Incyte Buoyed By Strong Rev. - Analyst Blog

Incyte Corporation (INCY) suffered a loss of 26 cents per share in the third quarter of 2010. Loss in the reported quarter was narrower than the Zacks Consensus Estimate of a loss of 33 cents and the year-ago loss (excluding special items) of 39 cents per share. The strong performance in the quarter was attributable to a surge in revenues.

Total revenues in the reported quarter jumped to $16.9 million from $939,000 in the year-ago quarter. Revenues were boosted by the receipt of $16.7 million in milestone payments from partners Novartis (NVS) and Eli Lilly & Co. (LLY).  Revenues were in line with the Zacks Consensus Estimate.

Total cost and expenses in the reported quarter climbed 19.8% to $38.9 million. Both research and development (R&D) expenses (up 15.4%) and selling, general and administrative (SG&A) expenses (up 74.7%) were on the upswing during the quarter. The increase was primarily attributable to Incyte's preparations for the potential commercialization of its candidate ICB18424 for treating myelofibrosis (MF).

2010 Outlook

Incyte also provided guidance for 2010. The company upped its revenue projection to $168 million-$170 million from the previously forecasted range of $99 million-$101 million. Incyte reduced its guidance for R&D and SG&A expenses. R&D expenses for the year are expected in the range of $128 million - $135 million as opposed to the previous range of $135 million-$142 million. SG&A expenses are expected in the range of $30 million-$35 million as opposed to the previous range of $35 million-$40 million.

However, management believes that in spite of the reduced projections for expense items, it is well on track regarding the development of its key pipeline candidates. Incyte also decreased its gross cash usage guidance to a $150 million-$155 million range from the previous projection of $160-165 million.

Pipeline Update

In addition to releasing quarterly results, Incyte provided an update on its pipeline candidates. In 2009, the company entered into a collaboration and license agreement with Novartis for two of its pipeline candidates – INCB18424, an oral JAK1/JAK2 inhibitor and INCB28060, an oral cMET inhibitor. While Incyte has retained exclusive rights for the development and potential commercialization of INCB18424 in the US, outside the US, Novartis will have responsibility for its future development and commercialization for all indications.

Incyte announced that the controlled portion of the COMFORT-I (US trial) late-stage study in MF is complete with top line data expected by year-end. Consequently, Incyte expects to submit a New Drug Application to the US Food and Drug Administration (FDA) in the first half of 2011. The other late-stage study, COMFORT-II (European trial), for the same indication is expected to be completed this year. A Marketing Authorization Application is expected to be submitted in the EU in the first half of 2011.

In September 2010, Incyte entered into an agreement with the FDA regarding a Special Protocol Assessment (SPA) for the design of a late-stage study (n~300) with INCB18424. The study will evaluate the candidate in patients suffering from advanced polycythemia vera (PV) who are not responding to hydroxyurea.

Incyte is also advancing the development of its other pipeline candidates such as INCB7839 for treating patients suffering from breast cancer, INCB28060 and INCB24360 for treating patients with solid tumors.

Our Recommendation

Currently, we have a “Neutral” stance on Incyte in the long-run, which is supported by the Zacks#3 Rank (short-term Hold recommendation).