Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) Q2 2023 Earnings Call Transcript

Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) Q2 2023 Earnings Call Transcript August 9, 2023

Deciphera Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $-0.57 EPS, expectations were $0.62.

Operator: Good morning, everyone. And welcome to the Deciphera Pharmaceuticals Second Quarter 2023 Financial Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Jen Larson, Senior Vice President of Finance and Investor Relations. Jen?

Jen Larson: Thank you, Operator. Welcome and thank you for joining us today to discuss Deciphera’s second quarter 2023 financial results. I am Jen Larson, Senior Vice President of Finance and Investor Relations. With me this morning to discuss the financial results and provide a general corporate update are Steve Hoerter, President and Chief Executive Officer; Dan Martin, Chief Commercial Officer; Matt Sherman, Chief Medical Officer; Margarida Duarte, Head of International; and Tucker Kelly, Chief Financial Officer. Before we begin, I would like to remind you that any statements we make on this call that are not historical facts are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Examples include our expectations for our preclinical and clinical programs, our commercialization of QINLOCK and guidance. Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, and we cannot assure you that our expectations will be achieved. Such risks and uncertainties include those set forth in our most recent quarterly report on Form 10-Q, as well as our other SEC filings. We assume no obligation to update or revise any forward-looking statements. Following this call, a replay will be available on the company’s website, www.deciphera.com. With that, I will now turn the call over to Steve Hoerter, President and Chief Executive Officer of Deciphera.

Steve?

Steve Hoerter: Thank you, Jen, and good morning, everyone. Thank you for joining us today as we provide an update from the second quarter, review our financial results and look forward to the rest of the year. We have made tremendous progress so far in 2023, thanks to the exceptional work of our dedicated team at Deciphera. Our commercial business continues to drive strong results highlighted by a record quarter for QINLOCK, which generated over $38 million in Q2 revenue, an 18% increase over Q2 last year. We believe that we can significantly grow the QINLOCK brand by expanding the label to include the second-line GIST patients with KIT exon 11 and 17/18 mutations and we are pleased to announce today an important milestone towards that goal.

The opening of the first sites for the Phase 3 INSIGHT study. The compelling results of the exploratory analysis of circulating tumor DNA from the INTRIGUE Phase 3 study of QINLOCK in second line GIST patients were featured in an encore presentation at the 2023 ASCO Annual Meeting. These data continue to generate very positive feedback from physicians, who are eager to enroll patients in the INSIGHT study, which is designed to serve as the basis for a Supplemental New Drug Application or sNDA. We are also proud to announce today that we have initiated two new combination cohorts for DCC-3116 with encorafenib and cetuximab and with ripretinib. On today’s call, we will share a data update from the DCC-3116 program, including data from both the Phase 1 single agent escalation and the initial combination escalation cohorts.

We are excited to generate additional data from this potential first-in-class program targeting the autophagy pathway. At the American Association of Cancer Research Annual Meeting in April, we presented eight posters on our early stage pipeline, including the first disclosure of our new pan-KIT inhibitor DCC-3009, for which we expect to file an IND in the first half of 2024. The data we presented at AACR highlighted the sustained productivity of our Kinase Switch-Control Research Engine and its proven ability to generate product candidates with first- and best-in-class potential. Now looking ahead, we are moving into an exciting second half of the year as we approach the topline readout for the pivotal Phase 3 MOTION study of vimseltinib in tenosynovial giant cell tumor and the IND submission for DCC-3084, our potential best-in-class pan-RAF inhibitor.

Now I would like to take a moment to recognize Dan Flynn, our Founder and Chief Scientific Officer, whose retirement was announced last week. On behalf of the entire Deciphera team, I want to thank him for his vision to found our company almost two decades ago and his trailblazing innovations in Switch-Control Kinase Inhibition, which have brought Deciphera to where it is today. It has been an honor working alongside Dan and I wish him the very best in his retirement. We are excited to welcome Dr. Dash Dhanak as our new Chief Scientific Officer next month. Dash brings an exceptional background as a leader in drug discovery with over 30 years of experience and joins Deciphera from Incyte Corporation, where he was most recently Executive Vice President and Chief Scientific Officer.

On today’s call, Dan Martin, our Chief Commercial Officer, will share insights on the U.S. commercial performance for the second quarter, and Margarida Duarte, our Head of International, will provide an update on QINLOCK’s ongoing fourth line GIST launch in Europe. Matt Sherman, our Chief Medical Officer will provide an update on our R&D efforts, including data from the DCC-3116 Phase 1/2 study. Finally, Tucker Kelly, our Chief Financial Officer, will review the financial results from the second quarter. First, I will turn the call over to Dan and Margarida to discuss our Q2 commercial performance. Dan?

Dan Martin: Thank you, Steve. Q2 was a record quarter for QINLOCK in the U.S. We achieved launch to-date highs in terms of net product revenue, as well as many of our core brand metrics. U.S. net product revenue was $28.9 million in the second quarter, which represents a 17% increase versus Q1 and 22% year-over-year increase versus Q2 of 2022. During the quarter, we saw continued momentum in the core drivers of demand, including new prescriber growth, new patient acquisition and average duration of therapy. Together, these factors drove strong volume growth in Q2 as demand bounced back from the seasonality driven the softness we saw in Q1. Additionally, gross to net declined slightly in Q2 versus Q1, whereas PAP increased slightly quarter-over-quarter.

