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S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
How major US stock indexes fared Friday, 3/1/2024
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Question of whether Nebraska public money can go to private schools still set for November ballot
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
Georgia's largest county is still repairing damage from January cyberattack
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
How major US stock indexes fared Friday, 3/1/2024
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Question of whether Nebraska public money can go to private schools still set for November ballot
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
Georgia's largest county is still repairing damage from January cyberattack
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Latest freight railroad layoffs and Wall Street pressure renew concerns about safety and service
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
How major US stock indexes fared Friday, 3/1/2024
Brazil's economy grows 2.9% in Lula's 1st year, beating expectations
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Question of whether Nebraska public money can go to private schools still set for November ballot
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
Georgia's largest county is still repairing damage from January cyberattack

Incyte Q3 2022 Earnings Call Transcript


View Latest SEC 10-Q Filing

Participants

Corporate Executives

  • Christine Chiou
    Head of Investor Relations
  • Herve Hoppenot
    Chairman, President and Chief Executive Officer
  • Barry Flannelly
    Executive Vice President and General Manager-North America
  • Steven Stein
    Executive Vice President and Chief Medical Officer
  • Christiana Stamoulis
    Executive Vice President and Chief Financial Officer

Presentation

Operator

Hello, and welcome to the Incyte Third Quarter 2022 Financial and Corporate Update Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Christine Chiou, Head of Investor Relations. Please go ahead.

Christine Chiou
Head of Investor Relations at Incyte

Thank you, Kevin. Good morning and welcome to Incyte's third quarter 2022 earnings conference Call and webcast. The slides presented today are available for download on the Investors section of our website. Joining me on the call today are Herve, Barry, Steven and Christiana who will deliver our prepared remarks and Dash, who will join us for the Q&A. Before we begin, I'd like to remind you that some of the statements made during the call today are forward looking statements and are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our reports filed with the SEC.

We will now begin the call with Herve.

Herve Hoppenot
Chairman, President and Chief Executive Officer at Incyte

Thank you, Christine, and good morning, everyone. During the third quarter, our product revenues increased 20% year-over-year to $713 million benefiting from strong Jakafi sales growth as well as an increasing contribution from Opzelura net sales. Jakafi net sales grew 13% to $620 million, driven by robust growth in chronic GVHD as well as new patient growth in MF and PV. Opzelura net sales more than doubled versus prior quarter to $38 million and we continue to execute on the successful launch in AD and vitiligo driving increased demand while also significantly improving formulary access. The ex-U.S. launches of Pemazyre and Minjuvi which are both still in early stages contributed to the 19% growth coming from other hematology and oncology product.

Turning to Slide 5. We have multiple opportunities for significant growth in both oncology and dermatology with our recent approvals and the potential for multiple new product and new indication over the next several years. For our oncology franchise, recent launches in new indications and new markets provides further growth opportunities for Jakafi, Pemazyre and Minjuvi. In LIMBER, pivotal data from two programs axatilimab in chronic GVHD and ruxolitinib plus parsaclisib in MF are expected next year. And we expect that data for BET and ALK2 in 2022 and 2023 to define the path forward for this program.

Outside of MPNs and GVHD, we have multiple early and late-stage clinical program, including our oral PD-L1 program which was the first to show clinical activity as an oral PD-L1 and we have a data at SITC next week. In addition to oncology is our dermatology franchise where Opzelura is a key near-term driver with launches currently underway in atopic dermatitis and vitiligo. Our dermatology pipeline is expanding with new indications being developed for ruxolitinib cream as well Povorcitinib and auremolimab in areas of high unmet medical need. This positions us well for significant growth and diversification.

