Incyte - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered strong top-line growth and broad commercial momentum: total GAAP revenues rose to $1.053B (+20% y/y) and net product revenues to $922M (+26% y/y), driven by Jakafi ($709M, +24% y/y), Opzelura ($119M, +38% y/y), and the U.S. launch of Niktimvo ($14M).
• Results beat Wall Street consensus: revenue beat by ~$55M and normalized EPS beat by ~$0.13; EBITDA was below consensus. Management raised full-year Jakafi guidance to $2.95–$3.00B (from $2.925–$2.975B), with all other guidance items unchanged.
• Operating leverage improved: GAAP operating income more than doubled to $205M (+123% y/y); non‑GAAP operating income rose to $284M (+76% y/y), as revenue outpaced OpEx growth.
• Near‑term stock catalysts: raised Jakafi guidance; positive CSU proof‑of‑concept and 18‑week HS data for povorcitinib; strong early Niktimvo adoption; minimal tariff risk due to dual‑sourcing manufacturing strategy.

What Went Well and What Went Wrong

• What Went Well

  • Jakafi strength and guidance raise: $709M (+24% y/y), supported by ~10% paid demand growth, favorability from Medicare Part D redesign, and less de‑stocking; full‑year guidance lifted to $2.95–$3.00B. “We are raising the full year ‘25 net product revenue guidance to a new range of $2.95 billion to $3 billion” (CEO).
  • Opzelura momentum despite Q1 seasonality: $119M (+38% y/y), with U.S. paid demand +24% y/y and growing ex‑U.S. contribution (Germany, France; launches in Italy, Spain). Coverage improved to preferred on 2 of 3 national PBMs, raising commercial coverage from 86% to 94%.
  • Niktimvo launch traction: $14M in first two months; 95% of top BMT centers have used, and 70% of centers have ordered—indicating broad early uptake and pathway to earlier‑line use.

• What Went Wrong

  • EBITDA came in below consensus despite strong operating income, suggesting higher near‑term spend and/or mix effects versus expectations (see Estimates Context table).
  • Opzelura U.S. channel inventory reduced in Q1 (typical seasonal reset), tempering net revenue versus paid demand growth; management flagged Q1 seasonality will continue.
  • Cost lines up modestly: GAAP COGS +20% y/y on royalty expense; SG&A +8% y/y on consumer marketing timing; R&D +2% y/y as late‑stage programs advance.

Transcript

Operator (participant)

Gre`etings and welcome to the Incyte Q1 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question-and-answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. In the interest of time, we ask that you please limit yourselves to one question and then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Greg Shertzer, Investor Relations. Please go ahead, Greg.

Greg Shertzer (Head of Investor Relations)

Thank you, Kevin. Good morning and welcome to Incyte's Q1 2025 Earnings Conference Call. Before we begin, I encourage everyone to go to the Investor section of our website to find the press release, related financial tables, and slides that follow today's discussion. On today's call, I'm joined by Hervé, Pablo, and Christiana, who will deliver our prepared remarks. Matteo, Mohamed, and Steven will also be available for the Q&A. I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. I'll now hand the call over to Hervé.

Hervé Hoppenot (CEO)

Thank you, Greg, and good morning, everyone. The Q1 of 2025 was very important for Incyte, not only because of the good performance of the commercial portfolio, but mostly because Q1 2025 puts us on a great trajectory for long-term growth with the continuous expansion of Opzelura, the successful launch of Niktimvo, and the successes of the pivotal studies in HS and proof of concept study in CSU. The financial performance was very strong, with growth above 20% in both product and total revenues. Our cash position at the end of the quarter reached $2.4 billion. On the commercial side, Niktimvo's successful launch is one of the four planned launches for Incyte in 2025 in the US.

On the R&D front, we report significant progress so far this year, with several key data: positive readout XR bioequivalent for ruxolitinib, proof of concept data in chronic spontaneous urticaria for Povo, and phase three result for ruxolitinib cream in prurigo nodularis and Povorcitinib in HS. In Q1, product revenue grew 26%, with total revenues increasing 20% year-over-year to $1.05 billion. This growth was driven by the ongoing demand for Jakafi and Opzelura, and the initial launch of Niktimvo in third-line chronic GVHD. Moving to slide seven and the Q1 commercial performance for Jakafi, Jakafi net product revenue in the Q1 grew 24% year-over-year to $709 million. Total patients increased 10% when compared to the same quarter in 2024.

Due to strong demand and the expected continued growth of Jakafi, we are raising the full year 2025 net product revenue guidance to a new range of $2.95 billion to 3 billion. Turning to slide eight and looking at Jakafi weekly dispenses by indication during 2023, 2024, and the Q1 of 2025, as you can see, unit growth remains robust across all three indications. Myelofibrosis showed growth again this quarter, while the most significant increase was seen in polycythemia vera. We expect PV to become the largest contributor for Jakafi over time, supported by the data from the MAJIC-PV study, which underscores the benefit of early intervention with Jakafi and its impact on thrombosis-free survival.

Moving to Opzelura on slide nine, total Opzelura net product revenue in the Q1 was $119 million, up 38% when compared to the same quarter last year, driven by continued growth in the US, increased contribution from Germany and France, and the more recent launches in Italy and Spain. In the US, the annual prescription trends for 2024 and the Q1 of 2025, as shown on the right of slide nine, reflect continued growth of Opzelura for both atopic dermatitis and vitiligo. Effective March 1, Optum added Opzelura to their preferred formulary, which means Opzelura is now preferred on two out of the three big PBM national formularies. This change has enhanced our commercial coverage from 86% to 94%. On slide ten, and our newest commercial product, Niktimvo. Niktimvo is the seventh product commercialized directly by Incyte after Jakafi, Opzelura, Iclusig, Pemazyre, Monjuvi, and Zynyz.