Our commercial team continues to execute at a very high level, again, delivering the highest reach, frequency and share of voice of any company in the GIST market and maintaining high awareness and positive product perceptions among both academic and community physicians. New prescriber growth has continued at a very consistent pace. In Q2, we surpassed 1,000 QINLOCK prescribers launch to-date. Our market research and KOL interactions continue to highlight QINLOCK is firmly entrenched as the clear standard-of-care in fourth-line GIST. At ASCO in June, we had the opportunity to sit down with many of the leading sarcoma experts from across the country. GIST KOLs consistently highlighted their positive clinical experience with QINLOCK and the tremendous impact QINLOCK has for their patients.

In particular, KOLs highlighted QINLOCK’s impressive efficacy and tolerability, which they noted is a combination that can be challenging to deliver to patients receiving sunitinib or regorafenib. We remain very pleased with our commercial momentum in U.S. and look forward to continuing strong execution in the second half of the year. We expect to see continued growth in demand balanced with modest increase in PAP. Consistent with prior years, we expect the PAP percentage in Q3 and Q4 to be near the high end of our estimated range of 20% to 30%. In addition, we expect to see modestly higher gross to net in Q4 related to the Medicare inflation rebates required by the Inflation Reduction Act. I will now turn the call over to Margarida Duarte, our Head of International, to discuss the progress of the QINLOCK launch in Europe.

Margarida?

Margarida Duarte: Thanks, Dan. We remain very excited with the strength of the international business and the launch momentum of QINLOCK in Europe. For the second quarter, international revenue was $8.4 million, up from $7.8 million in the prior year, driven by continued volume growth from the successful entry in Europe and partially offset by a lower monthly price in Germany following the expiration of the free pricing period in 2022 and by timing of orders from distributor markets outside Europe. QINLOCK continues to be very well received by physicians and patients in Europe based on the high unmet medical need and its unprecedented benefit in fourth-line GIST. In Germany, we continue to see strong demand as we work to unlock a significant opportunity in the more dispersed and fragmented community setting.

On the heels of the strong pricing we achieved in Germany, the team continues to work diligently on achieving reimbursement for QINLOCK with authorities in Spain, France, the United Kingdom and elsewhere. Last quarter, we shared that we expected to launch QINLOCK in Italy in the coming months and today we are delighted to announce that we are very close to launch. We have successfully finalized the reimbursement negotiation process and are waiting for the publication of the IFFA [ph] resolution in the Official Gazette, which is the last step before launch. We look forward to getting QINLOCK in the hands of patients in Italy shortly. Turning to the rest of the world, we are excited that negotiations with the pan-Canadian Pharmaceutical Alliance were successfully completed.

The agreement supports the public listing and reimbursement of QINLOCK by provinces in Canada and is a major step in enabling broad access to Canadian patients with fourth-line GIST. QINLOCK is already available in the first provinces and our partner in Canada continues to work with the remaining ones to finalize public reimbursement. Additionally, we are pleased to have recently received approval for QINLOCK in Singapore. All in all, these are very positive developments and we expect our international revenue to continue to grow as reimbursement agreements and approvals are achieved around the world alongside the growth from our initial launch markets. I will now turn the call over to Matt to provide an update on our clinical programs. Matt?

Q&A Session

Matt Sherman: Thanks, Margarida. We continue to complement our commercial success with substantial progress across our growing pipeline of clinical and preclinical programs, enabling Deciphera to solidify its position as a leading oncology company. There is excitement have all stages of our pipeline from the upcoming topline results of the Phase 3 MOTION study to the start of the INSIGHT trial and to the opening of cohorts for DCC-3116. I am confident about the prospects we have to apply our discovery, development and commercial capabilities to benefit patients with cancer. First, I’d like to start with our DCC-3116 program. 3116 is designed to be a first-in-class backbone combination agent across a wide range of cancers. As Steve mentioned earlier, we are excited to announce today that we have opened the first site for two new 3116 combination cohorts, one with encorafenib and cetuximab and the second with ripretinib.

We look forward to continued progress as we work to demonstrate clinical proof-of-concept for the inhibition of ULK1/2-mediated autophagy to treat cancer. Moving now to discuss updated Phase 1/2 data from both the single agent escalation and the combination escalation cohorts. Our initial clinical update at ESMO last year, we presented data on the first 18 patients with single agent dose escalation part of the study and that’s selected the starting dose of DCC-3116 at 50 milligrams BID for the initial combination cohorts. I will first provide a brief update on the additional data we have generated from the single agent dose escalation that includes 10 additional patients and the full 28 patients single agent 3116 remain well-tolerated at doses from 50 milligrams BID to 300 milligrams BID with no maximum tolerated dose reach.

