Deciphera Pharmaceuticals, Inc.

Good morning, everyone, and welcome to Decipher Pharmaceutical's 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?

Thank you, Operator.

Welcome, and thank you for joining us today to discuss Decipher'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 Herter, President and Chief Executive Officer, Matt Sherman, Chief Medical Officer, Dan Martin, Chief Commercial Officer, Margarita 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 Kinloch 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 statement. 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 Herter, President and Chief Executive Officer of Deciphera. Steve?

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 Kenlock growth in the U.S. and internationally drove record annual revenues. demonstrating the global capabilities of our commercial organization. With a highly successful phase three study in TGCT, we expect Vimseltinib to be our second approved medicine. We believe that at peak, Kinloch 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 Kinloch sales, driven by strong demand both in the U.S. and internationally. Meanwhile, our clinical team is working towards our goal of expanding Kinloch's label based on the ongoing Phase III INSIGHT study in second-line GIST patients with mutations in KIT exon 11 and 17 or 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 INTRIG study in second-line patients with mutations in KIT exon 11 and 17 or 18, showing that Kinloch 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 Kenlock and Sunitinib, and that treatment with Kenlock continued to show a favorable safety profile compared to treatment with Sunitinib. We believe that these results demonstrate the strong clinical activity of Kenlock in the second-line GIST patient population studied in Intrigue. For Vimseltinib, building upon the exciting positive results of the Motion Phase III 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 themseltinib in sight, we are also exploring potential indication expansion opportunities, including our plan to initiate a phase two proof of concept study of themseltinib 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, DCC3116, our goal is to select a recommended Phase II dose later this year and move to our first expansion cohort. For DCC3084, our pan-RAF inhibitor, we expect to initiate a Phase I study in the first half of this year. Finally, for DCC3009, 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 one 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. Margarita Duarte, our Head of International, will provide an update on the progress of the ongoing Kinloch 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? 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 Kinloch updates. As Steve mentioned, in January, we presented the final overall survival results from an Intrigue Phase III study at the ASCO GI Conference. As you may recall, in the Intrigue trial, 453 patients with second-line GIFs were randomized one-to-one to receive Kinloch or SubmitNet. 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 Kinloch at 35.5 months versus Sunitinib at 31.5 months, resulting in a 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 Kinloch versus Sunitinib. We also looked at whether treatment in the second line with Kinloch versus Sunitinib had any differential impact on clinical outcomes at the third line treatment. Irrespective of treatment with Kinloch 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 Kinloch versus 7.4 months for Sunitinib. These final results from INTRIG demonstrate that Kinloch offers similar efficacy versus Sudetenib in the second-line GIST population studied in INTRIG. The Nature Medicine publication last month was another major achievement for Deciphera, showcasing the potentially practice-changing results from the exploratory ctDNA analysis from INTRIG in one of the world's leading medical journals. In second-line GIST patients with KIT-X111 and 1718 mutations, Treatment with Kinloch 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 Kinloch patients compared to only 1.5 months for the sunitinib patients. Median overall survival for Kinloch was not reached versus 17.5 months for sunitinib. Kinloch showed an objective response rate of 44% compared to 0% for sunitinib. Together, the data represents a striking clinical benefit to these second-line GIST patients when treated with Kinloch. We're excited that our INSIGHT Pivotal Phase III study in the same patient population is now actively enrolling patients. If positive, we believe the results of the INSIGHT study will support an expanded label for Kinloch and significantly improve clinical outcomes for patients based on a precise understanding of their 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 themselves and then 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 three motion study, which achieved its primary endpoint in 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. CGCT 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 EMOTION 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. Decipher remains committed to ensuring that the full therapeutic potential of medicine and product candidates are explored. To that end, we plan to initiate a Phase II 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 triglycerides and an overall desire to move towards combination therapy. Inhibiting CSF1 receptor-expressing pro-inflammatory and pro-fibrotic macrophages has been clinically 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 Kinloch and Vimseltinib, we remain very excited about the potential for our clinical and research pipeline to fuel Decipher's growth. As Steve mentioned earlier, we expect to select a recommended Phase II dose for DCC 3116 in 2024 to move into our first expansion cohort. We also expect to initiate a Phase I study for DCC 3084 in the first half of 2024. Finally, we expect to submit an IMD for DCC 3009 with the FDA in the first half of 2024 and initiate a Phase I 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?

