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Incyte (INCY) Collaborates with Innovent for 3 Candidates

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Incyte (INCY - Free Report) announced that it entered into a collaboration agreement with China-based Innovent Biologics, Inc.

Both the companies have entered into the agreement through their respective subsidiaries, for the development of three clinical-stage product candidates - pemigatinib (FGFR1/2/3 inhibitor), itacitinib (JAK1 inhibitor) and parsaclisib (PI3Kδ inhibitor). All the three candidates were discovered and developed by Incyte.

Financial Terms of the Agreement

Per the terms, Innovent will pay Incyte $40 million in cash, up front. In addition, Incyte is eligible to receive an additional $20 million in connection with the first investigational new drug (IND) application by Innovent in China (expected in 2019). In exchange, Innovent will receive the rights to develop and commercialize the three candidates in hematology and oncology in Mainland China, Hong Kong, Macau and Taiwan.

Moreover, Incyte will be eligible to receive up to $129 million in potential development and regulatory milestones, and up to $202.5 million in milestone achievements. Further, Incyte is eligible to receive tiered royalties from the high teens to the low twenties on future sales of products resulting from the collaboration. Meanwhile, Incyte retains an option to assist in the promotion of the three product candidates in China.

Strategic Value of the Transaction

Incyte expects Innovent’s experienced leadership team and sizeable clinical network to expand the clinical program for itacitinib, pemigatinib and parsaclisib. A successful development of these candidates will strengthen Incyte’s portfolio.

Our Take

The deal will provide Incyte with an influx of funds to further develop its pipeline. The company suffered a couple of pipeline setbacks, and hence is looking to strengthen the same.

The company suffered a huge setback with the failure of the phase III study, ECHO-301, as it was one of the most promising candidates for Incyte, evaluating epacadostat in combination with Merck’s (MRK - Free Report) Keytruda. Further, the approval of the 4mg dose of baricitinib, which the company is co-developing with Eli Lilly (LLY - Free Report) , is also doubtful.

Incyte’s stock has lost 30.4% in the year so far compared with the industry’s 20% decline.

 

Incyte’s lead drug Jakafi continues to maintain momentum for the company as the underlying patient demand for the drug remains strong. Incyte’s sNDA, seeking a label expansion of Jakafi for the treatment of steroid-refractory acute graft-versus-host disease (GVHD), has been accepted for Priority Review by the FDA.

The agency has set a target action date of Feb 24, 2019. An approval will further boost sales. Meanwhile, the REACH2 and REACH3 studies, evaluating steroid-refractory acute and steroid-refractory chronic GVHD, respectively, are ongoing in collaboration with Novartis (NVS - Free Report) . Incyte plans to enroll more than 300 patients in each of these studies. Data from these studies are expected in 2019.

However, Incyte’s dependence on Jakafi is a concern.

Zacks Rank

Incyte currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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