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Is a Beat in the Cards for Incyte (INCY) in Q1 Earnings?

Zacks Equity Research

Incyte Corporation INCY is scheduled to report first-quarter 2019 results on Apr 30, before the market opens.

In the last reported quarter, the company missed earnings estimates by 7%. Incyte’s earnings track record has been disappointing so far. The company missed earnings expectations thrice, over the last four quarters, delivering average negative earnings surprise of 34.45%.

Why a Likely Positive Surprise?

Our proven model indicates that Incyte is likely to beat on earnings this quarter, as it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to be able to beat estimates.

Earnings ESP: Earnings ESP for Incyte is +28.6%. The Zacks Consensus Estimate is pegged at 40 cents, while the Most Accurate Estimate is pegged at 51 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Incyte currently carries a Zacks Rank #3, which when combined with a positive ESP makes us confident of an earnings beat.

Note, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving Growth

Incyte’s lead drug, Jakafi (ruxolitinib), is a first-in-class JAK1/JAK2 inhibitor, approved for the treatment of patients with polycythemia vera (“PV”), and those with intermediate or high-risk myelofibrosis (“MF”), including primary MF, post-PV MF and post-essential thrombocythemia MF. While the company markets the drug in the United States, it is marketed by Novartis NVS as Jakavi outside the country.

Incyte continues to gain traction from Jakafi’s performance. The drug’s revenues totaled $1.4 billion in 2018, up 22% from 2017, driven by strong patient demand.

We expect the trend to continue in the first quarter. The company expects Jakafi revenues of $1,580-$1,650 million.

In order to expand patient population and increase commercial potential of the drug, the company is working toward expanding Jakafi’s label, further. We expect investors to also focus on pipeline development, given the recent setbacks.

We remind investors that while Jakafi sales and royalties are key components of Incyte’s revenue growth, Iclusig sales and Olumiant royalties are also contributing to the top line. Iclusig revenues are expected to be $90-$100 million in 2019. This will also boost the company’s performance in the to-be-reported quarter.

Key Anticipated Updates

Earlier in the year, Incyte and partner Eli Lilly and Company announced that the two phase III studies, BREEZE-AD1 and BREEZE-AD2, evaluating the efficacy and safety of Olumiant monotherapy for the treatment of adult patients with moderate to severe atopic dermatitis (AD) met the primary endpoint. The drug is already approved for the treatment of moderately-to-severely active rheumatoid arthritis (“RA”) in patients with inadequate response or intolerant to TNF inhibitor therapies.

Incyte suffered a setback when the FDA extended the review period of the supplemental New Drug Application (sNDA) for Jakafi to treat patients with acute graft-versus-host disease (GVHD), who have had an inadequate response to corticosteroids. However, the FDA extended the action date by three months to review additional data submitted by the company in response to the FDA’s information requests.

The additional data have been determined by the FDA to constitute a major amendment to the sNDA. Hence, the new Prescription Drug User Fee Act (PDUFA) target action date is May 24, 2019.

Share Price Performance

Incyte’s stock has gained 16.8% in the year so far, outperforming the industry’s growth of 4.8%.


Other Stocks to Consider

Here are two health care stocks worth considering with the right combination of elements to beat on earnings:

Gilead Sciences, Inc. GILD has an Earnings ESP of +1.54% and a Zacks Rank #2. It is scheduled to release financial figures on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aduro Biotech, Inc. ADRO has an Earnings ESP of +82% and a Zacks Rank #2.

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