We are working diligently on pre-launch activities as we prepare to leverage our strong commercial capabilities to launch vimseltinib rapidly upon approval. I will now turn the call over to Margarida Duarte, our Head of International, to discuss the progress of the QINLOCK launch in Europe. Margarida?

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

Thanks, Dan. We are very enthusiastic about the notable achievements we made in 2023 in our international business, delivering strong results that accounted for more than 25% of Deciphera's total revenue, while laying the foundation for future growth. In 2023, QINLOCK generated $37.5 million in international net product revenue, up 33% from 2022, as well as $4.3 million in collaboration revenue from our partner, Zai Lab, in Greater China. For the fourth quarter of 2023, international net product revenue increased 56% from the fourth quarter of last year to $11.4 million, and collaboration revenue was an additional $1.6 million.

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

Last year was a milestone year for Europe, with growth across the entirety of the business, strong price outcomes, significant progress in market access in multiple countries, and the launch in Italy, which is off to an excellent start. The initial strong results we are seeing in Italy are a testament to the high unmet medical needs, the exceptional KOL advocacy, and the remarkable full innovation rating granted to QINLOCK by the Italian authorities, the highest for a non-curative disease, which has significantly accelerated the launch in the many Italian regions. Our recent entry in Italy is a good example of the type of opportunity that remains to be unlocked in Europe and underscores the importance of geographic expansion to overall growth in the business.

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

Last month, we announced a new distribution agreement with Genesis Pharma for Central and Eastern Europe to expand the geographic reach of QINLOCK to 14 European Union countries, with a combined population of 118 million people. QINLOCK has already received regulatory approval in all of these countries under the EMA umbrella, which will significantly accelerate the time to commercialization for Central and Eastern Europe. We are also excited to announce that we have submitted for pricing and reimbursement in the Netherlands and continue to advance price negotiations in Spain, France, and Switzerland. Our key growth drivers for 2024 include a continued focus on geographic expansion and open new markets to drive successful launches.

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

We are very pleased by the strength of our execution, and we expect our international revenues to continue to grow as reimbursement agreements and approvals are achieved alongside the growth from our initial launch markets, positioning QINLOCK to reach more patients around the world. Touching on vimseltinib, there is a palpable excitement in Europe surrounding the outstanding phase III MOTION data, where we believe the number of patients is comparable to the U.S. in the five largest European markets, and the unmet need is higher as there are no approved treatments.

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

We are working hard towards our first initial engagement with EMA agencies early this year, and I look forward to the MAA submission in the third quarter and preparing for the commercial launch. I will now turn the call over to Tucker Kelly, our Chief Financial Officer, to review the fourth quarter and full-year financial results. Tucker?

[Tucker Kelly, CFO at Deciphera Pharmaceuticals]

Thanks, Margarida. Total revenue for the fourth quarter was $48.3 million, which included $46.7 million in net product revenue of QINLOCK and $1.6 million in collaboration revenue. For the full year, total revenue grew 22% to $163.4 million, including net product sales of $159.1 million and collaboration revenue of $4.3 million. Cost of sales in the fourth quarter was $1.8 million, which includes $900,000 in cost of product sales, compared to cost of product sales of $700,000 for the fourth quarter of 2022.

[Tucker Kelly, CFO at Deciphera Pharmaceuticals]

For the full year, cost of sales were $3.7 million, including $2 million in cost of product sales, compared to cost of sales of $8.7 million in 2022, including cost of product sales of $2.7 million. As a reminder, in the third quarter of 2022, we completed the sales of zero-cost inventories of QINLOCK that had been expensed as R&D prior to FDA approval in 2020. Research and development expenses for the fourth quarter of 2023 were $58.6 million, compared to $48.1 million for the fourth quarter of 2022, and $234.1 million for the full year, compared to $187.8 million in 2022.

