Incyte Corporation ( INCY - Analyst Report ) and Eli Lilly and Company ( LLY - Analyst Report ) 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 - Analyst Report ) and Abbott Laboratories ( ABT - Analyst Report ) , 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.