Deciphera Pharmaceuticals, Inc. (DCPH) CEO Steve Hoerter on Q3 2020 Results - Earnings Call Transcript
Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) Q3 2020 Earnings Conference Call November 5, 2020 4:30 PM ET
Company Participants
Jen Robinson - VP, IR
Steve Hoerter - President and CEO
Dan Martin - CCO
Matt Sherman - CMO
Tucker Kelly - CFO
Conference Call Participants
Jessica Fye - JP Morgan
Allison Bratzel - Piper Sandler
Eun Yang - Jefferies
Charles Zhu - Guggenheim
Reni Benjamin - JMP securities
Ben Shim - Canaccord
Operator
Good afternoon, everyone, and welcome to the Deciphera Pharmaceuticals Third Quarter 2020 Financial Results Conference Call. At this time all lines are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions]
At this time, I would now like to turn the call over to Jen Robinson, Vice President, Investor Relations. Jen?
Jen Robinson
Thank you, operator. Welcome, and thank you for joining us today to discuss the Deciphera's third 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 Steve 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 may 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 those set forth and 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. Good afternoon, everyone, and thank you for joining us on today's call. This year has been an incredibly exciting one for Deciphera, a year in which we received regulatory approval for and launched our first medicine, QINLOCK, and also made significant progress advancing our pipeline of new product candidates. That we were able to accomplish so much this year, in spite of the challenges of the pandemic, is a testament to the dedication and hard work of the team here at Deciphera, and the investigators we work with around the world.
We are well-positioned for a strong finish to 2020, and eager to continue our mission in 2021. The third quarter marks the first full quarter of results from our ongoing launch of QINLOCK in the United States. QINLOCK which was approved by the FDA in May of this year, was designed to address the broad spectrum of mutations that are one of the hallmarks of gastrointestinal stromal tumor, or GIST.
In a moment Dan Martin, our Chief Commercial Officer, will share with you highlights from the launch and outline how we have been successful in establishing QINLOCK as the standard of care in our approved indication.
We are focused on exploring the full potential of QINLOCK to benefit people with GIST, and on today's call Matt Sherman, our Chief Medical Officer, will review recent data updates from the QINLOCK Development Program, which reinforced the potential best in class profile of QINLOCK in this disease.
Our near-term focus for further clinical development remains in the second line treatment setting, and we are on track to complete target enrollment by the end of this year in the Phase 3 INTRIGUE study, in which we are comparing QINLOCK to sunitinib in the second line. We believe QINLOCK has the potential to play an even broader role in the treatment off GIST. And we look forward to sharing with you our vision for further clinical development in the coming months.
One of our goals this year was to expand access to QINLOCK for people with GIST outside the United States. To that end, we announced today that we recently submitted a marketing authorization application or MAA to the European Medicines Agency. The submission was validated by the EMA last month, which signals the beginning of the formal review process. We look forward to working with the EMA to bring this potential new treatment options for patients in the European Union.
We also announced today that we intend to establish a direct commercial presence in key markets in Europe to commercialize QINLOCK if approved. This nimble organization will be positioned for future expansion as we've developed and seek approval for additional Deciphera medicines in the coming years.
In Europe, we believe the commercial opportunity in GIST is concentrated in the five largest markets, France, Germany, Italy, Spain and the UK. Within these countries the treatment of patients with GIST as often centralized at tertiary treatment centers, which we believe allows us to build an efficient and targeted commercial infrastructure.
As we lay the building blocks in Europe, we continue to make strides for the commercialization of QINLOCK in other areas of the world as well. Over the summer, we received approvals for QINLOCK in both Canada and Australia. I'm pleased to announce that we have recently entered into exclusive distribution agreements in both of these territories. And in China, our partner Zai Lab, filed the new drug application for QINLOCK in July, targeting a potential approval next year.
We look forward to working with our partners around the world to bring QINLOCK to patients with advanced GIST.
Finally, we continue to advance multiple clinical stage programs that have the potential to be future approved medicines. Earlier this year, we presented initial compelling data with rebastinib in combination with paclitaxel in patients with heavily pretreated endometrial and ovarian cancers.
And later this month, we are excited to present additional clinical data with DCC-3014 in tenosynovial giant cell tumor. As our clinical stage pipeline comes into focus, our novel switch-control kinase inhibitor discovery platform continues to provide opportunities for future growth.
I'll now turn the call over to Dan Martin, our Chief Commercial Officer to discuss the exciting results for the first full quarter of QINLOCK commercial sales. Dan?
Dan Martin
Thank you, Steve. Good afternoon. Today I'm pleased to share results from our first full quarter of QINLOCK sales. In Q3, we achieved U.S. net product revenue of $14.7 million, bringing total U.S. net product revenue for the first four and half months of launch to $19.5 million. While it is important to remember that it is still early in our launch, we continue to be very pleased with the way the launch has progressed, several important factors contributed to our Q3 results.