[Tucker Kelly, CFO at Deciphera Pharmaceuticals]

Selling, general, and administrative expenses in the fourth quarter were $39.1 million, compared to $32.2 million in the fourth quarter of 2022. For the full year, SG&A was $136.5 million, compared to $120.2 million in 2022. We ended the year with cash, cash equivalents, and marketable securities of approximately $352.9 million. In January, we announced that we had extended our cash runway guidance into the second half of 2026, which remains unchanged. With that, I'll now turn the call back over to Steve.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Thanks, Tucker. We're very excited for 2024 as we continue to drive commercial growth with QINLOCK, seek regulatory approval for vimseltinib in TGCT, and advance our clinical pipeline, including our plans to develop vimseltinib in cGVHD. Building off our momentum in 2023, we're pleased by our late-stage clinical execution and global commercial excellence as we continue our evolution into a self-sustaining company with multiple approved medicines. With that, operator, I'd now like to open the call for Q&A.

[Operator]

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Jessica Fye with JPMorgan. You may proceed.

[Jessica Fye, Managing Director and Equity Research Analyst of Biotechnology at JPMorgan]

Hey, guys. Good morning. Thanks for taking my questions. Two from me. First, what's the latest you're hearing about when doctors are turning to QINLOCK for second-line GIST in the unpromoted real-world use? Is this happening mainly with QINLOCK experienced treaters who are, you know, otherwise using it for fourth line, or are you seeing any pickup of new prescribers as a result of that type of use? And second, appreciate the details on vimseltinib. Can you just frame a little bit more how you think about the shape of that launch ramp? Thank you.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Hey, Jess, good morning. It's Steve. Thanks for the two questions. I'll ask Dan to take both of those questions, the one with respect to unpromoted off-label use of QINLOCK in the second line based on physician decision, and then the expected ramp for a potential vimseltinib launch here in the US. Dan?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Yeah. Thank you, Jess, for the questions, and good morning. So as it relates to your question about QINLOCK, as we've noted, you know, it, it is challenging to measure exactly, what and where, we're seeing in terms of the contribution of earlier line use. The data sources for us to, to be able to do that just aren't great. We do believe that it's been a, a mix of existing and new prescribers, so, we really think that it's something that reflects ... you know, a broad appreciation for the role of rpretinib for patients across lines of therapy in GIST.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Of course, I always want to underscore that that's an unpromoted use, so of course, we're not out there promoting that, and it needs to happen spontaneously based on physician decision. With respect to your second question on the launch ramp, the shape of the ramp, you know, we'll have the opportunity to get into more details about launch strategy and expectations as we draw closer to a potential approval. But what we're focused on right now is the significant unmet need that we know exists in the space for patients who are suffering from the significant morbidity of TGCT, and what physicians keep telling us, that there's a real opportunity to improve upon the existing therapies. We look forward to continuing to work really hard to be ready to launch vimseltinib as rapidly as possible, pending approval.

[Jessica Fye, Managing Director and Equity Research Analyst of Biotechnology at JPMorgan]

Thank you.

[Operator]

Thank you. One moment for questions. Our next question comes from Tyler Van Buren with TD Cowen. You may proceed.

[Tyler Van Buren, Managing Director and Senior Equity Research Analyst at TD Cowen]

Hey, guys. Good morning. Congrats on the progress during the quarter. Can you guys discuss what else needs to be done to have the vimseltinib filing ready for submission next quarter? And related to that, what is your confidence that you will not see a REMS program or a black box warning upon approval?

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Hey, Tyler, it's Steve. Good morning. Thanks for the question. So first, we remain very much on track for the filing of the NDA for vimseltinib here in quarter two coming up, and then the MAA to the EMA in Q3. So it's really just the usual and customary activities as we prepare for that filing that we are engaged in. We remain very confident in the profile of vimseltinib, based on the MOTION data. As you know, the study achieved the primary endpoint and all six key secondary endpoints, and also demonstrated that the drug is well tolerated in the patient population.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So we believe we have a very, clean and well-characterized safety profile with the drug and continue to have the expectation that we would—there's no reason to expect a REMS program or a black, black box warning, for the potentially fatal hepatotoxicity that is seen with pexidartinib and is believed to be an off-target effect. So we remain on track for the filings, and, we're excited to bring our, potential next approved medicine forward to patients.

[Operator]

Thank you. One moment for questions. Our next question comes from Eun Yang with Jefferies. You may proceed.

[Eun Yang, Analyst at Jefferies]

Thank you. So, QINLOCK's second-line off-label use, is that, you know, is that largely driven by, patients who are intolerant to Sutent or patients with exon 11, 17, 18 mutations?