With that, I'll turn the call over to Barry.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

Thank you, Herve, and good, morning, everyone. The launch of Opzelura continues to be very successful with double-digit demand growth in atopic dermatitis and strong uptake in vitiligo. Net sales grew 130% quarter-over quarter to reach $38 million, led by strong patient demand and broader reimbursement coverage for Opzelura. Over 62,000 units of Opzelura were shipped in the quarter representing a a growth of 32% versus Q2. The positive feedback loop between patients and physicians driven by the efficacy of Opzelura continues to fuel the uptake in atopic dermatitis. Opzelura in vitiligo has been well received by both physicians and patients and it's adding further to growth in-demand. Opzelura access continues to improve as NDC blocks are removed and payers continue to add Opzelura onto their formularies.

Turning to Slide 8, Opzelura in AD. Opzelura is now the number 1 prescribed agent for new AD patients amongst dermatologists with the new patient share of 17%. Opzelura is changing the treatment paradigm helping to break the cycle of repeated failures on topical corticosteroids and calcineurin inhibitors. The number of dermatologists gaining experience with Opzelura continues to increase and 96% of prescribers are reporting satisfaction with Opzelura. Efficacy and rapid itch reduction continues to be a top driver for prescribing and when it comes to selecting patients for therapy, dermatologists consider half of their AD patients as candidates for Opzelura. We expect the number of patient initiation per prescriber to continue to increase overtime.

Turning now to launch in vitiligo where we are seeing positive early momentum awareness levels are high with 9 out of 10 dermatologist aware of Opzelura as a treatment for vitiligo. Dermatologists view Opzelura which is the first-ever approved treatment for repigmentation as a transformative therapy for patients living with vitiligo. In a recent survey as shown on the left, dermatologists indicated their use of Opzelura in vitiligo would more than triple in the next six months. Of their currently treated vitiligo patients dermatologists consider nearly 70% could be candidates for treatment with Opzelura. For the 1.3 million diagnosed vitiligo patients who are currently not seeking treatment, we are launching several initiatives including direct-to-consumer campaigns, patient advocacy group engagements and branded patient meetings to raise awareness and encourage those patients to seek treatment now that there is a new approved therapy. Both AD and vitiligo our substantial opportunities and we expect Opzelura to become a meaningful growth driver over the next several years.

On slide 10, payer coverage for Opzelura continues to improve with the percentage of covered claims increasing from an average of 39% in the second quarter to 63% in the third quarter and reaching 70% in October. With an increasing number of plans adding Opzelura onto formularies and the continued removal of NDC blocks, we have started to gradually shut down the full buy-down program and transition to a more traditional free drug bridging program. We expect to fully discontinue the full buy-down program around the end of the year. Please note that during this period of transition to the free drug bridging program we expect variability and how IQVIA captures those prescriptions which may lead to data not being representative of the actual prescription levels and trends.

Moving on to Jakafi performance on slide 11. Jakafi net sales in the third quarter grew 13% year-over-year to $620 million, driven by growth in new patients across all indications. Within myelofibrosis, new patient starts grew by 8% and in polycythemia vera by 9%, total GVHD patients grew 20% year-over-year with the continued successful launch in the chronic setting. With strong demand for Jakafi, we are again tightening the full-year net product revenue guidance from a range of $2.36 billion to $2.4 billion to a new range of $2.38 to $2.4 billion.

Turning to Slide 12. Monjuvi net product sales in the U.S. were $22 million in the third quarter. We continue to see gradual improvement in duration of therapy as used, continues to expand in the second line. Monjuvi net sales were $6 million for the quarter with the launch going well in Germany and where we have seen several months of consecutive growth. Pemazyre worldwide net sales were $23 million with the launch continuing to progress in Europe and Japan. During the quarter we also received approval of Pemazyre as the first targeted therapy in the United States for myeloid lymphoid neoplasms with FGFR1 rearrangement an extremely rare and aggressive blood cancer.