First, we have continued to see strong prescriber demand for QINLOCK, in addition to robust month over month sales growth, insights from our recent launch tracking surveys, show strong product awareness, message recall, product perceptions and intense prescribe among physicians who have fourth line GIST patients.
Further, a large majority of these physicians indicate they now view QINLOCK as the standard of care treatment for these patients. Importantly, these metrics tend to be strongest among physicians who report being detailed by our sales team, underscoring the importance of physician reach and access in this promotionally sensitive disease area.
Second, we saw continued new prescriber growth across both academic and community settings. Thanks to the tireless work of our commercial team to navigate the unprecedented and ongoing challenges of COVID-19. The number of new QINLOCK prescribers more than doubled during Q3. Since launch more than 250 GIST treaters representing more than 200 unique institutions have prescribed QINLOCK.
As expected, while GIST treaters within academic institutions comprise the majority of our early adopters, our data suggest new prescriber growth is shifting toward the community setting. While new academic prescribers grew by more than 80% in Q3, new community prescribers grew by nearly 150%. During the quarter, more than 50% of both QINLOCK prescribers and QINLOCK treated patients came from community accounts.
Third, our market access team continued to deliver broad patient access to QINLOCK in Q3. We have been very pleased with our progress in securing payer coverage for QINLOCK in patients with fourth line GIST. We've also been very pleased with the performance of our channel partners and our Patient Support Center.
Finally, the percentage of patients in Q3 that received free drug under our Patient Assistance Program, or PAP was at the low end of our estimate of approximately 20% to 30%. However, we anticipate that the PAP percentage may be somewhat higher in Q4, as it's not uncommon for patients to experience increased affordability challenges late in the year.
Additionally, the PAP percentage may be higher in Q1 of next year, given that the Medicare Part D benefit resets on January 1, requiring patients to pay for their deductible and their portion of the coverage gap before reaching the catastrophic coverage tier.
Before turning the call over to Matt, I would like to highlight factors that may impact our results over the next several quarters. As I mentioned previously, we expect the majority of our future new prescriber growth to come from the community setting, where fourth line GIST patients are much more widely dispersed and physician awareness and knowledge of GIST is much lower, when compared to the academic setting.
Analysis of claims data indicates that community oncologists who treat fourth line GIST patients may see only one such patient every 12 to 18 months. Thus, while we're very pleased with the results we have seen in both academic and community institutions today, we recognize that future growth and product awareness and new patients start maybe more challenging, and come more slowly as we work to further penetrate the community setting. And this dynamic may be particularly challenging given the hurdles to physician access created by COVID-19, which we expect to continue as the pandemic persists and potentially intensifies over the next several quarters.
I will now turn the call over to Matt to discuss the progress of our clinical programs. Matt?
Matt Sherman
Thank you, Dan. QINLOCK serves as a great example of how we have effectively and efficiently discovered, developed and now commercialized a product generated from our research platform. While, Dan's team has been focused on helping fourth line GIST patient access QINLOCK in the U.S., our clinical and medical affairs teams have continued to generate and publish additional data and QINLOCK and our pipeline programs.
As Steve mentioned earlier, our strategic priority is to maximize the potential of QINLOCK in GIST and to generate additional clinical data for this program, and for our other development product candidates to reach key value inflection points on the way to potential registrational studies and regulatory approval. For QINLOCK, we're keenly focused on the completion of the ongoing Phase 3 INTRIGUE study in second line GIST. The study is on track to reach four enrollment by year-end, and we expect to be able to provide additional guidance depending on the primary endpoint at that time.
We remain confident in the likelihood of successful entry, based on the strong data we have seen in the Phase 1 and Phase 3 studies, that demonstrate the broad clinical activity in patients with GIST. At the recent ESMO Virtual Congress, we presented new data in two mainly oral presentations related to QINLOCK that continue to demonstrate the strong clinical benefit for second line through fourth line plus GIST patients.
The first many oral presentation provided longer-term follow-up results from the INVICTUS study in fourth line GIST that reinforce the exceptional progression free survival and overall survival benefit observed at the time of the initial database lock. The updated data provided an additional nine months of follow-up and demonstrated the treatment with QINLOCK continue to provide clinically meaningful benefit with a PFS maintained at 6.3 months. And importantly, the median OS benefit improved from an initial 15.1 months to an overall survival, that has now not been reached.
In addition, the updated safety findings were consistent with the previous primary analysis results, demonstrating that QINLOCK was generally well-tolerated.
The second many oral presentation in ESMO provided exciting data from the ongoing Phase 1 study of QINLOCK in patients with second line through fourth line plus GIST, who just escalated to 150 milligrams twice daily. In the Phase 1 study, patients were permitted to dose escalate to QINLOCK 150 milligrams twice daily after disease progression of 150 milligrams once daily.
These data show that across all three patient groups, treatment with 150 milligrams twice daily provided an additional clinically meaningful PFS benefit. Comparison of TEAs reported in these two dosing periods demonstrated by QINLOCK was similarly well-tolerated. Feedback from key opinion leaders on these data has been very positive. And we believe these data have the potential to impact clinical practice.