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Hi, Yoon. Good morning. This is Steve. I'll ask Dan to take the question on the off-label use that we're seeing in earlier lines based on physician decision. Dan?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Yes, hi, Eun, good morning. Thanks for the question. So, you know, we believe that the two significant events that occurred last year are what's behind the contribution that we've seen from earlier line use, unpromoted earlier line use. So there was the, as you noted, the NCCN listing for patients who are intolerant of Sutent in the second line, as well as the really exceptional data that was presented and now recently published in Nature Medicine, showing the dramatic treatment benefit that Ripretinib can offer patients with the exon 11, 17, 18 mutation. We think that both of those certainly have increased the noise level. Again, I always score...

[Dan Martin, CCO at Deciphera Pharmaceuticals]

This is something we don't promote, but just through the natural dissemination of this information, the presentation, the publication, you know, certainly have raised the noise level. So it's hard to discern, you know, which patient, which bottle is being driven by which of those factors, but we think that both are reflective of real interest in opportunities to use Ripretinib in patients with GIST. And of course, we think that it's important to note the level of energy that we see around the INSIGHT study and the excitement that we have for a potential approved indication, pending a positive study.

[Eun Yang, Analyst at Jefferies]

Thank you. And I have one question for Tucker. So OpEx in 4Q sequentially, R&D is down slightly, but SG&A is up. So could you give us some guidance on how OpEx level would be in 2024, as well as the collaboration revenue line? Thank you.

[Tucker Kelly, CFO at Deciphera Pharmaceuticals]

Sure. So on the OpEx side, Yoon, it was a little higher sequentially, you mentioned in SG&A. There's some one-off items and end-of-year items that we think are more exceptional. So we wouldn't expect necessarily to have that be the run rate going forward for SG&A. We will have some, in the second half of the year, expenses as we prepare for the launch of vimseltinib as well. And in terms of collaboration revenue, as we've always said, that's composed really of a couple of components. One is the royalty revenue that we get from our collaboration with Zai.

[Tucker Kelly, CFO at Deciphera Pharmaceuticals]

And then secondly, there's often supply revenue. The supply revenue is much more episodic, so some quarters we have it, and some quarters we don't. There was some supply revenue, as you'll see, in the cost of goods line for the collaboration revenue this quarter, and that's difficult to predict. So I think we always try and guide people to focus on the expectation for the royalty revenue, and then there'll be upside in quarters where we do have supply revenue coming through.

[Eun Yang, Analyst at Jefferies]

Thank you.

[Operator]

Thank you. One moment for questions. Our next question comes from Michael Schmidt with Guggenheim Securities. He may proceed.

[Michael Schmidt, Senior Biotech Analyst, Senior Managing Director, and Equity Research at Guggenheim Securities]

Hey, guys. Good morning. Thanks for taking my questions. I had one on vimseltinib as of your plans in GVHD, and how do you think about potential differentiation of vimseltinib in GVHD from some of the antibodies like axatilimab? Can you comment about the possible design of your planned phase II study? You know, will that be in axatilimab naive patients? Will you include pretreated patients? How do you think about sort of that space? Thanks.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah. Hi, Michael. Good morning. It's Steve. I'm happy to take the question. So, first, we're excited about the potential to expand vimseltinib and its utility beyond TGCT and into a new potential indication in chronic GVHD. And certainly one of the factors that enables us to do that, in addition to the strong data we have now in TGCT, is the very long IP runway that we have for vimseltinib, with a composition of matter patent that takes us to 2034, plus PTE, which we believe takes us to the end of the decade, and that doesn't include secondary patents for vimseltinib.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So ample opportunity for us to make additional investments in vimseltinib to take it into additional indications where we'll have the opportunity to benefit patients. So in terms of the landscape of GVHD and how we see differentiation at this early stage, first, I would just comment that certainly the target, CSF1 receptor is now clinically validated in this disease, which is very important, so it's a de-risked mechanism in GVHD. We believe the data that we've generated in Tenosynovial giant cell tumor demonstrates that we have a very potent and selective inhibitor against the target.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

In a disease where the current backbone of treatment is all oral regimens, we believe that an oral agent, like vimseltinib, an oral CSF1 receptor inhibitor, could play an important role as a, an add-on therapy in addition to a monotherapy in later lines, but as an add-on therapy to current standard of care, whether that be a JAK inhibitor or whether that be, a, a drug like Rezurock as an example. So we haven't yet disclosed full details of our clinical development strategy in GVHD. I'm sure we'll have incremental additional disclosures over time, particularly once we get the phase II study stood up at the end of this year. But we're excited about the potential now to expand, the places where vim can benefit patients.