With that, I will turn the call over to Steven.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

Thank you, Barry and good morning, everyone. We recently presented positive Phase 2 data of povorcitinib in hidradenitis suppurativa at the 2022 European Academy of Dermatology and Venereology Congress which demonstrated that patients on povorcitinib had significantly greater decreases in total abscess and inflammatory nodules count versus placebo from baseline to week 16. In addition, HS clinical response or HiSCR which is defined as a greater than or equal to 50% reduction in the total abscess and inflammatory nodules count and no increase in abscess count or draining fistulas compared to baseline was achieved in a greater percentage of povorcitinib patients than placebo at week 16.

Hidradenitis suppurativa represents a significant opportunity where there are more than 150,000 patients with moderate-to-severe disease in the United States. In October, our pivotal Phase 3 data of ruxolitinib cream in vitiligo was published in the New England Journal of Medicine and these data highlight the positive efficacy and safety profile of Opzelura as a treatment for repigmentation in vitiligo. The MAA for Opzelura in vitiligo is under review and we expect a regulatory decision in the first half of next year.

Moving to slide 16. Last month, we announced our agreement to acquire Villaris Therapeutics and their lead asset, auremolimab, a highly potent and selective anti IL-15 receptor beta monoclonal antibody. IL-15 signaling occurs upstream of the JAK/STAT pathway and demonstrates a strong scientific rationale for the evaluation of IL-15 blockade in vitiligo and other dermatologic conditions. In vitiligo, preclinical data suggests that maintenance and relapse is driven by resident memory T-Cells for TRM in the skin. IL-15 is critical for the survival of TRM and IL-15 blockade may result in the depletion of resident memory T-cells leading into a longer and more durable repigmentation effect. The addition of auremolimab to our dermatology portfolio bolsters our commitment to patients living with vitiligo and potentially offers optionality based on severity of disease as well as different dosing options that may allow for combination therapy, all of which is complementary to our JAK franchise. We are planning on entering clinical development with auremolimab in 2023.

On slide 17 is an updated table of our extensive clinical development pipeline in dermatology. With regards to ruxolitinib cream in hand eczema after discussions with the FDA, it was deemed not necessary to run larger Phase 3 clinical trial in chronic hand eczema as the indication is covered by the current label. We've also added two new indications in the development plan for ruxolitinib cream with two Phase 2 trials in preparation for lichen sclerosus and lichen planus. Additionally auremolimab in vitiligo has been included which is expected to enter clinical development in 2023 as I mentioned earlier.

Turning to slide 18 and axatilimab. As a reminder the Phase 1/2 study in chronic graft-versus-host disease this was an open-label study evaluating axatilimab an anti CSF1-R antibody in patients six years and older with active chronic graft-versus-host disease in the third-line plus setting. In this heavily pre-treated patient population, axatilimab monotherapy resulted in a best overall response rate of 68% across both doses of one milligram per kilogram every two weeks and three milligrams per kilogram every four weeks. Fifty three percent of patients reported a clinical meaningful improvement in their symptoms via the Lee Symptom Score. Axatilimab was also well tolerated and demonstrated an acceptable safety profile with no viral reactivations in this study. Looking ahead, we anticipate data from the ongoing AGAVE-201 pivotal trial in chronic graft-versus-host disease in mid-2023 and that's a potential BLA filing later in 2023. In addition the combination trial of axatilimab and ruxolitinib in steroid-naive chronic graft-versus-host disease is in preparation with an expected initiation in the first quarter of next year.

On the next slide and our progress in myeloproliferative neoplasms in graft-versus-host disease in general, we continue to advance our LIMBER pipeline and expect to achieve many important milestones in the remaining months of 2022 and into 2023. The Phase 1 study of ruxolitinib in combination with Cellenkos' CK0804 in myelofibrosis has initiated with the first patient dosed in October. Later this year, we expect to present initial data from the BET and ALK2 programs. The target action date for once-daily ruxolitinib is March 23, 2023 and we expect topline results from the Phase 3 study of parsaclisib plus ruxolitinib in inadequate responders in 2023 as well.

