Needs to happen to successfully overcome that cliff and have long-term growth in this industry.
Yeah, and I said this during the first earnings call. I definitely look at this as about more than building or filling a revenue gap. You're literally trying to build a product line that can produce these sort of durable cash flows. The core business is important. I never take it for granted. Right now, ex-Jakafi, that's OPZELURA, Niktimvo, a nd Monjuvi, namely. Fortunately, we're having a very good year. I think the fundamentals of the business are very strong. There should be no surprises in the third and fourth quarter. I like the way that business looks. I'd point out that I think the launch in Niktimvo is very encouraging. It's a launch, and it can be unpredictable. Our third and fourth quarter numbers, I expect to be positive. The next piece of the puzzle is the late-stage pipeline. I call it the mid-to-late stage pipeline.
There, we're focused on povorcitinib. We'll submit an NDA for that in the first half of 2026. Then INCB989, you know, the key there is to convert phase I results into a phase III program and FDA approval, and then a really successful product. We have an earlier- stage pipeline with select solid tumor programs in pancreatic, ovarian, and colorectal. Those programs become clear as data are available at the end of the year. When you step way back from this, I think a priority for us internally, and I think Pablo and I spend most of our time on this, is we have an asymmetrical advantage or differentiated knowledge and capabilities in MPNs.
If you look at companies of our size, scale, and stage that are successful, often, you probably know this as well as I do, they have super focus in a specialized high-value segment and usually win through serial innovation. What does that mean at Incyte? We have five different targeted therapies at various stages of development for MF, PV, and ET. Not all of them are going to work, but not all of them have to work. You get two or three of those targeted therapies to market in that space, you could 2x Jakafi in a success scenario. Even if I'm half right, being successful with INCB989, V617F, the bi-specific, maybe bet, we have an undisclosed discovery program, is a priority for the company. We know that space better than anybody. We can be first, only, early, and defend it.
I think that's key to sort of building this growth profile into the next decade.
Okay, very clear in terms of your internal capital allocation and resourcing where things are going to go. Thank you. What about external development and resource?
Yeah, it's a good question. It's got to play a part in our growth strategy. That's true at any company. I think it'll become more prominent at Incyte. There are very few, as you know, and I said this earlier, there are very few asymmetrical opportunities out there. De-risked assets can be quite expensive, and it leaves little return for the buyer. We will think broadly about business development. The key to success here is high throughput. You see a lot of things, create a framework, and then when you see something that makes sense, you're going to be prepared to act. We'll focus primarily on hematology and immunology, not looking to borrow a lot of unbounded downside risk, and not rushing to do anything. As our pipeline continues to sort of advance and programs become more transparent and less opaque, that'll sort of instruct how we approach business development.
Acutely aware of how easy it is to turn a dollar into $0.50 or less, but we'll be bringing in a new Head of Corporate Development in the third week of September and make sure that we see a lot of opportunities. It requires, as you know, sort of this contradictory combination of patience and aggression, but you can only be ready to act if you see a lot of stuff.
Okay. That framework, it sounds like, isn't quite yet in place, but that is being recreated within itself.
I think it's going to be accelerated. There's a good business development group, solid people, a lot of commercial assessment group, just going to bring in a new Head.
Okay.
I have one follow-up question on that. You talked before this morning about how it is too expensive to get fully de-risked assets, potentially that premium that you have to pay, but then also you don't want to take the risk. What's the sweet spot?
You know it when you see it. Look, I'd like to be 100% cautious versus 1% incautious. It's just like in R&D. Business development is no different. You have to call balls and strikes and understand what you think the intrinsic value of a business is in your hands. When you configure the portfolio, you're looking for a balance between some high-risk and high-reward assets and some things that are, or kind of sure bets. I think when it comes to business development, we're going to focus on things that are mid to late stage, near revenue in areas that we know so that we can actually assess the risk. Operationally, it should be seamlessly integrated. I think in hematology and immunology, we can do that.
