Deciphera Pharmaceuticals Inc (DCPH) 2020 Q2 法說會逐字稿

Good afternoon, everyone, and welcome to Deciphera Pharmaceuticals Second Quarter 2020 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Jen Robinson, Vice President, Investor Relations. Jen?

Thank you, Rachelle. Welcome, and thank you for joining us today to discuss Deciphera's second quarter 2020 financial results. I'm Jen Robinson, Vice President, Investor Relations at Deciphera. With me this afternoon to discuss the financial results and provide a general corporate update are Steven Hoerter, President and Chief Executive Officer; Dan Martin, Chief Commercial Officer; Matt Sherman, Chief Medical Officer; 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 reflecting the current beliefs and expectations of management made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements made during this conference call include our expectations for our preclinical and clinical programs, our commercialization of QINLOCK and 2020 guidance. Forward-looking statements made on this call 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 the potential impact of COVID-19, the execution of clinical trials, the timing of study data and 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?

Thank you, Jen. Good afternoon, everyone, and thank you for joining us on today's call. Deciphera's mission has always been focused on discovering, developing and delivering important new medicines for the treatment of cancer. And in the second quarter, we were proud to announce FDA approval of our first product, QINLOCK, for the treatment of patients with fourth line GIST. QINLOCK was designed and purpose-built for the treatment of this disease and is the only approved drug in the post-imatinib setting that offers a clinically meaningful overall survival benefit for GIST patients. The FDA approval and launch of QINLOCK is an important milestone for the thousands of people in the United States facing a GIST diagnosis and also serves as validation of Deciphera's novel approach to designing switch-control kinase inhibitors. FDA's approval of the QINLOCK NDA came approximately 3 months ahead of its PDUFA date and was reviewed under the FDA's real-time oncology review pilot program with priority review. The QINLOCK NDA was also part of Project Orbis, an initiative of the FDA Oncology Center of Excellence that provides a framework for concurrent submission and review of oncology drugs among participating international health authorities.

As a part of this initiative, we recently announced the approval of QINLOCK both by Health Canada and by the Australian Therapeutic Goods Administration. Additionally, as we look to further expand access to QINLOCK outside of the United States, we intend to file a marketing authorization application with the European Medicines Agency in the fourth quarter of this year.

Finally, last month, we were excited to announce, along with our partner, Zai Lab, that the China National Medical Products Administration, or NMPA, has accepted the NDA for QINLOCK. And earlier today, Zai announced that the QINLOCK NDA has received priority review. Prior to receiving FDA approval, our commercial and medical affairs teams had been working diligently to lay the groundwork and optimize readiness for the commercial launch. Because of their dedication and hard work, we were able to ensure that QINLOCK was commercially available through our limited specialty pharmacy network within 1 week of approval. During the call today, Dan Martin, our Chief Commercial Officer, will share our initial insights into the commercial launch.

While we are still in the early days of the launch, we are very pleased with our progress so far and believe that QINLOCK has the potential to transform the treatment of GIST in the post-imatinib setting. Beyond QINLOCK, we continue to advance our pipeline of novel switch-control kinase inhibitors. And Matt Sherman, our Chief Medical Officer, will discuss in further detail the progress we've made across our portfolio of product candidates, including our plans to declare our recommended Phase II dose for DCC-3014 in tenosynovial giant cell tumor and present additional data from our Phase I study in patients with TGCT later this year.

I'll now turn the call over to Dan Martin, our Chief Commercial Officer, to discuss the exciting results for the first partial quarter of our QINLOCK commercial launch. Dan?

Thank you, Steve. Good afternoon. Today, I'm pleased to share results from Deciphera's first partial quarter as a commercial stage company as well as initial insights regarding the QINLOCK launch. It's important to recall that QINLOCK was approved on May 15. Therefore, the commercial results and early launch insights I will share come from just 31 selling days over a period of approximately 6 weeks. We are very pleased with the results of our first partial quarter of launch.

Q2 net product revenue for QINLOCK was $4.8 million. Several important factors contributed to this result. The first is strong prescriber demand for QINLOCK. Based on feedback from our sales team, market research and interactions with key opinion leaders, we believe this strong demand was the result of high unmet need and advanced GIST, rapid growth and awareness of QINLOCK, GIST treaters positive perceptions of the QINLOCK clinical profile and FDA label, and the focus and determination of our customer-facing teams despite the challenging selling environment presented by COVID-19.

Second, we were very pleased to see significant prescriber breadths and diversity. In this initial 6-week launch period, there were more than 100 unique QINLOCK prescribers, representing more than 90 unique institutions. Approximately 50% of prescribers and 40% of QINLOCK-treated patients were from community accounts, consistent with our understanding of where GIST patients receive treatment. And nearly 80% of these prescribing institutions had no prior experience with QINLOCK from participation in clinical trials or our Expanded Access Program.

Third, I am pleased to share that our market access team has rapidly achieved broad patient access to QINLOCK. Our extensive launch preparations enabled us to deliver our first patient shipment of QINLOCK within days of approval. Additionally, our payer-focused efforts have led to broad coverage across both Medicare and commercial payers, including adoption of favorable coverage policies that are consistent with label.

