On Jan 6, we reiterated our Neutral recommendation on Incyte Corporation (INCY) largely due to its modest third quarter 2013 performance. Our investment thesis is supported by a Zacks Rank #3 (Hold).
Why the Reiteration?
On Oct 31, 2013, Incyte reported a loss 13 cents per share for the third quarter of 2013, in line with the Zacks Consensus Estimate. However, sales of Jakafi, Incyte’s sole marketed product, increased 37.8% to $60.2 million during the quarter.
The company now expects net product sales for 2013 on the higher end of its previously guided range of $220–$230 million. We note that Jakafi has performed well since its launch in the U.S. in Nov 2011 for treating patients suffering from intermediate or high-risk myelofibrosis.
We are encouraged by Incyte’s efforts to expand Jakafi’s label further. Jakafi is undergoing two global phase III studies (RESPONSE and RELIEF) for the polycythemia vera (:PV) indication. The company expects results from the RESPONSE trial in early 2014. Incyte intends to file a supplemental new drug application in the U.S. for the PV indication on the basis of results from the RESPONSE trial in the first half of 2014 with approval expected by the end of the year.
Jakafi is also being studied for the treatment of solid/other hematologic tumor and pancreatic cancer. Successful label expansion of the drug should drive growth further. We expect investor focus to remain on Jakafi’s performance and updates on its label expansion in the coming quarters.
However, we are concerned about Incyte’s over-dependence on Jakafi for growth. Consequently, the company’s pipeline needs to deliver. We prefer to remain on the sidelines until more visibility is obtained on the pipeline.
Other Stocks to Consider
Some better-ranked stocks include Lannett Company, Inc. (LCI), Forest Laboratories Inc. (FRX) and Jazz Pharmaceuticals (JAZZ). While Lannett and Forest Lab hold a Zacks Rank #1 (Strong Buy), Jazz Pharma carries a Zacks Rank #2 (Buy).