Thanks, Matt. 2023 was a very successful year for Kinloch 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 growth 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 Kinloch revenue growth in 2024, driven by its position 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 Kinloch in 2024. Now, I will turn to the exciting opportunity we see in TGCT with Vinsultamin, 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 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 and 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 denisulfanib versus pexidartanib, 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 Vinsultamin 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 Vinsultamin 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 themselves in it rapidly upon approval. I will now turn the call over to Margarita Duarte, our head of international, to discuss the progress of the Kinloch launch in Europe. Margarita?

Thanks, Ben. 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 Decipher's total revenue, while laying the foundation for future growth. In 2023, Kinlog 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 Xilab 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 medical needs, the exceptional KOL advocacy, and the remarkable full innovation ratings granted to Kinloch by the Italian authorities, the highest for a non-tuative 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 Kinloch to 14 European Union countries with a combined population of 118 million people. Kinloch 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 strength of our execution And we expect our international revenues to continue to grow as reimbursement agreements and approvals are achieved alongside the growth from our initial launch market, positioning Kinloch to reach more patients around the world. Touching on Vim's health needs, there is a palpable excitement in Europe surrounding the outstanding Phase III motion data, where we believe the number of patients is comparable to the U.S. in the five largest European markets, and the NREP need is higher as there are no approved treatments. We are working hard towards our first initial engagement with HTA agencies early this year, and I look forward to the MIA 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?

Thanks, Margarita. Total revenue for the fourth quarter was $48.3 million, which included $46.7 million in net product revenue of Kinloch, 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 2022, 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 Kinloch 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, SD&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. Thanks, Tucker.

We're very excited for 2024 as we continue to drive commercial growth at Kenlock, 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.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

One moment for questions. Our first question comes from Jessica Phi with JP Morgan.

You may proceed.

Hey, 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 Kinloch for second line just in the unpromoted real-world use? Is this happening mainly with Kinloch experienced treaters who are, you know, 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 consultative. Can you just frame a little bit more how you think about the shape of that launch ramp? Thank you.

Hey, 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 Kinloch in the second line based on physician decision. and then the expected ramp for a potential themselves that launch here in the U.S.

Dan? Yeah, thank you, Jess, for the questions. Good morning. So as it relates to your question about Kinloch, as we've noted, you know, 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, you know, a broad appreciation for the role of Repretinib for patients across lines of therapy and 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, you know, 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 the 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 from Sultanib as rapidly as possible, pending approval.

Thank you.

Thank you.

One moment for questions. Our next question comes from Tyler Van Buren with TD Cowan. You may proceed.

Hey, 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?

Hey, 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 themseltinin based on the motion data. As you know, the study achieved the primary endpoint and all six key secondary endpoints. and also demonstrated that the drug is well tolerated in the 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 pexidartanib 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.

Thank you.

One moment for questions. Our next question comes from Yun Yang with Jeffries. You may proceed.

Thank you. So Kim Locke's second line of labor use, is that you know, is that largely driven by patients who are intolerant to SUTEN or patients with exon 11, 17, 18 mutations?

Hi, Yoon. 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?

Yes. Hi, Yoon. Good morning. Thanks for the question. So, you know, 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 student 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 Repretinib 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 that natural study, dissemination of this information, the presentation, the publication, you know, certainly have raised the noise level. So it's hard to discern, you know, 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 Repretinib 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.

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 on how OPEX level would be in 2024, as well as the collaboration revenue line? Thank you.

Sure. So on the OpEx side, it was a little higher, a sequential dimension 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 to the run rate going forward for SG&A. We will have some second half of the year expenses as we prepare for the launch of itself in it 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 XI, 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 and quarters where we do have supply revenue coming through.

Thank you.

Thank you. One moment for questions. Our next question comes from Michael Schmidt with Guggenheim Securities. He may proceed.

Hey, guys. Good morning. Thanks for taking my questions. I had one on themselves in the event of your plans in GBHD, and how do you think about... Potential differentiation of themselves in urban GVHD from some of the antibodies like axotelumab and can you comment about the possible design of your plant phase two study? You know will that be in axotelumab naive patients? Will you include pre-treated patients? How do you think about that space? Thanks. 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 de-risked 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 themselves in 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 Resiroc 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 II 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.

Thank you.

One moment for questions. Our next question comes from Christopher Raymond with Piper Sandler. You may proceed.

Hey, 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 to get a broad label that could be potentially inclusive of the adjuvant setting? Thanks.