Maybe coming back to your internal resource allocation, we understand the focus on MPNs, team, et cetera, core business strength. How do we think about the overall spending levels? Historically, Incyte has spent aggressively in R&D. Pablo, we can bring you into this discussion too. I'm sure you guys discuss and debate what the appropriate level of resourcing is for the internal pipeline.
Yeah, it's a good question. We are right now in the process of looking at operating expenses across the board. I think it's not because we're getting ready for 2029, it's because that's just good corporate hygiene. I don't think you can hard- code R&D as a percentage of revenue, but clearly that percentage has got to come down. It comes down one of two ways. Sales go up and you get leverage, or if sales don't go up, you have to start reprioritizing and looking very carefully at the investment. We're at a point right now where we're looking to generate real product flow, which is an unforgiving pressure, not just at Incyte, but at any company. R&D prioritization is a daily responsibility. In terms of SG&A, got to look at it the same way. Every investment has got to be looked at carefully.
As we get into 2026 and provide guidance, we'll provide our rationale for whatever our OpEx guidance is going to be. As we migrate through the 2027, 2028, 2029 period, what I can tell you is it's going to be looked at very, very carefully. Whatever we come out with, we'll explain it.
Anything you want to add?
I think the way I look at it, when people ask about what's the right number for R&D, I don't ever think there is a specific answer for that. I think it depends on a point in time. It depends on your pipeline. It depends what you're trying to address. I can tell you, Eric, in the past two years, we terminated 15 programs, including ALK2, OLPL1, Like 3, Like 3 bispecific, TIM3. These were all clinical programs, plus a number of earlier stage programs that we had not disclosed. We're going to continue to have that discipline and probably, you know, get a little bit either raise the bar a little bit because we have a lot of programs, many of which I think are very interesting. I'm sure we'll talk about it in a few minutes.
We're going to look at every program to see, can this address an existing medical need? And two, does it have a positive return on investment under a different set of scenarios? If it clears those two things, we're going to try to fund it. If it doesn't, we're going to terminate it. For that, we're constantly looking. It's not that we run a process at a specific point in time in the year. We're constantly looking at these programs, looking at the competitive landscape, and addressing those two questions. Is there still a need that we can address? Do we have a path to have a good return on investment? If the answer is yes, we go. If the answer is no, we stop.
Okay. Let's at least briefly touch on the commercial side of the business. I know we want to spend a fair bit of time on the pipeline where there's a ton of investor interest these days. Before we get there, just on the MPN franchise and Jakafi in particular, how do you think about preserving value beyond 2029? I think we all see the great commercial trajectory that you're on right now through probably 2029. What are your thoughts post patent exclusivity?
Yeah, obviously the best way to preserve value in the MPN franchise is INCB989 and the other targeted therapies. As it relates to Jakafi XR, we'll resubmit to the FDA at the end of the year. Look, XR conversions fit into sort of a zip code, as you know. You could sort of think about it on the low end of 10%, or you could, I would think about the high end of like 30%. Take the midpoint of 20%, where you're able to maintain, you know, $500 million- $750 million in revenue. That would be it working. Okay. Obviously the payer environment is constantly evolving. We have several years where we can introduce a once-a-day Jakafi, and so it's a part of the formula, but obviously not a major part of the formula.
I think I'm very sober about how XR strategies work today as opposed to if you want to rewind 10 years ago. That's how we think about it right now.
How do you think about the OPZELURA f ranchise providing value? I know you got a PDUFA date this month even coming up. Let's talk about pediatric AD, but also just more broadly how big a nut this provides you in terms of keeping revenue.
Yeah, if you look at the current growth rate in the United States, and I'm just talking about AD and vitiligo, and you can throw pediatric in there, which I think is a safety signal, you know, a positive safety signal, and you look at what we're doing in Europe, this business over the next five years should grow at about a 10% CAGR, which means you're almost 2x, roughly 2x the business over the next five years. That would be OPZELURA working. We're going to face in Europe, we're going to be launching it in AD for moderate AD. We did $120 million in Europe with vitiligo, and I'd expect AD could be 2x that. All right. That's going to be, if you bridge from $650 million to call it $1 billion, $1.2 billion, that's one piece of it.