At the upcoming connective tissue oncology society or see CTOS virtual meeting, we will be presenting new QINLOCK data from the INVICTUS trial. These days include an oral presentation discussing the extensive heterogeneity of KIT and PDGFRA alpha mutations, as well a poster discussing QINLOCK's demonstrated activity across all KIT and PDGFRA alpha mutations in patients in the INVICTUS study.
QINLOCK was specifically designed as a drug that can broadly inhibit KIT and PDGFRA alpha mutated kinases, making it particularly suited to address GIST, a disease that is characterized by a broad spectrum of mutations in these kinases.
We have also explored QINLOCK utility in the treatment of additional non-GIST indications in the ongoing Phase 1 study, including systemic mastocytosis or SM. We have decided with input from our lead investigators not to invest in further studies in SM at this time. While we have seen clinical activity in SM and the safety and tolerability were consistent with what we've reported in GIST, given the overall landscape and the strength of the opportunities we have with QINLOCK and GIST and with our other product candidates, we believe it is best to focus our resources in areas in which we're able to have the greatest impact.
As we continue to advance our development activities across the portfolio, we are very excited about the potential for both DCC-3014 our potent and selective inhibitor CSF1R and rebastinib our potent and selective type 2 inhibitor.
We're developing DCC-3014 for the treatment of tenosynovial giant cell tumor or TGCT, which has significant morbidity for these patients, and is driven by a genetic translocation in certain cells within the tumor, causing an overproduction of CSF1, the ligand for the CSF1 receptor. The only approved systemic therapy for patients with TGCT is pexidartinib, a small molecule inhibitor in CSF1R, which is subject to a REMS program due to cytotoxicity and adverse event that is got to be an off target effect.
We believe that the DCC-3014 has the potential to be a best in class CSF1 receptor inhibitor, and to fulfill the unmet medical need for an effective and well-tolerated treatment for patients with TGCT. In the oral presentation of CTOS later this month, we are excited to present results from more than 20 TGCT patients across multiple dose levels and dose cohorts from the dose escalation portion of the Phase 1 study.
In addition, we are on track to select a recommended Phase 2 dose and to initiate the expansion cohort of the Phase 1/2 study in TGCT patients.
Turning to rebastinib, our potent and selective TIE2 inhibitor, which is currently being studied in combination with chemotherapy. TIE2 is a target primarily expressed endothelial cells and TIE2 expressing macrophages or testes, and plays an important role in angiogenesis as part of the angiopoetin TIE2 signaling access.
We were very pleased with the recent data presented at ASCO and ESMO from the two Phase 1b/2 studies in combination with paclitaxel and with carboplatinum. In particular, we presented data showing strong preliminary activity in patients with endometrial and platinum resistant ovarian cancer, and part two of the paclitaxel combination study. Data presented at the ESMO Virtual Congress 2020 and platinum-resistant ovarian cancer demonstrated encouraging efficacy within an objective response rate of 38% confirmed and unconfirmed and the clinical benefit rate of 88% of eight weeks in heavily pretreated patients. All patients received prior platinum and taxane-based therapy, 90% of patients received deposuzamab [ph], 62% received the PARP inhibitor and 31% received immunotherapy.
In addition to these data, we presented compelling data from the individual cohort at the ASCO 2020 Virtual program, showing promising preliminary anti-tumor activity and favorable tolerability with an objective response rate of 39%, confirmed and unconfirmed. And the clinical benefit rate is 72% at eight weeks, also in heavily pretreated patients.
We look forward to providing updated results from these ongoing Phase 1b/2 studies, as well as additional guidance on our clinical and regulatory plans for rebastinib.
Finally, we continue to be excited about the prospects for DCC-3116, our potential first in class ULK kinase inhibitor designed to treat mutant RAS cancers. We're aiming to submit the IND in the fourth quarter of this year, but this event may shift to the first quarter of 2021. We're making great progress, of course, each of our programs in our pipeline, and we believe that this is just the beginning of making a meaningful difference in the treatment of patients with cancer and rare diseases.
I will now turn the call over to Tucker Kelly, our Chief Financial Officer to review the financial results. Tucker?
Tucker Kelly
Thanks, Matt. I'd like to review the highlights from our third quarter 2020 financial results, which includes our first complete quarter of QINLOCK product sales. Total revenue for the quarter was $15.5 million, which includes $15.2 million of net product sales of QINLOCK and $300,000 of collaboration revenue. Net product revenue included $14.7 million in U.S. product sales, as well as approximately $500,000 in product sales of QINLOCK outside the U.S. under early access programs.
The gross in net adjustment in Q3 was slightly lower than our prior guidance of approximately 15%. I would note that this adjustment is likely to increase in Q4 and in Q1, as we accrue for anticipated Medicare Part D rebates required for existing QINLOCK treated patients, who reenter the coverage gap in January.