The AE profile was shown to be consistent with prior data disclosed at ESMO 2022 and only one dose limiting toxicity was observed, a grade 3 ALT increase at 100 milligrams BID. The updated pharmacokinetic profile continued to demonstrate 3116 exposure associated with the anticancer efficacy and preclinical combination studies. The PK profile showed the 3116 exposure increase doses between 50 milligrams and 200 milligrams BID with associated variability. At the dose of 300 milligrams BID, 3116 exposure appeared to approach plateau. We continue to see pharmacodynamic effects that were associated with anticancer efficacy and preclinical studies. At the end of last year, we began evaluating 3116 with two MEK inhibitors trametinib and binimetinib and the KRAS G12C inhibitor sotorasib in patients with advanced solid tumors.

As of August 4, 2023, we had enrolled 27 patients in the combination cohorts across a variety of solid tumors. Dose limiting toxicities were observed at 50 milligrams BID of 3116 in combination with the approved doses of trametinib and binimetinib. Based on these DLTs and the updated PK and PD data from the single agent dose escalation and the preclinical combination efficacy study with once daily dosing of 3116, we reduced the dose of 3116 to 50 milligrams QD for both the trametinib and binimetinib combination cohorts. And the sotorasib cohort, the first dose level of 3116 at 50 milligrams BID and sotorasib 240 milligrams QD was well tolerated with no DLTs observed, subsequently dose escalated 3116 to 200 milligrams QD and enrollment is ongoing.

We expect to have sufficient data in the first half of 2024 to make decisions about opening the MEK or KRAS G12C expansion cohorts after we have completed the dose escalation combinations. We remain excited about opening our two new DCC-3116 escalation combination cohorts and we will continue to follow the clinical data to invest in the right expansion combinations to demonstrate clinical proof-of-concept. Moving on to vimseltinib in the first quarter, we announced completion of enrollment in the MOTION pivotal Phase 3 study, which we believe will become the second approved product from our switch-control kinase inhibitor platform. We remain on track to readout topline results from MOTION in the fourth quarter. We also expect to present updated efficacy and longer term safety data from the Phase 1/2 study in the fourth quarter.

We are strongly encouraged by compelling clinical data we have generated, supporting the potential of vimseltinib to be the standard-of-care treatment for patients with TGCT non-amenable to surgery. We also opened the first sites for INSIGHT, a new pivotal Phase 3 study QINLOCK versus sunitinib in second line GIST patients with KIT mutations in exon 11 and 17/18 and look forward to enrolling the first patients. This positive, we believe the results of the INSIGHT study will support an expanded label for QINLOCK and significantly improved clinical outcomes for patients based on a more precise understanding of the GIST tumors that allows physicians to select the best therapy for their patients. Lastly, we remain on track to submit an IND for DCC-3084, a potential best-in-class pan-RAF inhibitor in the fourth quarter and another IND for our new pan-KIT inhibitor DCC-3009 in the first half of 2024.

I will now turn the call over to Tucker Kelly, our Chief Financial Officer to review the second quarter financial results. Tucker?

Tucker Kelly: Thanks, Matt. Total revenue for the second quarter of 2023 was $38.3 million, which includes $37.3 million of net product revenue of QINLOCK and $1 million of collaboration revenue, an increase of 18%, compared to total revenue of $32.5 million in the second quarter of 2022, including $31.5 million of net product revenue. The $1 million in collaboration revenue this quarter was comprised of product royalty revenue under our agreement with Zai. Cost of sales were $0.2 million in the second quarter of 2023, compared to cost of sales of $1.8 million for the second quarter of 2022. Cost of product revenue was $100,000 in the second quarter, compared to $1 million in the same period last year. In the second quarter, total operating expenses were $90.9 million, compared to operating expenses of $74.5 million in the same period in 2022.

Research and development expenses for the second quarter were $58.3 million, compared to $44.9 million for the same period last year. Selling, general and administrative expenses for the second quarter of 2023 were $32.6 million, compared to $29.6 million for the same period in 2022. We expect quarterly operating expenses in the second half of the year to be consistent with what we saw in the second quarter of 2023. As of June 30, 2023, cash, cash equivalents and marketable securities were $389.4 million and our cash run rate guidance into 2026 remains unchanged. With that, I will now turn the call back over to Steve.

Steve Hoerter: Thanks, Tucker. The first half of 2023 was a strong start to what we expect to be a very significant year for Deciphera. We have made significant strides across our commercial business, as well as our early- and late-stage pipeline, and we are now well positioned to achieve important milestones in the second half of the year. We are excited for the topline readout of the MOTION pivotal Phase 3 study of vimseltinib in the fourth quarter as this program has the potential to address the significant unmet needs of TGCT patients and become our second approved medicine. Additionally, we look forward to enrolling the first patient in the INSIGHT pivotal Phase 3 study of QINLOCK, as we seek to change the treatment paradigm for second line GIST patients with mutations in KIT exon 11 and 17 or 18. All while we continue to advance our earlier stage clinical pipeline. With that, Operator, I’d now like to open the call for Q&A.

Operator: Thank you. [Operator Instructions] It comes from the line of Tyler Van Buren with TD Cowen. Please proceed.

