To all of you today as we kick off the new year with our Healthcare C-Suite Unscripted Conference. Just as a quick framing for the day, we are fortunate to have a great lineup of corporates with us today, who we hope will shed light on some of the key themes that are top of mind across the sector as we enter 2024. We will also be hosting two Goldman Sachs panels, including a lunch panel that features our investment bankers to talk about things from their end, including M&A trends in the sector, as well as capital markets activity as we prepare for the reopening of the IPO window this year.
Then at the end of the day, I'll be moderating a panel on the outlook for the healthcare sector, with our equity strategy and research analysts, where we will discuss market trends, thoughts on thematic implementations within healthcare and top stock picks, for the year. Following that, we will host an informal cocktail event, which will be a great opportunity for everyone, to network and exchange thoughts and ideas. I hope many of you are able to stick around for that. So hopefully the day will give you plenty of fodder to launch, into the new year and also prepare you for the larger investor conference that I know many of you will be attending, next week.
I'd be remiss not to thank the whole team for helping put this event together, as well as our corporate access and events teams for all the heavy lifting that they did on the logistics and the meetings on this conference. So thank you, Leslie and team.
Perfect.
And now, I hand it over to our first panel. I also just wanted to mention very quickly that we are conducting our customary investor sentiment survey in conjunction with this conference. Many of you have likely already received this via email, so if you've already completed it, I thank you. But if not, there are copies in front of you. If you could kindly fill those out, we would greatly appreciate it. We will be collecting them after the sessions. The survey is just 12 questions. It's completely anonymous, and we will be collating results this evening, and we will share them with everyone tomorrow. So with that, thanks again for being here. Happy New Year. Welcome, and let's go right to our first panel with the management team of Incyte.
Salveen is above us, above us, watching over our shoulders, on the big screen.
On the big screen. Good morning, everyone, and Happy New Year. Thank you so much for joining us. I'm sorry for not being there in person, as I've contracted COVID. But I'm pleased to introduce the first speaker of the day, Hervé Hoppenot, Chairman, President, and CEO of Incyte. Hervé, thank you for joining us, and with Hervé on stage is Matt Dellatorre, who's been following this story for a very long time. So to start here, Hervé, a big picture question, product diversification continues to be a key focus for Incyte, and as we stand today, with Jakafi, Opzelura, and the current pipeline, notably where you do have some later-stage assets, such as povorcitinib and axatilimab, what is your outlook for the business and growth in 2024 and longer term?
Cool. No, and I mean, good to see you. I was hoping to be able to blame you for infecting everybody at JPM next week, but so it's not the case. But somebody will have to be blamed, so that will be funny. Okay, speaking about Incyte, I mean, that is the 2024 is obviously starting, so now we are more or less seeing what's going to happen in in some of the big events. The long term is where there are a lot of interesting perspective. I must maybe step back for a tenth of a minute here to remind everybody, I mean, Incyte is a discovery-based company. We have a fairly large R&D team and an investment in R&D, and we believe value creation is coming from the quality of that R&D effort that we are doing.
I must say, we have had, over a period of 10 years, if you look back, we have had waves of innovation that were very productive, and we have 5 products coming from our own research that are today commercial, which is very rare in the biotech world. You know, when you look at the, you know, having sequential success with a number of products that you have discovered yourself. We had a period, and I must say it was a period that was driven by the IDO story, where IO was our driver. We had a fairly large investment in immuno-oncology for a period of time with new targets that ended up not being successful. And what you are seeing today is a new wave of products that was basically three four years ago when we reallocated our research resources to new targets.
What you see today are basically these products that are coming from this new wave of innovation that is coming from our own R&D. I am frankly, very, very optimistic about the success of this. I mean, there will be certainly some that will not be successful, but these products that are coming now to the clinic are products that have a fairly different profile, maybe from what we have had in the years before and are fairly exciting. You saw that at ASH. I mean, we had two of them that were presented in the field of hematology.
One is a CAR antibody, another one is a V617F small molecule, targeted, very innovative, in a field where people have been trying to develop that type of product, and where Incyte is the first to really come to the clinic with it, and where I think it will have a big impact on the long term. So the long-term part, I think we should speak about. I mean, long term, I'm speaking of 2027, 2028, which is important... because in the portfolio mix, it's a date that, you know, is when Jakafi patent expiration could be happening around 2029. And we have in before that, a number of projects. In fact, there are, we call them the high impact project.