[Operator]

Thank you. One moment for questions. Our next question comes from Christopher Raymond with Piper Sandler. You may proceed.

[Christopher Raymond, Senior Research Analyst and Lead Author at Piper Sandler]

Hey, thanks. Just another question, I guess, on vimseltinib. And this is on the adjuvant opportunity. I know this has come up in the past, but what do you guys see as sort of the go, sort of no-go points to running a study in the adjuvant setting? As you guys even noted in your market landscape slide, that's a pretty sizable opportunity. Just any sort of plan there that you guys can articulate? And then maybe a second part of that question is, is there an opportunity or a chance that you get a broad label that could be potentially inclusive of the adjuvant setting? Thanks.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah. Hi, Chris, it's Steve. Thanks for the two questions. Really good questions. So, you know, of course, excited about the data from MOTION, which will give us this initial label in Tenosynovial giant cell tumor. As you'll remember, the patient population that we treated in the MOTION study is patients who are not amenable to surgery. So it's, you know, too early for me to comment on what ultimately FDA will decide as the indication statement or the label for vimseltinib in TGCT. But we, too, have heard also from investigators interest in exploring a role of an inhibitor like vimseltinib in other lines or earlier lines of treatment for Tenosynovial giant cell tumor. So recall, this is a disease that, particularly in the localized form of the disease, is often curable through surgery alone.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So we'd probably be speaking about a patient population that would not be amenable to surgery, but potentially could be made amenable to surgery with adjuvant or neoadjuvant treatment. So again, too early for us to comment on any specific plans, but certainly with the evidence that we have now in the patient population that we've studied, it's very clear we have strong activity in this disease with vimseltinib, and there may be opportunity for us to pursue whether label-enabling studies or non-label enabling studies to further characterize the potential of vimseltinib to benefit patients here.

[Christopher Raymond, Senior Research Analyst and Lead Author at Piper Sandler]

Great. Thank you so much.

[Operator]

Thank you. One moment for questions. Our next question comes from Andrew Berens with Leerink Partners. You may proceed.

[Ken Shields, VP of Biotechnology Equity Research at Leerink Partners]

Hi, this is Ken on for Andy. Thanks for taking the question. So you guys, I think, have been saying that the average duration for QINLOCK in the fourth line setting has started to come, I believe, above seven months now, increasing potentially up to eight and a half. We're wondering, do you have any color on the penetration in the fourth line, where that could be right about now? Thanks.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah, thanks for the question. Dan, would you like to take that?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Sure, absolutely. So, yes, you had mentioned about the average duration of therapy. In fact, we think that's a really important dynamic to our continued growth as we think about 2024. We look to the continued strength in our fourth line opportunity. We look to a continuing increasing average duration of therapy, and as we've noted in earlier questions, contribution from unpromoted earlier line use.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

So as we think about the opportunity for 2024, we're looking forward to another potential record year in the US for QINLOCK. As it relates to penetration in the fourth line setting, as we've said, you know, in the past, we feel as though we've done a really good job penetrating that opportunity, and that, you know, it's a pretty highly penetrated opportunity as a result of not only a really strong drug at high unmet need and, you know, our ability to execute over the last number of years.

[Operator]

Thank you. One moment for questions. Our next question comes from Bradley Canino with Stifel. You may proceed.

[Bradley Canino, Equity Research Analyst of Small/Mid Cap Biotechnology at Stifel]

Morning, and thank you. Another question for me on vimseltinib. I wonder how many doses you think you'll plan to use in the proof of concept study in chronic GVHD? And I'm asking in light of the inverse dose response noted for the antibody and the working hypothesis there around allowing for some degree of macrophage function recovery. Thank you.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah, thanks for the question, Brad. Matt, would you like to take that on, on GVHD?