This novel medicine, launched at the end of January for patients with third-line chronic graft versus host disease, addresses an important medical need, and it has significant long-term growth potential. After two months of commercialization, Niktimvo net product revenues in the Q1 were $14 million, driven by high patient need and strong commercial execution, along with our partner, Syndax. We are seeing positive early launch metrics with widespread product awareness and interest. 95% of top BMT centers have used Niktimvo, and 70% of all BMT centers have ordered. Niktimvo is the first anti-CSF1R antibody approved to target the inflammation and fibrosis associated with chronic GVHD, and we are already seeing the impact it is having for patients, giving us increased optimism for the long-term potential of this product as it is moving to earlier lines of treatment.

On slide eleven, a reminder that 2025 will be a pivotal year for Incyte, with numerous defining catalysts set to create a significant inflection point. The launch of Niktimvo has already shown strong initial success, and we are preparing for three additional launches this year, collectively offering important near-term revenue potential. We plan to initiate at least three phase three studies, and we anticipate that seven early-stage programs will generate informative data. These developments have the potential to transform our company. Finally, before I turn the call to Christiana, I would like to address the topic of tariffs. Seven years ago, we started a strategy to establish dual sourcing for key Incyte products with the goal of having a backup FDA or EMA-approved facility in case of technical issues.

This approach is giving us today flexibility for key products to manufacture in the US for the US market and from Europe for ex-US. Therefore, we expect the impact to Incyte of any potential tariffs on pharmaceuticals to be minimal. Finally, our exposure to China is now limited to some starting material for some of our drugs, and we currently hold inventory of starting material to support our forecasted supply needs over a multi-year period and have alternative sources of supply of starting material that we could consider moving to if needed. Now, I will hand over the call to Christiana for the financial update.

Christiana Stamoulis (CFO)

Thank you, Hervé, and good morning. In the Q1 of 2025, we delivered total revenues of $1.05 billion, up 20% versus the same period last year. Total product revenues of $922 million in the Q1 represent an increase of 26% year-over-year, driven by strong demand growth for Jakafi and Opzelura, as well as initial contribution from the commercial launch of Niktimvo during the quarter. Turning to Jakafi on slide 16, Jakafi net product revenue was $709 million for the Q1, representing 24% growth versus the Q1 of 2024. Pay demand increased 10% versus the prior year period, reflecting continued growth in all indications.

Net product revenue growth also reflects a positive gross-to-net impact from the removal of the Part D coverage gap liability under the Inflation Reduction Act, and Incyte's phased-in participation in the Part D initial and catastrophic phases, partially offset by growth in 340B. As a result of Jakafi qualifying for the small biotech exception, Incyte's participation in the Part D coverage is limited to 1% in both the initial and catastrophic phases in 2025. We expect this gross-to-net favorability for Part D to be limited to Q1, and for the remaining quarters in 2025, we expect the Part D coverage liability to be in line with 2024. Lastly, the year-over-year comparison of net product revenue includes a 7% positive impact due to less destocking in the Q1 of 2025 versus the Q1 of 2024. At the end of Q1 2025, Jakafi inventory levels were within normal range.

Turning now to Opzelura on slide 17, net product revenue for the Q1 was $119 million, representing a 38% increase year-over-year. US net product revenue of $95 million was up 20% year-over-year, driven by a 24% increase in pay demand, partially offset by a reduction in channel inventory. Channel inventory levels ended the quarter within normal range. Ex-US net product revenues of $23 million were driven by continued uptake in Germany and France, as well as the recent launches in Italy and Spain. Turning to slide 18, as in prior years, Opzelura Q1 results reflect the typical seasonality we see in the Q1 of each year, driven by the reset of insurance plan annual deductibles in the US, as well as holidays and other events that negatively impact scripts.

Turning now to other hematology-oncology products on slide 19, net product revenues for the Q1 were $94 million, representing a 30% increase year-over-year. This is primarily driven by the commercial launch of Niktimvo during the Q1 of 2024, which contributed $14 million in net product sales. Growth from Monjuvi in the Q1 of the year primarily reflects a full quarter of Incyte recording net product revenues in the US versus two months of net product revenues in 2023, as a result of the acquisition of the exclusive US rights to Monjuvi that closed in February 2023. Moving on to slide 20 and our operating expenses, total GAAP R&D expenses were $437 million for the Q1, an increase of 2% year-over-year, driven by continued investment in our late-stage development assets, offset by the timing of certain expenses, which favorably impacted Q1 2024.

Moving to SG&A, total GAAP SG&A expenses were $326 million for the Q1, representing an 8% year-over-year increase, primarily driven by timing of consumer marketing expenses and certain other expenses. Finally, total ongoing operating expenses in the Q1 of 2025 increased 6% year-over-year, compared to a 20% increase in revenues during the same period, leading to further increase in operating leverage and margins. Moving on to our guidance for 2025, we are increasing our full year guidance for Jakafi from a range of $2.925 to 2.975 billion to a new range of $2.95 to 3 billion. We are reiterating our full year guidance for Opzelura, our other hematology-oncology products, COGS, R&D, and SG&A. For R&D, our guidance excludes the impact of the recent deal we signed with Genesis or similar or similar, which is expected to add $15 million to our full year R&D spend. I'll now turn the call to Pablo for an R&D update.

Pablo Cagnoni (EVP and Head of R&D)

Thank you, Christiana, and good morning, everyone. As we highlighted a year ago and we summarized on this slide, we remain on track to deliver more than 10 high-impact launches by 2030 from programs across the portfolio. In the next few slides, I would like to provide an update on two of these programs. The phase two proof-of-concept study of Povorcitinib in patients with chronic spontaneous urticaria, and an update on the phase three results for Povorcitinib in patients with hidradenitis suppurativa. We're delighted to announce the positive top-line results for the phase two study evaluating Povorcitinib in patients with chronic spontaneous urticaria. The study met the primary endpoint at the 75 mg dose of change from baseline in the urticaria activity score summed over seven days, or UAS7, at week 12. Treatment with Povorcitinib was well tolerated, with no new safety signals observed.