In addition to strong demand, encouraging prescriber breadth and broad patient access, our Q2 results benefited from several additional factors. First, our Q2 revenue included a modest contribution from patients who switched to commercial drug from our Expanded Access Program in the U.S. The U.S. portion of our Expanded Access Program was closed in May upon FDA approval of QINLOCK. In addition, as with any oral oncology launch, our Q2 product revenue included the impact of initial inventory build within our network of specialty pharmacies and specialty distributors. Inventory held by our channel partners was in line with our days on hand targets, and we expect this inventory impact to diminish in subsequent quarters. Lastly, during this initial 6 week launch time frame, the percentage of patients receiving free drug under our patient assistance program was lower than our estimate of approximately 20% to 30%. However, as we communicated previously, this percentage can vary quarter-to-quarter. And moving forward, we continue to expect approximately 20% to 30% of patients to receive free drug as part of this program.

Before turning the call over to Matt, I would like to provide an update regarding our experience navigating the unprecedented challenges of the coronavirus pandemic and our expectations regarding its potential impacts moving forward. As I reviewed on previous calls, the cross-functional launch team has worked extremely hard to adapt our launch strategy and tactics to a virtual model. This includes developing and deploying remote detailing capabilities and increasing our investment in digital and other nonpersonal marketing channels. Our early experience is that while virtual details can be effective, accessing and coordinating the activities of physicians, pharmacists and other critical stakeholders within large complex health care institutions can be quite challenging and can take longer than usual when required to do so remotely.

Additionally, our recent market research with GIST prescribers indicates that GIST patient volume remains below pre COVID-19 levels, and that some GIST treaters may consider delaying treatment switches for advanced GIST patients due to COVID-19 related concerns.

Lastly, it remains to be seen what impact the millions of people who are newly uninsured due to pandemic-related job losses will have on the proportion of patients eligible to receive free drug under our patient assistance program. Therefore, while we are very pleased with GIST treaters' initial response to QINLOCK, we also recognize the potential for the continued spread of COVID-19 to impact physician access, GIST patient treatment and the rate of uptake for QINLOCK in the near term.

I will now turn the call over to Matt to discuss the progress of our ongoing clinical programs. Matt?

Thank you, Dan. As Deciphera transitioned into a commercial stage company, we've remained deeply committed to furthering our core understanding for QINLOCK (inaudible) beyond our initial approval in fourth-line GIST and in advancing our additional ongoing clinical stage programs to create new medicines for patients with significant unmet medical needs. While our commercial team executes a successful launch, our medical team continues to support the potential of QINLOCK in GIST with a robust publication plan and life cycle management strategy, which includes the potential to treat second line and beyond GIST patients. In June, results from the pivotal INVICTUS study were published in Lancet Oncology, highlighting QINLOCK's significant improvement in progression-free survival, or PFS, compared to placebo as well as its clinically meaningful improvement in overall survival, along with a well-tolerated safety profile. We also presented additional QINLOCK data from the INVICTUS study, demonstrating positive patient-reported outcome results at the ASCO Virtual Scientific Program in May and additional clinical benefit for crossover patients at the ESMO World Congress on Gastrointestinal Cancer 2020 virtual meeting in July. At the upcoming ESMO Virtual Congress in September, we look forward to presenting additional data from the ongoing Phase I study of QINLOCK (inaudible) study in the (inaudible) presentations.

The first presentation is titled “Ripretinib intra-patient dose escalation following disease progression provides clinically meaningful progression-free survival in gastrointestinal stromal tumor in Phase I study.” This presentation focuses on the GIST patients who are enrolled in dose escalation and expansion phases across second, third and fourth-line treatment who receive QINLOCK 150-milligram QD. Patients in the Phase I study had the option to be dose escalated to 150 milligrams BID. We will report at the meeting the initial progression-free survival, or PFS 1, and the subsequent progression-free survival, or PFS 2, from the day of dose escalation to second disease progression or death from this subgroup of patients who are dose escalated to 150 milligrams BID.

The second presentation is titled “Clinical benefit with ripretinib as fourth line or greater treatment in patients with advanced GIST: update from the Phase III INVICTUS study.” This presentation will highlight updated PFS by blinded independent central review, overall survival and safety with a new data cutoff of March 9, 2020, which is an additional 9 months of follow-up from the data presented at ESMO last year. Our team at Deciphera continues to be encouraged by the potential for QINLOCK to meaningfully alter the treatment landscape for the spectrum of GIST patients across multiple lines of therapy. While QINLOCK is being well received by fourth-line GIST patients and the treating physicians, we look forward to advancing QINLOCK for the treatment of patients with second-line GIST where we believe it can also provide meaningful benefit.

To that end, we are pleased to report today that we are on track to complete the target enrollment in the fourth quarter of this year in our ongoing INTRIGUE Phase III study of QINLOCK compared to the current standard of care sunitinib in patients with second-line GIST. Currently, there are 122 sites in 22 countries that have been activated in the INTRIGUE study.

