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Incyte (INCY) Up 10.2% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Incyte Corporation (INCY - Free Report) . Shares have added about 10.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is INCY due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Incyte Incurs Loss in Q1, Revenues Miss Estimates

Incyte reported a net loss of 1 cent as against a net income of 14 cents in the year-ago quarter. Incyte had received a milestone payment in the year-ago quarter which boosted the bottom-line. The Zacks Consensus Estimate was of an earnings of $0.08.

Quarterly revenues were $382.2 million, up 30% year over year. The reported figure, however, missed the Zacks Consensus Estimate of $382.9 million.

The year-over-year growth was driven by higher sales of Jakafi.

Quarter in Detail

Jakafi sales grew 25%, year over year to $313.7 million driven by strong patient demand. Net product revenues of Iclusig amounted to $20.7 million, up from $13.7 million in the year-ago quarter. Product royalty revenues from Novartis for the commercialization of Jakafi in ex-U.S. markets grew 41.4% to $41 million.

R&D expenses were up to $266 million from $177 million in the year-ago quarter. SG&A expenses amounted to $109 million, up 39.7% year over year.

2018 Outlook

The company continues to expect Jakafi revenues in the range of $1,350-$1,400 million. Iclusig revenues are expected in the range of $80-$85 million.

R&D expenses are now expected in the range of $1,013-$1,108 million, down from $1,077-1,172 million. SG&A expenses are now expected in the range of $340-$355 million, down from the earlier expectation of $465-$480 million.

Pipeline Update

The phase II trial, REACH1 trial evaluating Jakafi in patients with steroid-refractory acute graft-versus-host disease (“GVHD”) has completed enrolment and results are expected in the first half of 2018. Incyte expects to submit sNDA seeking approval of Jakafi for this indication in the second half of 2018.

Data from the trial evaluating INCB54828 in patients with cholangiocarcinoma are expected in second half of 2018.

However, Incyte suffered a setback with epacadostat. The external Data Monitoring Committee (eDMC) review of the pivotal phase III study, ECHO-301, evaluating epacadostat in combination with Keytruda in patients with unresectable or metastatic melanoma determined that the study did not meet the primary endpoint of improving progression-free survival in the overall population compared to pembrolizumab monotherapy.  

The phase III trial, ECHO-301 was evaluating epacadostat plus Merck’s Keytruda in patients with unresectable or metastatic melanoma study’s second primary endpoint of overall survival also was not expected to reach statistical significance. Consequently, based on the disappointing data and the recommendation of the eDMC, Incyte stopped the study to enable patients and their physicians to consider alternative therapeutic options. Incyte is also significantly downsizing the epacadostat development program.

As a result, Incyte and its collaboration partners have decided that the two pivotal trials of epacadostat in combination with Keytruda in lung cancer (ECHO-305 and ECHO-306) will be converted into randomized phase II trials. Enrollment will be discontinued in the four additional pivotal trials of epacadostat in combination with pembrolizumab.  

The two pivotal trials of epacadostat in combination with Bristol-Myers Squibb’s Opdivo will be amended to enable patients and their physicians to consider alternative therapeutic options. The pivotal trial in combination with durvalumab in Stage 3 lung cancer will not be initiated.

However, in April 2018, the FDA convened its Arthritis Advisory Committee to discuss the resubmission of the baricitinib NDA, which recommended approval of the 2mg dose of baricitinib as a once-daily oral medication for the treatment of moderately-to-severely active rheumatoid arthritis for adult patients who have had an inadequate response or intolerance to methotrexate.

While the Advisory Committee unanimously supported the efficacy of the 4mg dose of baricitinib, it did not recommend approval of the 4mg dose of baricitinib for the proposed indication based on the adequacy of the safety and benefit-risk profiles. The FDA action date for baricitinib is in June 2018.

The European Commission has already approved baricitinib as Olumiant in February 2017 for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to or are intolerant to one or more disease-modifying anti-rheumatic drugs.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Incyte Corporation Price and Consensus

VGM Scores

At this time, INCY has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions has been net zero. Notably, INCY has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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