These results open the door to a potentially new treatment option for over 300,000 patients with CSU who are inadequately controlled on antihistamines. We're pleased with these proof-of-concept results, which will be presented at an upcoming medical conference, and we will be engaging with regulatory agencies to determine next steps as we plan a pivotal study for Povorcitinib in patients with CSU. Just a few weeks ago, we presented the results of the phase three studies STOP-HS1 and STOP-HS2 evaluating Povorcitinib in patients with moderate to severe HS. The studies showed statistically significant and clinically meaningful improvements in high score at both doses in both studies. Slides 25 and 26 summarize updated results through 18 weeks of follow-up in these two studies. As a reminder, patients on placebo were allowed to crossover at week 12 and were randomized to either 45 or 75 milligrams of Povorcitinib.

As illustrated in the chart, for those patients who started on Povorcitinib in STOP-HS1, the number of patients achieving high score increased from 176 at week 12 to 203 by week 18. Among the patients who crossed over from placebo to receive either Povorcitinib 45 or 75 milligrams, high score at week 18 improved from 28.6% on placebo to 57.1% and 57.8%, respectively. Importantly, for the crossover patients, the number of responders increased from 58 to 100 in just six weeks, demonstrating once again the rapid onset of benefit produced by Povorcitinib in patients with HS. Similar findings are observed in STOP-HS1 summarized on this slide. For those patients who started on Povorcitinib, the number and proportion of patients achieving high score continues to increase from 164 patients at week 12 to 177 patients at week 18.

Among the patients who crossed over from placebo to receive either Povorcitinib 45 or 75 milligrams, high score at week 18 improved from 29.7% on placebo to 58% and 55.2%, respectively, while the number of those achieving high score increased from 60 to 99. This week 18 results from both STOP-HS1 and STOP-HS2 clearly show that the response rates in the Povorcitinib arms continue to increase over time and, perhaps more importantly, demonstrate a doubling of the responses in patients initially randomized to placebo after they were switched to either Povorcitinib dose level. We previously reported a greater differential efficacy in favor of Povorcitinib in patients previously treated with biologics, with an average placebo-adjusted difference in high score of 19.1% for Povorcitinib 45 milligrams and 18.3% for Povorcitinib 75 milligrams in the pooled analysis for STOP-HS1 and STOP-HS2.

Its slides 27 and 28 show that this is true regardless of the type of biologic being considered, either anti-TNF or anti-IL-17 agents. Shown on this slide is a high score by prior anti-TNF therapy with a placebo-subtracted high score of 13% to 23% in the different arms of these two studies. On slide 28, we see the high score by prior anti-IL-17 therapy with a placebo-subtracted high score of 5% to 25% in favor of Povorcitinib-treated patients. In all, the totality of the data presented clearly demonstrates that patients with HS have the potential to benefit from Povorcitinib therapy regardless of whether they have received treatment with a biologic and regardless of the type of biologic they received. We're pleased by the positive data that Povorcitinib continues to generate.

With positive phase three data for HS, positive phase two proof-of-concept data previously presented for vitiligo, prurigo nodularis, and now CSU, Povorcitinib solidifies itself as a potential new medicine across several indications in development. We're executing a broad development plan and anticipate additional proof-of-concept data for asthma to be available in the second half of 2025. We continue to evaluate additional opportunities for Povorcitinib and plan to share these updates in the second half of 2025. As mentioned by Hervé, 2025 will be a pivotal year for Incyte, with over 18 key milestones, including four new product launches, four pivotal trial readouts, at least three phase three study initiations, and seven proof-of-concept study results.

As you can see on slide 32, we have achieved several of these milestones with the launch of Niktimvo, bioequivalency data for ruxolitinib extended release, phase three data for ruxolitinib cream in prurigo nodularis, and Povorcitinib in hidradenitis suppurativa, as well as the phase two proof-of-concept data for CSU. We look forward to sharing additional updates on these milestones over the course of 2025. I will now hand the call over to Hervé for closing remarks.

Hervé Hoppenot (CEO)

Yes, thank you. Before we close the presentation, following Pablo's update on the Povo data in HS, I would like to comment on the HS market in 2027 in the US when Povo will be launched. It's a fast-growing market where there are more than 100,000 diagnosed patients with moderate and severe HS who do not yet receive advanced systemic therapies. The illustration on slide 32 reflects the group of patients on systemic therapy. There are around 3,000 patients who are not eligible for injectable treatment with biologics, as research shows that 10% to 15% of eligible diagnosed HS patients are not receiving injectable therapy for practical, financial reasons or at the patient's request. Povo will be the only oral treatment approved in the pre-biologic setting, and we anticipate this segment to grow significantly in the years following the approval of Povorcitinib.

In 2027, Povorcitinib will compete for the 16,000 new biologic-eligible patients started on systemic therapies that year, in dark blue on the graph, with a competitive product profile based on an oral treatment with high high score, durable responses, and fast pain relief. The largest segment at launch in 2027 will be the group of patients in light blue on the right who have received biologic treatment, including anti-IL-17, and require a new treatment option for lack of good disease control. We estimate that group at 27,000 patients, or around one-third of a pool of 74,000 patients on biologics that year. This is equivalent to an estimate of average biologic treatment duration of three years. In this patient population, as Pablo has presented earlier, Povorcitinib efficacy profile is unique and will drive the early adoption curve.

Overall, this estimate shows that Povorcitinib will be potentially targeting 46,000 HS patients in 2027. With the longer-term data shown today for new patients, with efficacy data maintained in the post-biologic setting, we see HS as an important contributor to the total potential of Povorcitinib, with vitiligo, prurigo nodularis, and now CSU as the subsequent indication. To recap, we have delivered a very strong commercial execution in the Q1 in both oncology and in dermatology. The successful launch of Niktimvo demonstrates that there is a clear need for new treatments in GVHD, giving us optimism for the long-term potential of Niktimvo. This quarter is when we confirm that Povorcitinib will be potentially launched in 2027 for HS, with positive data on all primary endpoints in both phase 3 studies, a competitive profile in treatment-naive and post-biologic HS, and now proof-of-concept in CSU.