Turning to slide 20 and our oral PD-L1 program. We continue to progress the development of our oral PD-L1 program with two compounds, 280 and 318 which have been prioritized based on observation of tumor shrinkage and to date no evidence of peripheral neuropathy with either compound. We will be presenting updated data on both compounds at the Society for Immunotherapy of Cancer Annual Meeting in Boston next week. The third quarter was successful for Incyte across regulatory, clinical and business development and we are looking forward to an exciting close to the year.

I'd like to turn the call over to Christiana for the financial update.

Christiana Stamoulis
Executive Vice President and Chief Financial Officer at Incyte

Thank you, Steven, and good morning, everyone. Our third quarter results reflect continued strong revenue growth with total product revenues of $713 million, representing an increase of 20% over the third quarter of 2021. Total product revenues are comprised of $620 million for Jakafi, $55 million for other hematology, oncology products and $38 million for Opzelura. Net product revenue growth was primarily driven by increases in Jakafi and Opzelura net revenues. Hematology oncology net revenues which include revenues from Iclusig, Pemazyre and Minjuvi were impacted by unfavorable changes in foreign exchange rates. On a constant currency basis, other hematology oncology net product revenues grew by 32% over the prior year period.

Total royalty revenues for the quarter were at a $110 million and are comprised of royalties from Novartis of $86 million for Jakavi and $4 million for Tabrecta and royalties from Lilly of $20 million for Olumiant. Jakavi and Olumiant royalties for the quarter were negatively impacted by FX headwinds while Olumiant royalties were also impacted by a decrease in net product sales of Olumiant for use as a treatment for COVID-19 and a one-time deductions taken by Lilly related to securing additional intellectual property rights. Excluding the impact of one-time IEP payments COVID-19 related sales and currency fluctuations, Olumiant royalties were essentially flat on a constant currency basis compared to the prior year period.

Opzelura net product revenues for the quarter were $38 million, driven by robust demand and broadening payer access. As payers add Opzelura to formularies and the share of covered claims increases, we are continuing to see improvement in the gross-to-net discount rate. As Barry previously presented the percentage of covered claims is increasing and the average quarterly gross-to-net discount is decreasing as shown at the bottom of the slide. The fully-loaded gross-to-net discount rate decreased from 81% in the second quarter of 2022 to 71% in the third quarter of this year. We expect the gross-to-net discount rate to continue to decline in the fourth quarter and reach a fully-loaded steady state exit rate of 40% to 50% around year end.

Moving onto our operating expenses on a GAAP basis, ongoing R&D expenses of $351 million for the third quarter increased 6% from the prior year period primarily due to continued investment in our late-stage development assets. The growth of SG&A expenses was primarily due to our investments related to the new dermatology commercial organization in the U.S. and the related activities to support the launch of Opzelura in atopic dermatitis and vitiligo. Our collaboration loss for the quarter was $2 million which represents our 50% share of the U.S. net commercialization loss for Monjuvi.

Moving on to our guidance for 2022. Based on the strong performance of Jakafi, we are tightening our guidance to a range of $2.38 billion to $2.4 billion. Given FX headwinds that we're experiencing year-to-date and expect to continue to experience in the fourth quarter we are revising our other hematology oncology revenue guidance to a range of $200 to $210 million. Finally we are reaffirming our R&D guidance which now includes the $70 million upfront payment to Villaris anticipated in Q4 as well as SG&A guidance for the year.

Operator, that concludes our prepared remarks. Please give your instructions and open the call to Q&A.