Cost of sales for the three months ended September 30, 2020 was immaterial, as the majority of the manufacturing costs related to QINLOCK, sales were incurred prior to FDA approval, and thus were recorded as R&D expense. Cost of sales will not be significant until the initial pre-launch inventory is depleted, and additional inventory is manufactured and sold.
In the third quarter of 2020, our total operating expenses excluding cost of sales were $79 million, compared to total operating expenses of $76 million in the second quarter. Research and Development expenses were approximately $49 million, and selling general and administrative expenses were approximately $30 million for the third quarter of 2020.
We expect our operating expenses will increase modestly in the coming quarters as we continue to invest in the development of our clinical pipeline, the commercial launch of QINLOCK in the U.S. and prepare for potential commercial launch in Europe. We ended the third quarter in a strong financial position and remain well-capitalized, ending the quarter with cash, cash equivalents and marketable securities of approximately $584 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.
Steve Hoerter
Thank you, Tucker. I'm extremely proud with what our team has accomplished so far this year. We have delivered on our promise to bring an important new medicine to patients with cancer with the approval and successful initial launch of QINLOCK in the United States, and are now working to bring this novel product to patients with advanced GIST around the world.
Meanwhile, we continue to advance the rest of our pipeline, based on our novel switch-control kinase inhibitor platform. And we look forward to presenting updated data on DCC-3014 at the CTOS meeting later this month.
Operator, I'd now like to open the call for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Jessica Fye with JP Morgan. Your line is open.
Jessica Fye
Hey, guys, good afternoon. Congrats on the quarter. I'm curious if you can give a little more color about the QINLOCK dynamics. For example, is it possible to find the average number of patients on QINLOCK in the quarter? And how many were on therapy as of quarter end?
Steve Hoerter
Yes. Hi, Jess, it's Steve. Thanks. Good to hear your voice and thanks for the question. I want to stand Martin, who's on the call to address your question. Dan?
Dan Martin
Hey, Jess, thanks for the question. It's a good one. So really, I think we're just going to remain focused on what we think were the key themes. This quarter, we've been really pleased to see the continued strong demand, not only in terms of the numbers themselves, the revenue numbers themselves, but also any number of measures from our various launch tracking surveys.
The new prescriber growth that we saw as well as broad access, we've been really pleased with how payer policies have come into place for QINLOCK in the fourth line.
And in terms of, specific metrics, our goal is on these calls to provide color that's relevant to convey our launch progress and expectations moving forward. And we'll definitely continue to assess what information to share on future calls to help convey those insights. But we're not sharing specific patient numbers at this time.
Jessica Fye
Okay, maybe if you cannot answer that. I'm curious with the rapid uptake you're seeing in the community, what percent of QINLOCK you estimate is in fourth line versus potentially earlier lines of therapy?
Steve Hoerter
Yes, thank you. Another good question. Before launch, we've done quite a bit of claims, analytics to help us estimate just that. And before launch, before we had experienced selling our first product in that market, we thought that overall about 30% of GIST treatment across all lines of therapy occurs in the academic setting. With about 70% broadly distributed throughout the much larger just in terms of number of physicians and institutions community setting.
At the time, we also thought that that tended to flip a bit with maybe 60% of late line, fourth line or later patients being treated in the academic setting. But interestingly, even then our analytics would suggest that 40% or so of very late line patients received care in the community. And what we're seeing, well, before I come in and what we're seeing, I think one other important thought was or one other important question was with a new product that is highly efficacious and has a favorable tolerability profile.
Would more community treaters hold on to those late stage patients as opposed to maintaining the same referral patterns they had historically? And so, while we are still early days, and we don't have answers to all those questions, yet what we are seeing is slightly more than that, 40% that we expected to occur in the community setting for late line GIST we're seeing slightly more than 50% thus far, which we are encouraged to see.
But like I said, in my prepared remarks, I think it's really important. One thing we want to highlight is and we've said this on prior calls, although the majority of our early adopters were in the academic setting, and we've seen some nice growth in early days in the community setting, we expect moving forward, just because of the nature of the structure of the market, that future growth will need to increasingly come from the community setting. And that's a setting where patients are much more widely dispersed. As I mentioned, in my prepared remarks, a lot of prescribers in the community setting may treat only one patient every 12 to 18 months with late line GIST.
And so given that, lower awareness and lower knowledge, we're cognizant of the fact that continued growth which will depend on our ability to continue to penetrate not setting the community setting, maybe more challenging, it comes somewhat more slowly, particularly in light of the ongoing challenges of the pandemic, which I think we all know, is likely to persist and perhaps even intensify in the coming quarters. So that's how we're thinking about sort of source of business, GIST overall and for QINLOCK as we look ahead.
Jessica Fye
Got it. Thank you. And if I can sneak in one more for Steve. In prepared remarks, I think you alluded to a broader potential for QINLOCK and GIST. And it kind of sounded like you weren't solely talking about second line. So can you elaborate on what you meant there?