This result reinforced Povorcitinib potential as a multi-billion driver of future growth for our company. Our pipeline continues to advance with short-term deliverables for three additional launches in 2025, Rux XR in 2026, and good progress of the earlier project. Importantly, we have multiple upcoming milestones and catalysts remaining in 2025, which will further shape our trajectory and create additional value. Operator, that concludes our prepared remark. Please give your instruction and open the call for Q&A.

Operator (participant)

Certainly. We'll now be conducting a question-and-answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. If you'd like to remove yourself from the queue, please press star two. In the interest of time, we ask you to please ask one question, then return to the queue. Once again, that's star one to be placed in the question queue, and please ask one question, then return to the queue. Our first question today is coming from Michael Schmidt from Guggenheim. Your line is now live.

Michael Schmidt (Senior Managing Director and Equity Research Analyst for Biotechnology)

Hey, good morning. Thanks for taking my questions. I had a question on Jakafi, where PV, as you mentioned, is now the most important growth driver for the product, capturing about one-third of sales. Can you talk a bit more about your expectations for how much of that is driven going forward by new patients versus continued use of the drug by patients on therapy? Secondly, there was some recent positive announcement of phase three data of a hepcidin mimetic in PV as an add-on to standard of care. How do you expect that potential approval to impact potential use of Jakafi going forward? Thanks so much.

Mohamed Issa (SVP Commercial)

Hi, Mohamed here. Thank you for the question. Let me just address the PV growth drivers first. The team is doing a really nice job today executing on our PV strategy, educating the marketplace on the importance of treating PV earlier with Jakafi, which results in reducing the risk of thrombosis. Because of that, we're seeing actually new patient growth as well as patients continuing on therapy. The drivers for growth for us in the future will be a combination of both new patient starts as well as persistency within that. From the phase three data that you're mentioning, look, I think first and foremost, it's always good to see new treatment options available for patients. That said, the agent that you're referring to is currently being studied in combination with other agents.

We think that that's going to be used generally in combination with Jakafi and others. Jakafi, on the other hand, remains the only FDA-approved JAK inhibitor for PV after HU failures or intolerance that addresses both hematocrit and disease progression. That's a really unique profile for us that we think continues to put us in a really competitive leading position. Thanks again for the question, Michael.

Operator (participant)

Thank you. Next question today is coming from David Lebowitz from Citi. Your line is now live.

David Lebowitz (Senior Research Analyst for Biotechnology)

Thank you very much for taking my question. In terms of Povorcitinib for chronic spontaneous urticaria, ultimately, where do you see it fitting? Is this something that would be before moving to biologics such as Xolair and other therapies, but after things like the antihistamines and montelukast? Or do you see it more competing directly with the post-Xolair crowd?

Steven Stein (Chief Medical Officer)

Let me take that question. I think that, as you know, most of the patients, more than half the patients, fail not only conventional antihistamines but next-generation antihistamines and high-dose antihistamines. Those patients, we believe, will benefit from having an oral option to manage their chronic spontaneous urticaria. I think it will be both populations. I think it will be a patient preference to some extent. Some patients will prefer to try another oral, like Povorcitinib, before trying a biologic. Other patients, particularly perhaps those with high IGE, which are about half the patients, will prefer to try a biologic first. Those patients still have a very high failure rate, and they could be treated with Povorcitinib as an alternative after that. I think we will potentially address both patient populations.

Operator (participant)

Thank you. Next question is coming from Andrew Berens from Leerink Partners. Your line is now live.

Andrew Berens (Senior Managing Director, Partner and Senior Biotechnology Analyst)

Thanks, and congrats on the new Povo HS data. I know the placebo patients crossed over in this trial, but what would you have expected the control arm to do based on historical data? Are you guys going to continue following these patients beyond 18 weeks? You also suggested in the press release that there may be increased activity in naive patients crossing over from placebo. Was this the data that you shared in the presentation in patients that had received a prior biologic, or were these true naive patients?

Steven Stein (Chief Medical Officer)

Morning, Andy. A couple of points to address your questions. Yes, we will continue to follow the patients for efficacy and safety up to 52 weeks. We are not going to provide an update every few weeks, but there will be future updates on the maturity of the data, both for efficacy and safety from the two studies. I think we wanted to provide an update now because our study was analyzed at week 12, which was a little bit earlier than other studies from our competitors. We wanted to show longer follow-up from both treatment arms and, particularly important in this case, the crossover arm, which shows how quickly the placebo patients improve when they are crossed over to Povorcitinib.

I think that when it comes to naive versus biologic exposed, I think the important point is the overall, the two studies met the primary endpoint, both studies in both dose levels. That is, I think, important to remember. We wanted to give clarity on the post-biologic use because we think that, as Hervé highlighted, is one of the areas where Povorcitinib could have a very important role for patients. The clarity that it worked very well regardless of prior biologic use and regardless of the type of biologic, we thought it was an important thing to remind everyone of.

Operator (participant)

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

Tazeen Ahmad (Managing Director of Global Research)

Hi, good morning. Thanks for taking my question. I just wanted to get an update on one of your pipeline assets, namely the mCALR compound. You had guided data for this calendar year. Is that still the plan? If so, can you just give us a little bit of guidance on what level of data to expect? Thanks.

Steven Stein (Chief Medical Officer)

This is Pablo. I think you're asking about the mutant mCALR monoclonal antibody. We promised data in 2025, and we will present data this year. It will be a substantive amount of data. We have dose escalation. We're going to have a range of doses. We're going to have data in ET and data in myelofibrosis. We will present clinical endpoints as well as early data on VAF, variant allele fraction burden, over time. I think you should expect a reasonable number of patients with a range of doses that will be presented.

Operator (participant)

Thank you. Next question is coming from Salveen Richter from Goldman Sachs. Your line is now live.