Tyler Van Buren: Hey, guys. Good morning. For the registrational MOTION trial reading out next quarter, assuming success which is likely, how quickly can you file them for TGCT. And as a follow-up or related question, what specifically should we look forward to from the Phase 1/2 update expected next quarter relative to what we saw last year?

Steve Hoerter: Yeah. Good morning, Tyler. Thanks for joining and thanks for the questions. It’s Steve. I will take the first question about the readout and potential timing for filing and I will ask Matt to comment on expectations setting for the Phase 1/2 update. So as we noted on the call, we reiterated our guidance to report out the topline for the Phase 3 MOTION study in quarter four of this year. We are excited to get to that milestone. We think the data we presented so far clearly demonstrate the potential for vimseltinib to the best-in-class for the treatment of patients with tenosynovial giant cell tumor. And so when we get to the report out of the topline in quarter four, we believe we will be in a position then to provide an update on potential filing timeline.

Of course, once we get to the topline report out, we will engage with FDA as we usually do in the ordinary course and have that conversation with them as we prepare for that potential filing. And we are excited about the program, as you know, because there is very nice overlap with the prescriber base for the existing business we have with QINLOCK in GIST and we think that this product has a very high likelihood of being our next commercial products here in the U.S. and outside of the U.S., allowing us to transition to be a multi-product company. So, Matt, do you want to comment on the Phase 1/2 expectations.

Matt Sherman: Yes. So, good morning, Tyler. So in regards to the updated data for the Phase 1/2 study of vimseltinib in TGCT that we plan to present later this year. As you know, a year ago, we presented the data at the ESMO 2023 — 2022 meeting, and at that time, we were able to report really very strong objective response rate for both the dose escalation cohorts and cohorts A and B in patients with previously untreated or treated TGCT. So with longer follow-up as we saw previously patients may respond. So that would be part of the update, as well as longer safety information. And importantly also, again, looking at the patient reported outcomes and quality measures that we had mentioned previously both pain and for stiffness, because those are very important about how patients feel and function. So there will be updated data for those as well.

Tyler Van Buren: Thank you.

Operator: One moment for our next question. It comes from the line of Eun Yang with Jefferies. Please proceed.

Eun Yang: Thank you. So a couple of questions. One is on the Phase 3 INSIGHT trial, which just began. According to the clinicaltrials.gov, the primary completion is in February 2026 and this is a 2 to 1 randomization with a QINLOCK showing 14 months of PFS in Phase 3 INTRIGUE. So does this timeline assume about 18 months, maybe 12 months to 18 months enrollment period. And second question is for Tucker, in terms of collaboration revenue for this year. My understanding is that it’s going to be around $8 million and based on the first half of this year run rate, what are the kind of collaboration partnership revenues if they wish to be expecting in the second half of this year aside from Zai Lab royalties? Thank you.

Steve Hoerter: Hi, Eun. Good morning. Thanks for the two questions. I will take your first question with regard to INSIGHT and then Tucker can take your second question. So we were excited, as you heard to announce that we have opened now the first sites for the INSIGHT study and in the conversations we have been having with investigators and with thought leaders, there continues to be really palpable enthusiasm for the study and for this notion of being able to better understand patients — the genetic profile of patient’s tumors in order to guide therapy in GIST. And as you know, this is in essence, the first time in GIST that we are able to advance the field on this way. So we are looking forward to getting additional sites open as we began now screening and enrollment in the study.

As we have noted before, as we get into a cadence of enrollment, we think we will be in a much better position to provide updates on when we would expect to get to full enrollment in the study and when we might expect the study to readout. So I would use the ct.gov listing. It was really — I would take that with a pinch of salt for the moment until we really get into enrollment having more sites open and we have a better sense of what that cadence of enrollment will be. And as I just said, we will provide updates along the way, so we can share our progress on the study. But we are looking forward to, as I said, opening more sites and remain enthusiastic about what we hear from investigators who are going to be participating in the study.

Tucker Kelly: Eun, it’s Tucker, for your second question. So as a reminder, collaboration revenue at the moment consists exclusively of revenue we recognized under our collaboration agreement with Zai Labs for QINLOCK in Greater China. So we recognized so far this year $1.2 million roughly. The two key components historically for collaboration revenue have been product royalties, as well as commercial supply revenue. In the first half of this year, and particularly in the second quarter was really almost exclusively royalty based revenue, so only a small amount outside of that. The first quarter was a bit different in that they had been taking a price adjustment based on the NRDL listing which happened earlier this year. So I think we have got a nice quarter for royalty revenue was just under $1 million for Zai in Q2 and we haven’t provided any guidance as to the balance of the year.

I think what we would say is that we continue to expect royalty revenue to increase over time as they expand the market opportunity in China and then the commercial supply revenue is more episodic and we don’t provide guidance. But from time-to-time in particular quarters you may see that as well, but the royalty revenues to be the consistent piece.

Operator: Ms. Yang, does that answer your question?

Eun Yang: Yes. Thank you very much.

Operator: Thank you. One moment for our next question please. It comes from the line of Michael Schmidt with Guggenheim. Please proceed.

