Deciphera Pharmaceuticals (ticker: NASDAQ:DCPH) has announced its financial results for the fourth quarter and the full year of 2023, showcasing a record annual revenue driven by the robust performance of its drug, QINLOCK, both in the United States and internationally. The company also shared its strategic priorities for 2024, which include continued QINLOCK sales growth and the advancement of its clinical pipeline. With a solid cash position, Deciphera is well-positioned to pursue its goals into the second half of 2026.
Key Takeaways
- Deciphera Pharmaceuticals reported a record annual revenue for 2023, attributing the growth to the success of QINLOCK.
- The company expects QINLOCK and Vimseltinib to reach over $1 billion in peak global revenue.
- A strong cash position of $352 million extends the company's cash runway into the second half of 2026.
- The INTRIGUE study showed QINLOCK's significant benefits, and an NDA for Vimseltinib is expected in Q2 2024.
- Plans to initiate a Phase 2 study for Vimseltinib in chronic GVHD and submit an IND for DCC-3009 are underway.
Company Outlook
- Deciphera is actively pursuing label expansion opportunities for QINLOCK and Vimseltinib.
- The Phase 3 INSIGHT study for QINLOCK label expansion is ongoing.
- The company is preparing for the potential launch of Vimseltinib, with a focus on engaging with HCA (NYSE:HCA) agencies and submitting an MAA in Q3 2024.
Bearish Highlights
- Challenges in predicting new market openings due to varying reimbursement processes and timelines.
- Potential quarter-over-quarter variability in revenue growth.
Bullish Highlights
- QINLOCK's net product revenue in the US increased by 25% over 2022.
- Positive progress in international markets, with a successful launch in Italy and a deal with GENESIS for Central and Eastern Europe.
Misses
- Research and development expenses for Q4 2023 were $58.6 million, while selling, general, and administrative expenses were $39.1 million.
Q&A Highlights
- The company acknowledged the potential for Vimseltinib's use in earlier lines of treatment but stated it's too early for specific plans.
- The average duration of therapy for QINLOCK is increasing, with expectations for continued growth.
- Deciphera is excited about the proof-of-concept study for Vimseltinib in chronic GVHD.
- The company is focusing on disease education and raising awareness in preparation for Vimseltinib's launch.
- Seasonality in revenues is expected to follow patterns similar to previous years.
Deciphera Pharmaceuticals has outlined a robust growth trajectory for its key drug, QINLOCK, and the development of Vimseltinib. The company remains committed to expanding its market presence and addressing unmet medical needs globally. With strategic initiatives in place and a strong financial foundation, Deciphera is poised for continued success in the years ahead.
InvestingPro Insights
Deciphera Pharmaceuticals (ticker: DCPH) has demonstrated a strong commitment to growth, underscored by its positive revenue trajectory and strategic initiatives for its flagship drug, QINLOCK. As we delve into the financial health and stock performance of the company, several key metrics and InvestingPro Tips shed light on its market position and future prospects.
InvestingPro Data:
- Market Cap: Deciphera's market capitalization stands at $1.19 billion, indicating its size and significance within the biopharmaceutical sector.
- Revenue Growth: The company has shown a notable revenue growth of 24.22% over the last twelve months as of Q3 2023, aligning with the reported record annual revenue in the article.
- P/E Ratio: With a P/E ratio of -6.43, investors can glean insights into the market's valuation of Deciphera's earnings potential.
InvestingPro Tips:
- Analysts' Optimism: Four analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook for Deciphera's financial performance.
- Strong Liquidity Position: Deciphera holds more cash than debt on its balance sheet and liquid assets exceed short term obligations, affirming the company's solid cash position mentioned in the article.
While the company is not expected to be profitable this year and suffers from weak gross profit margins, Deciphera's strong return over the last three months, with a 24.62% price total return, indicates investor confidence in its growth potential. Notably, Deciphera does not pay a dividend to shareholders, which is a common trait for growth-focused biotech companies reinvesting earnings into R&D and expansion.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available, which can provide more nuanced perspectives on Deciphera's financial health and stock performance. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription, and discover the full range of insights that can guide your investment decisions.
Full transcript - Deciphera Pharmaceuticals (DCPH) Q4 2023:
Operator: Good morning, everyone, and welcome to Deciphera Pharmaceuticals Fourth Quarter and Full Year 2023 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Jen Larson, Senior Vice President of Finance and Investor Relations. Jen?
Jen Larson: Thank you, operator. Welcome and thank you for joining us today to discuss Deciphera's fourth quarter and full year 2023 financial results. I'm Jen Larson, Senior Vice President of Finance and Investor Relations. With me this morning to discuss the financial results and provide a general corporate update are Steve Hoerter, President and Chief Executive Officer; Matt Sherman, Chief Medical Officer; Dan Martin, Chief Commercial Officer; Margarida Duarte, Head of International; and Tucker Kelly, Chief Financial Officer. Before we begin, I would like to remind you that any statements we make on this call that are not historical facts are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include our expectations for our preclinical and clinical programs, our commercialization of QINLOCK, and guidance. Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, and we cannot assure you that our expectations will be achieved. Such risks and uncertainties include those set forth in our most recent annual report on Form 10-K as well as our other SEC filings. We assume no obligation to update or revise any forward-looking statements. Following this call, a replay will be available on the company's website, www.deciphera.com. With that, I will now turn the call over to Steve Hoerter, President and Chief Executive Officer of Deciphera. Steve?