Hey, great. Thank you. This is Matt on for Salveen. Maybe just a follow-up on that last question. Could you share any more details in terms of how we should assess the kind of curative efficacy potential for mCALR? And then kind of just walk us through what is the base case in terms of mono versus a Jakafi combo. If I could just on tariffs, it seems like you all are well-positioned from a manufacturing perspective. Is there anything you guys can share in terms of where IP is based and how much profit you book in the US? Thank you.

Steven Stein (Chief Medical Officer)

Let me take the first part of the question on mCALR. I think that the data for a new intervention, in this case, a mCALR anti-mCALR antibody for patients with ET and MF, obviously, we would like to change the treatment paradigm in these patients. Over time, we would like to see evidence of disease modification. That could take time, but we would like to see early on that there's a decrease in the allele burden in these patients.

That's an important part of the studies. However, the immediate benefit for patients, or in the near term, will be the classic signs and symptoms of this disease, as blood counts, symptoms, etc., both in ET and MF. What we intend to present is a comprehensive data package addressing both sides of that question, the clinical endpoints as well as allele burden reduction. Over time, we expect a sustained and more pronounced effect in these patients with continued treatment with the antibody.

Hervé Hoppenot (CEO)

On the tariff question, as I said, I mean, we have manufacturing available for each of the key products in Europe and in the US. That gives us basically an opportunity to supply the US market from the US. Therefore, there is no tariff eligibility there. Regarding IPs, the ownership of the patents for our key product is in the US.

Operator (participant)

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

Hi, everyone. This is Nevin on for Brian. Just a quick question on Opzelura. What's been the contribution of atopic derm and vitiligo to Q1 for Opzelura? How do you kind of see that moving forward? We've heard from some physicians that access to AD continues to be a hurdle. How are you currently working to improve some of the access to Opzelura and AD?

Matteo Trotta (EVP Commercial)

Yeah, the two-part question is multiauthentic. The first part on the contribution of AD versus vitiligo. Right now, we see the split to be pretty constant as both indications are growing at pretty much a similar pace. In terms of access to AD in the future, there are two components of it that we're working on. One is the formulary position that we have, particularly on the commercial plan. As Hervé mentioned before, as of March 1, we had Optum Premium moving from not covered for Opzelura to preferred position. That brings us not just two out of three major PBMs in the preferred position, but also, as Hervé mentioned, more than 90% of patients on commercial plan covered.

The other area of work that we're doing, and we're receiving initial positive feedback on improvement that ACPs and their office staff see on the accessibility to Opzelura is on the patient service that we offer. We continue to work on both fronts to make sure that the feedback and the easy-to-access Opzelura feedback continues to improve in the coming quarters.

Operator (participant)

Thank you. Our next question today is coming from Jessica Fye from J.P. Morgan Chase. Her line is now live.

Jessica Fye (Managing Director and Equity Research Analyst for Biotechnology)

Hey, guys. Good morning. Thanks for taking my question. Curious if you could update us on how the company is thinking about capital allocation and business development. Do you want to see the rest of this year's pipeline readouts play out before making any moves there? With the stock back in the 50s, is another ASR on the table? Thank you.

Hervé Hoppenot (CEO)

Let me take that. I mean, the big picture on capital allocation is obviously our internal pipeline success and/or lack of. The evolution of the internal pipeline is driving a lot of the way capital is allocated. You can imagine with seven proof-of-concept events happening, each of them can lead to a phase three program, and therefore, it will be utilizing a large portion of our R&D budget. That is the first capital allocation in our R&D. In terms of external business development, we spoke about it. We would be, like we have done recently with Genesis or similar, looking at our research partnership of very early products where we have an interest on the scientific side, like preclinical or very early clinical sort of a partnership. We continue to look for that. Regarding future strategies in terms of share repurchase, I cannot comment on that.

Operator (participant)

Thank you. Next question is coming from Marc Frahm from TD Cowen. Your line is now live.

Marc Frahm (Managing Director and Senior Analyst)

Hi. Thanks for taking my question. A couple of follow-ups just on some of the earlier topics. On the mCALR update, would you expect to be able to talk about kind of next steps and whether you think there's a pivotal path forward yet, or is this data likely to maybe not quite be that level of maturity? On the updated HS data, just the potentially better efficacy in the IL-17 experienced patients is obviously provocative. Any ideas as to how you can kind of prospectively identify these patients that may do very well on a JAK relative to an IL-17 to maybe help them avoid months of what might be ineffective IL-17 therapy?

Pablo Cagnoni (EVP and Head of R&D)

Hi, Marc. This is Pablo. On mCALR, we'll certainly discuss next steps when we present the data. We always try to do that. That's why we wait to have a reasonable number of patients and some follow-ups so we can tell you what we're planning to do next. You should expect a conversation on that to happen when we disclose the mCALR data. On the second part or your second question, it's hard to tell at this point.

I think that we will look in more depth at the data that we have, which are two large positive phase 3 studies, to see if we can identify any specific baseline characteristics that predict for better results. It's going to be hard to figure it out ahead of time which patients are more likely to respond to an IL-17 than to a JAK inhibitor. I think Hervé highlighted very clearly where do we think that patients are more likely to benefit or to use a JAK inhibitor from the start of therapy. In a proportion of patients, that will happen after an IL-17 or after the TNF. It is going to be hard to identify those patients ahead of time.

Operator (participant)

Thank you. Next question today is coming from Judah Frommer from Morgan Stanley. Your line is now live.

Judah Frommer (Executive Director and Senior Equity Research Alnalyst)

Hi, good morning. Thanks for taking our questions. Just following up on the mutant mCALR questions, we actually had a similar one for the JAK2V617F program. Just wanted to see what level of update we can expect this year for that program and also kind of what you might be able to communicate on next steps there once we have that data set. Secondly, I guess revisiting Ruxolitinib Extended Release, just wanted to get an update on where that program stands, what next steps are, and how you would see that moving forward, assuming positive update from the FDA there. Thank you.