Yeah, 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 themselves in PTT. But we, too, have heard also from investigators interest in exploring a role of an inhibitor like themseltinib in other lines or earlier lines of treatment for tenosynovial giant cell tumors. 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.

Great. Thank you so much.

Thank you. One moment for questions. Our next question comes from Andrew Behrens with Learing Partners. You may proceed.

Hi, this is Ken for Andy. Thanks for taking the question. So you guys, I think, have been saying that the average duration for quinlock in the fourth line setting has started to come up, I believe, about seven months now, increasing potentially up to eight and a half. We're wondering, do you have any color on the penetration in the fourth line, where that could be right about now?

Yeah, thanks for the question. Dan, would you like to take that?

Sure, absolutely. So, yes, you had mentioned about the arbitration 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 Kinloch. As it relates to penetration in the fourth line setting, as we've said, you know, in the past, we feel as though we've done a really good job penetrating that opportunity and that, you know, it's a pretty highly penetrated opportunity as a result of not only a a really strong drug at high unmet need and our ability to execute over the last number of years.

Thank you. One moment for questions. Our next question comes from Brad Canino with Stiefel. You may proceed.

Good morning and thank you. Another question for me on vimseltinib. I wonder how many doses do 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.

Yeah, thanks for the question, Brad. Matt, would you like to take that on GVHD?

Sure. Good morning, Brad. Yeah, this is Matt. So, yeah, so what you're referring to is the pivotal study that was done with axotilamab and 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 more tolerant than the higher doses. That may be more unique to antibodies, because we know the antibody inhibition of the CSO1 receptor has led to 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, I'm 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.

Thank you. One moment for questions.

Our next question comes from Rennie Benjamin with Citizens JMP. You may proceed.

Hey, 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? Are you still ramping that up? Any sort of as to how that's progressing, because that seems to be key in terms of unlocking the second line, you know, just opportunity. And then just as a follow-up with Vimseltinib, you know, you're filing the NDA and MAA. Any chance that we could get some sort of a priority review, or is the base case scenario a standard review, you know, both in the U.S. as well as Europe? And, you know, how long does it take in Europe, you know, just to get the decision?

Hi, Rand. It's Steve. Good morning. Thanks for the great questions. 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 presentations 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 Kinloch 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 to 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 dialogue 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 dialogue 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. Right.

And then if I could just have a follow-up regarding Vimseltinib and what, you know, could ultimately be involved in pre-launch activities. You know, is this something that we should just be, you know, just given the overlap, I 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 pre-launch activities that need to be conducted, you know, given this market?

Yeah, 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?

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 MedAffairs organization and 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 Kinloch and the opportunity in TGCT with himself.

Perfect. Thanks for taking the questions, guys. Good luck.

Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone.

One moment for questions. Our next question comes from Peter Lawson with Barclays. You may proceed.

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 GBHD, just your thoughts on differentiation as well around safety and potentially efficacy versus an antibody and the ability to to combine with other regiments in that GBHD space. Thank you.

Hi, Peter. Thanks for the two questions. So I'll ask Dan and Margarita 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 GBHD.

Dan, do you want to go first? 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 is 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 Kinloch, specifically strengthen 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. Margarita?

Sure. So regarding XQS, I mean, 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 Kinloch 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. Kinloch is well-positioned for growth, and the recent deal with Genesys for Central and Eastern Europe is also a good example of the type of transactions that you can expect from us in the future.

Great. Thanks, Margarita. Matt, do you want to take the Zim-Sultanate question?

Yes. So, hi, Peter. Yes. So, in regards to your question about Zim-Sultanate and TGC, I'm sorry, and breath versus host disease, and our ability 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 dimsultinib and TGCT, both from the motion phase three study as well as from the phase one, two 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 chronic disease such as GVHD. Now, that's a pretty significant burden on patients. So one of the major features of using demsultamin 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 the RAK2 inhibitor, and on the backbone of steroids as well, too. And so our ability to differentiate from an antibody is pretty significant with consulting in our Phase II study.

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?

I think most of the preclinical data just speaks to the role of the macrophage in the pro-fibrotic 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 is a major organ that currently does not have satisfactory treatments of current regimens for fibrosis. So, the role of macrophages in those particular organs could really be a benefit for themselves in this disease.

Great. Thanks so much.

Thank you. I would now like to turn the call back over to Steve Horter for any closing remarks.

Yeah. 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 Decipher during the course of the year. Hope you have a great day.

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Good morning, everyone, and welcome to Decipher Pharmaceutical's 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?

Thank you, Operator.