We have eight of them that we think could be contributing to the revenue between today and 2028 and 2029. And that's obviously what we are watching in terms of progress on the clinical side. On the commercial side, and that's a sort of shorter term, if you look at 2024, now coming back to the short term, obviously there is a Jakafi franchise, and we can spend time discussing about that because there are three different dynamics in three different indications. And then we have the launch of Opzelura, which has been, as you know, you know, one of the big events for Incyte, diversifying into dermatology with high technology type of indications, being first to develop a new product for vitiligo, having a very unique profile in atopic dermatitis.
The growth there is obviously something that is driving this diversification that you were speaking about at the beginning. So that's, that's the two big components for us. Axatilimab is interesting because it's the first of this product that will be working in the Jakafi franchise. You know, we had this LIMBER, the concept of saying, replacing Jakafi with better products for each of the indication where it's approved. The first that will be crossing the line is axatilimab in GVHD. It was a plenary session at ASH. It's a very interesting profile, and it has the potential to be more than, you know, just replacing Jakafi, but certainly expanding our franchise in the next few years. And the submission at the FDA is done. So now we are in the review phase, and it should be approved in 2024.
While we will discuss Jakafi life cycle management in more detail shortly, what were the key takeaways from ASH that, you know, you just mentioned here, and can you speak to your level of conviction that you'll be able to manage this Jakafi 2027, 2028 loss of exclusivity?
I think, I think ASH was multiple things. It's, it was not like one big thing that ended up changing everybody's mind. I think there is axatilimab in the plenary, and that meant that this is a, you know, practice-changing kind of product, is that the mechanism is such, it's dealing with inflammation, it's dealing with fibrosis, that it should be some of the main component of combination treatment for chronic GVHD. So we have the third line data that was presented, which is very good in terms of safety and efficacy. So that would be the first submission, and then it will be developed in combination with Jakafi and in combination with steroids for the first-line treatment of patients with chronic GVHD. And if you calculate the number of patients, you can see that that could be by itself, bigger than Jakafi in GVHD.
So it would fulfill the requirement of saying, we can, we can certainly manage the patent expiration from that standpoint. I think the second piece is the BET inhibitor, the ALK-2, are two mechanisms that we are developing for myelofibrosis. In the case of BET, as you know, there was data from other companies showing that in fact, that mechanism seems to have activity, so that may be a de-risking of the BET project, so that could be one aspect. But frankly, what I think was the most impactful was this concept that with both CALR and 617F, we are not just like replacing Jakafi. We are in fact expanding this market drastically by addressing new populations that were never addressed by Jakafi. So it's not anymore like manage the cliff kind of situation.
It's literally making it something where we could be expanding this potential opportunity in a way that will be way beyond the size of Jakafi today.
Then business development, just pivoting here. You've recently spoken about your interest in pursuing more significant business development. Can you talk about the key considerations and the overall approach you are taking, specifically noting your $3.5 billion in cash and debt? How much total capacity do you have, and are you prioritizing certain disease areas, just given where you're focused right now?
So the capacity, as you said, it's like we have today $3.5 billion, more or less, $3+ billion. We have no debt, so you can calculate. I mean, there is a range. We could take some. I mean, we are not looking forward to doing that, but that's a possibility. So we are in this range that could go a little above that or not. I think the key criteria for us is not the therapeutic area. I mean, it has to be close to something that we are doing. So we are in Onco, Hemato, Dermato. So that gives us the scope of what we would be looking for to take advantage of synergies on the commercial side. And we are looking for diversification between 2026, 2027, 2028, 2029.
The second half of the decade is where we would like to have revenue growth, and that gives you the profile of what we are looking for. That's something we are very aligned in the leadership team and the board in saying if we could find opportunities that fit this criteria, it would be good, it would be a good addition to what we have. I think it's fairly obvious because it's back to the diversification of revenue question you were asking at the beginning.
And we've seen M&A pick up significantly. Could you just speak to how competitive the process is now? Is it difficult to compete with these large pharmas and their pockets? And is this impacting your strategy or focus here? Are you looking to go, you know, earlier stage?