We also continue to rapidly advance our next wave of novel switch-control kinase inhibitors. First, turning to DCC-3014, our potent and selective inhibitor CSF1R, we are on track to select a Phase II dose level for the treatment of tenosynovial giant cell tumor, or TGCT, and initiate the expansion cohort later this year. We expect to present data from additional patients from the dose escalation portion of the Phase I study at a medical meeting in the fourth quarter. As you'll recall, we presented initial clinical proof-of-concept data in 3 TGCT patients at the Connective Tissue Oncology Society, or CTOX, Annual Meeting last year, and we look forward to sharing additional data later this year.

Turning to rebastinib, our potent and selective type 2 inhibitor. We are conducting 2 clinical Phase Ib/II studies in combination with chemotherapy, one with paclitaxel and one with carboplatin. At the ASCO 2020 Virtual Meeting in May, we were highly encouraged by the preliminary data presented from the endometrial cancer cohort of Part 2 of the ongoing paclitaxel study, which showed an objective response rate of 29% and a clinical benefit rate of 72% at 8 weeks. As we announced during our earnings call last quarter, we have also observed more than 4 responses in the ovarian cancer cohort, which has now advanced the second stage of the Simon 2-stage design. We look forward to presenting data in the poster presentation from the ovarian cancer cohort from Part 2 of the study at the ESMO Virtual Congress in September.

In addition, we announced today that we will be presenting data from Part 1 of the study of rebastinib in combination with carboplatin at the ESMO Virtual Congress. We are also happy to confirm that we are on track to file an IND for 3116, our potential first-in-class autophagy inhibitor designed to treat mutant RAS cancers in the fourth quarter of this year.

Finally, I wanted to say a few words on the ongoing COVID-19 pandemic. Our studies remain open for enrollment, and patients continue to receive investigational drug as well as appropriate follow-up. We are committed to supporting our clinical study sites and contract research organizations to help ensure patients receive care in a safe manner, consistent with regulatory guidance.

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

Thanks, Matt. I'd like to review the highlights from our second quarter financial results, which includes our first partial quarter of QINLOCK product sales. Total net revenues for the second quarter of 2020 was $7.1 million, which includes $4.8 million of net product sales of QINLOCK and $2.3 million of collaboration revenue. We recognized product revenue upon delivery of QINLOCK to our specialty pharmacy and distribution partners, and the second quarter revenue includes net product sales from our first shipments in May following FDA approval. The gross to net adjustment in Q2 was slightly lower than our prior guidance. Please keep in mind that growth to net can vary quarter-to-quarter, and we continue to expect the rate to be approximately 15% going forward. In addition, we recognized $2.3 million in collaboration revenue under our agreement with Zai Lab, including a $2 million milestone payment due upon their submission of a new drug application to the China National Medical Products Administration for ripretinib for the treatment of adult patients with advanced gastrointestinal stromal tumor. Cost of sales for the 3 months ended June 30, 2020 was immaterial, as the majority of the manufacturing costs related to the second quarter of QINLOCK sales were incurred prior to FDA approval and thus recorded as R&D expense. Cost of sales will not be significant until the initial prelaunch inventory is depleted, and additional inventories manufactured and sold.

In the second quarter of 2020, our total operating expenses, excluding cost of sales, were $76 million, which remained consistent with expenses of $75.3 million in the first quarter of 2020 as we support our commercial launch of QINLOCK as well as advance the clinical development activities across the pipeline. Research and development expenses were approximately $46.1 million and selling, general and administrative expenses were approximately $29.9 million for the second quarter of 2020. We expect our operating expenses will increase in the second half of the year compared to the first half of this year as we continue to support clinical development of our pipeline and the commercial launch of QINLOCK. We ended the second quarter in a strong financial position and remain well capitalized to execute on the launch of QINLOCK in the U.S. and to fund the development of our exciting pipeline of novel switch-control inhibitors. We ended the second quarter with cash, cash equivalents and marketable securities of approximately $632 million, which we expect will be sufficient to fund our operations into the second half of 2022.

With that, I'll now turn the call back over to Steve.

Thank you, Tucker. Before we open the call for Q&A, I'd like to take a moment and thank the entire team here at Deciphera for their impressive focus and hard work over this past quarter. Looking forward, I'm confident we are well positioned to continue to execute successfully, both on our QINLOCK commercial launch, building on the momentum of our first partial quarter of launch that we reported today and our remaining promising development programs.

With that, operator, I'd like to open the call for questions.

(Operator Instructions) And your first question from the line of Chris Raymond from Piper Sandler.

Congrats on the great number right out of the gate. Just a couple of questions. On the QINLOCK revenue number, I think I heard you say that some of that was stocking, but I don't think I heard you guys quantify that. So I'm just kind of curious if you can provide us some sense of end-user demand.