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

Sure. Good morning, Brad. Yeah, this is Matt. So, yeah, so what you're referring to is the, the pivotal segment done with axatilimab in GVHD, where, they tested three dose levels and different schedules as well, too. And what they did demonstrate an inverse dose response where some of the lower doses had more efficacy and were, much better tolerated than the higher doses. That may be more unique to the antibody.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

As we know, the, antibody, inhibition of the CSF1R receptor has led to a much more prolonged on target effect, and it's been difficult in other, indications to develop those antibodies, clinically. So as Steve said earlier, you know, excited about moving forward with our, proof of concept study in the second half of this year in GVHD. We haven't yet given the details of the study, but as we get closer to the initiation of the study, we certainly will be speaking to the design of that study and what we expect to achieve.

[Operator]

Thank you. One moment for questions. Our next question comes from Reni Benjamin with Citizens JMP. You may proceed.

[Reni Benjamin, Managing Director and Senior Equity Research Analyst at Citizens JMP]

Hey, good morning, guys. Thanks for taking the questions, and congratulations on the progress. Maybe just to start off, you know, Steve, can you give us any sort of color on the INSIGHT study and how that's progressing? Have you kind of hit, you know, all the trial sites? Are they all kind of open, or are you still ramping that up? Any sort of color as to how that's progressing, because that seems to be key in terms of unlocking the second line, you know, just opportunity.

[Reni Benjamin, Managing Director and Senior Equity Research Analyst at Citizens JMP]

And then just as a follow-up with vimseltinib, you know, you're following the NDA and MAA. Any chance that we could get some sort of a priority review, or is the base case scenario a standard review, you know, both in the U.S. as well as Europe? You know, how long does it take in Europe, you know, just to get the decision?

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah. Hi, Reni, it's Steve. Good morning. Thanks for the great questions. So first, for INSIGHT, you know, as you're aware, I should first note that we published the results from the analysis of INTRIGUE in Nature Medicine last month. So really exciting to see the data in such a top-tier journal. And the noise that that analysis has generated, both with the presentations at ASCO and now with the publication in Nature Medicine, has been a real tailwind in terms of building enthusiasm for the ongoing INSIGHT study. So we continue to make really good progress in getting sites open, actively screening and enrolling patients in that study. And the enthusiasm from investigators is really palpable.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

I think they're really excited, not only about the data that's been published and presented so far from the analysis of INTRIGUE, but just also the potential to be part of advancing how second-line GIST is treated based on insights into a patient's tumor using circulating tumor DNA. So drawing a simple tube of blood in order to understand a secondary mutation status. That is an aim or a goal I think that the field and thought leaders in the field are really excited about. And their participation in the INSIGHT study, we believe, will help us to achieve that goal of demonstrating prospectively this outsized benefit of QINLOCK versus sunitinib in this selected patient population.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So we continue to be moving forward, very much on schedule and on track with the INSIGHT study, and we'll have further updates, I'm sure, over the coming quarters on our progress with that specific study in second-line GIST patients. Your second question was related to vimseltinib and what our expectations are in terms of regulatory review and timing. And your specific question was with respect to whether we may enjoy priority review with the application. So it's too soon for us to comment on that, and certainly the FDA will make that determination as to whether or not the application qualifies for priority review. As you may remember, the ENLIVEN study and the application for pexidartinib was reviewed by FDA with priority review status, so that certainly is the precedent, if you will, in this disease.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So we're looking forward to our ongoing and continued productive dialogue with the FDA as we prepare to file here in the second quarter. And we'll of course make appropriate disclosures at the right time in terms of whether that is a priority review or a regular review at the FDA's discretion. And then in terms of the European review process, that, as you may remember, is a lengthier process.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

So we would expect that that will take potentially longer than the FDA review. But as we get into our further dialogue with the EMA, we may be able to better cast a timeline as to when we might expect action on the application once it gets filed. But we remain super excited about the profile of the drug. The MOTION data are very clear and compelling, and we're looking forward to delivering our second potential approved medicine to patients.