... Yeah, damn large pharmas with deep pocket. Yeah, I don't know. I don't know. I think, I think, I mean, if you are looking for product with 100% probability of success or already commercialized with a multi-billion potential, then yes, there is no reason for Incyte to be winning that bidding. I think we have some views about certain type of disease where we have expertise, so that may give us a sort of a competitive advantage.
It, it also leads to saying we could be interested in earlier project maybe than the fully proven project and do multiple deals that will be, each of them, you know, with, a certain, maybe a lower probability of success, but overall, you know, contributing to our goal, which is, as I said, 2027 and beyond, and the product diversification by then. But, yeah, I, I don't, I don't think there is—I don't think it's impossible for a company of our size, with the resources that we have, to do that kind of, of deal. So that's something we are working on as we speak.
Hervé, just given your two large revenue drivers in the pipeline here, do you view yourself as a potential target, and how do you think large pharma views your portfolio?
I really, I literally don't know, so I'll pass on that one. Yeah.
Perfect. Matt, let me turn it over to you to ask questions on margins and Jakafi here.
Yeah, sure. So Hervé, I think your margins are right now in, like, the high teens or so, operating margins from, like, a GAAP or non-GAAP perspective. How do you see that evolving, you know, towards the end of the decade? Do you see any changes to that, given maybe the shift to more dermatology?
I think so the margin is really very similar—the operating margin, I mean, there are a lot of other components that make the number fairly different from what you are speaking about here. But what we have is an investment in R&D, which is around $1.6 billion per year. We have a revenue that is around total revenue close to $4 billion, let's say, or somewhere around there. And we have the commercial investment, which is around $1 billion. And what we have done in the past is make sure that the R&D budget or spending investment is growing at a rate that is slower than the rate of the revenue, so that we are basically improving leverage. And you can see it. It's very consistent over 10 years. It's a line, two lines that are slowly diverging.
We had an investment in our commercial team in dermatology two years ago that now is behind us. So we are at a stage where what we will be starting to see is an expansion of the margins or the leverage because we will be amortizing our commercial investment in dermatology with revenue that would be large enough to compensate for that investment. So what you can expect there is to continue to see a relatively stable commercial spending, slowly growing investment in R&D, and therefore an improvement of the leverage over time, as we have said and as we have done very consistently over the past years.
Mm-hmm. And then just going back to maybe ALK-2 and QD for Jakafi, is the delay. The delay is two years. Is that two years from the announcement in, I think, earlier this year, or is it two years from now? And-
So it's not super precise, but it's basically, we have to develop a new formulation that is basically a higher dose of the existing formulations that we have. We have to test it in very small PK studies, and we have to put it in stability, and the stability is 12 months. So we are expecting 2 years from, you know, sometime this year. So I don't know whenever we, we spoke about it, but I would say it's like September +2 or something like that.
September. Oh, got it. And then for ALK-2, what are... I mean, you've had to work again a bit on dose optimization. Is it straightforward in the sense that you can really just maybe keep upping the dose for ALK-2? Or what do you really have to optimize there?
Yeah. So ALK-2 is a complicated product. I mean, what we are basically trying to do is to manage anemia through the hepcidin pathway. And what we have already demonstrated, and it's very well established, is that in fact, our ALK-2 inhibitor is impacting the hepcidin pathway. What we have not yet fully demonstrated is that that impact is in fact changing consistently the anemia profile of patient treated with Jakafi plus ALK-2 in the first-line setting. Because that's, that's a cohort of patients where we don't have enough patients yet. So that's a very important data that will be coming in 2024. We all know the anemia profile of patients started on Jakafi is very typical, is that there will be an effect, and that effect will go away after 20-some weeks.
But there is a dip, and that dip in hemoglobin has an impact on the outcome of these patients because it's leading to dose reduction, and dose- lower dose of Jakafi is bad for patients. So that's the whole idea, is to maintain the dose of Jakafi-
Mm-hmm.
At its best level, it's a little bit like G-CSF and chemo, by preventing that anemia that is coming from Jakafi and is also adding to the anemia coming from MF. So we are not there yet. We are. As you have seen, the data is fairly promising, but we need to see what's happening now with patient in the front line. And if we can show that we are maintaining hemoglobin while we are treating with Jakafi, then we have a good case to to develop that product in that setting. So that's the way we are thinking about it. It should be happening during 2024.