Welcome, and thank you for joining us today to discuss Decipher'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 Herter, President and Chief Executive Officer, Matt Sherman, Chief Medical Officer, Dan Martin, Chief Commercial Officer, Margarita 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 Kinloch, 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 Herter, President and Chief Executive Officer of Deciphera. Steve?

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 Kenlock growth in the U.S. and internationally drove record annual revenues. demonstrating the global capabilities of our commercial organization. With a highly successful phase three study in TGCT, we expect Vimseltinib to be our second approved medicine. We believe that at peak, Kinloch 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 Kinloch sales, driven by strong demand both in the U.S. and internationally. Meanwhile, our clinical team is working towards our goal of expanding Kinloch's label based on the ongoing Phase III INSIGHT study in second-line GIST patients with mutations in KIT exon 11 and 17 or 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 INTRIG study in second-line patients with mutations in KIT exon 11 and 17 or 18, showing that Kinloch 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 Kenlock and Sunitinib, and that treatment with Kenlock continued to show a favorable safety profile compared to treatment with Sunitinib. We believe that these results demonstrate the strong clinical activity of Kenlock in the second-line GIST patient population studied in Intrigue. For Vimseltinib, building upon the exciting positive results of the Motion Phase III 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 demseltinib in sight, we are also exploring potential indication expansion opportunities, including our plan to initiate a phase two proof of concept study of demseltinib 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, DCC3116, our goal is to select a recommended Phase II dose later this year and move to our first expansion cohort. For DCC3084, our Pan-RAF inhibitor, we expect to initiate a Phase I study in the first half of this year. Finally, for DCC3009, 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 one 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 US commercial performance and outlook for the year ahead. Margarita Duarte, our Head of International, will provide an update on the progress of the ongoing Kinloch 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? 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 Kinloch updates. As Steve mentioned, in January, we presented the final overall survival results from an Intrigue Phase III study at the ASCO GI Conference. As you may recall, in the Intrigue trial, 453 patients with second-line GIFs were randomized one-to-one to receive Kinloch or SubmitNIP. 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 Kinloch at 35.5 months versus Sunitinib at 31.5 months, resulting in a 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 Kinloch versus Sunitinib. We also looked at whether treatment in the second line with Kinloch versus Sunitinib had any differential impact on clinical outcomes at the third line treatment. Irrespective of treatment with Kinloch 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 Kinloch versus 7.4 months for Sunitinib. These final results from Intrigue demonstrate that Kinloch offers similar efficacy versus Subitinib in the second-line GIST population studied in Intrigue. The Nature Medicine publication last month was another major achievement for Deciphera, showcasing the potentially practice-changing results from the exploratory ctDNA analysis from Intrigue and one of the world's leading medical journals. In second-line GIST patients with KIT-X11 and 1718 mutations, Treatment with Kinloch 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 Kinloch patients compared to only 1.5 months for the sunitinib patients. Median overall survival for Kinloch was not reached versus 17.5 months for sunitinib. Kinloch showed an objective response rate of 44% compared to 0% for sunitinib. Together, the data represents a striking clinical benefit to these second-line GIST patients when treated with Kinloch. 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 expanded label for Kinloch and significantly improve clinical outcomes for patients based on a precise understanding of their 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 three motion study, which achieved its primary endpoint in 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. CGCT 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 EMOTIONS 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. Decipher remains committed to ensuring that the full therapeutic potential of medicine and product candidates are explored. To that end, we plan to initiate a Phase II 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 somatopoietic stem cell transplant recipients, with an estimate of 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 triglycerides and an overall desire to move towards combination therapy. Inhibiting CSF1 receptor-expressing pro-inflammatory and pro-fibrotic macrophages has been clinically 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 VimSultanib for patients in the future. Beyond Kinloch and VimSultanib, we remain very excited about the potential for our clinical and research pipeline to fuel Decipher's growth. As Steve mentioned earlier, we expect to select a recommended Phase II dose for DCC 3116 in 2024 to move into our first expansion cohort. We also expect to initiate a Phase I study for DCC 3084 in the first half of 2024. Finally, we expect to submit an IMD for DCC 3009 with the FDA in the first half of 2024 and initiate a Phase I 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?

Thanks, Matt. 2023 was a very successful year for Kinloch 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 growth 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 Kinloch revenue growth in 2024, driven by its position 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 Kinloch in 2024. Now, I will turn to the exciting opportunity we see in TGCT with Ben Seltzman, 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 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 and 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 enzalpinib 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 Vinsultamid 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 Vinsultamid 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 themselves in it rapidly upon approval. I will now turn the call over to Margarita Duarte, our head of international, to discuss the progress of the Kinloch launch in Europe. Margarita?