Steve Hoerter: Thank you, Jen. Good morning, everyone and thank you for joining us today as we provide an update from the fourth quarter and full year 2023, review our financial results and discuss our strategic outlook and planned corporate milestones for 2024. 2023 was a year of significant progress toward our goal of becoming a self-sustaining company with multiple approved medicines. Continued strong QINLOCK growth in the U.S. and internationally drove record annual revenue, demonstrating the global capabilities of our commercial organization. With a highly successful Phase 3 study in TGCT, we expect vimseltinib to be our second approved medicine. We believe that at peak, QINLOCK and Vimseltinib will be able to generate over $1 billion in global revenue. With a long IP runway for both products, we are actively pursuing label expansion opportunities to create further value for patients and for our shareholders. Beyond these late-stage programs, we continue to strategically invest in key earlier-stage programs to help build a sustainable pipeline of potential new medicines to improve the lives of people with cancer. Last month, we outlined our key strategic priorities for 2024. We expect 2024 to be a year of continued growth in QINLOCK sales, driven by strong demand both in the U.S. and internationally. Meanwhile, our clinical team is working towards our goal of expanding QINLOCK's label based on the ongoing Phase 3 INSIGHT study in second-line GIST patients with mutations in KIT Exon 11 and 17/18, which has the potential to double peak sales. A few weeks ago, we were thrilled to announce the publication in Nature Medicine of the exceptional results from the ctDNA analysis from the INTRIGUE study in second-line patients with mutations in KIT Exon 11 and 17/18 showing that QINLOCK provided significant progression-free and overall survival benefit compared to the current standard of care sunitinib. Publication in one of the world's leading medical journals highlights the clinical importance of this compelling data and serves as strong validation for the ongoing INSIGHT study. In addition to the Nature Medicine publication, we also recently presented the final overall survival results from the INTRIGUE study at the ASCO GI Symposium, which showed that the overall survival rate was similar for both QINLOCK and sunitinib and that treatment with QINLOCK continued to show a favorable safety profile compared to treatment with sunitinib. We believe that these results demonstrate the strong clinical activity of QINLOCK in the second-line GIST patient population studied in INTRIGUE. For Vimseltinib, building upon the exciting positive results of the MOTION Phase 3 study in patients with tenosynovial giant cell tumor, we remain on track to submit the NDA to the FDA in the second quarter of this year and an MAA to the EMA in the third quarter of this year. With the potential approval of Vimseltinib INSIGHT, we are also exploring potential indication expansion opportunities, including our plan to initiate a Phase 2 proof-of-concept study of vimseltinib for the treatment of chronic graft versus host disease or cGVHD, in the fourth quarter of 2024. In addition, we're making focused investments in our earlier-stage pipeline, which we expect will fuel our future growth. For our ULK inhibitor DCC-3116, our goal is to select a recommended Phase 2 dose later this year and move to our first expansion cohort. For DCC-3084, our pan-RAF inhibitor, we expect to initiate a Phase 1 study in the first half of this year. Finally, for DCC-3009, our new pan-KIT inhibitor, we expect to submit an IND with the FDA in the first half of this year and initiate a Phase 1 study in the second half of 2024. We remain well capitalized with $352 million in cash at the end of the year and a cash runway into the second half of 2026. I'll now pass the call to Matt Sherman, our Chief Medical Officer, who will provide more detail on our development pipeline. Dan Martin, our Chief Commercial Officer, will then share insights on the U.S. commercial performance and outlook for the year ahead. Margarida Duarte, our Head of International, will provide an update on the progress of the ongoing QINLOCK launch in Europe for fourth-line GIST and its continued strong momentum. We'll end with Tucker Kelly, our Chief Financial Officer, who will review highlights from the fourth quarter and full year 2023 financial results. Matt?