Michael Schmidt: Hey guys. Good morning. Thanks for taking my questions. I had one on DCC-3116. It’s interesting you mentioned these DLTs in the trametinib and binimetinib combination cohorts at 50 milligrams twice a day. Could you talk about that some more and what were some of those DLTs? Do you think this could be mechanism related perhaps off target? It’s just interesting, given the single agent dose up to 300 was well-tolerated, just curious if there’s anything else going on in that particular combination.

Steve Hoerter: Yeah. Thanks, Michael. Matt, do you want to take that?

Matt Sherman: Yes. Good morning, Michael. So, yeah, as you know, we have reported some DLTs in the combination cohorts of DCC-3116 with trametinib and binimetinib. And just to go back to the data that we presented initially at ESMO last year and then recently updated today. In the monotherapy cohorts, the doses of 50 milligrams BID up to 300 milligrams BID of 3116 as a single agent was well tolerated. There was no dose limiting — there was no maximum tolerated dose identified and there’s only one dose limiting toxicity identified of asymptomatic reversible ALT elevation in patient at the 100 milligram dose level. And then the combination cohorts with both trametinib and binimetinib at the starting dose level at 50 milligrams BID with the standard doses those agents, we did observe a few DLTs. Interesting, those DLTs have been reported in the label for both of those single agents — both of those drugs are single agent.

So if you look at the warnings precautions or like most common as for events with trametinib rash and diarrhea are noted, and certainly, for binimetinib cardiac changes in ocular changes are also noted for binimetinib. So those may be related to the single agent of those standard-of-care drugs. But, of course, in a clinical trial setting, because the drugs are combined, the attributions given to the combination. So we proceed with the dose escalation cohorts for both trametinib and binimetinib. In addition for sotorasib, we are also combining sotorasib with 3116 and we have now escalated to 200 milligrams QD in combination with sotorasib have not seen any dose limiting toxicities in that cohort.

Michael Schmidt: So in the MEK inhibitor combination, so you stepping down to 50 QD, but then — as the opportunity then to escalate after that cohort is completed?

Matt Sherman: Yeah. So there is protocol, there’s opportunities to modify the doses of both 3116 and/or the standard-of-care combination drug. So once we start to complete enrollment in those cohorts and look at all the information, we will be able to make decisions about the next dose levels that we will be able to move to in those combination.

Michael Schmidt: Okay. And then a question on vimseltinib obviously a lot of focus on the MOTION study completing that and discussing the data. But just curious if you — how do you think about potential other indications for vimseltinib in the future or are there other opportunities that you might be interested in pursuing for the CSF1R?

Steve Hoerter: Yeah. Michael, thanks for the question. It’s Steve. I am happy to take that. So I think you are familiar with recent reports of CSF1R inhibition in chronic graft versus host disease as an example. So some recent data within antibody, you confirming the potential role of CSF-1 receptor inhibition in that disease. There have been other reports in the literature about a potential role for inhibitors and treating fibrotic diseases like IPF. So we haven’t made any disclosures yet as you know about the potential additional indications that we might pursue with vimseltinib, but we are very actively evaluating additional opportunities for them, and at the right time, we will have future disclosures with respect to our plans and the opportunity to broaden the role potentially for vimseltinib to treat a variety of diseases.

So that’s where we stand. But we are pleased to see how the field continues to evolve and certainly with the profile, like, we have demonstrated already with vimseltinib being an oral agent and being very potent and selective. We think we have a great drug on our hands, which we want to make sure we explore fully.

Michael Schmidt: Great. Thank you.

Operator: Thank you. One moment for our next question. It comes from the line of Chris Raymond with Piper Sandler.

Chris Raymond: Hey. Thanks. I have got just two questions. Maybe first on QINLOCK, can you maybe talk about what you are seeing commercially in the second-line setting at this point, you had a pretty strong second quarter print. I am just kind of curious if you can give any color as to the second-line uptake that might be from the NCCN guidelines that may be driving that? And then a question on vimseltinib, I don’t think there’s any suspense at least as I talk to investors in terms of meeting the primary endpoint of the MOTION study. But maybe can you just talk a little bit about what kind of expectations, you would like to set? You have got the dynamic of deepening response rates over time, you have got the 69% at any time point, but this is a 25-week study, which one would argue is likely to skew on the lower end of some of the stuff you guys have shown.

So maybe just to set expectations if you will in terms of what that actual number should be when you see the readout? Thanks.

Steve Hoerter: Thanks. Thanks, Chris. Good morning. Thanks for joining us. So I will ask Dan to take the first question, Matt can take the second. Maybe I will to start before I turn it over to Dan and just say that. As we said on in the prepared remarks, we are really excited about the performance that we saw in quarter two and the strength of the business here in the U.S. and the growth that we saw, and of course, our continued launch in Europe and opportunities geographically to expand continues. But, Dan, you want to offer some more color commentary on what we are seeing in the U.S. business.