I see.
In mid-2024 or end of 2024, we'll have enough data.
I see. And so it's really about the frontline patients, 'cause I think you said before that the FDA asked you to go into the later stage patients, which you did not.
Yeah, we had to test it into... First, we had to test it as a single agent, which frankly, was-
Right
Very difficult to find patients for this. Then we combine it with Jakafi in patients who have advanced disease, and now we are doing it in the first line, and that's where it would be the real test for the product.
I see. Salveen, do you wanna switch to Opzelura or, or, or-
Let me just jump in here just with a few more questions. So when you look at the ALK-2 and you look at the BET and CALR, just help us understand how you're thinking, and then QD coming in, how you're thinking of kind of solving the Jakafi LOE aspect. Like, where, how are you kind of parsing out the market to these other drugs?
So the once a day is obvious. I mean, that's something that can be used instead of Jakafi, but it's also very important because it can be used as a combination partner for all of these combinations that are being done with Jakafi. And as you know, many of these combinations are, in fact, once a day product, so that's a reason to also have it. In our own portfolio, the once a day will be combined with once a day ALK-2 and once a day BET in a way that will be very powerful commercially because we will be able to basically price the combination in a way that cannot be done by other companies. So that's important, and that's one aspect of the once a day.
The BET, as you know, is potentially helping in myelofibrosis, improve patient outcome in the first line setting, and the data from MorphoSys is fairly interesting because the effect on spleen is very, visible. It's not subtle. And, so that's now sort of a path that we have well identified and where we can work with our own product. And ALK-2, as we said, is a little behind, and, we still need to establish the exact way to use it in the first line. But assuming it's happening, it would be the same ability to combine once a day Jakafi with a once a day, ALK-2. The CALR and 617F are fundamentally different.
They are disease-modifying strategies, and we are basically speaking about reducing a little burden very quickly, which is not the case with any of these other products that we are speaking about, and it's a functional cure for patients. And what we know is that not only in MF, but also in PV and ET, north of 90% of patients have either a CALR mutation or V617F JAK2 mutation.
So now we are speaking about hundreds of thousands of patients instead of tens of thousands, where we are basically trying to develop with all the caveats of early. We are just starting, but trying to develop strategies that will be changing the way people are thinking about this disease, where it will be looking at the mutation and depending on the mutation, treating with products that have the ability to reduce allele burden very quickly, and therefore could be in some, with, you know, some, some, in brackets, but could be curative for this patient. So we see CALR and 617 F as qualitatively very, very different from BET, ALK-2, once a day. BET, BET, ALK-2, once a day, are like managing the life cycle of Jakafi, when in some ways, these other products are expanding the market very significantly.
When could we see data from CALR and 617F?
So CALR, we are treating patients as we speak, so we are in phase one. V617F, the IND is basically being done now, so we will be starting clinical trial in the first half of this year. It depends. I mean, you know, in phase one, sometime you have to slow down for some reason. So it's very difficult to predict, but I would say for CALR, we should have some patients being treated by the end of 2024, that we'll be able to speak about. We have patients treated now.
Just back to QD for a sec, let's say, you know, maybe you don't get the combos to work, but you still get QD. Is that in itself enough to extend Jakafi at all, or is it not compelling enough?
It will help. I think it will help.
Yeah.
Is it going to protect the franchise? No.
Right.
I would say it's going to change the curve, but it's not going to be like the magic bullet to protect the franchise. Our goal for this franchise is to change the
Right
... clinical outcome of patients with better products.
Right. So the goal is basically Jakafi. Maybe it gets extended, but you instead replace it as it's coming off patent with multiple products.
Yeah.
But just back to QD, in the sense that, would providers, I mean, or would insurers cover a QD instead of twice a day after patent?
So in 2029, I don't know. I mean, you know, what's going to happen then with the payer is fairly unpredictable.
Yeah.
I think it will help. I think switching patients back, patients with cancer, switching them back to a different product-
Mm-hmm.
is always problematic. So as I said, I don't see QD as a solution to the life cycle question of-
Yeah
Jakafi. I think it's a contributor, and it's helping for the combination with other QD products. Because having a twice a day with a once a day in combination is dangerous.
Right
Because people make mistakes. So, that's what we are looking at.