Matt Sherman: Thanks, Steve. Together with our commercial success, we continue to make great strides with our development pipeline that we believe will provide continued growth for Deciphera over the coming years. First, I'd like to start with our recent QINLOCK updates. As Steve mentioned, in January, we presented the final overall survival results from INTRIGUE Phase 3 study at the ASCO GI conference. As you may recall, in the INTRIGUE trial, 453 patients with second-line GIST were randomized one-to-one to receive QINLOCK or sunitinib. The final analysis included 18 months of additional follow-up based on the data cut in March 2023. Median overall survival in the intent-to-treat population was very similar, with QINLOCK at 35.5 months versus sunitinib at 31.5 months, resulting in the hazard ratio of 0.86. The long-term safety profile was consistent with the primary analysis showing fewer patients with Grade 3/4 TEAEs and a lower rate of treatment discontinuations due to TEAEs with QINLOCK versus sunitinib. We also looked at whether treatment in the second-line with QINLOCK versus sunitinib had any differential impact on clinical outcomes after third-line treatment. Irrespective of treatment with QINLOCK in the second-line, the results show that the patient outcomes in the third-line were similar. Median PFS on the next line of therapy was 7.7 months for QINLOCK versus 7.4 months for sunitinib. These final results for INTRIGUE demonstrate that QINLOCK offers similar efficacy versus sunitinib in the second-line GIST populations studied in INTRIGUE. The Nature Medicine publication last month was another major achievement for Deciphera, showcasing the potentially practice-changing results from an exploratory ctDNA analysis from INTRIGUE in one of the world's leading medical journals. In the second-line GIST patients with KIT Exon 11 and 17/18 mutations, treatment with QINLOCK resulted in a 78% reduction in the risk of disease progression and a 66% reduction in the risk of death compared to sunitinib. Median PFS was 14.2 months for the QINLOCK patients compared to only 1.5 months for the sunitinib patients. Median overall survival for QINLOCK was not reached versus 17.5 months for sunitinib. QINLOCK showed an objective response rate of 44% compared to 0% for sunitinib. Together, the data represents a striking clinical benefit for these second-line GIST patients when treated with QINLOCK. We're excited that our INSIGHT pivotal Phase 3 study in the same patient population is now actively enrolling patients. If positive, we believe the results of the INSIGHT study will support an extended label for QINLOCK and significantly improve clinical outcomes for patients based on a precise understanding of the GIST tumors. We are also working hard to get our second potential approved medicine to patients as quickly as possible. We remain on track to submit an NDA for vimseltinib for patients with TGCT in the second quarter of 2024 and an MAA in the third quarter of 2024. These filings are supported by the outstanding success of the Phase 3 MOTION study, which achieved its primary endpoint of ORR at week 25, as well as all six key secondary endpoints. In a disease such as TGCT, the secondary endpoints are critical measures of clinical benefit. These outcomes of how patients feel and function play an incredibly important role in treatment decisions as well as for patients' interest in starting and staying on drug therapy. TGCT can be a difficult chronic condition associated with severe pain, swelling, stiffness, and loss of mobility. All of these can severely limit patients' daily activities and quality of life, including their ability to continue to work or function independently. Without an effective treatment, a TGCT diagnosis can have a profound impact on their ability to lead a normal, active and healthy life, and we look forward to making this important new medicine available to these patients as quickly as possible. We plan to present results from the MOTION study at a major medical meeting in the second quarter of 2024 as well as updated results from the ongoing Phase 1/2 study in the second half of this year. Deciphera remains committed to ensuring that the full therapeutic potential our medicine and product candidates are explored. To that end, we plan to initiate a Phase 2 proof-of-concept study of vimseltinib and chronic GVHD based on its potential as a best-in-class CSF1 receptor inhibitor. Chronic GVHD affects 30% to 50% of allogeneic hematopoietic stem cell transplant recipients, with an estimated 14,000 prevalent patients in the U.S. There is a significant unmet medical need in this setting, with 50% of patients being refractory to treatment with steroids and an overall desire to move towards combination therapy. Inhibiting CSF1 receptor expressing proinflammatory and profibrotic macrophages has been clunkily validated for patients with GVHD based on a recent pivotal study with an antibody targeting the CSF1 receptor. As an oral agent, vimseltinib may offer a best-in-class CSF1 receptor option as a single agent or in combination with other oral therapies. We expect to initiate a proof-of-concept study by the end of this year, putting us on a path to potentially expand the utility of vimseltinib for patients in the future. Beyond QINLOCK and Vimseltinib, we remain very excited about the potential for our clinical and research pipeline to fuel Deciphera's growth. As Steve mentioned earlier, we expect to select a recommended Phase 2 dose for DCC-3116 in 2024 to move into our first expansion cohort. We also expect to initiate a Phase 1 study for DCC-3084 in the first half of 2024. Finally, we expect to submit an IND for DCC-3009 with the FDA in the first half of 2024 and initiate a Phase 1 study in the second half of 2024. I will now turn the call over to Dan Martin to discuss our U.S. commercial updates. Dan?
Dan Martin: Thanks, Matt. 2023 was a very successful year for QINLOCK in the U.S., with net product revenue growing to $121.5 million, a 25% increase over 2022. In the fourth quarter, U.S. net product revenue was $35.3 million, a 38% increase over Q4 2022. These record results were driven by strong demand in our core fourth-line business, increasing average duration of therapy and contribution from unpromoted earlier line use. In Q4, the percentage of total demand that was fulfilled through our Patient Assistance Program or PAP was at the high end of our 20% to 30% expected range and gross to net was between 15% and 20%. Looking at 2023 as a whole, consistent with prior years, PAP was between 20% and 30%, and we expect the PAP percentage to be similar in 2024. Gross to net in 2023 was between 15% and 20% and we expect it to be in a similar range in 2024 as a result of the Medicare inflation rebates required by the Inflation Reduction Act. We expect continued QINLOCK revenue growth in 2024, driven by a physician as the standard of care in fourth-line GIST, potential, unpromoted off-label use in earlier lines of therapy based on physician decision, as well as increasing average duration of therapy. Further, we expect quarterly revenues this year to follow a similar pattern to what we have seen in prior years, including Q1 seasonality consistent with industry dynamics. We remain confident in the strength of our business and the potential for another record year for QINLOCK in 2024. Now, I will turn to the exciting opportunity we see in TGCT with Vimseltinib, our potential second approved medicine. Based on our analysis of U.S. claims data, we believe the total addressable market for TGCT in the U.S. is approximately $700 million. Based on the estimated 1,400 treatment incident patients who are diagnosed, receive systemic therapy and have recently engaged with an oncologist. This U.S. opportunity does not include the estimated 9,000 treatment prevalent patients seen by oncologists or the estimated 1,300 treatment incident patients seen by surgeons. We believe there is a comparable number of patients in the five largest European markets where there are no approved treatments. We recently provided additional insight into the treatment landscape for these 1,400 treatment incident patients in the U.S. that has increased our confidence in the market opportunity and in our commercial team's ability to reach these patients given our deep experience in GIST. Based on our claims analysis, we believe there is a 70% to 80% overlap in the prescriber base for GIST in TGCT and that we are uniquely positioned to drive awareness and use in both the academic and community settings. We have tested a blinded product profile of vimseltinib versus pexidartinib, which is approved in the U.S. but not in Europe, and versus imatinib, which is commonly used off-label to manage patients with TGCT. The results from the qualitative market research show that vimseltinib is rated the highest across the key measures of efficacy and tolerability that physicians tell us they view as most important when selecting the TKI to treat their TGCT patients. In the same market research study, 100% of physicians surveyed selected the vimseltinib profile as their preferred agent for managing patients with TGCT. We are working diligently on pre-launch activities as we prepare to leverage our strong commercial capabilities to launch vimseltinib rapidly upon approval. I will now turn the call over to Margarida Duarte, our Head of International, to discuss the progress of the QINLOCK launch in Europe. Margarida?