Questions and Answers

Operator

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

Salveen Richter
Analyst at The Goldman Sachs Group

Good morning. Thanks for taking my question and congratulations on the quarter. On Opzelura, can you help us think about the trajectory from here, just given the moving parts with the drug in gross-to-net and the uptake in the vitiligo populations. Just maybe some color there would be helpful. And then secondly in Opzelura just if you could help us understand the reimbursement dynamics that are playing out around writing a script and how owner [Phonetic] may be and what you're doing to kind of alleviate that burden on the part of the physician.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

First, Salveen, this is Barry. So as far as the uptake in vitiligo goes, we're very happy. As you see from the prepared remarks, our dermatologist are excited about having this new therapy first-ever therapy to re-pigment a skin in patients with vitiligo. We know that as soon as the launch which really we began in August, vitiligo scripts began to accelerate and we know that will continue to accelerate. As we've told you before, it is about 150,000 to 200,000 patients that are actively being treated for vitiligo. Now there may be 1.3 million or more patients that have vitiligo, they may choose to come back to their dermatologist now that they have an active therapy that can help them there. So, we're very happy. We can't really break out the actual number of percentage of vitiligo versus atopic dermatitis for you just at this point just because we're uncertain about the actual numbers, since many of the claims that we can look at really don't have diagnostic codes associated with them. So where we know that atopic dermatitis for example because we have more data, with that is growing at least double digits quarter-over-quarter. We know that vitiligo is accelerating, week after week and we assume that's going to continue to occur.

In terms of reimbursement and the dynamics there, of course we most -- patients have to go through the prior approval process, those patients that have commercial insurance but as we've said it is the coverage has continued to get better and better over time so that the vast majority of commercial patients do have access to therapy. As far as problems go, prior approval is something that dermatologist deal with all the time. Most of the AD utilization criteria do in fact include one or two step therapies that they have to go through but dermatologists are used to doing that now. There may have been a little period of time where they were getting used to the prior approval process, the step therapy process but certainly since July 1st, it's really taken off and if there were barriers they're mostly removed. Sometimes there is geographic barriers, one region of the country maybe be easy, another area of the country maybe a little bit more difficult but with our own people that are out in the field we tried to help as best we can. We have an excellent market access team that can help the dermatologists and pharmacists go through the prior approval process. So most patients now and into the future should have little problem accessing Opzelura for both AD and vitiligo.

Salveen Richter
Analyst at The Goldman Sachs Group

Thank you.

Operator

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

Tazeen Ahmad
Analyst at Bank of America

Hi, good morning. Thanks for taking my question. Just wanted to follow up on gross-to-net. Where are you with the free drug program as of right now. Are you withdrawing that and where do you expect that to be on a go-forward basis as you are trying to get closer to your 40% to 50% gross-to-net for the year. And just to clarify. You're planning on exiting the year with 40% to 50% growth to net, is that correct? Thanks.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

Tazeen, it's Barry again. Yeah, so our gross-to-net we do plan on having and get better as we exit the year. The most important factor is we are changing over from what we call a full buy-down program where it was very generous program at the beginning of the year at the beginning of launch whereas the very easiest thing to do for patients and for dermatologists so that they can go to any pharmacy and even when there was really limited coverage because of NDC blocks, they were able to access the drug because we were paying for the drug for full buy-down. Now that we have increasing coverage and the vast majority of commercial patients do have access to the drug, we're switching over to a more typical bridging program where patients will be able to -- that have commercial insurance and they go through the prior approval process and for whatever reason they are in fact denied coverage then they would go, they would end up getting through our bridging program free drug at cost of goods. For us so that has a big impact on gross-to-net but that number will continue to go down over and over.

As we've said 70% of the claims currently are going through and being paid and that will increase as we go through the year and towards the end of the year. So that will improve as well. So, we'll continue to improve our gross-to-net just through that switching our programs but also we are continuing to increase coverage for those payers out there that we still have some work to do and will increase our -- will improve our gross-to-net by working with each of the plans to improve the utilization management criteria so that we are in the proper tiers where we should be, so the copays are lower. So those things will affect the gross-to-net and bring it down to the targeted range that we're looking for.