... Hervé, just going back to axatilimab, this index partnered asset here. When you look at the chronic GVHD market, how big do you think this really is? And, you know, what proportion could be addressed by that drug, and, and how does it kind of overlap with Jakafi?
So in the third-line setting, the first indication, in fact, we have a good surrogate with Rezurock, because that's where it's being used. You know, you have seen maybe the last quarterly business from them was, I think, around $85-$90 million, something like that. So it gives you an idea of the size of that opportunity in third line and where I think axatilimab will have a very competitive profile. And if it's, you know, Rezurock versus axatilimab, it could be used one after the other. As you have seen in the axatilimab data at ASH, one of the key aspect was the pretreatment with either Jakafi or Rezurock has no impact on the efficacy of the product. So the mechanism is totally independent, and there is no cross resistance. So that's really important.
That gives you the idea of the third line and what it could be. In the first-line setting, there are 14,000 patients with chronic GVHD in the U.S. There are as many in Europe, and if you look at the way the Jakafi business has been evolving, at the price of Jakafi, the way it's used, we think the first-line indication for axatilimab can be north of $1 billion. I mean, that would be meaningful for us.
Just one final question here. Jakafi, you, you tightened guidance for, for the year on the 3Q 2023 call. What trends have you been seeing across different indications, and just talk about the, the growth outlook for, for this asset?
So as you know, we have a long-term guidance of $3 billion. We have a short-term guidance for this year of $2.6 billion, $2.59 billion or something. So that's the big picture. We have three different trends in Jakafi, so that makes it a little complex. You have the MF Trend, which is a trend of saturation and plateauing. I mean, that's something we have already seen for a while. You have the chronic GVHD and acute GVHD. GVHD overall, that has been growing very fast, but now it's starting to get out of the launch phase, so it's growing at a lower pace. And you have the PV business that has been expanding very steadily over the years.
What's really important to realize is that IRA is going to have an impact on Jakafi, a positive impact on Jakafi. The implementation of IRA is starting in 2024, with a limitation on the copay for patients, and in 2025, we'll have a very dramatic reduction of the out-of-pocket for Medicare patients. Most of the business for Jakafi, more than 50%, is Medicare, and out-of-pocket payments for Jakafi is one of the reason why it's not used more broadly, because some patients are unable or not willing to contribute, specifically in PV. The way I see it for the next, let's say, between today and 2028, which is, you know, what we are all looking at, is that you should assume that MF will be on a more stable level.
I think chronic GVHD and GVHD in general will continue to grow at a lower pace, but I think PV could be accelerating in terms of growth, and that's what's leading us to the $3 billion overall that we have in our long-term guidance.
Great. So pivoting over to Opzelura, can you share with us the latest update here on the Opzelura launch in both atopic dermatitis and vitiligo? Does physician and patient feedback remain strong? What are you seeing in terms of compliance and persistence, and when might we understand kind of the trajectory as it stands for vitiligo?
Okay. So I mean, in the case of Opzelura, it's a little bit like what I was describing for Jakafi. I mean, we are basically at the beginning of something that will be a long game, and the long game is obviously a number of indications that we are working on that we'll be adding to what we have today in atopic dermatitis and vitiligo. So that's important to keep that perspective, is that we have, like, four or five indications for these products that are coming up. Some of them are fairly advanced, where we are already in phase three, and some of them we are still in phase two, trying to establish the proof of concept. On the launch itself, atopic dermatitis is now very well understood. We are...
I mean, the level of efficacy we are seeing and the speed of itch relief that we are seeing is unmatched, and patients will tell you that. If you know patients with eczema, I urge you to try Opzelura, because that will be frankly surprising in many ways, because it does work on itch in minutes. We are not speaking about days, and it has an anti-inflammatory effect that is very, very meaningful, very quickly. And what it leads to is the fact that we have seen, maybe it works too well, is that the use of Opzelura in atopic dermatitis is around two tubes per year, per patient now, and that is relatively two point something, 2.1 or so, but it's around that, that number.