Margarida Duarte: Thanks, Dan. We are very enthusiastic about the notable achievements we made in 2023 in our international business, delivering strong results that accounted for more than 25% of Deciphera's total revenue while laying the foundation for future growth. In 2023, QINLOCK generated $37.5 million in international net product revenue, up 33% from 2022, as well as $4.3 million in collaboration revenue from our partner Zai Lab (NASDAQ:ZLAB) in Greater China. For the fourth quarter of 2023, international net product revenue increased 56% from the fourth quarter of last year to $11.4 million and collaboration revenue was an additional $1.6 million. Last year was a milestone year for Europe, with growth across the entirety of the business, strong price outcomes, significant progress in market access in multiple countries and the launch in Italy, which is off to an excellent start. The initial strong results we are seeing in Italy are a testament to the high unmet medical need, the exceptional KOL advocacy and the remarkable full innovation rating granted to QINLOCK by the Italian authorities, the highest for a non-curative disease, which has significantly accelerated the launch in the many Italian regions. Our recent entry in Italy is a good example of the type of opportunity that remains to be unlocked in Europe and underscores the importance of geographic expansion to overall growth in the business. Last month, we announced a new distribution agreement with GENESIS Pharma for Central and Eastern Europe to expand the geographic reach of QINLOCK to 14 European Union countries with a combined population of 118 million people. QINLOCK has already received regulatory approval in all of these countries under the EMA umbrella, which will significantly accelerate the time to commercialization for Central and Eastern Europe. We are also excited to announce that we have submitted for pricing and reimbursement in the Netherlands and continue to advance price negotiations in Spain, France and Switzerland. Our key growth drivers for 2024 include a continued focus on geographic expansion and open new markets to drive successful launches. We are very pleased by the strengths of our execution and we expect our international revenue to continue to grow as reimbursement agreements and approvals are achieved alongside the growth from our initial launch markets, positioning QINLOCK to reach more patients around the world. Touching on Vimseltinib, there is a palpable excitement in Europe surrounding the outstanding Phase 3 MOTION data where we believe the number of patients is comparable to the U.S. in the five largest European markets and the unmet need is higher as there are no approved treatments. We are working hard towards our first initial engagement with HCA agencies early this year and I look forward to the MAA submission in the third quarter and preparing for the commercial launch. I will now turn the call over to Tucker Kelly, our Chief Financial Officer, to review the fourth quarter and full year financial results. Tucker?
Tucker Kelly: Thanks, Margarida. Total revenue for the fourth quarter was $48.3 million, which included $46.7 million in net product revenue of QINLOCK and $1.6 million in collaboration revenue. For the full year, total revenue grew 22% to $163.4 million, including net product sales of $159.1 million and collaboration revenue of $4.3 million. Cost of sales in the fourth quarter was $1.8 million, which includes $900,000 in cost of product sales compared to cost of product sales of $700,000 for the fourth quarter of 2022. For the full year, cost of sales were $3.7 million, including $2 million in cost of product sales compared to cost of sales of $8.7 million in '22, including cost of product sales of $2.7 million. As a reminder, in the third quarter of 2022, we completed the sales of zero-cost inventories of QINLOCK that had been expensed as R&D prior to FDA approval in 2020. Research and development expenses for the fourth quarter of 2023 were $58.6 million, compared to $48.1 million for the fourth quarter of 2022 and $234.1 million for the full year, compared to $187.8 million in 2022. Selling, general and administrative expenses in the fourth quarter were $39.1 million, compared to $32.2 million in the fourth quarter of 2022. For the full year, SG&A was $136.5 million, compared to $120.2 million in 2022. We ended the year with cash, cash equivalents and marketable securities of approximately $352.9 million. In January, we announced that we had extended our cash runway guidance into the second half of 2026, which remains unchanged. With that, I'll now turn the call back over to Steve.
Steve Hoerter: Thanks, Tucker. We're very excited for 2024 as we continue to drive commercial growth with QINLOCK, seek regulatory approval for Vimseltinib in TGCT and advance our clinical pipeline, including our plans to develop Vimseltinib in GVHD. Building off our momentum in 2023, we're pleased by our late-stage clinical execution and global commercial excellence as we continue our evolution into a self-sustaining company with multiple approved medicines. With that operator, I'd now like to open the call for Q&A.