Hervé Hoppenot (CEO)

On 617F, that program is, if you remember, is behind the mutant mCALR antibody program because we started in healthy volunteers. We had to do some work on the formulation. It started to be tested in patients later than the mutant mCALR antibody. The update that we provide, which we intend to do this year, may be a smaller number of patients than the mutant mCALR antibody. We're still going to discuss what the next steps are at that time, but the extent of the update could be more limited. Let me hand it over to Steven to talk about where we are with the RUX XR program.

Steven Stein (Chief Medical Officer)

Yeah, thanks. On the extended release, as we communicated earlier this year, the key component that we had to achieve was to meet bioequivalence, which we did, and we have in writing from the regulators that that was achieved. What follows is to lay down stability and complete that towards the end of this year and then immediately file that response towards the end of this year. It's a response to a CRL. The timeline clock on that from a regulatory point of view is six months. We expect approval for XR, should that all go well, by the middle of next year. Thanks.

Operator (participant)

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

Hi, this is Alex from Kripa. In reference to the slide of the HS market with the 46,000 eligible patients that could be treated by Povo, is that a snapshot of the current market? When we think about penetration into the different segments there, is it equal penetration that you see Povo going into for all the three different segments, or do some stand out more than others? How do you see the landscape evolving in the future?

Hervé Hoppenot (CEO)

Yeah, I mean, and Matteo can complete the response. The way the slide was was really to give you a picture of 2027. It is when Povo will be launching. The idea is to show that, in fact, there are three different segments that are part of where Povo could fit and would be competing. One of them, the first one, is for patients who do not want to get injection for many reasons. That is not nothing. It is around 10-15% of newly diagnosed patients who are moving to systemic therapy today. We have some research on that. That is the top segment. It will start at around this 10-15%, which is 3,000 patients. Obviously, as the other piece, which is the dark blue in the graph, is evolving, it is a place where newly started patients who are eligible to biologics.

That is where basically the competition will be between starting with a biologic versus starting with Povo. I think that will take time. At the beginning, we will be dealing with patients who are not eligible for injectable therapy and a lot of patients who are basically coming out of the pool of existing biologic-treated patients. What I wanted to say with this slide is that that number is, in fact, the largest of the three. That is a place where, as you have seen the data from Pablo was speaking about on the prior biologic-exposed patients, we think the first pool of patients treated with Povo will be there in addition to the 3,000 early patients, so the light blue.

Over time, the dark blue, which is the newly started patient on systemic therapy, will be evolving to oral treatment when people are comfortable with the profile of Povo. That is what we are trying to say, that there is a market with biology-exposed patients. There is a small segment who do not want to receive injectable. Over time, we will be gaining share in the third segment, which is the newly treated patients.

Matteo Trotta (EVP Commercial)

I can complement on a couple of comments on the evolution of the landscape. As Hervé said, we are already seeing now in 2024, at the beginning of 2025, quite a dramatic increase in the churn of patients that go from IL-17 to TNFs and vice versa. We see that continuing to grow all the way to 2027, where we expect to come with Povo and beyond. That is actually the segment in terms of penetration that we see the highest unmet need from the very beginning. We are very confident in the market growth that we see in front of us for Povo.

Operator (participant)

Thank you. Next question today is coming from Matt Phipps from William Blair. Your line is now live.

Great. This is Madeline on for Matt. Thanks for taking the question. Related to Povo and CSU, how does the efficacy profile you're seeing compare to the profile with MRGPRX2 inhibition? Does the positive data with Povo change your view on the potential to develop backup X2 antagonist programs? Thanks.

Hervé Hoppenot (CEO)

We will discuss how the data compares with the data sets once we show the data later this year. I think that related to the X2 program, we have no intention of restarting this program. We are very happy with the results of Povo and CSU. We think this proof-of-concept is very important for Povo and for patients with CSU, and we intend to advance to pivotal studies. We will talk about the details of the data later this year.

Operator (participant)

Thank you. Next question is coming from Ash Verma from UBS. Your line is now live.

Ash Verma (Executive Director for SMID Biotech and Biopharma)

Hi. Thanks for taking my question. I had a question on Monjuvi. We just found these phase three in the first line and relapsed refractory DLBCL would be in the frontMIND studies. Just if you can share what are your expectations here in these studies in terms of the efficacy, that would be great. Thanks.

Steven Stein (Chief Medical Officer)

Yeah, thank you. It's Steven. Tafositamab now obviously has positive data in relapse refractory diffuse large B-cell lymphoma, and that indication is approved. More recently at ASH last year, the inMIND study in follicular lymphoma with really outstanding efficacy in terms of hazard ratios, etc., and now waiting for the first line study to report out. It's event-driven. It's a large study.

We've guided to having data potentially in the first half of this year as soon as we have sufficient events. Should that be positive, we would be moved very rapidly to complete a submission package and get it across the finish line. We really like the way the CD19 antibody is shaping now as it moves sort of forward, as I said, in relapse refractory, follicular, and now potentially in first line. With more and more evidence accumulating, that CD19 expression is not affected by treatment with this antibody. It's maintained. People can, for example, use CAR-T directed against CD19 after the therapy. It's a profile that we become increasingly encouraged by. Thanks.

Operator (participant)

Thank you. Next question is coming from James Lee from Deutsche Bank. Your line is now live.

James Shin (Director of Biopharma Equity Research)

Good morning, guys. Thank you for the question. Maybe one for Steve and Pablo. For the week 18 Povorcitinib update, it looks like about half of the placebo patients crossed over. Did these crossover patients experience rapid pain reduction from the week like we saw in week 12? If I recall, around 36-37% of the placebo patients were post-biologic exposed. Can you give us a breakout of pre and post-biologic for these placebo crossovers? Thank you.

Steven Stein (Chief Medical Officer)

Yeah, no, thank you. It's Steven. I'll take that question. Pablo may add comments to what he had in his prepared remarks. We thought this was a really important update to reiterate what Pablo said to demonstrate drug effect because once you have that 28% to 29% placebo rate at week 12 and then introduce those patients to either the 45 or the 75, you can see in six weeks this dramatic 20% to 30% absolute improvement in his CAR rates. That really demonstrates the drug effect of placebo versus active drug there. That's really, really encouraging.