Dan Martin: Yeah. Absolutely. Thanks, Steve, and good morning, Chris. Thanks for the question. So extremely pleased with our performance and results in Q2. Really a record quarter for QINLOCK in U.S. Clearly, QINLOCK is entrenched as the standard-of-care in the fourth-line setting, which we continue to be really pleased with. And importantly, we saw strength across virtually all of our core brand metrics this quarter, including new prescriber growth, new patient acquisition and average duration of therapy, among others. Regarding your question about, could there be growth in the off-label setting. First, I will just note as we always do that these — any second-line uses an off-label use that we can’t and don’t promote and really there’s sort of two elements to this.

One is the 11 and 17/18 data that we presented at both the virtual ASCO Plenary, as well as the ASCO Annual Meeting in June, where we continue to hear great excitement by KOLs around that data, they call it potentially practice changing and therefore real excitement for the INSIGHT study that we have just announced — we have opened. And then the second component that you touched on the guidelines piece, which is listing of QINLOCK for patients who may be intolerant of sunitinib. And what we hear from KOLs there really is an appreciation for having another option albeit some variation prescriber to prescriber in terms of how common it is for them to have a patient that’s intolerant of sunitinib, certainly always appreciate having another option.

And so in terms of what those, either of those are both of those dynamics may be having on the business. We think it’s still just a bit early to be able to discern what impact if any that’s having. It really just a bit early to know certainly something that we will continue to monitor and there’s no question that overall, we are extremely pleased with the strength and direction of the business.

Matt Sherman: Yeah. Hi, Chris. So this is Matt. So in regards to vimseltinib in TGCT, as you noted, we are very pleased with the data that we first reported at ESMO last year with really strong objective response rates across all three groups of patients from the Phase 1 dose escalation to the two expansion cohorts and as we noted earlier today to we plan to have a update of that data as well later this year. And importantly, it’s not only just the regulatory endpoint for approval at week 25, but as we noted previously and has been previously shown with other agents with continued treatment. The response rates go up and that would be really being important for how these patients journeys will progress, because as we know that this is not a malignant disease.

So patients have normal life expectancy even though they suffered from their disease. So the chronicity of treatment will be really important for these patient’s quality of life. In regards to quality of life, importantly, as well too as we first reported as last year, patient reported outcomes are really critical to the use of this drug. This was missing part of the pexidartinib approval, because they had a lot of missing data in their evaluations of patients. But we have incorporated the quality of life measures including pain and stiffness and we reported those last year as well too, patients had very meaningful changes in both worst pain as well as in stiffness. And in addition, one of our other endpoints is range of motion and this is really important as well to the FDA asked for these diseases.

It’s not just how patients survive, but importantly, how they feel and function. So there — the quality of life measures and particularly range of motion can be an important secondary endpoint that we will look forward to speaking to in the future.

Steve Hoerter: Yeah. Just to build on Matt’s comment. This is Steve. Chris, good question on expectations setting. When we reported the data last from the Phase 1/2 at ESMO last year. What we noted was that we saw a week 25 or six-month response rate that was at 38%. But yet as Matt noted, we saw additional responses beyond that time point. So I think when it comes to how this drag ends up getting commercialized assuming success, it will be based on the totality of the data, including longer term follow-up, which is very consistent with how Daiichi today markets pexidartinib, it’s based on the totality of the pex data as opposed to solely that week 25 endpoint. But we are really pleased with how the product is performed in the Phase 1/2 and look forward to reporting out the topline in Q4.

Matt Sherman: And also one more comment on that question as well too is the duration of therapy is also very important as we were able to report last year in the patients who were in the dose escalation cohorts, who have been on study for the longest. We had nearly an 18-month duration of therapy for those patients. And with additional follow-up that we expect to report later this year too with longer follow-up for those patients that duration of therapy number also could be — we will report on an updated duration therapy number for the patients.

Chris Raymond: Great. Thank you very much.

Operator: Thank you. One moment for our next question. It comes from the line of Andrew Berens with Leerink Partners.

Andrew Berens: Hi. Thanks and congrats on the progress guys. Couple from me. Now that the QINLOCK the Phase 2 INSIGHT trials opening. Can you give us some idea how long you think it could take to enroll that trial? How many patients do you think you have to screen to identify one with exons 11 and 17 or 18? And then question on 3009 the pan-KIT agent, another pan-KIT agent has setback before the company got to minimally efficacious dose, because the hand fit and skin reactions, thoughts on that toxicity and how it can be dialed out or avoid it? And then just to follow-up on Michael’s question, it sounds like 3116 and reactions were mechanism Braftovi maybe PK related or metabolic issues that’s increasing the levels any insights about that.

Steve Hoerter: Hey, Andy. Good morning. Thanks for joining. Three great questions. So I will take the first question on INSIGHT and enrollment expectations and I will also comment on the 3009 question you had the setback from the other pan-KIT inhibitor. Matt, you may want to offer some additional commentary there and then, Matt, you can take the 3116 question. So first on INSIGHT, Andy, we were excited to announce today that we have the first sites opened for the study. As Matt has said, we continue to hear very positive feedback and excitement about enrolling patients on INSIGHT from investigators also from thought leaders and I think really based on their enthusiasm to finally move GIST treatment into the 21st century and be able to better understand what’s driving an individual patient’s progression and offer a customized treatment for patients.