Of course, in the United States, most of the growth in the topical AD market is coming from migration of topical corticosteroids to non-steroidal branded topicals. That topical corticosteroid market is very, very large, and we're not the only ones benefiting from it. There are other non-steroidal topicals out there. I think between those two pieces, we have a 2x story here, and we got to keep it on track. It's a daily job. I think the numbers for the third and fourth quarter are going to be right in line with our guidance. We may get an indication for HS, which would be an incremental driver, but I think with AD and vitiligo, that's what we're thinking about.
Okay. The other product that you have that's doing quite well, Niktimvo. You already mentioned, Bill, that you're expecting better sales in the second half. How has your view on the overall size of this opportunity changed?
I think that in third line plus, you have [Resurrex] doing $500 million. In an order of entry analysis, you'd say you do somewhere south of that, maybe not much south, but call it $300 million- $500 million if you keep this business on the current trajectory. I always sort of point out, and you know this, product launches are very unpredictable. One quarter they look good and the next quarter they don't. We're still very much in the early innings here. I think the key to success with Niktmvo long term, when you think about the size of the product, will be the sub-Q and data in combination with a steroid or with Jakafi, which would move you into second line or earlier. Those studies are being done right now. We have to see the data.
I will tell you the response to therapy is really, when you talk to BNT centers, high response rates, it's working across multiple organs. Persistency with the drug is good. We're off to a good start. I think long term, sub-Q and the two indications, and all of a sudden this becomes a very relevant part of that next decade growth profile.
Okay. Thank you.
Could you remind us when we're going to see some of that data of moving earlier line? Do you think that an NCCN listing would be possible before approval?
It's a good question. In terms of the timing of the combination studies, I believe we're looking at the end of 2026, early 2027 for both the combination with Jakafi and with the steroid.
Yeah, we may get safety data with Jakafi sooner than that. We don't think that's going to lead to a compendial listing or to NCCN guidelines, but it's certainly, if you know transplanters, I think that once the safety data with the combination with Jakafi are out, there might start to be increased utilization there. Remember, chronic graft-associated disease, people tend to think about, we all tend to think about this like lines of therapy in oncology, right? First, second, third, PFS goes down, duration of therapy goes down, very structured. It's not the way it works in chronic graft-associated disease. Almost everybody gets started on steroids. Patients are started, then they're moved on and off different medications over time as they respond, then responses cease for a particular medication. Patients are reintroduced based on prior experience with it. It's a pretty dynamic treatment flow.
Fortunately, most of these patients are cured of their primary disease, so they have to manage this condition for a long period of time. Duration of therapy tends to be much longer. We think the combination with Jakafi is critical because honestly, talking to KOLs, when we got the AGAVE data, they asked us to please try to find a steroid-free regimen for patients with chronic graft-associated disease. That's the impetus behind that, which is why we want to have the safety data to show as soon as possible.
Let's get into the pipeline.
Let's do it.
Where do you want to start?
I'm happy to start anywhere. These are all my children. I love them equally.
I think everyone in the audience wants to start with mCALR. Let's start with that.
Why don't you just briefly recap why this is an exciting molecule? I think most of us see it as such. Maybe more importantly, preview what we're going to see in myelofibrosis later this year.
Sure. I think the reason it'll be exciting with INCB989 is the first targeted therapy for MPNs, which is a broad group of diseases, in this case, mCALR specifically for about 25% of the patients with essential thrombocythemia and 35% of the patients with myelofibrosis. The first targeted therapy. When you look at the evolution of treatment in malignant hematology over the last 20 years, when targeted therapies work, they take over specific markets. That's been demonstrated over and over again, over the past couple of decades. We presented over the past few years the clear thesis why we thought this was a well-differentiated therapy. We presented a lot of preclinical models that we developed in-house that showed, that made a number of predictions as to what the therapy would do in patients. Those were that it would selectively suppress the malignant clone in patients with myeloproliferative neoplasms.