Operator

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

Jessica Fye
Analyst at JP Morgan Cazenove

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

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

Well. I think we said that as of now 70% of the claims are going through and being paid. The coverage, really, is approaching 84%. Plans have -- 84% of patients that have commercial insurance have access through the contracts that we have signed. So that's fair. As far as patient retention is concerned because most of the scripts that come through our new Rxs or new-to-brand Rxs so in fact will need some more time and data to figure out exactly what the refill rate will ultimately be both for AD and vitiligo but we're still projecting for AD the average per year scripts will be two to three tubes, will be two to three and the average for vitiligo around at 10 tubes per year for vitiligo patients.

Thank you.

Operator

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

Unidentified Participant
at Incyte

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

Christiana Stamoulis
Executive Vice President and Chief Financial Officer at Incyte

So in terms of the royalties, as I indicated in the prepared remarks, we have seen FX headwinds having an impact on royalties given that Jakafi and Olumiant are very much ex-U.S., based on ex-U.S. sales. In addition to the FX impact for Olumiant, we saw saves associated with COVID-19 treatment going away and as a result there were no royalties associated to COVID-19 sales this past quarter and in addition to that, there was a one-time payment associated with securing some additional IP which was deducted from the royalties that we get for Olumiant. If you take out all those impact FX COVID-19 related sales and the one-time IP payments then we see royalties being pretty flat year-over-year. Going forward, we don't provide guidance on royalties but we would expect for Olumiant to continue not to have any COVID-19 related royalties and also the FX impact obviously something that everybody has been experiencing and at this point we continue to see that impact continuing in the fourth quarter.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

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

Operator

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

Vikram Purohit
Analyst at Morgan Stanley

Hi, good morning. Thanks for taking my question. So going back to dermatology. I wanted to ask a question on IQVIA capture ratios. So we recall that in 2Q '22 you mentioned that there was an overstatement. I just wanted to see if there's any color available about how that's trended in 3Q versus 2Q and then you mentioned that there could be some more irregularities going forward because of the transition from the full buy-down program to the bridging program. And I was just wondering if you could comment on directionally how you think those irregularities might trend if you think that's going to be an overstatement or understatement and to what degree do you think the capture ratio might be regular. And then I have a follow-up.

Christiana Stamoulis
Executive Vice President and Chief Financial Officer at Incyte

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

Vikram Purohit
Analyst at Morgan Stanley

Okay, understood. And then, I had a follow-up on povorcitinib. So you mentioned that a Phase 3 study there is going to start in hidradenitis suppurativa by the end of the year. Could you just talk a little bit about what the study could look like from a design perspective and what patient population you think you would enroll in this program.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

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

Vikram Purohit
Analyst at Morgan Stanley

Thanks.

Operator

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

Mara Goldstein
Analyst at Mizuho Securities

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

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

So, Mara, this is Barry. On the gross-to-net, yeah, so we're saying that we get to the 40% to 50% by the end of the year for all of the factors that I pointed out before that transition to the bridging program about the improved coverage about our working with the payers to have better utilization, management criteria, lowering the period, lowering the copay. You know, we didn't mentioned before is that you're picking-up copays and you're picking-up deductibles and deductibles go down as the year goes down. So that improves that and I'll turn it over to Steven for the HS part.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

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

Mara Goldstein
Analyst at Mizuho Securities

Thank you.

Operator

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

Unidentified Participant
at Incyte

Hey, this is Leonard on for Brian. Thanks for taking our question. I wanted to go back to Opzelura. So earlier you had mentioned that there were some challenges with scripts being abandoned and formularies or the pharmacy not coating properly. I guess can you talk about how these have been resolved and if there's any challenges there that may continue to occur due to the free drug wind-down program and I guess do you have a sense of what percentage of patients that are actually on the free drug then go and start using the paid product and what you might need to do to get those claims higher and then I guess sort of just related to that gross-to-net aspect. I mean do you have any visibility into the 2023 contracting given that inflation is fairly high. Do you think you'll have to give back a lot of any potential price increases you might take into gross-to-net. Thanks.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

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

Unidentified Participant
at Incyte

Got it, thanks.