Steve Hoerter
Yes. Thanks, Jess. It's a good question. And we're very committed with QINLOCK to fully exploring the potential of the drug and GIST, even beyond where we're at now currently standard of care on the fourth line, as Dan was describing, and also beyond the INTRIGUE study in the second line setting. We know we have a very active drug in this disease. And we think there may will be other places where we could explore the drugs utility. We're not ready to share details about that vision and that strategy, we will do that over the course of the coming months.
But we are fully committed to conducting further clinical study of this drug and GIST.
Jessica Fye
Got it. Thank you.
Operator
Our next question comes from the line of Chris Raymond with Piper Sandler. Your line is open.
Allison Bratzel
Hey, good afternoon. This is Allison Bratzel on for Chris. Thanks for taking the question. So first, one on the QINLOCK dynamics. I think last quarter, you've called that a slight revenue benefit from QINLOCK inventory build. So just hoping you could provide any color on whether there is any inventory impact this quarter, or even just directionally help us understand how the magnitude or direction of any inventory impact in Q3 compares to Q2?
And maybe a similar question on a new patient or new commercial patient adds from the expanded access program and how that played into the Q3 revenue number?
Steve Hoerter
Yes. Thanks for the questions, Allison. I'll ask Dan Martin to take both of those.
Dan Martin
Yes, thanks, Allison. Good questions. So the first one related to inventory build, inventory build was not a significant contributor to our Q2 revenue performance. And then on the EAP front, as we've shared previously, there were a number of patients who converted from our EAP program to commercial product at the time of approval. And our Q3 revenues continue to include a modest contribution from those patients, but we haven't provided specific numbers.
But yes, Q3 did include a modest contribution from those patients who were still in therapy.
Allison Bratzel
Okay, thanks. And maybe just one more on some of the data you had at ESMO, specifically the data on ripretinib from the Phase 1 the interpatient dose escalation that was really supportive of treating patients past progression and up dosing them to the to BID dose. And really the later line patients seeing a nice benefit on PFS, too. So I was just hoping you could maybe talk to how that compares with the early launch experience and your messaging for QINLOCK? And basically how willing are physicians to treat past progression in those later line GIST patients?
Steve Hoerter
Dan, would you like to take that?
Dan Martin
Sure, absolutely. So good question. Yes, we mentioned that data a number of times. I think that's really interesting data. We've also said previously, though, that how a drug gets used in the commercial setting is impacted by a number of factors. And as it relates to the BID dosing, you know, first of all, I want to underscore that we are entirely focused on launching QINLOCK in the fourth line, consistent with our label. And that goes for indication, it goes for our recommended dose in our label.
But we've seen a small number of prescriptions for BID, but the vast majority has been at the 150 QD. And when I say a lot of things contribute to how a drug gets used in the commercial setting, one of them that's really important is payer policies. And we've been really pleased to see the payer coverage come along really nicely for QINLOCK, but those policies have very much been consistent with label, including from the dose perspective.
So, well certainly interesting data and certainly our KOLs tell us there's interest in it. From a commercial point of view, it's been a pretty modest contribution to revenues today.
Allison Bratzel
Got it. Thank you.
Operator
Our next question comes from the line of Peter Lawson with Barclays. Your line is open.
Unidentified Analyst
Hi, guys. This is Waleed on for Peter. Congrats, on the great quarter and thank you for taking the questions. I just had a couple of questions here. I was wondering if you could provide any sort of details on the QINLOCK usage this quarter. Are you seeing any potential off label use in earlier lines of GIST? And then we had a question on the upcoming data for TGC-TFC pod [ph]? Wondering if you could set expectations as to what you would be considering to be positive results from that study?
Steve Hoerter
Sure. Waleed, it's Steve. Thanks very much for the question. So maybe what I'll do is take the TGCT question first, and then ask Dan, to take the first question that you had. So with respect to 3014, as Matt mentioned in his prepared remarks, what we're looking forward to having additional data from the Phase 1 in just over 20 patients be presented in an oral presentation at the connective tissue oncology society conference here coming up in a couple of weeks.
As you know, this Phase 1 study is a dose escalation study. So what you can expect to see is data from a variety of different dose cohorts, doses and schedules of 3014 in patients with TGCT. What we do know is that our drug 3014 is very potent and very selective against the target. This is a disease as you know, that's driven by a genetic translocation results in overproduction of the ligand for the receptor.
So based on the biology and based on our knowledge of the mechanism, we would expect to see 3014 have activity in this patient population, as we previously reported at CTOS last year. So we're looking forward to presenting the data here coming up in a couple of weeks. And as Matt mentioned, we remain on track to get to a recommended Phase 2 dose and also to open the expansion cohort.
Dan, would you like to take Waleed's question related to off label use?
Dan Martin
Sure, absolutely. So similar to as I mentioned a moment ago, we of course, are not out promoting anything other than our label indication. And the payer policies that we're seeing come online have very consistently been aligned with our labeled indication. It is difficult. We've shared before, it's difficult to estimate the proportion of patients who may be receiving QINLOCK in earlier lines of therapy, frankly, because the data sources are imperfect.