Sure, Chris. So this is Steve. So I'd be happy to take that. So yes, we're really pleased with this initial partial quarter of launch that we've reported today and the strong revenues out of the gate. As Dan mentioned in his prepared remarks, which you may have been able to hear. I know there have been some technical issues on the line there. But we did note that one of the contributing factors, in addition to strong demand, was the usual and customary inventory build that we saw in this first partial quarter of launch. So we haven't quantified that, but we have said that we ended the quarter with what we expected to see in terms of days on hand for inventory.

Okay. And maybe just another question here. I think I've seen in previous slides and the way you guys have described the mix of prescribers between community and academic as being sort of 70% academic, 30% community. But I think I heard you mention that 50% of prescribers were community-based. So I guess on that, I mean, a, I guess, is that a surprise to you guys, especially given that the label is fourth line and one would expect that to be maybe even more skewed towards academic? But maybe a second part of that is are you getting a sense that there's some use in earlier lines in the community?

Yes. Thanks, Chris. It's a great question. So I'll ask Dan Martin to take both of those questions for you.

Yes. And I hope you're able to hear me okay. How's the audio. All right? Okay. So apologies for any audio challenges previously. So just to clarify, the first part of your question, academic versus community. So what we said previously is that, overall, about 70% of GIST treatment happens in the community setting, about 30% in the academic setting. Now to your point, when you look at fourth line, the later you go in the line of therapy, that switches a bit, as you might expect, as patients' treatment options dwindle and you get more referral to the academic setting. However, we've always thought in the fourth line, still probably anywhere from 30% to 40% of GIST treatment was happening in the community setting. And so consistent with that, what we just shared in my prepared remarks was that about 40% of our QINLOCK treated patient volume is coming from the community. About 50% of the prescribers, which you can do the math, and the patients per prescriber is a little bit heavier in the academic setting, as one would guess. So really pretty consistent with what we expected.

With regard to your -- second part of your question, earlier lines of therapy, it's a good question. We're really pleased with the way the first partial quarter has gone. Of course, all of our focus is on optimizing the launch of QINLOCK in the fourth line. So all of our promotional efforts, all of our materials, et cetera, are all consistent with our FDA-approved indication. That said, we recognize that some physicians may have an interest in using QINLOCK in earlier lines of therapy. It's really challenging to estimate the proportion of patients who may be receiving treatment in earlier lines. The data sources that are available are imperfect and often don't provide a very clear or reliable picture. So at this time, still very early in launch. It's really difficult for us to determine how much use, if any, was off-label.

For your next question, from the line of Eun Yang from Jefferies.

So I just want to ask you again about the second quarter sales. So consensus was less than $1 million, and then you came at $4.8 million. So can you talk about how much of your sales actually benefited from inventory? It was -- did they expanded the patients switching to commercial?

Yes, Eun, it's Steve here. So Dan covered some of that in his prepared remarks. But Dan, maybe you could provide Eun with a little bit more color in terms of factors that contributed to the strong performance in this first partial quarter.

Yes, absolutely. Thanks, Steve. Good question. So again, it's really important, I think, I want to reiterate that there were a number of factors that we think contributed to our initial strong result. And primarily, that strong physician demand for QINLOCK, also really encouraging prescriber breadth and diversity, and importantly, very rapid gains toward broad patient access. So those are the primary drivers. Additionally, just to provide some additional color, we outlined in my prepared remarks that there was some contribution to the Q2 revenue from conversion of U.S. patients from our Expanded Access Program to commercial product. We have not given specific details on our EAP. What I can say is that program in the U.S. is now closed, as is typical upon FDA approval.

And then as it relates to inventory build, what we can share is that it's typical for any oral oncology launch in a first partial quarter to have some contribution of revenues tied to an initial inventory build. However, as Steve mentioned and as answer to a prior question, the team did a great job managing inventory throughout the quarter, and the inventory held by our channel partners was very consistent with our days on hand targets. And we would expect the contribution or the impact of that initial inventory build to diminish in subsequent quarters.

And have you actually seen QINLOCK usage in earlier lines than fourth line?

Yes. Dan, would you like to address that question?

Sure. We know this is certainly an area of interest. But as I mentioned to the prior question, in my answer to the prior question, first and foremost, we are focused on the fourth line launch and all of our promotional efforts are toward that. We recognize that some physicians may have interest in using QINLOCK in earlier lines of therapy. The fact remains it's challenging to estimate, especially this early on in launch, what proportion of patients may be receiving treatment in earlier lines, if any, because the data sources are just imperfect to do that and often don't provide a clear, reliable picture. So at this time, just difficult for us to determine how much use, if any, is in earlier lines of therapy.

Okay. I have a last 2 question. So in ripretinib, in the past, you are looking at other solid tumors, KIT-driven tumors, in the expansion cohort. So is there any update on what types of tumors you may pursue?

Yes, Eun, it's Steve. Thanks for the question. So Matt referenced in his prepared remarks that we were really pleased to see some of the Phase I data be accepted as a mini oral presentation coming up at ESMO. So this is the GIST cohorts from the Phase I. As you noted, there are a number of other expansion cohorts, signal-seeking cohorts, that we had as part of the Phase I, and we don't have a further update for you at this time on today's call.

