Incyte Could Be A Takeover Target, Argus Lifts Price Target To $98

Argus raised its price target on shares of Incyte Corporation INCY, premising the positive opinion on a trio of factors.

The firm noted that the company reported better than expected second quarter sales and earnings per share and also hiked its guidance for Jakafi sales in 2016. Additionally, the firm believes the company could be a takeover target, probably for Gilead Sciences, Inc.GILD, which is seeking to boost its oncology pipeline.

Value Opportunity

Argus sees the below-peer group average of 18.2 for the company as presenting a value opportunity based on its prospects for above-average sales growth. The firm's view of further appreciation scope is due to the company's promising pipeline and the growth trajectory for Jakafi, despite the recent clinical setbacks.

Jakafi is the first and only drug approved for the treatment for myelofibrosis, a rare blood cancer. It has also been approved by the FDA for the treatment of polycythemia vera, another blood cancer

Seeking Inorganic Growth

Argus noted Incyte's recently closed acquisition of the European operations of oncology company Ariad Pharmaceuticals, Inc.'s ARIA European operations for $140 million, plus tiered royalties from sales of its drug Iclusig to treat leukemia, helps it to diversify from Jakafi.

Raising Estimates

Argus raised its 2016 earnings per share estimate to $0.45 from $0.32 and that for 2017 to $1.33 from $1.31. The firm maintains its 2016 revenue forecast at $1 billion but raised its 2017 forecast to $1.4 billion from $1.3 billion.

The firm noted that its new price target of $98, up from $92, implies 16.1 times its 2016 sales per share estimate. The rating was maintained at Buy.