I just got a report from ML substantially lowering their price target on INCY. Justifications were that they are shifting from disbelieving to believing management projections of high ongoing R&D expenses and that they are shifting from disbelieving to believing management's projections of a slow initial Jakafi rollout. The HAVE increased the imputed value of '050 to $250MM.
Frankly, it makes me wonder if BoA is acting for a potential acquirer, and the Chinese Wall is doing what such walls ever do.
Bank of America has published a research report that shows Incyte Corp. (NASDAQ: INCY[FREE Stock Trend Analysis]) increasing operating expense assumptions for 2012 and lowering PT from $26 to $21.
In the report, Bank of America comments, “We are increasing our operating expense assumptions for 2012 and beyond to reflect INCY's continued pipeline focus and expectation that earlier stage programs will demand more sizable R&D investments. SG&A expense should pick up as marketing efforts expand for recently launched Jakafi. COGS should be minimal in 2012, as Jakafi inventory was pre-expensed, and we continue to believe our 95% gross margins are achievable. These changes push our profitability assumption from 2013 to 2014. As part of our model review, we also lowered our 2014+ Jakafi PV sales ramp to a more conservative stance, which negatively impacts tail valuation in our DCF analysis, pushing our PO from $26 to $21. Upside drivers to our PO are success for LLY/INCY's '050 in rheumatoid arthritis, success in the early stage pipeline, or a better than expected Jakafi launch.”
Management's story about that is that few MF patients are treated by physicians who are absolutely current on the disease (a large general practice might have one or two MF patients). They expect most physicians to be unaware of Jakafi until they are detailed (400 per week), and then wait until the next visit from an MF patient (typically scheduled quarterly) to even consider prescribing the drug.
I think that's too pessimistic.
Your friend apparently was in a nice spot relative to both awareness and interest on the part of his physician.