Next question from the line of Peter Lawson from Barclays.

Just on the TGCT data in 4Q. I mean when should we expect to see here a number of patients? And any metrics we should be thinking about for that data?

Yes, Peter, it's Steve. So maybe I'll start off answering that. And then, Matt, please feel free to add some additional color to that. So as Matt noted in his prepared remarks, we have a couple of milestones, important milestones, coming up for the 3014 program for the balance of the year. And one of those is to declare a recommended Phase II dose. The other is to open an expansion cohort in patients with TGCT. And then as Matt noted, we also intend to provide data from the Phase I at a medical meeting coming up in the fourth quarter of the year. So I think we haven't guided specifically to a number of patients that you can expect to see data on. As you know, at CTOX last year. We reported initial clinical proof-of-concept in the first 3 patients that we had treated. So we'll have data updates on some of those patients and, of course, additional patients, but tough for us to specify at this time exactly what number to expect. But of course, what we're going to be looking for, as we go through the data and accumulate the data, is what is the optimal dose going forward, how does that compare in early data with what we see from the other approved agent pexidartinib for this disease, for TGCT. So stay tuned for more to come at the end of the year. Thanks, Peter.

Perfect. And then just an update on how things are moving for ASM and when we can see the next data. Just any updated thoughts around systemic mastocytosis?

Sure. So I'll be happy to address that. So somewhat similar, I think, to Eun's question earlier. Matt noted in his prepared remarks that we will have data at ESMO from the GIST expansion cohorts from the Phase I. So for the first time, we're going to be reporting on the subset of patients that dose escalated to 150 BID in that study. So we'll be reporting on the PFS 1, so the initial interval of progression-free survival for those patients. And then upon dose escalation, we then captured PFS 2. So we'll then also report for that subset the PFS 2 data. So for -- on today's call, I don't have any further update in terms of the other expansion cohorts from the Phase I.

For your next question, from the line of Michael Schmidt from Guggenheim.

Congrats on the launch as well from me. Maybe a question around competitive dynamics and just QINLOCK obviously benefits from a broad label that doesn't specify certain genotype, but there is obviously overlap to some degree with ava KIT. I was just wondering if you could comment on what you're seeing in terms of PDGFR-alpha D842V positive patients that might have been treated with QINLOCK in the second quarter and how you see the competitive dynamics evolving there.

Yes. Thanks, Michael. So it's Steve. Maybe I'll start off and then turn it over to Dan as well, who can comment on what we've seen in the second quarter and also what we've seen in the extensive market research that we've done. Maybe just to tee that up a little bit. We've talked for a number of months now, probably starting back at the JPMorgan conference in January, about the market research that we've done based on the INVICTUS data, and with that target product profile, getting reactions from physicians to the profile as they evaluate the treatment options for their patients with gastrointestinal stromal tumor. And what we've heard very consistently is with those randomized data in a broad spectrum of patients, so irrespective of mutational status, that physicians really value, a, the fact that we have randomized data; but b, the fact that we -- the drug offers, based on INVICTUS, such a striking benefit in terms of progression-free survival and also a clinically meaningful improvement in overall survival. And all of that against a backdrop of what is a very well tolerated drug.

So our expectation based on the data is that QINLOCK or ripretinib really has the potential to be best-in-class for this disease based on the INVICTUS data. Now as you point out, in a competitive marketplace where there's one other recently approved agent with avapritinib, with a narrow label, as you point out, for the exon 18-driven part of the disease, I think what physicians are now internalizing is the negative VOYAGER trial that reported out a couple of months ago and what that means for them as they think about options for patients. Certainly puts the data from INVICTUS in context. But Dan, maybe you want to comment further on what we're seeing and hearing in terms of this subset of patients that has exon 18-driven disease.

Sure. Just a couple of thoughts on both parts of the question. I mean the only thing that I would add to Steve's answer as it relates to the profiles, we continue to do research, and we've been doing research now that we're launched and what comes back consistently is just very, very strong positives for the QINLOCK profile. And one of the things that I've been pleased to see is that GIST treaters are increasingly understanding how QINLOCK is differentiated from other products in the space, including avapritinib's much more narrow profile, as Steve just pointed to.

As it relates to PDGFR-alpha, one of the things that we're really fortunate to have is a very broad indication. And so all of the payer policies that we're seeing going into place, they are agnostic mutation. And so we don't -- there's no reason for us to really collect or track data on the mutational profile of QINLOCK-treated patients because it's an all-comers drug. So we've always viewed QINLOCK, as Steve mentioned, best-in-class and potentially standard of care product in the post-imatinib setting. And that is inclusive of patients of all mutation types, including wild type, for that matter.

Okay. Great. And then a question on DCC-3014. I know you talked about the Phase I update later this year. I was just wondering how we should think about the potential development path forward longer term in TGCT. Should we think about maybe a single-arm approval strategy here based on the Phase Ib dose expansion cohort? And I guess, what -- I guess, what do you -- what would the regulatory bar be here? Do you need to, I guess, exceed pexidartinib, for example? Or what level of efficacy would you give confidence, for example, that you could win in a randomized controlled studies? Maybe just some high-level thoughts on the path to market here longer term.