Operator: [Operator Instructions] Our first question comes from Jessica Fye with JPMorgan. You may proceed.
Jessica Fye: Hi guys. Good morning. Thanks for taking my questions. Two from me. First, what's the latest you're hearing about when doctors are turning to QINLOCK for second-line GIST in the unpromoted real-world use? Is this happening mainly with QINLOCK experienced treaters who are otherwise using it for fourth-line, or are you seeing any pickup of new prescribers as a result of that type of use? And second, appreciate the details on vimseltinib. Can you just frame a little bit more how you think about the shape of that launch ramp? Thank you.
SteveHoerter: Hi, Jess, good morning, it's Steve. Thanks for the two questions. I'll ask Dan to take both of those questions. The one with respect to unpromoted off-label use of QINLOCK in the second-line based on physician decision, and then the expected ramp for a potential vimseltinib launch here in the U.S. Dan?
DanMartin: Yes. Thank you, Jess, for the questions. And good morning. So as it relates to your question about QINLOCK, as we've noted, it is challenging to measure exactly what and where we're seeing in terms of the contribution of earlier-line use. The data sources for us to be able to do that just aren't great. We do believe that it's been a mix of existing and new prescribers. So we really think that it's something that reflects a broad appreciation for the role of ripretinib for patients across lines of therapy in GIST, of course, I always want to underscore that that's an unpromoted use, so of course we're not out there promoting that, and it needs to happen spontaneously based on physician decision. With respect to your second question on the launch ramp, the shape of the ramp, we'll have the opportunity to get into more details about launch strategy and expectations as we draw closer to a potential approval. But what we're focused on right now is a significant unmet need that we know exists in the space with patients who are suffering from the significant morbidity of TGCT, and what physicians keep telling us that there's a real opportunity to improve upon the existing therapies. So we look forward to continuing to work really hard to be ready to launch vimseltinib as rapidly as possible, pending approval.
Jessica Fye: Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Tyler Van Buren with TD Cowen. You may proceed.
Tyler Van Buren: Hi, guys. Good morning. Congrats on the progress during the quarter. Can you guys discuss what else needs to be done to have the vimseltinib filing ready for submission next quarter? And related to that, what is your confidence that you will not see a REMS program or a black box warning upon approval?
SteveHoerter: Hi, Tyler, it's Steve. Good morning. Thanks for the question. So first, we remain very much on track for the filing of the NDA for Vimseltinib. Here in quarter two coming up, and then the MAA to the EMA in Q3. So it's really just the usual and customary activities as we prepare for that filing that we are engaged in. We remain very confident in the profile of vimseltinib based on the MOTION data. As you know, the study achieved the primary endpoint in all six key secondary endpoints, and also demonstrated that the drug is well tolerated in this patient population. So we believe we have a very clean and well-characterized safety profile with the drug and continue to have the expectation that we would -- there's no reason to expect a REMS program or a black box warning for the potentially fatal hepatotoxicity that is seen with pexidartinib and is believed to be an off-target effect. So we remain on track for the filings and we're excited to bring our potential next approved medicine forward to patients.
Operator: Thank you. One moment for questions. Our next question comes from Eun Yang with Jefferies. You may proceed.
Eun Yang: Thank you. So QINLOCK's second-line off-label use, is that largely driven by patients who are intolerant to Sutent or patients with Exon 11, 17/18 mutations?
SteveHoerter: Hi, Eun. Good morning. This is Steve. I'll ask Dan to take the question on the off-label use that we're seeing in earlier lines based on physician decision. Dan?
DanMartin: Yes. Hi, Eun. Good morning. Thanks for the question. So we believe that the two significant events that occurred last year are what's behind the contribution that we've seen from earlier line use, unpromoted earlier line use. So there was the, as you noted, the NCCN listing for patients who are intolerant of Sutent in the second-line, as well as the really exceptional data that was presented and now recently published in Nature Medicine showing the dramatic treatment benefit that ripretinib can offer patients with the Exon 11, 17/18 mutation. We think that both of those certainly have increased the noise level. Again I always score this is something we don't promote, but just through the natural dissemination of this information, the presentation, the publication, certainly have raised the noise level. So it's hard to discern which patient, which bottle is being driven by which of those factors, but we think that both are reflective of real interest in opportunities to use ripretinib in patients with GIST. And of course, we think that it's important to note the level of energy that we see around the INSIGHT study and the excitement that we have for a potential approved indication pending a positive study.
Eun Yang: Thank you. And I have one question for Tucker. So, OpEx in 4Q sequentially, R&D is down slightly, but SG&A is up. So could you give us some guidance how OpEx level would be in 2024, as well as a collaboration revenue line? Thank you.
Tucker Kelly: Sure. So on the OpEx side, Eun, it was a little higher sequentially, you mentioned in SG&A. There's some one-off items and end-of-year items that we think are more exceptional. So we wouldn't expect necessarily to have that good a run rate going forward for SG&A. We will have some kind of second half of the year expenses as we prepare for the launch of vimseltinib as well. And in terms of collaboration revenue, as we've always said, that's composed really of a couple of components. One is the royalty revenue that we get from our collaboration with Zai. And then secondly, there's often supply revenue. The supply revenue is much more episodic, so some quarters we have it, in some quarters we don't. There was some supply revenue, as you'll see in the cost of goods line for the collaboration revenue this quarter, and that's difficult to predict. So I think we always try and guide people to focus on the expectation for the royalty revenue, and then there'll be upside in quarters where we do have supply revenue coming through.
