Incyte Downgraded As RBC Analyst Awaits More Revenue Visibility

Incyte Corporation INCY has suffered a series of setbacks in its clinical programs, with the company's epacadostat  failing to meet endpoints in a late-stage study for metastatic melanoma when evaluated in combination with Merck & Co., Inc. MRK's Keytruda.

Incyte is scrapping a study of its INCB50465 pipeline candidate for diffuse large-B cell lymphoma.

The Analyst

RBC Capital Markets analyst Brian Abrahams downgraded Incyte from Outperform to Sector Perform and lowered the price target from $76 to $74.

The Thesis

The Street overreacted to the recent clinical trial setbacks and shares should rebound to the mid-$70s, Abrahams said in a Tuesday note.

The price level accounts for the substantial opportunity presented by Jakafi, Incyte's lead product for myelofibrosis, through its out-year patient cliff and probability-adjusted pipeline prospects, the analyst said. 

"We remain positive on Jakafi's growth prospects in existing MF/PV indications, which we believe sets a solid foundation floor," Abrahams said. The analyst estimates long-term Jakafi sales of $3 billion for the current indications.

Incyte's pipeline is crucial in light of the recent setbacks, as investors begin to focus on out-year Jakafi patient cliffs, the analyst said. 

The company's focus on targeted oncology and immuno-onocology as well as rheumatology and inflammation is viewed with skepticism by RBC, given the crowded nature of the spaces.

" ... The company's impressive translational work and medicinal chemistry should help set [it] up well longer-term, but in the nearer term we would expect shares to trade in line until there is more visibility on meaningful new revenue opportunities," Abrahams said. 

The Price Action

Incyte shares were moving down 5.63 percent to $67.79 at the time of publication Tuesday.

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