Yes. Thanks, Michael. So that's a good question. Matt, would you like to take that?

Sure. Thanks, Steven. This is Matt. Thanks, Michael. Can you hear me okay? I just want to make sure the audio is coming through clearly, had some trouble earlier with the storm passing overhead. Yes. And so it's a very good question. Let me just start with saying, we look forward to the updates at the end of this year. As we said, we'll be able to talk about a recommended Phase II dose initiation of an expansion cohort and also to update folks at a medical meeting in the fourth quarter this year for further data in the TGCT patients in the ongoing Phase I study. But if we think about further development, we can use as a benchmark the pexidartinib development when it was approved last year in August by the FDA. And at that time, they conducted a 120-patient study, randomized one-to-one to placebo. And based on objective response rate at week 25 of 38%, 39%, we're able to receive full approval despite also having a pretty significant safety profile with a black box warning on the label and the requirement for a REMs program for patient enrollment onto treatment. So using that sort of as a benchmark for development, we think with no safer drug, so that potentially 3014 has the ability for approval in TGCT patients. It also should be noted that the CHMP had a negative opinion for pexidartinib in the EU. So again, speaks to the safety profile that was shown with pexi.

Great. Congrats on the launch again.

For your next question, from the line of Robyn Karnauskas from Truist.

This is Nicole on for Robyn from Truist Securities. So really quickly, can you remind us of the median profile and what the overlap is and PDGFR? Also mutants between ripretinib and sunitinib. And then also I'm not sure if I missed this, but how many prescriptions were filled or how many patients received drug in the second quarter?

Yes. Nicole, it's Steve. Thanks for the question. So maybe I'll take the second question first, and then I'll just ask Matt if he'd like to briefly outline the spectrum of activity of ripretinib relative to sunitinib based on what we've previously published in cancer cell, for example, last year. But specifically for this question about number of scripts and number of patients. So we haven't disclosed that on today's call. That's not one of the launch metrics that we'll be sharing externally on a quarterly basis. But as Dan said in his prepared remarks and then in response to the questions that have come up so far, certainly, we're very, very pleased with the launch. It's a reflection of strong demand, which spans not only physicians and patients being treated in the academic setting, but also very importantly, we believe, the use of the drug in the community setting. It's a real indicator that we're following very closely, and we're very pleased to see the breadth of utilization so far.

So Matt, do you want to take that first question?

Sure. Yes. So the question, as I understand, is speaking about the activity of ripretinib in the second-line setting compared to the historical data for sunitinib, which is approved now for the second line. So we did present at the triple meeting last year the data from the Phase I study, where we looked across 142 patients in second line, third line and fourth-line patients. And so drilling down on the second-line patients, we had a progression-free survival of 10.7 months in that study with a 19% objective response rate. And while it's a cross-study comparison, sunitinib, in its pivotal study, had about a 5.6-month progression-free survival, with a 7% objective response rate. So that gave us a reason to believe for initiating the INTRIGUE study. As you know, the INTRIGUE study is our randomized Phase III study comparing ripretinib to sunitinib and as we highlighted today as well, too, we're on track to completing enrollment of that study by the end of this year.

For your next question, from the line of Ren Benjamin from JMP Securities.

Congratulations on a great start to a launch. Maybe my first question a little bit having to do with the broad kind of ex U.S. strategy. Steve, you've got approvals in several kind of distributor-based sort of delivery in those countries. You now have China, the NDA being accepted. Can you just kind of take us through your latest thoughts on how the timing of when you think these revenues from the ex U.S. launch may start contributing to your P&L? And how you see that unfolding?

Yes, Ren, it's Steve. Thanks for the question. You broke up a little bit, but I think I got the gist of the question in terms of ex U.S. strategy and timing for any future potential revenues. So first, maybe we can just, broad strokes, kind of talk about where we are globally in terms of our regulatory strategy. Obviously approved here in the U.S., excited about the early days of the launch and looking forward to continuing to get out and educate physicians about QINLOCK or ripretinib as we drive further utilization of the brand here in the U.S. As we've noted previously, we now have, of course, approval in Canada and in Australia. This was part of Project Orbis, as you know, Ren. And as we've talked about previously, our strategy in those 2 territories specifically is very likely to be a distributor approach where we retain rights to the product, but we partner with a local distributor that's able to help navigate the pricing and reimbursement process and then, of course, get the product to patients physically and also engage with physicians and share with physicians the data to support the product.

Both of those territories, for both Australia and Canada, there can be a somewhat lengthy pricing and reimbursement process. So these are territories that are very different from what we experienced here in the U.S. where we price a product and then launch it immediately. Of course, educating and working with insurance companies, but in these other single-payer markets, there's quite a bit of negotiation and work that has to be done in submitting data to HTA bodies and then getting a price approval. So difficult from where we are now, Ren, to project when we might see revenues from those territories. It's certainly at some point further off in the future.