Operator

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

Unidentified Participant
at Incyte

Okay, this is Joe [Phonetic] on the line for Jay. Thanks for taking the question. So maybe one question on povorcitinib for let's say for HS. Can you just maybe talk about the unmet needs with Humira that you can maybe potentially effect [Phonetic] with povorcitinib and also on auremolimab, you recently acquired just if you can provide some colors on how we can complement your vitiligo franchise, especially in povorcitinib [Indecipherable] for vitiligo and any other potential indications you are planning or you are thinking about with auremolimab. Thank you.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

Yes, this is Steven. Thanks for the question, again on HS. So just to be somewhat repetitive, the patients have a lot of morbidity particularly in skin folds like the armpit, the axilla and other parts of the body in terms of abscesses and nodules that drain and causes a lot of morbidity to these patients. It looks like the currently approved TNF inhibitor doesn't fully address that unmet need and again that speaks to the interest in new mechanism-of-action here that look like from our Phase 2 proof-of-concept maybe addressed very well from in terms of povorcitinib and JAK inhibition. So that's the reason we're excited about the data. That's the reason we want to go fast into a Phase 3. There is a very good in the slide in the prepared remarks, response in terms of abscess and nodules formation and we will be testing as I said earlier, two doses there. It's about somewhere around 0.1% of the U.S. population but we estimate approximately 100 -- excuse me upwards of 150,000 patients in U.S. prevalence wise and maybe you know about 50,000 currently get treated but if you have a therapy that addresses that need then that will be a really important thing to develop.

In terms of auremolimab and its IL-15 receptor beta monoclonal antibody as I've said this addresses resident memory T-Cells in the skin which are felt to cause the melanocytes not to produce the pigment and then to keep the disease present. So by addressing this and this is a very good preclinical model you can potentially result in quote-unquote cure or at least prolonged responses in terms of re-pigmentation. So we view this completely complementary. Just to go over the entirety of our vitiligo studies, our first indication with Opzelura is in patients with 10% of below body surface area involvement and requires long-term treatment to get the effects that improve overtime. If you look at the data, if you look at the 24-week data that goes up another 20% absolute points when you get to 50 weeks and then with povorcitinib of our vitiligo program, you are looking at patients with more severe vitiligo, more body surface area involvement, so 8% or above and again we have data there that's really encouraging and we will be presenting at early next year at a major meeting and then make going forward decisions for povorcitinib there in terms of an oral therapy with the different therapeutic ratio. And then just to round it out now with the anti IL-15 receptor beta antibody we get their entirety and we expect that will have activity on its own based on the preclinical models and that's how we'll start testing it initially but you can imagine a world going forward were these therapies will complement one another and be used interchangeably depending on the disease and how it evolves. And we really want to address the unmet need here. We are excited about our vitiligo franchise and what it can do for patients who require and want re-pigmentation. Thanks. Oh, I'm sorry, your last question. Other indications. I think it's pretty early but the mechanism may be important in areas like systemic sclerosis sarcoid, etc. but it's very early in that journey. So we'll just see how this program goes going forward. Thank you.

Unidentified Participant
at Incyte

Thank you so much.

Operator

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

Matt Phipps
Analyst at William Blair

Guys, thanks for taking my questions. Congrats on the progress. I'm wondering if you could help set the stage a little bit for the LIMBER updates coming soon. Maybe an idea of how many patients you have with the ALK2 or BET plus Jakafi combinations and later this year, do you think that's enough data to make a determination on how you're moving either or both of those programs forward.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

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

Operator

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

Unidentified Participant
at Incyte

Hey this is Kelsey on for Michael. Apologies for getting disconnected there but thank you for taking our question. I guess, how do you kind of anticipate the MF market landscape evolving in the coming years with the recent approval of Vonjo and potential approval of momelotinib next year and are you seeing a change in patients new starts particularly those with low platelets given Vonjo is now available in the U.S. Thanks so much.