What's more is because of the market breakdown that Hervé illustrated in the different potentially eligible populations, whether it's naive or biologic exposed, again, we thought it was important to illustrate the data in biologic-exposed patients, both to TNF alpha inhibitors, IL-17, potentially to both, and again, demonstrate the really encouraging and potentially even better activity in those populations as demonstrated by the data. You're absolutely right about one-third, 35% to 40% of patients on the whole are biologic exposed. The majority of the population, 60% plus, is naive. That's an important population to study. It was really important for Europe in terms of getting reimbursement there as well. The breakdown in the naive versus experience, we didn't tease out directly, but you can indirectly work it out. Again, the activity is shown across the board. Thanks.

Operator (participant)

Thank you. Next question is coming from Salim Syed from Mizuho Securities. Your line is now live.

Salim Syed (Managing Director and Senior Biotechnology Analyst)

Great. Thanks for the question, guys. Just maybe one from me on Niktimvo, actually. Pretty good beat this quarter. Just curious if you can maybe comment on just some of the dynamics with the $14 million of sales. Was there anything there particularly one-timer that we should just be aware of? Kind of related to that with the J-code going effective for 1/25, how much of a tailwind has that been kind of through the month of April? Thank you.

Mohamed Issa (SVP Commercial)

Hi, Salim, Mohammed here again. Thank you for the question. Yeah, look, let me just start by saying we're very pleased with the launch performance so far. Our team has done a really effective job of driving broad and productive utilization of Niktimvo. As you heard earlier in the prepared remarks, 95% of our top accounts are using Niktimvo. 70% of all target accounts are already using Niktimvo. From a one-time perspective, there isn't really much there. We're seeing that penetration and productivity continue. As you'd expect, Niktimvo this early on is used primarily in that fourth line plus patient. There's obviously a bolus of patients with an urgent need for these new treatment options. I think that's where you're seeing Niktimvo's rapid uptake really take hold.

The great news, though, is that these patients are seeing a rapid response that's very favorable, which is going to naturally encourage providers to use Niktimvo earlier in treatment. The last thing maybe I touch on from a one-time perspective. As you know, we have a generous EAP program. In the Q1, only 50% of those patients moved on to paid drug, and the other 50% or so will come in Q2. As you would expect, when a new product is launched, there's certainly an inventory dynamic that you see in Q1. About a third of our sales in Q1 is also coming from some inventory build, but we expect that to be stable for the rest of the year.

Operator (participant)

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

Gavin Clark-Gartner (Managing Director for Biotechnology Equity Research)

Hey, guys. I just wanted to quickly follow up on the Tafasitamab first line phase three DLBCL trial. I believe on the slides you noted the data got moved to the second half of this year. I think, Steven, you may have noted data was still in the first half potentially. I just wanted to confirm the latest guidance and also clarify if a 0.73 hazard ratio from Polivy's trial is a reasonable benchmark. Thank you.

Steven Stein (Chief Medical Officer)

Yeah, Gavin, it's Steven. It's always tricky with event-driven studies to be precise, as you know, when data will ultimately come, especially when it spans a quarter change. You can read in the marks from my remarks that we expect it sometime soon. We're getting close to the required events to trigger the analysis. What will then follow is database closure, cleaning, independent review of radiology, etc. It may track a little later. We see, and that could be a positive thing if those, obviously, delay of events is due to activity. I think the Polivy effect in first line diffuse large B-cell lymphoma is probably in the ballpark of a reasonable benchmark because it's the similar population of the more severe people with this disease, so the IPI higher scores in terms of prognostic index.

Just to remind everyone, the first positive study increasing cure rates in first line diffuse large B-cell lymphoma in a long time, obviously with the CD79 mechanism. We're really interested now in dual inhibition of 19 and 20. We've shown data just to be repetitive in relapse refractory, follicular, and now we'll see what the first line data shows. We will announce because of the materiality of this data as soon as we have it available, and we're waiting for those events. Thanks.

Operator (participant)

Thank you. Our next question today is coming from Jay Olson from Oppenheimer. Your line is now live.

Jay Olson (Directror and Senior Biotechnology Analyst)

Hey, thanks for taking the question and congrats on all the progress. For your CDK2 inhibitor, what are the key data points we should be looking out for in your ASCO update? What are the gating factors to starting the phase three study in ovarian cancer? Especially if you could talk about the companion diagnostic and how that's progressing. Thank you.

Hervé Hoppenot (CEO)

Thank you for the question. What you will see at ASCO is an incremental update. You remember we presented a very comprehensive data set at ESMO last year, and ASCO will provide a little bit more data, more follow-up in some of those patients. I think more importantly, to the second part of your question, we are in process of implementing the pivotal trials in platinum-resistant ovarian cancer. That is moving forward. We are moving forward with the diagnostic as well. That is advancing very well. We are conducting a combination phase one study in combination with bevacizumab, which is necessary to launch the platinum-sensitive ovarian cancer study. All those things are moving forward as we speak.

Operator (participant)

Thank you. Our next question today is coming from Kelly Shi from Jefferies. Your line is now live.

Clara Dong (VP of Equity Research in Biotechnology)

Hi, good morning. This is Clara from Kelly. Congrats on the update and the initial launch performance of Niktimvo. For Niktimvo, I wanted to hear some key physician feedback, whether you're seeing more rough-rough experienced patients or rough-rough naive patients at this point, and how you expect this dynamic to evolve over time. Full apologies if I missed it, but what's the timeline for Povorcitinib regulatory submissions?

Hervé Hoppenot (CEO)

Yeah. The question was about ruxolitinib and where it's used on the launch.

Matteo Trotta (EVP Commercial)

Yeah. Thank you, Clara, for the question. Let me take the Niktimvo piece, and then I'll pass the timeline for Povorcitinib to Pablo and Steven. As I mentioned, Niktimvo, when introduced in such an unmet need that currently exists, we're currently seeing it used really primarily in the fourth line plus patients. As you would expect, there's a bolus of patients with chronic GVHD late stage that have an urgent need for a new treatment option.