Thanks, Ben. 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 the Cypher's total revenue, while laying the foundation for future growth. In 2023, Kinlog 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 Xilab 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 medical needs, the exceptional KOL advocacy, and the remarkable full innovation ratings granted to Kinloch by the Italian authorities, the highest for a non-tuative 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 Kinloch to 14 European Union countries with a combined population of 118 million people. Kinloch 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 strength of our execution and we expect our international revenues to continue to grow as reimbursement agreements and approvals are achieved alongside the growth from our initial launch market, positioning Kinloch to reach more patients around the world. Touching on Jim's health needs, there is a palpable excitement in Europe surrounding the outstanding Phase III motion data, where we believe the number of patients is comparable to the U.S. in the five largest European markets, and the NREP need is higher as there are no approved treatments. We are working hard towards our first initial engagement with HTA agencies early this year, and I look forward to the MIA 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?

Thanks, Margarita. Total revenue for the fourth quarter was $48.3 million, which included $46.7 million in net product revenue of Kinloch, and $1.6 million in collaboration revenue. For the full year, total revenue grew 22 percent 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 2022, 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 Kinloch 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. Thanks, Tucker.

We're very excited for 2024 as we continue to drive commercial growth at Kenlock, 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.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

One moment for questions. Our first question comes from Jessica Phi with JP Morgan.

You may proceed.

Hey, 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 Kinloch for second line just in the unpromoted real-world use? Is this happening mainly with Kinloch experienced treaters who are, you know, 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 ginseltinib. Can you just frame a little bit more how you think about the shape of that launch ramp? Thank you.

Hey, 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 Kinloch in the second line based on physician decision. and then the expected ramp for a potential themselves that launch here in the US.

Yeah, thank you, Jess, for the questions, and good morning. So, as it relates to your question about Kinloch, as we've noted, you know, 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. We really think that it's something that reflects a broad appreciation for the role of Repretinib for patients across lines of therapy and 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, you know, 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 the 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 from sultanib as rapidly as possible, pending approval.

Thank you.

Thank you. One moment for questions. Our next question comes from Tyler Van Buren with TD Cowan. You may proceed.

Hey, 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?

Hey, 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 themseltinin based on the motion data. As you know, the study achieved the primary endpoint and all six key secondary endpoints and also demonstrated that the drug is well tolerated in the patient population. We believe we have a very clean and well-characterized safety profile with the drug and continue to have the expectation that 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.

Thank you.

One moment for questions. Our next question comes from Yun Yang with Jefferies. You may proceed.

Thank you. So, Kimlock's second-line off-label use, is that, you know, is that largely driven by patients who are intolerant to Sutan or patients with exon 11, 17, 18 mutations?

Hi, Yun. 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?

Yes. Hi, Yoon. Good morning. Thanks for the question. So, you know, 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 student 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 Repretinib 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 that natural dissemination of this information, the presentation, the publication, you know, certainly have raised the noise level. So it's hard to discern, you know, 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 Repretinib 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.

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 on how OPEX level would be in 2024, as well as the collaboration revenue line? Thank you.

Sure. So on the OPEX side, it was a little higher, a sequential dimension 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 to the run rate going forward for SG&A. We will have some second half of the year expenses as we prepare for the launch of itself in it 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 XI, 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 and quarter, but we do have supply revenue coming through.

Thank you.

Thank you. One moment for questions. Our next question comes from Michael Schmidt with Guggenheim Securities. He may proceed.

Hey, guys. Good morning. Thanks for taking my questions. I had one on themselves in the event of your plans in GBHD, and how do you think about... potential differentiation of mucelotinib and GVHD from some of the antibodies like axotelumab? And can you comment about the possible design of your planned phase two study? You know, will that be in axotelumab naive patients? Will you include pre-treated patients? How do you think about that space? Thanks.

Yeah, 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 de-risked 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 themselves in 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 Resiroc 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 II 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. Thank you.

One moment for questions. Our next question comes from Christopher Raymond with Piper Sandler. You may proceed.

Hey, 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 get a broad label that could be potentially inclusive of the adjuvant setting? Thanks.