[Reni Benjamin, Managing Director and Senior Equity Research Analyst at Citizens JMP]

Great. And then if I could just have a follow-up regarding vimseltinib and what, you know, could ultimately be involved in pre-launch activities. You know, is this something that we should just be—you know, just given the overlap, I think that Dan mentioned in the call, is this something that could just be as easy as kind of dropping it into the bag of sales, and they're sort of off and running? Or are there significant pre-launch activities that need to be conducted, you know, given this market?

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah, I'll ask Dan to comment on the pre-launch activities, but you're right, Reni. You know, we believe there's 70%-80% overlap in terms of the prescriber base, so a really meaningful opportunity, both in the U.S. as well as in Europe, for meaningful synergy with our existing commercial organization. Dan, do you wanna comment further on the pre-launch activities?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Yes, absolutely. Thanks, Reni, for the question. So we think that investment in market development or pre-launch activities is really important. Our focus will be on disease education, largely to make sure that all potential treaters of TGCT are you know, thoroughly educated on how common TGCT is and the burden that these patients deal with. This is a really debilitating disease. It's something that isn't a lethal disease, of course, but it is one that can be very locally aggressive and really have a significant impact on how patients feel and function. And we wanna really paint that patient picture, bring that to light, raise that awareness.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

So certainly that, coupled with our Medical Affairs organization, and, you know, data from our studies, all of this will be part of making sure that prior to launch, physicians appropriately so know the information that they need. And then, as Steve mentioned, at launch, yes, we think there's tremendous synergy. We think we're really uniquely positioned to take advantage of both the opportunity in GIST with QINLOCK and the opportunity in TGCT with vimseltinib.

[Reni Benjamin, Managing Director and Senior Equity Research Analyst at Citizens JMP]

Perfect. Thanks for taking the questions, guys. Good luck.

[Operator]

Thank you. As a reminder, to ask a question, please press star one one on your telephone. One moment for questions. Our next question comes from Peter Lawson with Barclays. You may proceed.

[Peter Lawson, Managing Director and SMID-cap Biotech Analyst at Barclays]

Great. Thank you so much. Thanks for taking the question. I guess two, firstly, just on the seasonality and how we should think about that for the U.S. versus ex-U.S., as you have in your investor model out 2024 revenues. And then just moving into GVHD, just your thoughts on differentiation as well around safety and potentially efficacy versus an antibody and the ability to, to combine with other regimens in that GVHD space. Thank you.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah. Hi, Peter. Thanks for the two questions. So I'll ask Dan and Margarida to comment on expectations for the year broadly in 2024 and our expectation of the usual seasonality patterns. And then I'll ask Matt to take your second question with respect to vimseltinib and GVHD. Dan, do you wanna go first?

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Sure, absolutely. Hi, Peter. Good morning. Thanks for the question. So as we noted on the call, we feel really excited and pleased with the progress that we've made, in the... I'll speak to the U.S. specifically, in the fourth quarter, delivering $35.3 million in net product revenue, which was a 38% year-over-year increase for the full year 2023, $121.5 million, which is a 25% year-over-year increase. So, we feel really pleased with that. And as we look to 2024, we think some of the core drivers of our recent success will continue to be the core drivers of what we expect to be another record year for QINLOCK.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Specifically, strength in our core business, increasing average duration of therapy, and then, as noted earlier, contribution from unpromoted earlier line use. So, when we take a step back and look at the year as a whole, those are sort of the themes and the reason for our excitement. As we think about just the quarter-to-quarter pattern, we wanted to note that we would expect a pattern similar to past years, which reflects some seasonality dynamics, specifically as it relates to Q1. Very common in the industry to see a strong quarterly buying pattern at the end of the year, that can potentially impact Q1, as well as some early in the year, sort of post-holiday demand, seasonality or demand softness.

[Dan Martin, CCO at Deciphera Pharmaceuticals]

Of course, the other factor that we've noted in the past and would expect this year to also play out true to form is the PAP dynamic, which we typically see a lower PAP percentage in the early part of the year with a gradual increase throughout the year. So those are some of the moving parts that we wanted to note. Margarida?