That would lead to improved outcomes, which are different for different diagnoses, ET and MF. The predictions were made over and over based on preclinical data. At EHA, a couple of months ago, we showed clinical data for the first time. I think it's fair to say that those predictions turned out to be true in the ET data set. INCB989 was safe. There were minimal side effects. There were questions about some aspects that we can discuss. Fundamentally, all the patients but one at that time stayed on therapy. Only one had an adverse event, which was unrelated to the drug. Two, it normalized platelets. I think there's a very important distinction between reducing platelets and normalizing platelets. You can reduce platelets with any cytotoxic. You reduce platelets, right? You kill malignant clones in the bone marrow. Platelets go down, all of them.
What INCB989 does uniquely is it normalizes platelets. You start INCB989, platelets drop, and they stop dropping when they get to the normal level. What that tells you is you're suppressing the malignant megakaryocytes, but not touching the normal ones. Your platelet count stays normal. It was well tolerated over extended periods of time. Importantly, you reduce the allele burden in those patients. Even more importantly, when you look at the CALR positive megakaryocytes in the bone marrow, that is the factory of malignant cells in ET, it dramatically reduced it. We have data in only a handful of patients, but consistently in those patients, we show that it does that. This tells you, number one, the drug affects clinically valid endpoints, platelet normalization, and over time, that should lead to thrombotic event reduction.
Number two, it has the ability to potentially change the natural history of the disease by specifically suppressing the malignant clone. That's what we know today. As Eric mentioned, we're going to have more data before the end of the year. We're going to update the ET data. We're going to present a broader translational picture. We're going to show for the first time data in patients with myelofibrosis that will include both single-agent data and combination with Jakafi. We believe it's really important to convey the picture of what it does as a single agent on traditional endpoints. Again, in MF, that would be symptoms, spleen, anemia, as well as the same translational endpoints that we showed in ET, VAF reduction, and malignant megakaryocyte reduction. The combination with Jakafi is important.
Jakafi, imperfect as it is, improves symptoms, shrinks spleens, and improves survival in first-line MF patients with intermediate or high-risk disease. The combination with Jakafi is an important part of the development plan for INCB989, which is not to say that single-agent activity is not important. We recognize that, and we intend to show that data as well.
That's a great summary. Tell us about the regulatory framework here. I mean, in some ways, you've got a modern-day targeted innovative disease-modifying therapy, but the regulators have created a system that forces you into kind of an old-school framework for development.
Yeah, it's interesting, right? Because we, Incyte, created the system. I mean, the TSS, as we are, endpoint was invented by Incyte well before Bill or I were around to get Jakafi approved because it was noted that Jakafi, because of the broad anti-inflammatory effect, improves symptoms very rapidly and spleen shrinks very well. Although I would add, the spleen reduction, as we are 35%, first-line patients with Jakafi is between 30% and 40%. COMFORT-I, COMFORT-II, and the placebo-controlled arm. There's a lot of room for improvement there. TSS has been proven harder to improve upon, as you all know. The conversation with FDA will be, we have a different drug with a different mechanism. We recognize the importance of those symptoms.
Let's try to take a broader look, not to move those away, but to maybe add to those in a composite endpoint, taking advantage of what INCB989 does in affecting the burden of the disease. Every patient on Jakafi progresses. Average duration of therapy is 20 months- 24 months. Every patient with myelofibrosis today dies of progressive myelofibrosis that either becomes spent because of fibrosis in the marrow or transforms to leukemia. We're trying to change that with INCB989. We want to have a collaborative discussion with FDA here how we can do that. I think in essential thrombocythemia it's more straightforward. I think it's a hematologic response. We would like to add VAF. We would like to add some translational endpoints to that because we think are important for prescribers to know. We'll see how the conversation goes with FDA.
If you were to have a composite endpoint in myelofibrosis that also included VAF, I guess it just depends on the weighting then, because Jakafi is not going to have that much of an impact on VAF in six months.