Now with respect to China, as we noted today, the applications submitted by Zai Lab, who is our partner for Greater China, they anticipate -- they received priority review, as we disclosed today and as they disclosed this morning. And they believe that the time line for a potential approval could be about 12 months. I think that was their experience with Zejula. Unlike the system here in the U.S., there isn't a prescribed action date by which time the NMPA has to take action on the application. So there is some uncertainty in terms of when they may take action and then when, of course, Zai then would be able to start commercializing QINLOCK in China specifically.

Now as Matt also noted and we noted in the press release, the next significant regulatory milestone for us is going to be filing the marketing authorization application to the European Medicines Agency, and we further refined our guidance today to say that we'll be making that filing in quarter 4.

So one of the things we haven't disclosed yet is what our go-to-market strategy is going to be for Europe. And so as we get closer to that filing and at the right time, then we'll disclose exactly what our go-to-market approach is going to be for the European Union.

Got it. That's very helpful. And then just maybe switching gears to 3116. I know you'll be filing the IND, but can you maybe just give us a little bit more color how we should be thinking about this asset and how we should be thinking about the development of this asset going forward. Should we be focusing on particular tumor-agnostic model? Or any sort of color you could share.

Sure. So maybe I'll start off and then I'll turn it over to Matt. So we're really excited about 3116. This is our potential first-in-class ALK inhibitor targeting the autophagy pathway, which we know is an escape pathway for mutant RAS cancers. And as you know, we plan to file an IND before the end of the year for that program, making it the next program coming out of our research organization. But Matt, maybe you want to offer some additional color on how you're viewing the potential development path for 3116.

Thanks, Steve. So yes. So as we indicated today, we are very excited about the opportunity to develop 3116 as ALK inhibitor and first-in-class inhibitor of autophagy. The development path of this, as we indicated, would be in the setting of mutant RAS cancers and mutant RAS cancers represent approximately 30% of all human cancers and particularly represented in pancreatic cancer. So fairly intractable cancer by many targeted therapies as well as a significant number of patients with lung cancer and additional patients with colorectal cancer. So if you think about the development, it would be in potentially those indication. And we look forward to sharing more details once we further -- once we move further along with the IND filing.

For your next question, from the line of Andrew Berens from SVB Leerink.

Congrats on the results for the quarter. I'm sorry if I asked some of the topics you already addressed. We had a power outage. I had to dial back in. I was wondering if you guys are getting patients that have failed Sutent, but not gotten Stivarga yet. And then also, I just would like to get a color on whether or not you're seeing a warehouse of patients that were awaiting a novel GIST drug.

Yes. Thanks, Andy. You've got both really good questions. I'll ask Dan Martin if he'd like to address those.

Yes, absolutely. Thanks, Andy. Appreciate the questions. So the first question was about earlier line patients. So we are laser-focused, of course, on promoting the drug and optimizing the launch in fourth line. So all of our efforts and materials and messaging and whatnot are, of course, on label with the fourth-line indication. That being said, we do appreciate that there may be some physicians who may have some interest in using QINLOCK in earlier lines of therapy. However, it's really challenging to estimate the proportion of patients who may be receiving treatment in earlier lines. The data source is available just -- they're imperfect and often don't provide a clear or reliable picture. So it's still certainly early days. And at this time, it's difficult for us to determine how much use, if any, is off-label.

Regarding your question about whether or not there was sort of a bolus prevalent patients, another good question. We've communicated previously that we did not expect there to be a significant bolus of prevalent patients in this setting, given how late line the setting is, how sick some of these patients are, and frankly, again, being quite early days, tough to assess. What I would say is that we are thrilled with the early experience of QINLOCK in the marketplace, the prescriber demand and breadth and diversity of prescribers. So really pleased with that. And we did mention also, I don't know if you've heard it before given the power outage you experienced, but we did also mention that a couple of other factors contributed to the Q2 revenue. One was a modest impact of conversion of U.S. patients in our Expanded Access Program to commercial drug. Another was consistent with any oral oncology launch, particularly one with a partial first quarter, a inventory -- initial inventory build, so impact of initial inventory build. And then thirdly, a lower-than-anticipated utilization of our patient assistance program. We had previously estimated 20% to 30%. Came in a bit lower than that, but we continue to expect that estimate to hold true moving forward.

Okay. I appreciate all the color. And then I think Peter asked you guys about the SM data that, on the Q1 call, you said would be presented by year-end. Are you still planning to present that? I wasn't really clear on your answer to that.

Sure. Thanks for the question, Andy. So what I noted in my response to Peter's question is that we have some data from the Phase I, as Matt noted, from the GIST cohorts, that has been accepted as a mini oral presentation at ESMO. So this is looking at the patients who dose escalated to 150 BID and looking at PFS 1 as well as PFS 2 for that cohort. So we don't have, on today's call, any further update with respect to other cohorts from the Phase I.

Okay. Is that SM cohort still enrolling? Or what is the status of it?