Eun Yang: Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Michael Schmidt with Guggenheim Securities. You may proceed.
Michael Schmidt: Hi guys, good morning. Thanks for taking my questions. I had one on vimseltinib, as of your plans in GVHD, and how do you think about potential differentiation of vimseltinib and GVHD from some of the antibodies like axatilimab. And can you comment about the possible design of your planned Phase 2 study? Will that be in axatilimab naive patients? Will you include pretreated patients, how do you think about sort of that space? Thanks.
SteveHoerter: Yes. Hi Michael, good morning, it's Steve. I'm happy to take the question. So, first, we're excited about the potential to expand vimseltinib and its utility beyond TGCT and into a new potential indication in chronic GVHD. And certainly one of the factors that enables us to do that, in addition to the strong data we have now in TGCT, is the very long IP runway that we have for vimseltinib with a composition of matter patent that takes us to 2034 plus PTE, which we believe takes us to the end of the decade. And that doesn't include secondary patents for vimseltinib. So ample opportunity for us to make additional investments in vim, to take it into additional indications where we'll have the opportunity to benefit patients. So in terms of the landscape of GVHD and how we see differentiation at this early stage, first I would just comment that certainly the target CSF1 receptor is now clinically validated in this disease, which is very important, so it's a derisked mechanism in GVHD. We believe the data that we've generated in Tenosynovial Giant Cell Tumor demonstrates that we have a very potent and selective inhibitor against the target. And in a disease where the current backbone of treatment is all oral regimens, we believe that an oral agent like vimseltinib, an oral CSF1 receptor inhibitor could play an important role as an add-on therapy in addition to a monotherapy in later lines, but as an add-on therapy to current standard of care, whether that be a JAK inhibitor or whether that be a drug like Rezurock, as an example. So we haven't yet disclosed full details of our clinical development strategy in GVHD. I'm sure we'll have incremental additional disclosures over time, particularly once we get the Phase 2 study stood up at the end of this year. But we're excited about the potential now to expand the places where Vim can benefit patients.
Operator: Thank you. One moment for questions. Our next question comes from Christopher Raymond with Piper Sandler. You may proceed.
Christopher Raymond: Hi, thanks. Just another question, I guess on vimseltinib, and this is on the adjuvant opportunity. I know this has come up in the past, but what do you guys see as sort of the go, sort of no-go points to running a study in the adjuvant setting? As you guys even note in your market landscape slide, that's a pretty sizable opportunity. Just any sort of plan there that you guys can articulate? And then maybe a second part of that question is, is there an opportunity or a chance that you can get a broad label that could be potentially inclusive of the adjuvant setting? Thanks.
SteveHoerter: Yes. Hi, Chris. It's Steve. Thanks for the two questions. Really good questions. So you know, we're of course, excited about the data from MOTION, which will give us this initial label in Tenosynovial Giant Cell Tumor. As you'll remember, the patient population that we treated in the MOTION study is patients who are not amenable to surgery. So it's too early for me to comment on what ultimately FDA will decide as the indication statement or the label for Vimseltinib in TGCT. But we too have heard also from investigators interest in exploring a role of an inhibitor like vimseltinib in other lines or earlier lines of treatment for Tenosynovial Giant Cell Tumor. So recall, this is a disease that, particularly in the localized form of the disease, is often curable through surgery alone. So we'd probably be speaking about a patient population that would not be amenable to surgery, but potentially could be made amenable to surgery with adjuvant or neoadjuvant treatment. So again, too early for us to comment on any specific plans, but certainly with the evidence that we have now in the patient population that we've studied, it's very clear we have strong activity in this disease with vimseltinib, and there may be opportunity for us to pursue whether label enabling studies or non-label enabling studies to further characterize the potential of vimseltinib to benefit patients here.
Christopher Raymond: Great. Thank you so much.
Operator: Thank you. One moment for questions. Our next question comes from Andrew Berens with Leerink Partners. You may proceed.
Unidentified Analyst: Hi, this is Ken on for Andy. Thanks for taking the question. So you guys, I think, have been saying that the average duration for QINLOCK in the fourth-line setting has started to come up, I believe about seven months now, increasing potentially up to eight and a half. So wondering, do you have any color on the penetration in the fourth-line where that could be right about now? Thanks.
SteveHoerter: Yes, thanks for the question. Dan, would you like to take that?
DanMartin: Sure. Absolutely. So, yes, you had mentioned about the average duration of therapy, in fact, we think that's a really important dynamic to our continued growth. As we think about 2024, we look to the continued strength in our fourth-line opportunity. We look to a continuing increasing average duration of therapy. And as we've noted in earlier questions, contribution from unpromoted earlier line use. So as we think about the opportunity for 2024, we're looking forward to another potential record year in the U.S. for QINLOCK as it relates to penetration in the fourth-line setting. As we've said in the past, we feel as though we've done a really good job penetrating that opportunity, and that it's pretty highly penetrated opportunity as a result of not only a really strong drug at high unmet need and our ability to execute over the last number of years.
Operator: Thank you. One moment for questions. Our next question comes from Brad Canino with Stifel. You may proceed.