That is where I think it's going to stay, because in what we are seeing every day is that patients are, in fact, well, very well controlled. Then they will stop taking the product, and then when they have a flare coming back, they will use it again, if it's coming back. In vitiligo, so that's basically what the dynamic is. What is preventing us from, you know, multiplying the sales we have in atopic dermatitis are the processes for payers, where, as you can imagine, dermatologists don't want to spend their days doing, you know, prior authorization and calling the payers and explaining why people should be using that product. So basically, the strategy we have is to make that path as smooth as possible so that dermatologists can use it. They want to use it more.
They are using it already a lot, but they want to use it more, but they don't want to spend their days doing, you know, all of this paperwork for the insurance company. So you saw the, you know, the new contract we have is an attempt to do that, of saying, "We are going to remove some of the prior authorization. We are going to automate some of the process, and we want, basically, dermatologists to be able to prescribe Opzelura, and then it goes through, and they will never hear about these patients again with atopic derm." So that's one dynamic. I think there is it's a long game. I mean, it will take time, but I think there is a very good chance to get there.
In vitiligo, it's a completely different story, where we have patients who are trickling into the office of the dermatologist, and one of the big problem is making appointment with a dermatologist. I know it sounds a little weird, but I can tell you it is not a small issue. When you are in front of the dermatologist, there is a compliance issue of how people are using RUX cream, Opzelura, for vitiligo, how they are putting it on them twice a day or not. And there, we have seen a number of a little bit of strange behaviors, where patient would be trying the product, in fact, on some part of their body, sometime on their hand or their arm. They would be trying it to see the repigmentation before they put it on their face, which is very logical, in fact.
We didn't see that in the clinical trials, but we see that in practice. So there is a lot of work in vitiligo to do two things, is to bring the patient in front of the dermatologist, that we do some, you know, DTC campaign, and that is working fairly well. There is a good awareness of Opzelura in the vitiligo community. And the second step is compliance, how to use the product, because if you use the product right, you will see repigmentation happening. And then it's an amazing situation where, in fact, people for the first time can get back the skin that they have. So it's. I think both of them have, you know, challenges, AD and vitiligo. They are completely different.
We are working on both, and we have, I think, very good approaches to solve these issues, and that will give us a growth for this brand that I think will be fairly, very, very meaningful for the long term. And also, as I said, with new indication coming, it will be a growth driver for Incyte for the long term.
In terms of the prior authorizations for AD, what are the main levers you have there to reduce those? I mean, can you do this broadly?
There is an automation process that could be done. Yes, that's part of it, yeah.
It's just an automatic system.
Yeah.
Okay. It's not any sacrifice on price or anything like that, or?
So there is a status... I mean, you know the way the system works, is that there are basically payers are using their leverage to try to extract value from us. That's what's happening. So then the question is, you know, where do we go? Where do we stop? I think it's interesting also to realize that in atopic dermatitis, 80% of patients treated with Opzelura will never go to a systemic treatment. So there is something else from the economic standpoint to be looked at, which in some countries has been very well analyzed, where if you can prevent patients from going to a systemic drug... Remember, also, two tubes of Opzelura is a fraction of the price of many of these systemic drugs, so there is a benefit there, too.
Mm-hmm. And then in terms of compliance over, like, I guess now you've seen AD patients for multiple years now. You're seeing them, you know, ones that started in 2021, they're actually, you know, continuing to take or use the cream multiple years in a row, or is it more of like a one year and then-
It's not easy to know because, you know, 30 around 30% of patients are changing insurance companies every year. So there is a little bit of a loss of continuity in the way we can analyze from one year to the next. What we know is that in a given year, it would be around two tubes, 2.1 tubes per AD patient in average. So median is one-
Mm-hmm.
- but the average is two, because there are some patients taking way, way more than two.
I see. I see.
Have you made further progress on the percentage of covered claims, and how do you both, you know, view these gross to net adjustments evolving in 2024? You know, now you've got preferred brand tier for CVS Caremark and Aetna. So how are you thinking about this?
No, we are, in fact, at a fairly late—I mean, the coverage is around 85%. It moved from 80% to 85% during the year, so it's creeping up. It will never be 100%. There are a number of plans that are literally insuring for nothing, so that one will not cover Opzelura. So we know it's basically going to end up at 90%, and it's going to creep up from where we are today, which is 83%, 84%, I think, to that over time. And it's a, you know, it's a work of every day. We have a team doing that. So that coverage, I think, will be at a good—it's at a very good place.
