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The Zacks Analyst Blog Highlights: Incyte, Eli Lilly, Johnson & Johnson, Abbott Laboratories and Express Scripts Holding

Zacks Equity Research

For Immediate Release

Chicago, IL – November 21, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Incyte Corporation (INCY), Eli Lilly and Company (LLY), Johnson & Johnson (JNJ), Abbott Laboratories (ABT) and Express Scripts Holding Company (ESRX).

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Here are highlights from Tuesday’s Analyst Blog:

Incyte Progresses on RA Candidate


Incyte Corporation (INCY) and Eli Lilly and Company (LLY) recently announced positive results from an ongoing 24-week phase IIb study of baricitinib. Baricitinib is an oral janus kinase (:JAK) inhibitor being developed for the treatment of patients suffering from moderate-to-severe rheumatoid arthritis (:RA), who had an inadequate response to methotrexate treatment.

The 12-week portion of the study revealed that patients on baricitinib showed significant differences in ACR20, ACR50 and ACR70 responses when compared to patients on placebo. The 12- to 24-week portion of the study revealed that patients who continued receiving 2 mg, 4 mg or 8 mg doses of the candidate sustained or showed improvement in ACR20, ACR50 and ACR70 responses.

Incyte also used Magnetic Resonance Imaging (:MRI) technology in a sub-study (n=154) to observe joint erosion and other markers of structural changes in and around the joint on baricitinib treatment.

Results from this 12-week sub-study showed a statistically significant improvement in Total Inflammation Score as well as in the Total Joint Damage Score for both 4 mg and 8 mg doses of baricitinib compared to placebo. The same effects were maintained at 24 weeks also.

We note that Incyte did not report any opportunistic infections or deaths during the study. Incyte also stated that baricitinib will now be studied in a phase III study for RA treatment.

Incyte recently received a milestone payment of $50 million from its partner Eli Lilly for advancing baricitinib in a phase III study for the treatment of RA. Incyte has an exclusive worldwide license, development and commercialization agreement with Eli Lilly for baricitinib.

The companies have planned four phase III studies. These studies will be evaluating safety and efficacy of baricitinib (2mg and 4 mg dosage) in patients suffering from active RA who are methotrexate-naive, biologic-naive or biologic-experienced. After completing any of these studies patients will be eligible for a fifth study.

Our Take

Although competition is tough in the RA market, with players like Johnson & Johnson (JNJ) and Abbott Laboratories (ABT), we believe baricitinib, once launched, will be able to corner a market share of its own as the patient base is quite large. The candidate is also being evaluated in patients suffering from moderate-to-severe psoriasis (phase II).

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


Express Scripts Drops to Neutral


We have downgraded Express Scripts Holding Company (ESRX) to Neutral from Outperform after the company hinted at a lackluster 2013 performance. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

The company projected a bleak economic outlook for 2013 on its third quarter 2012 conference call. Express Scripts stated that a higher unemployment rate is expected to lead to lower demand for health coverage in the upcoming year. Express Scripts also hinted that the 2013 earnings estimates provided by analysts were higher than the company’s expectations. We have reduced our 2013 earnings estimate by 20 cents to $4.25 per share.

Express Scripts’ third quarter 2012 adjusted earnings increased 29.1% to $1.02 per share, beating the Zacks Consensus Estimate of 99 cents per share. Revenues jumped 133.3% in the reported quarter to $27.0 billion. The massive jump in revenues was attributable to the expanded product portfolio at Express Scripts due to the acquisition of Medco Health Solutions.

Apart from releasing its third quarter results 2012, Express Scripts upped the lower end of its adjusted earnings guidance for 2012. The company now expects adjusted earnings for 2012 in the range of $3.65-$3.75 per share (previous guidance: $3.60 – $3.75 per share). We, too, have increased our 2012 earnings estimate by 2 cents to $3.72.

In April 2012, Express Scripts acquired health care company Medco Health Solutions for $29.1 billion. The acquisition, which should lower the cost of prescription drugs and improve the quality of healthcare, is expected to generate synergies worth $1 billion. The company expects to realize the synergies sooner than previously targeted. Express Scripts’ revenues received a major boost with the acquisition of Medco Health.



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