Brad Canino: Good morning and thank you. Another question for me on vimseltinib. I wonder how many doses you think you plan to use in the proof-of-concept study in chronic GVHD. And I'm asking in light of the inverse dose response noted for the antibody and the working hypothesis there around allowing for some degree of macrophage function recovery. Thank you.
SteveHoerter: Yes, thanks for the question Brad. Matt, would you like to take that on GVHD?
MattSherman: Sure. Good morning Brad. Yes, this is Matt. So what you're referring to is the pivotal study was done with axatilimab in GVHD where they tested three dose levels in different schedules as well too. And what they did demonstrate an inverse dose-response where some of the lower doses had more efficacy and were much better tolerated than higher doses. That may be more unique to antibody because there will be antibody inhibition of the T cell receptor has led to a much more prolonged on target effect, and it's been difficult in other indications to develop those antibodies clinically. So as Steve said earlier, you know we're excited about moving forward with our proof-of-concept study in the second half of this year in GVHD. We haven't yet given the details of the study, but as we get closer to the initiation of that study, we certainly will be speaking to the design of that study and what we expect to achieve.
Operator: Thank you. One moment for questions. Our next question comes from Reni Benjamin with Citizens JMP. You may proceed.
Reni Benjamin: Hi, good morning guys. Thanks for taking the questions and congratulations on the progress. Maybe just to start off, Steve, can you give us any sort of color on the INSIGHT study and how that's progressing? Have you kind of hit all the trial sites? Are they all kind of open or are you still ramping that up? Any sort of color as to how that's progressing because that seems to be key in terms of unlocking the second-line GIST opportunity. And then just as a follow-up with vimseltinib. You're filling the NDA and MAA. Any chance that we could get some sort of a priority review or is the base case scenario standard review both in the U.S. as well as Europe? And how long does it take in Europe just to get the decision?
SteveHoerter: Yes, hi Ren, it's Steve. Good morning. Thanks for the great question. So first for INSIGHT, as you're aware, I should first note that we published the results from the analysis of INTRIGUE in Nature Medicine last month. So really exciting to see the data in such a top-tier journal. And the noise that, that analysis has generated both with the presentation at ASCO and now with the publication in Nature Medicine has been a real tailwind in terms of building enthusiasm for the ongoing INSIGHT study. So we continue to make really good progress in getting sites open, actively screening and enrolling patients in that study. And the enthusiasm from investigators is really palpable. I think they're really excited not only about the data that's been published and presented so far from the analysis of INTRIGUE, but just also the potential to be part of advancing how second line GIST is treated based on INSIGHTs into a patient's tumor using circulating tumor DNA. So drawing a simple tube of blood in order to understand a secondary mutation status, that is an aim or a goal, I think that the field and thought leaders in the field are really excited about. And their participation in the INSIGHT study, we believe, will help us to achieve that goal of demonstrating prospectively this outsized benefit of QINLOCK versus sunitinib in this selected patient population. So we continue to be moving forward very much on schedule and on track with the INSIGHT study. And we'll have further updates, I'm sure, over the coming quarters on our progress with that specific study in second line GIST patients. Your second question was related to vimseltinib, and what our expectations are in terms of regulatory review and timing. And your specific question was with respect to whether we may enjoy priority review with the application? So it's too soon for us to comment on that. And certainly the FDA will make that determination as to whether or not the application qualifies for priority review. As you may remember, the ENLIVEN study and the application for pexidartinib was reviewed by FDA with priority review status. So that certainly is the precedent, if you will, in this disease. So we're looking forward to our ongoing and continued productive dialog with the FDA as we prepare to file here in the second quarter. And we'll, of course, make appropriate disclosures at the right time in terms of whether that is a priority review or a regular review at the FDA's discretion. And then in terms of the European review process, that as you may remember, is a lengthier process. So we would expect that, that will take potentially longer than the FDA review. But as we get into our further dialog with the EMA, we may be able to better cast a timeline as to when we might expect action on the application once it gets filed. But we remain super excited about the profile of the drug. The MOTION data are very clear and compelling, and we're looking forward to delivering our second potential approved medicine to patients.
Reni Benjamin: Right. And then if I could just have a follow-up regarding vimseltinib and what could ultimately be involved in prelaunch activities. Is this something that we should just be -- just given the overlap think that Dan mentioned in the call, is this something that could just be as easy as kind of dropping it into the bag of sales and they're sort of off and running or are there significant prelaunch activities that need to be conducted you know given this market.
SteveHoerter: Yes, I'll ask Dan to comment on the pre-launch activities, but you're right, Ren, we believe there's 70% to 80% overlap in terms of the prescriber base. So a really meaningful opportunity, both in the U.S. as well as in Europe, for meaningful synergy with our existing commercial organization. Dan, do you want to comment further on the pre-launch activities?
DanMartin: Yes, absolutely. Thanks, Ren, for the question. So we think that investment in market development or pre-launch activities is really important. Our focus will be on disease education, largely to make sure that all potential treaters of TGCT are thoroughly educated on how common TGCT is, and the burden that these patients deal with. This is a really debilitating disease, it's something that isn't a lethal disease, of course, but it is one that can be very locally aggressive. And really have a significant impact on how patients feel and function. And we want to really paint that patient picture, bring that to light, raise that awareness. So certainly that, coupled with our med affairs organization and you know data from our studies, all of this will be part of making sure that prior to launch, physicians appropriately so know the information that they need. And then, as Steve mentioned, at launch, yes, we think there's tremendous synergy, we think we're really uniquely positioned to take advantage of both the opportunity in GIST with QINLOCK and the opportunity in TGCT, with Vimseltinib.