I think the big question is: How much burden, paperwork burden, is put on the dermatologist offices? And that's really what we are working plan by plan. I mean, there are 3,000 plans in the country, so we are working on them. And over time, we make progress because some of the plans are realizing that the use of Opzelura is, in fact, a good thing. And one of the interesting thing was Medicaid, because as in Medicaid, in fact, Opzelura is in a preferred position in many states, in part, because of that expectation that it will, it will be cost savings overall in the field of atopic dermatitis.
So, what happened with Medicaid is that there was an unexpected increase in Medicaid use because of the preferred position it got, and also because Medicaid expanded very quickly in New York and California, and that ended up, like, changing the overall gross to net in some of the quarter. At the last quarter, I think we spoke about 54% as a gross to net. It's a good calibration of what you can expect. I mean, that's somewhere... It's fairly stable. Obviously, Q1 will be very different, and then Q2, Q3, and Q4 will be catching up and leading to that number more or less for the year.
And then we have a question from the audience real quick.
Hi, Edmund from TIG. I had a quick question coming out of ASH, obviously, in MF, a lot of news. And then, as we kind of looked at posters and tried to figure out spleen reduction and its correlation to OS, you know, I think we could, you know, dig through the posters, and we could find some of that. But it does seem like there's a limit to symptoms. Like, you kind of hit your symptoms, no matter how much SRV you have, the symptoms kind of plateau.
So how, how are you thinking about, and how do you think the FDA is gonna think about, you know, looking at SVR and the correlation to OS, and, you know, how are you thinking about the landscape in the next few years, given Jakafi and then, and the innovation coming?
I think your question is about MorphoSys, in fact, in some way. I mean, I really cannot comment. You know, we are all in favor of... We hope it's going to get approved. It's good for it will be good for, I think, for patients. It will also be good for Jakafi because it's used in combination with Jakafi. So we are all, you know, looking at the same, hopefully, hoping for the same outcome. I don't know how the FDA will treat it. I really don't, and it's something that would be interesting to watch. In our side, we have a BET inhibitor. It has a continuous administration.
It will be probably able to move to phase 3 during the year 2024, and in some ways, the de-risking is happening, is happening as we, as we go and as other BET inhibitor are being submitted to FDA. So we'll, we'll see. I don't know how the FDA will treat it.
Hervé, jumping back into vitiligo here. On the third quarter earnings call, you noted that about 40% of scripts are coming from this indication. How do you expect that to evolve in 2024 and for the launches here to differ?
You know, it's interesting because if you think about percentage of the total coming from vitiligo, it is dependent on how fast atopic derm will be growing. And obviously, we are pushing atopic, as you know, with the new formulary status. So I think the way I look at it is saying there is a growth curve for vitiligo. It's driven by patients going to their dermatologist and very heavily by compliance with, you know, the twice a day and using one to ten tubes per year. And we are not there. I mean, so that's something that needs to improve, and I think it will. I think it's a question of education of physician, education of the patients, and it makes sense.
I mean, there is no reason not to do it, so it's for us to succeed in doing that. So we see vitiligo as a growth driver for Opzelura because if compliance is improving, or when compliance is improving, obviously you have the multiplier of all the refills that will be increasing, and we see that. We see the refill rate is increasing very much. In parallel, I think atopic derm will have its own curve, which is also growing. And, you know, depending on how well we can manage this issue of paperwork and burden on the prescriber, I think it could grow at the same rate. So in some way, I mean, I think vitiligo will end up being as large as, if not larger, than atopic dermatitis. We have said that.
Now, how fast it will get there, I frankly don't know.
In AD, is it fair to say that the majority of sales are coming from continuing patients in the sense that every year, you know, you-
No, no. No, most of the sales in AD are coming from new patients.
From new patients?
Yeah.
So you're essentially replacing and growing-
Yeah.
the patient base.
Yeah. Yeah.
And then in vitiligo, you mentioned the issue with, you know, compliance and putting it on their face, you know, repeatedly. I think your oral JAK also looked very good on the face.
Mm-hmm.
Is the thought that maybe if that works out, that could be a replacement for vitiligo?