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

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

Operator

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

Eva Privitera
Analyst at Cowen

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

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

Well. Because most of the contracts were -- that we established for AD carried over to vitiligo now some of the vitiligo utilization criteria that's in place there was vitiligo criteria for maybe half of the plans throughout the United States before Opzelura was approved for vitiligo and has only increased overtime. Some of the utilization criteria that we've seen have Opzelura as first-line, some have one step, some have two steps now. We will continue to work with each and every one of those plans every single day to optimize utilization criteria to actually reflect the clinical data because in fact there's no reason to use any step therapy for vitiligo for these patients that have vitiligo because the clinical data, because it's the only drug approved, the first and only drug approved for that condition. So in a way, we will continue to see the utilization criteria only get better because the drug is so good and it should be used in the first-line setting when patients come in and want to be treated for their vitiligo.

Eva Privitera
Analyst at Cowen

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

Steven Stein
Executive Vice President and Chief Medical Officer at Incyte

Well, we are already doing DTC for vitiligo in a variety of locations, of course through social media, things like Facebook, Instagram and so forth, in terms of Internet search optimization. So if you go looking for vitiligo you'll find Opzelura, you go looking for Opzelura you'll find that vitiligo is there. We also have patient webinars and we work with patient advocacy groups, so the DTC is going on. If what you mean by television commercials as you know we are running TV advertisements both linear and non-linear, so connected TV and non-connected TV for atopic dermatitis now. So, the vitiligo commercials for again for connected and non-connected TV will start either in December or January. We have to figure that out yet just for what's the best placement, what's the best timing for these ads to have the most impact.

Operator

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

Andrew Berens
Analyst at SVB Securities

Alright, thanks guys. I'm sorry if I missed sudden jump in from call to call but I was wondering if you could give some color on inventory levels. When I do a back-of-the-envelope calculation it appears that may have gone up about $3 million based on the numbers you've given and then also just wondering if you guys are still confident in the $1.5 billion guidance for Opzelura in AD in the U.S. alone. Thanks.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

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

Andrew Berens
Analyst at SVB Securities

Okay, thank you.

Operator

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

Gavin Clark-Gartner
Analyst at Evercore ISI

Hey, thanks for taking the question. I just wanted to confirm something I heard earlier. Did you mention that patients are using two to three tubes per year for Opzelura in atopic derm within the real-world setting.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

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

Gavin Clark-Gartner
Analyst at Evercore ISI

Okay. So I mean what's driving the difference from the three to four tubes that we've been guiding towards previously.

Barry Flannelly
Executive Vice President and General Manager-North America at Incyte

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

Operator

Thank you. Next question is coming from Kripa Devarakonda from Truist. Your line is now live.

Kripa Devarakonda
Analyst at Truist Financial

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

Christiana Stamoulis
Executive Vice President and Chief Financial Officer at Incyte

Thank you, Kripa. In terms of vitiligo, as Barry indicated, we're very pleased with the launch and the initial progress but we are very early in the launch and this is a very different market than AD. It is not an established market. You have only a small percent of the patients that have been diagnosed with vitiligo currently seeking treatment, it's around 10%. And you have a very big part of the patient population that is inactive. So we want to wait to see a few quarters of uptake to get a better understanding not only of the currently active patients seeking treatment and how quickly do they come into the therapy but also how quickly the inactive population gets activated and the uptake there before we provide any type of guidance around vitiligo. In terms of your second question on the deal, there is no change in our thinking in terms of the type of transactions and the objective that we have with PD. We are looking to bring in assets that fit well with our current areas of expertise and can leverage our capabilities, can leverage our infrastructure and can add to our revenues and diversification in the second half of the decade. Villaris fits very nicely with that objective. It is an earlier stage and smaller deal but we continue to actively look for others. I would say bolt-ons is the the nature of acquisitions that we are primarily focusing on.

Operator

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

Christine Chiou
Head of Investor Relations at Incyte

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

Operator

[Operator Closing Remarks]

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