Reni Benjamin: Terrific. Thanks for taking the questions, guys. Good luck.
Operator: [Operator Instructions] Our next question comes from Peter Lawson with Barclays. You may proceed.
Peter Lawson: Great. Thank you so much. Thanks for taking the questions. I guess two. Firstly, just on the seasonality and how we should think about that for the U.S. versus ex- U.S., as investors model out 2024 revenues. And then just moving into GVHD, just your thoughts on differentiation as well around safety and potentially efficacy versus an antibody and the ability to combine with other regimens in that GVHD space. Thank you.
SteveHoerter: Hi, Peter. Thanks for the two questions. So I'll ask Dan and Margarida, to comment on expectations for the year broadly in 2024 and our expectation of the usual seasonality patterns. And then I'll ask Matt to take your second question with respect to Vimseltinib and GVHD. Dan, you want to go first?
DanMartin: Sure, absolutely. Hi Peter, good morning. Thanks for the question. So as we noted on the call, we feel really excited and pleased with the progress that we've made. I'll speak to the U.S. specifically, in the fourth quarter, delivering $35.3 million in net product revenue, which was a 38% year-over-year increase for the full year 2023, $121.5 million, which was a 25% year-over-year increase. So we feel really pleased with that. And as we look to 2024, we think some of the core drivers of our recent success will continue to be the core drivers of what we expect to be another record year for QINLOCK. Specifically strength in our core business, increasing average duration of therapy, and then, as noted earlier, contribution from unpromoted earlier line use. So when we take a step back and look at the year as a whole, those are sort of the themes and the reason for our excitement. As we think about just the quarter-to-quarter pattern, we wanted to note that we would expect a pattern similar to past years, which reflects some seasonality dynamics, specifically as it relates to Q1, very common in the industry, to see a strong quarterly buying pattern at the end of the year that can potentially impact Q1, as well as some early in the year sort of post-holiday demand seasonality or demand softness. Of course, the other factor that we've noted in the past and would expect this year to also play out true to form is the Pap dynamic, which we typically see a lower PAP percentage in the early part of the year with a gradual increase throughout the year. So those are some of the moving parts that we wanted to note. Margarida?
Margarida Duarte: Sure. So regarding ex-U.S., let me start by saying that we are delighted with the launch, how it's going, and the strong revenue growth from last quarter, which was driven by strong performance in existing markets, but also the contribution from the launch in Italy. So I would say that as we continue to successfully advance our price and reimbursement and launch in new markets, we expect QINLOCK to continue to grow in International. It is always difficult to predict when new markets will open given the different reimbursement processes and different timelines in each market. But assuming we get there, I expect this to happen more toward the second part of 2024. So another thing to note is that while we expect future growth, we cannot exclude quarter-over-quarter variability. So we have seen this in the past and we may see this again in the future. So, I would say all in all, geographic expansion is a key focus for us in 2024. QINLOCK is well positioned for growth. And the recent deal with GENESIS for Central and Eastern Europe is also a good example of the type of transactions that you can expect from us in the future.
SteveHoerter: Great. Thanks Margarida. Matt, do you want to take the vimseltinib question?
MattSherman: Yes. So hi Peter. Yes, so in regards to your question about Vimseltinib in TGC -- I'm sorry, in graft versus host disease, and really to be able to differentiate this, we do remain very excited about our plan to initiate our proof-of-concept study in the second half of this year. And also we have a very large database of safety based on Vimseltinib in TGCT, both from the MOTION Phase 3 study as well as from the Phase 1/2 study. And GVHD is a chronic disease and particularly with the skin and joint involvement there can be severe limitations of patients mobility. And the antibody therapy would have to be given intravenously every two weeks. So for a chronic disease such as GVHD, that's a pretty significant burden on patient. So one of the major features of using vimseltinib as an oral agent will be to combine with other oral therapies as you know, the standard of care now consists primarily of oral agents, whether it's a JAK2 kinase inhibitor or Fura-2 inhibitor and in fact on steroids as well too. And so our ability to differentiate from an antibody, pretty significant with vimseltinib in our Phase 2 study.
Peter Lawson: Got you. Thank you. Is there any way from, I guess, preclinical data to see any differentiation of an oral drug versus an antibody. If you think that could drive differences in efficacy or durability or safety?
MattSherman: Yes, I think most of the preclinical data just speaks to the role of the macrophage in the profibrotic manifestations of the disease. And that's particularly important in several organs, as I mentioned, particularly the skin, because these patients can have pretty severe sclerotic skin lesions, and even joint contractions and also particularly in the lungs as well too. And fibrosis has been a major organ that -- is currently is not a satisfactory treatments current regimens for GVHD. So the role of macrophages inhibiting macrophages in those particular organs could really be a benefit for vimseltinib in this disease.
Peter Lawson: Great. Thanks so much.
Operator: Thank you. I would now like to turn the call back over to Steve Hoerter for any closing remarks.
Steve Hoerter: Yes. Thank you for joining us on today's call, and thanks for your support. We look forward to keeping you updated on our continued progress here at Deciphera during the course of the year. Hope you have a great day.
Operator: Thank you for your participation. You may now disconnect.
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