But what we are seeing in the data that we have is that a significant majority of QINLOCK patients have been fourth line or fourth line plus. That's not surprising to us again, because, again, the point about payer policies being consistent with label and then again, we're not out promoting that data. So, the large majority consistent with the fourth line indication.
Unidentified Analyst
Got it. Thanks for taking the questions.
Operator
Our next question comes from the line of Eun Yang with Jefferies. Your line is open.
Eun Yang
Thank you. So the first question is on the phases III [ph] INTRIGUE data timeline. So based on what you saw in the Phase 1 and second line for the ripretinib PFS and certain historical PFS, when do you think you would expect to see the data once you finish the enrollment by end of this year?
Steve Hoerter
Yes. Hi Eun, it’s Steve. Thanks very much for the question. It's a great question. As Matt mentioned in his prepared remarks, we're looking forward to getting to completion of enrollment in INTRIGUE here by the end of the year. And when we get to a completion of enrollment in the study, our intention at that time is to be able to share more detail about the timeline for the study to readout.
As you know, from our Phase 1 experience in the second line cohort, we've seen a very robust PFS in that patient population that we've studied, close to 11 months of PFS. And when you look at the Sutent label, one would expect to PFS in the range of five and a half months to six months. So it's premature for us at this stage to talk about when we think the study will readout. But certainly as we get to full enrollment here before the end of the year, which is our target we will then be in a position to share more.
Eun Yang
Great. And then as you move into second line with the INTRIGUE study, so once it's approved in second line, do you expect to use ripretinib in fourth line of dramatically reduced? Or do you think there is a potential in some patients ripretinib could be recycled in the fourth line?
Steve Hoerter
Yes. Hi Eun, it’s Steve. I'll ask Dan to address that in a second, as the team and Dan have done a ton of market research and speak to clinicians all the time about their view of ripretinib and QINLOCK in the treatment of this disease as the treatment paradigm evolves. And then I think what's also relevant here, in a way the data that we presented at ESMO, where we dose escalated patients to 150 BID and saw additional meaningful benefit by treating patients beyond after progression with a higher dose of the drug. So it seems clear that ripretinib has the potential at least to be a real backbone of treatment for patients and for patients to receive prolonged benefit from the drug in that context.
But Dan, maybe you want to comment further about how you see the market evolving in a world of a positive INTRIGUE readout and how physicians may evolve the treatment approach and paradigm.
Dan Martin
Sure, absolutely. So, what we hear from our KOLs is certainly real interest in seeing QINLOCK get to that second line setting. They all tell us that that's where they see the principal use for QINLOCK, and they're really excited to see the results of INTRIGUE as a result, as you would expect.
When we look through the claims data, when we talk to our KOLs, we don't see a dramatic amount of retreatment in this space. As you know there's some data for imatinib with retreatment. But, we haven't seen a ton of that. And so it remains to be seen whether or not ripretinib, QINLOCK would be looked at as a valuable option and retreatment setting.
As we've said before, there's a lot of things that go into how a drug will be used, obviously data that gets generated, how things appearing guidelines, payer policies and the like. So it's still a bit early for us to have a good sense for that. But definitely what our KOLs tell us is they're looking forward to potentially having QINLOCK available in the second line.
Eun Yang
Great. And the last question is on the market, the commercial strategy. So, Steve in your prepared remarks, you are preparing to launching at least the major European countries. But emerging markets are like really big opportunity for new therapies. So I want to ask you outside the U.S. and major European countries and Zai Lab territories, what are your plans for commercial strategy for ripretinib? Thank you.
Steve Hoerter
Thanks, Eun. That's a good question. So as you know, you referenced that we have our collaboration with Zai in Greater China that NDA has been filed, and there's the potential for action on that application next year. And of course, we also announced today that we're working through a couple of distributors in other territories, so specialized therapeutics in Australia and other Pacific Rim countries. And then we also announced our distribution agreement with medicine for Canada and Israel.
Beyond those territories, however, our approach to commercial point of view would be to take a similar approach that is to work through distributors in key territories, and we will start to make our way around the world with QINLOCK in terms of making sure that patients have access to it in a commercial setting upon approval. And that is something that we're committed to, so we're looking forward to continuing to identify partners in the right priority territories as we seek to make the drug available further.
Eun Yang
Thank you.
Operator
Next question comes from the line of Michael Schmidt with Guggenheim. Your line is open.
Charles Zhu
Hey, guys, this is Charles Zhu on for Michael Schmidt. Thanks for taking the question and congrats on the strong quarter. A couple on DCC -- for the TGCT, I fully understand that you and others have highlighted the market opportunity for TGCT as an annual 1,300 patients or so at least for the diffuse type with a much larger prevalence given its long lethal. On that front, however, what's your sense of how many patients are truly candidates for pharmaceutical intervention relative to the current role and potential cure rates of a surgery even repeat surgery and/or radiation?
