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Incyte Does Not Excite

Zacks Equity Research

Incyte Corporation’s (NasdaqGS:INCY - News) second quarter 2011 loss of $0.41 per share was wider than the Zacks Consensus Estimate by $0.05. The wider loss suffered in the reported quarter was attributable to lower revenues and higher operating expenses. The company earned $0.02 per share in the corresponding period of 2010.

Total revenues in the reported quarter declined to $16.8 million versus $49.8 million recorded a year-ago. The year-ago revenues were boosted by the recognition of $33.0 million as milestone payments received from partners Eli Lilly and Company (NYSE:LLY - News) and Pfizer (NYSE:PFE - News). Revenues in the second quarter of 2011 fell short of the Zacks Consensus Estimate of $20 million.

Total cost and expenses in the reported quarter climbed 60.0% to $57.9 million. Both R&D expenses (up 59.9%) and SG&A expenses (up 58.4%) were on the upswing during the quarter. Incyte’s efforts to develop its pipeline contributed to the rise in R&D expenses. The jump in SG&A expenses was attributable to the expenses incurred by the company for INCB18424 (also known as INC424).

The candidate is being developed to treat patients suffering from myelofibrosis (Other OTC:MFGLQ.PK - News), a rare bone marrow disorder. Incyte submitted a new drug application (:NDA) to the US Food and Drug Administration (:FDA) seeking marketing approval for the MF candidate in June 2011.

Approval has been sought on the basis of encouraging data from two late-stage studies - COMFORT (COntrolled MyeloFibrosis Study with ORal JAK Inhibitor Therapy) - I (US trial) and COMFORT-II (European portion of the study).

While Incyte was responsible for the COMFORT-I study, COMFORT-II was conducted by partner Novartis (NYSE:NVS - News). Management expects a decision from the FDA regarding INCB18424 by year-end. Novartis is seeking approval of the candidate in the European Union.

2011 Outlook

Incyte maintained its outlook for R&D and SG&A expenses. R&D expenses for 2011 are expected in the range of $175 million - $185 million.  SG&A expenses are expected in the range of $50 million-$55 million in 2011. Incyte also projects 2011 cash usage in the range of $185 million-$200 million.

Our Recommendation

Currently, we have a Neutral stance on Incyte in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.

INCYTE GENOMICS INC (INCY): Read the Full Research Report

PFIZER INC (PFE): Read the Full Research Report

ELI LILLY & CO (LLY): Read the Full Research Report

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