Yes. We don't have any further update at this time on the cohort. As we've talked about previously, this has been a cohort for us that has been really challenging to enroll. As you know, from last year, we talked about how we had amended the protocol to start to treat patients at 150 BID, but it's been a tough going for us. So we don't have any -- at this time, any further update for you on that cohort.

For your next question from Ben Shim from Canaccord.

Congratulations on the launch this quarter. A couple of companies have remarked that the virtual formats of some of these medical meetings like ASCO has made it hard for the company to get the word out for product launches. And I'm just wondering if you agree with that. And maybe if you could rank order some of the challenges that you might see out there that might be headwinds towards getting the launch trajectory up and going.

Yes. Thanks, Ben. It's a great question. We started talking about the potential impact of COVID-19 on the Q1 call. And now that we're, of course, in the middle of the launch, Dan would be in a good position to offer some additional color. He had some in the prepared remarks, but I'm sure he can share some additional color in terms of what we're seeing, what our experience has been so far and what the challenges may be ahead in terms of being able to engage with physicians and a promotional discussion given COVID-19. Dan?

Sure, absolutely. As it relates to virtual details, what our experience has told us so far is that virtual details can be -- they can be very effective. The challenge is when you're trying to coordinate the activities of many diverse stakeholders, be it physicians, pharmacists and other key stakeholders in these large complex health care institutions, doing that when you're able to walk in live and spend the day in the facility is one thing. But when you have to coordinate all of that remotely, with one -- often one-off virtual engagements, it can be challenging. And it can, frankly, it's not that it can't be done. It can and we are, but sometimes, it can take a bit longer than normal. So it's just -- it's something to keep in mind as it relates to consideration for ramp trajectory, that sort of thing. But we've been -- I really want to underscore again how pleased we've been with physician GIST prescribers' reaction to QINLOCK, to the profile, to the -- all the data and to the FDA label.

So when we are able to get in front of the right folks via the virtual means, it's been a very effective means. It just does create some challenges. Beyond that, I pointed to in the prepared remarks that some -- we've done extensive launch market research with GIST prescribers. And some of that, we've asked questions about expectations for COVID moving forward or the impact of COVID moving forward. And some of them have noted that overall patient volume, as a result of COVID, GIST patient volume is still somewhat below pre COVID-19 levels and that some physicians would even consider delaying some late-line switches as a result of COVID-related concerns. So those are some of the things that we've got our eye on and will continue to monitor as it relates to COVID-19 challenges.

Okay. Great. I wish you the best of luck in tackling those. I just have another quick follow-up or 2. Can you comment on the amount of inventory that flowed into prepaid from R&D prior to approval? Is that where it's going to be coming out of, going forward, until you actually start incurring cost of goods?

That's right. I can take that one. Up until the time of approval, all of the materials that we've used for commercial product are expensed through R&D. Once we reached approval, we would then start to capitalize that. So you'll see some initial capitalization inventory on the balance sheet now. But it will be quite some time before we start to have a higher and more normalized rate of cost of goods, given the expense prior to approval.

Okay. So that's going to be, I guess, a tricky modeling item going forward. Last question I had is I think you remarked that it could take as long as 12 months for Zai to get approval in China. Can you refresh and remind us about what the financial milestones would be upon approval and thereafter?

Yes. Tucker, you want to -- would you like to take that question?

Sure. So we haven't specifically provided the breakdown of the individual milestones, but we've talked about at the aggregate for a commercial and development-based milestones. We did announce, obviously, today that the filing itself had the $2 million milestone payment, which we recognized in the second quarter. But we haven't given specifics on what a future milestone for commercial approval might be.

For your next question, from the line of Eun Yang from Jefferies.

So the Phase III INTRIGUE study patient enrollment completion in fourth quarter, do you have any expectation for the time line for the data? Looking at clinicaltrials.gov, you still list primary completion date of June 2021. So I just want to ask you if that is still in line with your expectation?

Yes. Eun, it's Steve. Thanks for the question. You're right. That time to study completion that you referenced in clinicaltrials.gov of June of 2021 was what we had put up on clintrials.gov when we first loaded the study up. So what we said -- as Matt noted in his prepared remarks, is that we're pleased with the pace of enrollment. We're pleased, of course, with the site openings that we've seen, and we intend to complete enrollment in the study at the end of the year. And when we achieve that milestone of getting to target enrollment, we'll then provide some additional color on when we might expect to see data from the study. I think we'll have additional information that will give us a better read on what the time line could be for a readout. Of course, it's an endpoint in the study that's in a time to event analysis. It's a PFS endpoint. So you have to wait, of course, for the events to accumulate based in part on the pace of enrollment over time and the like. But we'll provide that update when we get to completion of target enrollment here by the end of the year.

And we don't have any further questions over the phone. Let me turn the call over back to Steve.

Great. Thanks, Rachelle, and thanks, everybody, for joining us on the call today, and thank you for your continued support. We look forward to keeping all of you updated on our continued progress with our first commercial launch of QINLOCK as well as the balance of our development programs. Hope you'll have a great evening. Thank you. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.