Steve Hoerter
Hi Charles, It's Steve. Thanks for the question. With respect to 3014, as you know that the target indication for us for 3014 and TGCT is for patients that are not amenable to surgery. And we know that as a referenced, there are about 1,300 new patients in the U.S. each year with a diffuse form of the disease. And these are patients with a high recurrence rate, who generally at some point in the course of their disease, I think the estimates are between 30% and 50% of those patients have recurrence. But at some point those patients as we understand that run out of surgical options to manage their disease, and then would become candidates for a systemic therapy.
So that is the population we're targeting. We also know that there are patients with a localized form of the disease that are also not amenable to surgery, for whatever reason, and then also would be candidates for drug therapy for systemic therapy.
Charles Zhu
Got it. It makes sense. And I guess also based on the research you've done so far around pexidartinib and other off label drugs, such as imatinib for this disease, what's your sense around a potential treatment duration in these patients? And is it possible to convert these patients, I guess, from previously unamenable to surgery into eligible patients for potentially curative surgery?
Steve Hoerter
Yes, it's a good question with respect to the potential for neoadjuvant treatment in this disease contexts. And who knows there may well be a role for CSF1R inhibition in such patients to shrink tumors to make them potentially resectable, whereas perhaps prior to treatment that might not have been resectable. So that I think remains an open question. You know, this is a disease category where this haven't been systemic treatments until the approval of pexidartinib last year.
And what we continue to hear from physicians is that they have concerns about using pex in their patients, and in fact, patients have concerns about using pex as a result of the blackbox warning for hepatotoxicity and the rems that is associated with that. So we believe there remains a significant medical need for a drug that is effective and well-tolerated in the treatment of this disease. And I think part of our task assuming continued success is going to be to ensure that we're able to access patients at the right time and their disease course for a systemic treatment like ours.
Charles Zhu
Got it. It makes sense. Thanks for taking the questions and congrats again on the strong quarter.
Steve Hoerter
Thanks, Charles.
Operator
Our next question comes from the line of Reni Benjamin with JMP Securities. Your line is open.
Reni Benjamin
Sorry about that. Congratulations, guys on a great quarter. Thanks for taking the questions. Can you provide us maybe a little bit more color on the commercial plans in the EU? Maybe I missed it. But how many people are we talking about? Is there going to be a centralized kind of sales force just any sort of idea as to how that build out will occur? They occurred just based on by country-by-country approval, any sort of color there?
Steve Hoerter
Yes. Reni, it's Steve. I'd be happy to take your question about Europe. As I mentioned in the prepared remarks, we think the majority of the opportunity is in the five largest markets as you'd expect. And we don't have any reason to believe that the prevalence of GIST or the incidence of GIST in Europe, as a percent of population is any different than what we see in the U.S. So based on that, we think across the five largest markets they're probably between 4,000 and 6,000 new patients with GIST that are diagnosed each year.
So as we think about our build in Europe, it will very much be a staggered build based on market access. So as you know, each of these markets are generally single payer markets, and so depending on the country, a manufacturer like us would have to go through pricing and reimbursement negotiations. And sometimes that can take a matter of a few months and sometimes that can take as long as a year. So depending upon, how long that process takes to get to a price and ticket to reimbursement in the system, that would then be the trigger for us to consider a build related to that country.
As I also mentioned in the prepared remarks around our estimate is that these patients tend to be treated centrally at tertiary centers. So there's probably an opportunity here as we look at it for us to build more of a hub model across Europe, where we'd have the majority of our headcount sitting in a regional center within a field based personnel in key markets. And so I'm sure as we get to a potential approval in Europe, which as you know the filing is now gone in, it's been validated. So we think that the earliest potential action on the application could be by the end of next year.
So as we get closer, I'm sure we'll be sharing some more detail about how we view the builds and what we see in terms of numbers. But it's certainly going to be a staggered build. And we'll of course, continue to be thoughtful about what the size of that organization ends up looking like to access the opportunity
Reni Benjamin
Got it. And then I think it was Matt, he might have mentioned that the SM opportunity is you guys are no longer investing in that. Can you talk a little bit, I guess about, was it because enrollment was kind of tough or you were not seeing the kind of efficacy that you were hoping for?
And ultimately, will we see based on the patients that you have enrolled, what the data look like? Or it really doesn't make any sense to move that forward overall?
Steve Hoerter
Yes, thanks for the question Reni. As we've been saying for a number of months, now even well, over a year, our real focus of development for QINLOCK over ripretinib is in GIST. And as Matt noted in his prepared remarks, we have seen modest clinical activity in fewer than 20 patients that we treated in that SM cohort. But we didn't see sufficient activity to warrant further development in this disease. And that's particularly given the context of the evolving treatment landscape in SM, and frankly, the compelling investment opportunities that we see in other parts of the portfolio, not only in QINLOCK or ripretinib, but also in our other clinical stage assets as those start to really come into focus.
And so as a result, we've decided to focus our investment resources both people and dollars in other areas for now. I'm sure when the time is right at some sage we will publish the data from the SM cohort. I don't have any specific details I can share with you at this time, Reni.