So we are really pleased with the reception to the data that we reported from INTRIGUE and the ctDNA analysis and also the excitement and reception to the INSIGHT study itself. As we get the study underway, which we now are and start to see enrollment in the study, we are going to be in a much better position to offer some perspective and color on what we see is the trajectory for enrollment and when we may reach full enrollment in the study. It’s really just too early for us to be able to offer meaningful color commentary with respect to that. But stay tuned, rest assured will provide additional update on future quarterly calls as we see the cadence of enrollment in the INSIGHT study. And then for 3009, as we have disclosed we expect to file the IND for 3009 in the first half of next year, and you referenced, Andy, a recent setback from a competitor agent despite a lot of sort of promise and expectation that had been created they unfortunately were unable to reach exposures that were well tolerated seeing as you noted some significant toxicities namely palmar-plantar erythrodysesthesia and patients.

So for us, we have now demonstrated I think our success in designing inhibitors like ripretinib or QINLOCK, we have applied those same skills to our design and selection of 3009 as our candidate to take forward and we believe based on the selectivity profile that we have previously reported at AACR earlier this year, this candidate has an even more selective profile than ripretinib, which is regarded as being very well tolerated. So we are looking forward to getting the IND filed and then getting this drug into patients and understanding the profile of patients. Matt, do you want to comment then on the 3116 question.

Matt Sherman: Yeah. So, thanks. So just to clarify we were talking about earlier, we did see dose limiting toxicities with 3116 in combination with trametinib and binimetinib. And as I noted, those events were — have been seen with those other agents alone. So in the clinical trial setting, of course, the relatedness is related to both drugs, because both drugs are combined. But I noticed that the DLTs that we noted have been seen either with trametinib or binimetinib alone.

Andrew Berens: All right. Would that suggest that it’s a PK issue or metabolic issue, increasing the exposure levels of those drugs?

Matt Sherman: Yeah. No. No. Not at all. No. So there was no thought that it might have anything to do the metabolism of the drug or PK issues. What I was commenting on that when you see these effects with the combination, it could be due to the single agent alone, if you use that single agent, these are reported safety events, adverse events, warning precautions in the label. We don’t know, we continue to enroll patients in cohort really in those cohorts and it’s right the totality of data that will inform us about overall combined ability wants to see with MEK inhibitors. But as know we continue to enroll patients. We are very pleased with progress that we have had in the trial sotorasib cohort continues to know as well too. So we look forward to having an update sometime in the future.

Andrew Berens: Okay. Thank you. Appreciate it.

Operator: Thank you. One moment for our next question. It comes from Brad Canino with Stifel.

Brad Canino: Good morning. Thanks for the questions. Two from me. First, any changes in the U.S. inventory, you would flag, and I guess, where are you versus normal levels. And then a question for Tucker on how to think about R&D. You are pretty close to where you were around $60 million a quarter before the optimization following the entry results. So help us understand the puts and takes as you get towards the end of vimseltinib study, the ramp of INSIGHT and you are investing into the pipeline. Should we expect continued increase in spend and are you likely to exceed the peak spend that we saw in 2021? Thank you.

Steve Hoerter: Hey, Brad. This is Steve. Thanks for the questions. I will take the first one on inventory, and Tucker, if you would like to take the second one. So, Brad, in the quarter, we didn’t see inventory is significant driver of results. So this was principally driven by strong demand growth in the quarter versus first quarter and versus prior year. Tucker?

Tucker Kelly: Sure. So, Brad, thanks for the question on the R&D expense. So what we said today, we had $91 million of OpEx in the second quarter, $58 million that was for R&D and we expect that the balance of the year will be similar in terms of overall total OpEx from we saw in the second quarter. You noted that kind of a high watermark for R&D was back in 2021, we had $257 million of R&D expense there based on the results, last year we had $187 million after the restructuring the portfolio prioritization. So I don’t think we will get back to that $257 million this year and if you can again roll forward our $58 million roughly in the second quarter and then the balance for 2024 and beyond, really just depends on how quickly we can move and success in the pipeline.

We have got a lot of really great things going on in our clinical development area and assuming success, we will continue to prudently invest in the assets in the right place. So I don’t think we are getting back there this year and the balance of that will depend on the success in the clinic.

Brad Canino: I appreciate the commentary. Congrats on the quarter. Thanks.

Operator: Thank you. One moment for our next question. It comes from the line of Reni Benjamin with JMP Securities.

Reni Benjamin: Hey. Good afternoon, guys. Good morning, guys. Congratulations on the quarter. A question on vimseltinib, can you talk about the remaining steps, maybe remind us when the last patient was enrolled. When you think the database might be locked and how long it takes from a database lock to reporting top line results. And can you also remind us is the filing going to be both in the U.S. and the EU will that be filed simultaneously or is there more data that’s required in the EU?