Yeah, we don't really, I don't think so. Look, the data we have with Jakafi is from the COMFORT studies and the V617F data, and the impact was minimal. I mean, it took a long, long time to see minimal reductions. That's part of the story. Are symptoms the only way to look at this, or does anemia matter? We do know that some patients actually need to be transfused to stay on Jakafi full dose because of anemia. Maybe that's something that if INCB989 does what we expect, which is over time reduces the size of the malignant clone and gives more, quote unquote, space to the benign clone to expand, that could help with the anemia over time. That could be part of the story. I honestly don't have it yet in my head. Emerging data over the next few months will help us crystallize it.
One more on the anemia. I guess one potential on-target issue could be worsening of anemia. Did you see any worsening of anemia in the ET patients that you presented already?
Look, I don't think INCB989 is a very selective drug. If you don't have both a mutation, a mutated CALR protein, and a TPO receptor, the drug doesn't hit the cells. Obviously, when you do a phase I study in patients with ET, many of whom were already on a cytoreductive therapy, you're going to see anemia. Is that related to IINCB989? At this point, I find it hard to believe. I think time will tell. I'm not concerned about the safety profile of INCB989 at this point.
How do we think about a bi-specific approach here relative to your naked antibody?
Yeah, we have a bi-specific program. We designed that specifically to work in, you know, as good as INCB989 is, it may not cure everybody. Patients that escaped INCB989, we designed a bi-specific with a mutant CALR arm that binds to a different epitope. That's the idea. Either patients that need something more potent for whatever reason, or that did not respond to INCB989 for whatever reason. That's the plan with the bi-specific. If you look at the essential thrombocythemia data, I think in essential thrombocythemia, it doesn't seem to, there's going to be room for bi-specific based on the data that we've seen so far. I think in certain patients with myelofibrosis, that might be different. We'll find out when we see the data. I think it's very different from the approach our competitors are taking that basically binds to the same epitope.
I think it will be tricky to use it in patients that are resistant. Now, in first-line myelofibrosis, if you combine with Jakafi, remember Jakafi reduces T-cell function. The combination of bi-specific, a T-cell engager with a T-cell suppressor may not be the best idea. I'm not sure there's going to be room for the bi-specific in first-line myelofibrosis.
We've only got two more minutes. I think we can only do one more drug.
Okay.
You pick.
Povo? Okay. I mean, I think the street has a kind of lackluster view toward your data. Obviously, HS is a very competitive marketplace. Why are we wrong?
Look, I think some people are right, some people are wrong out there. I'm povo. Let's be clear. What do we have, right? We have the first oral therapy that showed efficacy, positive two front, positive phase III trials. Let's also agree that the endpoints that the trials were used, the primary endpoints, were artificial endpoints created for regulatory purposes. There's nothing that tells a patient whether you are between high score 50 or 75, and patients are counting their nodules to see if they feel better. They should feel better because they have fewer nodules. Patients have pain, patients have flares, and patients have highly inflammatory lesions like draining tunnels. Those three measures within povo are where the true nature of the povo benefit resides. Dramatic and fast improvement in pain, reduction in flares, and improvement of high inflammatory lesions.
We'll provide an update in the near future about some of these endpoints in more detail for you. All that with an oral, the first oral in HS. I think that's a value. Are some patients going to start with the biologics? That's probably true. Other patients will prefer to start with an oral. Either way, I think over time, I just don't see a market where people go from one IL-17 to another to another to another, Eric. I think you switch mechanisms. All these drugs are going to stop working. None are going to cure HS. This is not a funnel like oncology. It's more like a rectangle. People don't tend to die. They have a chronic disease they have to manage for a lifetime. I think there's going to be room for Povo to be an important drug in this disease.
Strong arguments, Pablo. Bill, Pablo, we're out of time. Thank you very much. We could go on forever, but we just have to cut it short. Thanks everyone for joining, and we'll get ready for our next session.
All right.
Thank you.
That was a pleasure.
Thank you. Always.
Great to meet you, Bill.
Great to meet you, too.