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

Sure. So regarding QINLOCK, I mean, let me start by saying that we are delighted with the launch, how is it, how it's going, and the strong revenue growth from last quarter, which was driven by strong performance in existing markets, but also the contribution from the launch in Italy. So I would say that as we continue to successfully advance our price and reimbursement and launch in new markets, we expect QINLOCK to continue to grow in international. It is always difficult to predict when new markets will open, given the different reimbursement processes and, and different timelines in each market. But assuming we get there, I expect this to happen more toward the second part of 2024.

[Margarida Duarte, Head of International at Deciphera Pharmaceuticals]

So another thing to note is that while we expect future growth, we cannot exclude quarter-over-quarter variability. We have seen this in the past, and we may see this again in the future. So I would say, all in all, geographic expansion is a key focus for us in 2024. QINLOCK is well positioned for growth, and the recent deal with Genesis for Central and Eastern Europe is also a good example of the type of transactions that you can expect from us in the future.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Great. Thanks, Margarida. Matt, do you want to take the vimseltinib question?

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

Yeah. So hi, Peter. Yeah, so in regards to your question about vimseltinib and TGCT... I'm sorry, in GVHD and, our ability to be able to differentiate this, you know, we do remain very excited about our plan to initiate our proof of concept study in the second half of this year. And also, we have a very large database of safety based on vimseltinib and TGCT, both from the MOTION phase III study, as well as from the phase I/II study. And, GVHD is a chronic disease, and particularly with the skin and joint involvement, there can be severe limitations of patients, mobility. And, the antibody therapy would have to be given intravenously every two weeks. So for a chronic disease such as GVHD, now that's a pretty significant, burden on patient.

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

So one of the major features of using vimseltinib as an oral agent will be to combine with other oral therapies. As you know, the standard of care now consists primarily of oral agents, whether it's a Janus kinase inhibitor or a ROCK inhibitor on the background of steroids as well, too. And so our ability to differentiate from an antibody is pretty significant with vimseltinib in our phase II study.

[Peter Lawson, Managing Director and SMID-cap Biotech Analyst at Barclays]

Gotcha. Thank you. Is there any way from, I guess, preclinical data to see any differentiation of an oral drug versus an antibody? If you think that could drive differences in efficacy or durability or safety?

[Matt Sherman, CMO at Deciphera Pharmaceuticals]

Yeah, I think most of the preclinical data just speaks to the role of the macrophage in the pro-fibrotic manifestations of the disease. And that's particularly important in several organs, as I mentioned, particularly the skin, because these patients can have pretty severe sclerotic skin lesions and even joint contractions, and also particularly in the lungs as well, too. And the lungs have been a major organ that currently does not have satisfactory current regimens for GVHD. So the role of inhibiting macrophages in those particular organs could really be a benefit for vimseltinib in this disease.

[Peter Lawson, Managing Director and SMID-cap Biotech Analyst at Barclays]

Great. Thanks so much.

[Operator]

Thank you. I would now like to turn the call back over to Steve Hoerter for any closing remarks.

[Steve Hoerter, President and CEO at Deciphera Pharmaceuticals]

Yeah, thank you for joining us on today's call, and thanks for your support. We look forward to keeping you updated on our continued progress here at Deciphera during the course of the year. Hope you have a great day.

[Operator]

Thank you for your participation. You may now disconnect.

Participants

Executives

• Dan Martin, CCO
• Jenn Larson, SVP and Investor Relations
• Margarida Duarte, Head of International
• Matt Sherman, CMO
• Steve Hoerter, President and CEO
• Tucker Kelly, CFO

Analysts

• Bradley Canino, Equity Research Analyst of Small/Mid Cap Biotechnology at Stifel
• Christopher Raymond, Senior Research Analyst and Lead Author at Piper Sandler
• Eun Yang, Analyst at Jefferies
• Jessica Fye, Managing Director and Equity Research Analyst of Biotechnology at JPMorgan
• Ken Shields, VP of Biotechnology Equity Research at Leerink Partners
• Michael Schmidt, Senior Biotech Analyst, Senior Managing Director, and Equity Research at Guggenheim Securities
• Peter Lawson, Managing Director and SMID-cap Biotech Analyst at Barclays
• Reni Benjamin, Managing Director and Senior Equity Research Analyst at Citizens JMP
• Tyler Van Buren, Managing Director and Senior Equity Research Analyst at TD Cowen