Yeah, hi, Chris. It's Steve. Thanks for the two questions. Really good questions. So, you know, 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 themselves in PTT. But we, too, have heard also from investigators interest in exploring a role of an inhibitor like FemCeltenib in other lines or earlier lines of treatment for tenosynovial giant cell tumors. 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.

Great. Thank you so much.

Thank you. One moment for questions. Our next question comes from Andrew Behrens with Learing Partners. You may proceed.

Hi, this is Ken for Andy. Thanks for taking the question. So you guys, I think, have been saying that the average duration for quinlock in the fourth line setting has started to come up, I believe, about seven months now, increasing potentially up to eight and a half. We're wondering, do you have any color on the penetration in the fourth line, where that could be right about now?

Yeah, thanks for the question. Dan, would you like to take that?

Sure, absolutely. So, yes, you had mentioned about the arbitration 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 Kinloch. As it relates to penetration in the fourth line setting, as we've said, you know, in the past, we feel as though we've done a really good job penetrating that opportunity and that, you know, it's a pretty highly penetrated opportunity as a result of not only a really a strong drug at high unmet need and our ability to execute over the last number of years.

Thank you. One moment for questions. Our next question comes from Brad Canino with Stiefel. You may proceed.

Good morning and thank you. Another question for me on vimseltinib. I wonder how many doses do 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. Yeah, thanks for the question, Brad.

Matt, would you like to take that on GVHD?

Sure. Good morning, Brad. Yeah, this is Matt. So, yeah, so what you're referring to is the pivotal study that was done with axotilamab 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 the higher doses. That may be more unique to antibodies. The antibody inhibition of the CSO1 receptor has led to 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, I'm 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.

Thank you.

One moment for questions. Our next question comes from Rennie Benjamin with Citizens JMP. You may proceed.

Hey, 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? Are you still ramping that up? Any sort of as to how that's progressing, because that seems to be key in terms of unlocking the second line, you know, just opportunity. And then just as a follow-up with Vimseltinib, you know, you're filing the NDA and MAA. Any chance that we could get some sort of a priority review, or is the base case scenario a standard review, you know, both in the U.S. as well as Europe? And, you know, how long does it take in Europe, you know, just to get the decisions?

Yeah, hi, Rand. It's Steve. Good morning. Thanks for the great question. So first, for insight, you know, 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 presentations 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 Kinloch 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 to 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 dialogue 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 dialogue 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. Right.

And then if I could just have a follow-up regarding Vimseltinib and what, you know, could ultimately be involved in pre-launch activities. You know, is this something that we should just be, you know, just given the overlap, I 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 pre-launch activities that need to be conducted, you know, given this market?

Yeah, 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?

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 Kinloch and the opportunity in TGCT with himself.

Perfect. Thanks for taking the questions, guys. Good luck.

Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone.

One moment for questions. Our next question comes from Peter Lawson with Barclays. You may proceed.

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 US versus ex-US as investors model out 2024 revenues. And then just moving into GBHD, just your thoughts on differentiation as well around safety and potentially efficacy versus an antibody and the ability to to combine with other regiments in that GBHD space. Thank you.

Hi, Peter. Thanks for the two questions. So I'll ask Dan and Margarita 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 GBHD.

Dan, do you want to go first? 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 is 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 Kinloch, specifically strengthen 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. Margarita?

Sure. So regarding X2S, I mean, 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 Kinloch 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. Kinloch is well-positioned for growth, and the recent deal with Genesys for Central and Eastern Europe is also a good example of the type of transactions that you can expect from us in the future.

Great. Thanks, Margarita. Matt, do you want to take the Zimzaltinib question?

Yes. So, hi, Peter. Yes. So, in regards to your question about Zimzaltinib and TGC, I'm sorry, and breath 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 dimsultinib and TGCT, both from the motion phase three study as well as from the phase one, two 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 chronic disease such as GVHD. Now, that's a pretty significant burden on patients. So one of the major features of using VimSultanib 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 the RAK2 inhibitor, and on the backbone of steroids as well, too. And so our ability to differentiate from an antibody is pretty significant with insults in our Phase II study.

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?

I think most of the preclinical data just speaks to the role of the macrophage in the pro-fibrotic 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 in the lungs is a major organ that currently does not satisfy the treatments of current regimens for fibrosis. So, the role of macrophages in those particular organs could really be a benefit for themselves in this disease.

Great. Thanks so much.

Thank you. I would now like to turn the call back over to Steve Horter for any closing remarks.

Yeah. 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 Decipher during the course of the year. Hope you have a great day.

Thank you for your participation. You may now disconnect.