Reni Benjamin
Got it. And then just one final one regarding the IND for 3116. I think I heard it right that it was shifted to the first quarter. Anything, is it just you guys have enough to focus on right now? Or did anything kind of pop up that's making you have to make that shift?
Steve Hoerter
No, we remain really excited about 3116. This is targeting the initiating factor in autophagy, which is thought to play a role in mitant RAS cancer. So really large patient populations and significant tumor types like lung and bladder cancer. So we remain really excited about the program. The team has been working cold hard to advance us to file the IND. This is a goal that we have for the end of the year. That was our initial milestone.
And as Matt indicated, this is a goal that we have for the end of the year. That was our initial milestone. And as Matt indicated, there's a possibility that this shifts into quarter one, but this is really just a function of timing being an end of year sort of a goal. But we've remained really excited about the program and very focused on it.
Reni Benjamin
Terrific. Thanks for taking the questions and congrats.
Steve Hoerter
Thank you.
Operator
Thank you. And our last question comes from the line of Arlinda Lee with Canaccord Genuity. Your line is open.
Ben Shim
Hey, good afternoon, folks. It's Ben Shin for Arlinda. And congrats on the great quarter. Many of my questions have already been answered. I kind of have a high level question for you. For the benefit of us outsiders, can you walk us through how on a day-to-day basis you're getting more penetration in the community setting? And how is it different in the pandemic environment? And to what extent can you communicate the potential for earlier lines of treatment? Since you guys are already there, can you kill two birds with one stone as it were? I have a couple of follow-ups.
Steve Hoerter
Yes, thanks for the question. Ben, I'll ask Dan Martin, to take that first part of your question and then we'll come back to your follow-ups.
Dan Martin
Yes. Hi, thank you. Good question. So really the crux of our effort to penetrate the community setting is just being incredibly, highly targeted, and leveraging our analytics strength to identify where the physicians were most likely to have a late line, fourth line GIST patient. As I mentioned before, patients are much more widely dispersed, as much more diffuse in the community setting. And so making sure that you are spending your sales and marketing efforts in the right place is critically important.
And so, of course, in addition to communicating all the things that we do, irrespective of setting, communicating the best in class profile, communicating the fact that it's the only approved agent for the fourth line, et cetera, really making sure that we are laser targeted in our efforts is critically important.
Now, as relates to COVID-19, this is an ongoing challenge, I think it is for just about every company. It's an ongoing challenge, because of any number of reasons. The data continues to show that broadly patient numbers remain somewhat depressed in oncology. And there's a lot going on at these provider institutions. One of the things that is a challenge is virtual fatigue, I think a lot of people can appreciate the sort of virtual fatigue that happens. And so, we continue to invest in training and resources for our field force to make sure that they are having the most robust and engaging conversations with physicians about QINLOCK and about their on-label patients.
So, there's no magic bullet, no magic potion here. A lot of it is just continuing to work every day, and the team has done a fabulous job navigating that. But, as we think about moving further and further into the community setting and with the ongoing pandemic, which may intensify in the coming quarters, it is something that we are cognizant of and think that, continued growth in those new patients starts maybe a bit more challenging and come a bit more slowly. So, I hope that answers your question.
I missed the second part of your question. And I wasn't sure if that was a commercial one or not. You said something about second line.
Ben Shim
Yes. To what can you communicate or may you communicate the potential for earlier lines, since you guys are already there and not having to go back?
Dan Martin
When you say already there, you mean, at the physician with the physician?
Ben Shim
At the physician level, yes.
Dan Martin
Okay. Sure. So, the answer is we can't, not promotionally. The data on second line, the KOLs are obviously already aware of that data from the publications and such, really excited about it, and really looking forward to INTRIGUE results. And the potential movement of QINLOCK up order of therapy, but from a promotion perspective, we stick to the labeled indication.
Ben Shim
Got you. Okay, that makes sense. And maybe a question for Tucker. Can you give us some color when the accrued pre-launch inventory will be worked through, let's say current one? We’re talking [Multiple Speakers].
Tucker Kelly
Yes, absolutely. If you notice, we did have a little bit when you'll see the financial results in the earnings release, and then in the Q there was a little bit of cogs expense in this quarter, but it'll be a number of quarters before we work off the pre-launch inventory as we've already expenses R&D.
Ben Shim
Okay, that's very helpful. Well, I think you guys mentioned something was there any material changes in payer mix for the quarter? I'm sorry if I missed the question or the statement.
Dan Martin
I can take that. It's Dan. No, no material change that we've seen in payer mix.
Ben Shim
Okay, great. Thanks very much, and congrats on the quarter.
Steve Hoerter
Thank you, Ben.
Operator
Thank you. I'm not showing any further questions. So I'll now turn the call back over to Steve Hoerter for closing remarks.
Steve Hoerter
Great. Thank you, Bridget, I appreciate that. And thanks to everybody on the call for joining us on the call today and for your continued support. We're looking forward to keeping you all updated on our continued progress with QINLOCK as well as with the balance of our development programs. Have a great evening, everyone.
Operator
Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.