Steve Hoerter: Yeah. Hi, Reni. Good morning. It’s Steve. I am happy to take those two questions. So first, with respect to the timing for the readout of the MOTION Phase 3 study. As you know we have guided to Q4, we completed enrollment in the study in Q1, which was ahead of schedule. So we are really pleased with the pace of enrollment. And so we — as you know, the primary endpoint is response at 25 weeks or six months and so once we get to that — all patients get to that time point for evaluation for efficacy, we are then able to do the work that we need to do to block clean the database and then to be able to analyze data and get ready for the report out. So this is why we have been consistent here in the last couple of quarters and guiding to a Q4 readout for the vimseltinib study.

And your question with respect to where we may file, absolutely, of course, in the U.S., it’s our intent to file in the U.S. and in Europe, you may recall there are no approved agents to treat tenosynovial giant cell tumor in Europe and so our goal would be to file in Europe as close as we can to U.S. filing. So as we get to the readout of the topline of the study in Q4, we will be in a position to provide some better guidance on filing timeline and how close we think we can make U.S. filing and the European filing. But we know there is significant unmet medical need in Europe given no approved agents also of course unmet need here in the U.S. and our goal is to get the drug to patients who get assuming success as quickly as we can.

Reni Benjamin: Got it. And then just maybe as a follow-up for 3116, are we on track then to report kind of recommended Phase 2 doses by the end of the year and would that be a good point no-go decisions especially on maybe the trame and binime combinations or do you really feel that you need to…

Steve Hoerter: Yeah. Reni, it’s Steve. We lost you there for the last bit of your question. I think your question was about timing forgetting to recommended doses for the combinations and the existing cohorts. So as Matt noted, we continue to enroll patients across the trametinib to bini and the sotorasib cohorts, Matt provided, I think, it really put an update in terms of what we have seen so far both from the updated Phase 1 monotherapy dose escalation data, but also the initial combination dose escalation data. We also noted in the prepared remarks that we now expect that in the first half of next year, we will have sufficient data to make decisions around potential expansion cohorts in which we might pursue, and of course, we will continue to be guided by the data and the science in terms of which expansions we might pursue.

Meanwhile, we are also really pleased to announce today that we have now opened the first sites for the new combination dose escalation cohorts. One of those is with our very own ripretinib as you know and the second is the result of a clinical supply and collaboration agreement with Pfizer for an encorafenib and cetuximab combination. So we were pleased to get those sites open for enrollment for those two new cohorts. So we continue to make good progress and we think we will be in a position, as I have said in the first half of next year now to make decisions about the potential expansion.

Reni Benjamin: Great. Thanks for taking the questions.

Operator: Thank you. One moment for our next question. It comes from the line of Peter Lawson with Barclays. Please proceed.

Unidentified Analyst: Hi. Good morning. This is Shay [ph] on for Peter. Thanks for taking our question. I just wanted to get a bit of a better sense on the organic growth for U.S. versus ex-U.S. Maybe could you speak a little bit more to the volume growth in these two components, if there is any one-timers, we should be thinking about such as stocking orders any pricing benefits? And just a follow-up on the second-line component. Is there — I appreciate that it’s still early, but is there any metrics you could point to that suggest uptake here or any metrics you would look to provide in the near-term that might give a little more color on the second-line I think? Thanks so much.

Steve Hoerter: Hi, Shay. Good morning. It’s Steve. Thanks for the great set of questions. So I will ask Dan to talk about — to answer your questions about the U.S. business and the growth that we saw in Q2 versus Q1 and versus last year and then Margarida can comment on what we are seeing in the international business.

Dan Martin: Yeah. Thanks, Steve. So, Shay, thanks for the questions. In the U.S. really strong quarter that we had was driven principally by demand volume. So you asked to kind of understand how it breaks down volume versus price. The 22% year-over-year growth that we delivered in the quarter for net revenue was driven largely by growth in demand and that comes from several sources, average duration of therapy being really key one that we have talked about previously, we continue to feel as though that will continue to gradually increase. We have said previously that it was about seven months on average in 2022 and we expect that to gradually grow to eight months to eight and a half months and we continue to believe that’s very achievable. So demand was the primary driver in the U.S. during the quarter.

Margarida Duarte: For international markets, let me start by saying that it’s really exciting to continue to see the strength of our launch in the first markets in international and to see all the progress that we are making with regards to market access to unlock new countries, which will allow future launches on Italy and Canada are great recent examples. So we are going from strength to strength and we expect our international revenue to continue to grow in the future. Keeping in mind that Q3 tends to be historically a softer quarter driven by summer holidays as we saw last year. But overall, QINLOCK is very well positioned for growth, especially as new markets come online, which will be soon the case of Italy.

Operator: Peter, does that answer your — I am sorry, Shay, does that answer your question?

Unidentified Analyst: Great. Thank you so much.

Operator: Thank you. And ladies and gentlemen, I will conclude the Q&A session now and turn it back to Steve Hoerter for closing remarks.

Steve Hoerter: Great. Thanks, Carleen, and thanks to everyone for joining us on today’s call and thank you for your continued support. We look forward to keeping you updated on our continued progress here Deciphera. Hope you have a great rest of your day.

Operator: Thank you all for participating in today’s program. You may now disconnect.