That's where I think Niktimvo will make an impact as soon as it gets introduced. Like I also mentioned, the great news, though, is that we're seeing these later stage patients respond very favorably. Customer feedback has been very positive, with some sharing that they're seeing Niktimvo really demonstrate its rapid and broad efficacy profile that was seen in clinical trials in practice. That will naturally move Niktimvo earlier line.

Timbo, in our perspective, has a key differentiator, which is the mechanism of action, which is a completely different pathway than other approved agents, making Niktimvo, I think, a great addition and option to be used right after Jakafi in the third line. Whether it is in the third line now versus rough-rough or not, I think it is soon to be told. We are really optimistic about the competitive profile and the customer feedback so far. Again, we are really optimistic about it being used earlier in line once providers and patients get more experience with it.

Steven Stein (Chief Medical Officer)

Yeah. Kelly, in terms of the timeline for the HS submission, obviously, you've seen the efficacy data and the safety profile through week 12 and now through week 18 very clean. The key component of this is negotiating with the regulators as to how much of the safety they'll require at the time of initial submission versus the ability to supplement that at the four-month safety update. Our guidance hasn't changed. We want to do it as quickly as possible towards the end of this year, tracking potentially into early 2026 at the moment. We'll provide more precision on that when we have more precision. Thanks.

Operator (participant)

Thank you. Next question is coming from Eric Schmidt from Cantor Fitzgerald. Your line is now live.

Great. Hi, this is Imogen on for Eric. Good morning, everyone. Two questions from me. The quick one on Axatilimab. Could you comment on that $14 million of what proportion of that is inventory? It looks like a really strong launch, so congrats. One question on Povo and the HS and the longer-term data after week 12. Could you talk about how the dropouts were treated in that later section and whether patients who took rescue medications like antibiotics in the week 12 control period were then kind of added back in? I think that was part of the non-responder criteria. Thanks.

Mohamed Issa (SVP Commercial)

Hi, Imogen Mohammed here. Thanks for the question on Niktimvo. In just the first couple of months, we're seeing about 20%-30% of the sales so far is really made up of inventory. As I mentioned, multiple accounts have already reordered, and that inventory level continues to be stable. That is what I would expect for the rest of the year.

Steven Stein (Chief Medical Officer)

Imogen, thank you on the long-term data. It's really interesting. We obviously had a very conservative approach in terms of the analysis and the non-responding imputation in that anybody who discontinued for whatever reason was considered a non-responder versus a more modified approach, which some other competitors are using. We will analyze both and at some point in time provide both. We expect the modified NRI actually to have slightly better numbers than the conservative approach we used. Thank you for that question. It's an important one.

Operator (participant)

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

Malcolm Hoffman (Senior Equity Research Associate of Biopharma)

Hi, Malcolm Hoffman on for Evan. Thanks for taking our question. For Opzelura, you noted a slight reduction in inventory, which maybe dampened sales. Could you quantify the impact any further? Could you provide any additional commentary on how you've seen tube usage in the US progress? I know at the start of the launch, this was highlighted as an expansion opportunity. Do you guys still think we could see more tube usage per patient over time? Thank you.

Christiana Stamoulis (CFO)

Hi, Malcolm, it's Christiana. Let me take the first part of the question regarding Opzelura and the inventory. As I mentioned in my prepared remarks, in the U.S., the net revenue growth was 20% with the paid demand growth 24%. The difference came from the reduction in inventory. The reduction in inventory was mainly because given where the end-of-the-year holiday took place this year, which was in the middle of the week, wholesalers bought before that. It impacted Q4. We saw that inventory level coming back down in Q1 of the year. As I mentioned, we look at the current inventory levels as within a normal range and expect to continue to be pretty stable at those levels.

Steven Stein (Chief Medical Officer)

I'll comment on the tube usage over time and what we expect. We expect increased utilization overall in both indications. I think it's driven by two dynamics: our continuous prescription growth, which includes obviously additional new patients over time in both indications, as well as the usage of the tubes across the extensive patient population that we have built so far. To close with that is the feedback that we continue to get from, on the patient side, highest level of patient satisfaction of people that have used Opzelura. On the ACP side, we continue to see the willingness to utilize it more in the coming future. When we put everything together, we expect higher utilization in the coming quarters.

Operator (participant)

Thank you. Our next question is a follow-up from Michael Schmidt from Guggenheim. Your line is now live.

Michael Schmidt (Senior Managing Director and Equity Research Analyst for Biotechnology)

Oh, hey. Thanks, guys, for taking the follow-up. Just another one on Povorcitinib. This continued increase in HiSCR50 out to week 18 obviously looks very interesting. Did you observe a similar trajectory also for the HiSCR75 outcomes? The other question I had is just on your KRAS G12D inhibitor, where I know you've guided to POC data later this year. Just wondering how you think about differentiation and the competitive landscape there, just given we've seen some data recently at AACR. Thanks for taking the follow-ups.

Steven Stein (Chief Medical Officer)

Michael, I'll start on the Povorcitinib question through the updated data through week 18. Obviously, we just showed for efficiency reasons the Hisco 50 because that was the primary endpoint. We wanted to demonstrate that over time. We absolutely will have the others as well, Hisco 75, etc. The trend, I can say, is similar to your question. I'll hand it over to Pablo for your 12D question.

Pablo Cagnoni (EVP and Head of R&D)

Michael, thank you for the question. As you know, KRAS inhibition continues to get increasingly competitive. I mean, I think there were 57 posters and presentations at AACR, and new data continues to be presented. We are very happy with the profile of our G12D inhibitor. That study is advancing very well. We will have data to discuss with you later this year. I think at that point, we're optimistic that our profile is going to be very competitive. We're advancing not only single agent, but we're starting combinations as well. We will have a broader conversation when we have the data. So far, we're very happy with the progress of that program, and we think we're going to have a very competitive profile.

Operator (participant)

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.

Hervé Hoppenot (CEO)

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

Operator (participant)

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.