Yeah, we can speak about povorcitinib for a minute because it is, in my mind, one of the big assets that sometimes is not fully taken into account when people are thinking about Incyte. So it's an oral, long half-life, high volume of distribution, JAK1, very selective product. So it's important because it goes to the skin, and that's why we ended up developing it in multiple skin indications. We have two phase 3s in HS. We have two phase 3s in vitiligo. So it's a fair, you know, it's an important investment for us, and we are now moving in, yeah, in prurigo nodularis. You saw the data, it's very promising. We think it's a product that has unique efficacy levels, in fact, compared to biologics or other oral products or even other JAKs in each of these indications.
We see it as best in class or best product for this type of disease for each of the three. Now it's coming relatively soon because we have those phase 3s ongoing in HS, and you can expect, you know, 2027, 2028, 2026, 2027, 2028, the same window we are all speaking about, where this povorcitinib indication will be launched. In vitiligo, the phase 3s are done in patients who have more than 5% BSA with vitiligo, where for ruxolitinib cream Opzelura, it's less than 10% BSA. There will be the 5%-10%, where in fact, there will be a choice of saying, "If you want to use a topical product, you can use Opzelura.
If you want to use a systemic appeal once a day, you can use, you can use, povorcitinib." So there will be a choice given to patients, which I think some will like one better than the other. So efficacy as you have noticed, the efficacy level is very, very good in the phase 2 that have been published.
Interesting. Okay, when might you provide revenue guidance for Opzelura, and then speak to the future indications that come in, the contribution from pediatric AD, and when that might play out, and how you think about the peak opportunity here?
So the pediatric AD submission is planned for midyear, and because we are waiting, there is a follow-up on one of the maximum use studies that has to be 12 months follow-up. So the study is already published. You have seen it, it's fantastic. The efficacy level are very good. The itch relief for kids, which is very important because itch, scratching, bleeding is the cycle of atopic dermatitis for children, and that's something where I think we will it will have a meaningful impact. And there are 2 million, you know, people in the U.S. that could be eligible, more or less, for this product in atopic dermatitis. So it will add to our current franchise. And we... You know, we guided long-term atopic dermatitis at $1.5 billion, which we still believe will be the case, you know, at peak.
So not tomorrow morning, but it will take time to get there. But we see it as the calibration of what this could be for Opzelura. We have not guided long-term on vitiligo, in part because we don't know, and there is this big unknown of, you know, how many tubes per year, per patient will be used in practice, and we are still waiting to stabilize that number to see how it's evolving before we can do that.
Just in the last few minutes here, two questions. Anything you want to highlight from the pipeline that we haven't discussed, be it the oral PD-1 program or anything else? And then what do you think will be kind of key value drivers that play out in 2024?
Okay. So I mean, on the pipeline, so we spoke about the MPN, so axatilimab coming soon in GVHD. The MPN, we spoke about that ALK-2 CALR V617F and once a day. So that's clear. Povorcitinib for dermatology, so that's clear, on top of all the new indication we have for Opzelura. And in the cancer, I think the two projects I could... We have a number of early project that, as I said, I believe are very promising, very interesting scientifically, but are very early. The ones that are more advanced are oral PD-1 and the CDK2, where it seems to be a good target, where we are seeing good things happening. So that's the two project now in Onco, beyond everything else I described, that I would look at.
The oral PD-1 is really interesting because we can combine oral-oral—we can do oral-oral combination with KRAS, with VEGF. We are also doing combination with CTLA-4, with the goal of improving the ability to stop overstimulation of the immune system because of the short half-life of our product compared to injectable antibodies. So there is, there is good progress being made there. And I think when we get clarity on exactly which indication we'll be pursuing with this product, it will be visible that it has a high potential. You know, it's not like going to replace, obviously, all the all the IV PD-1, but it has some space where it could be used preferably to the injectable. So that's important.
And then just the catalyst or the event path for you over the year that you're focused on?
For 2024, I mean, we have all of the progress on the pipeline we spoke about, the key, the key project. There is, obviously, the submission of axatilimab is important because that will be a new product in GVHD, the progress of Opzelura, and, as I said, I mean, the expansion of the, of Jakafi, specifically in PV, and that's what's sort of, you know, driving our short-term strategies or tactics.
Great. Well, with that, thank you so much, Hervé. Really, thanks so much for joining us.
No, thank you. Good luck. Hope you get better, huh?
Thank you. Appreciate it. Thanks for that.