Incyte (INCY) Q1 Loss Narrower Than Expected, Revenues Beat

Incyte Corporation (NASDAQ:INCY) reported first-quarter 2017 loss of 96 cents, a penny narrower than the Zacks Consensus Estimate of a loss of 97 cents. Incyte had reported earnings of 12 cents per share in the year-ago quarter.

Quarterly revenues were $384.1 million, up 45.8% year over year, and beat the Zacks Consensus Estimate of $353.6 million. The top line was driven by higher sales of Jakafi in the U.S. and Iclusig in Europe as well as royalties from ex-U.S. sales of Jakavi.

Incyte’s shares has gained 60.7% in the past one year, while the Zacks classified Medical - Biomedical and Genetics industry fell 4.7%.

Quarter in Detail

Jakafi sales grew 37%, year over year to $251 million. Net product revenue of Iclusig amounted to $14 million. Product royalty revenues from Novartis (NYSE:NVS) for the commercialization of Jakafi in ex-U.S. markets surged 31.8% to $29 million.

Contract revenues rose approximately 55.1% to $90 million.

Research and development (R&D) expenses were up significantly to $408 million from $157 million. The increase was primarily due to the expansion of the portfolio as well as upfront and milestone expenses of $209 million related to collaboration and license agreements. Selling, general and administration (SG&A) expenses amounted to $87 million, up 33.8% year over year.

2017 Outlook

The company continues to expect Jakafi revenues in the range of $1,020–$1,070 million. Iclusig revenues are expected in the range of $60–$65 million.

R&D expenses are now expected in the range of $1-1.1 billion, up from the earlier forecast of 990 million–$1,040 million. SG&A expenses are still expected in the range of $340–$360 million.

Pipeline Update

A phase III trial evaluating Jakafi in patients with graft-versus-host disease (GVHD) is underway while the pivotal program evaluating Jakfai in patients with essential thrombocythemia (ET) is likely to be initiated soon. A phase III trial, REACH3 evaluating Jakafi as a treatment for patients with steroid-refractory chronic GVHD is expected to begin in 2017.

Incyte also expanded its collaboration with Merck (NYSE:MRK) , growing the pivotal program studying epacadostat in combination with pembrolizumab to a total of five tumor types. Incyte and Merck will advance four additional tumor types beyond melanoma – non-small cell lung cancer (NSCLC), bladder, renal and head & neck cancers – across six phase III trials. These trials are expected to begin in 2017.

Additionally, Incyte expanded its collaboration with Bristol-Myers Squibb (NYSE:BMY) evaluating epacadostat in combination with nivolumab in pivotal studies in two tumor types.

The European Commission approved Olumiant in Feb 2017 for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying anti-rheumatic drugs (DMARDs). However, the company suffered a setback when the FDA issued a complete response letter (CRL) for baricitinib in which the FDA indicated that additional clinical data are needed to determine the most appropriate doses. The FDA further stated that additional data are necessary to further characterize safety concerns across treatment arms.

Our Take

Incyte’s first-quarter results were encouraging as the company reported a narrower-than-expected loss and surpassed revenue expectations. The growth in Jakafi sales is driven by patient demand and should boost revenues.

While most of the demand is due to a larger established patient base in myelofibrosis, polycythemia vera is also expected to be a major long-term driver of Jakafi growth. This is owing to the larger potential patient population and the possibility for longer duration of treatment. The company exited the first quarter with approximately 10,000 patients being treated with Jakafi. However, the delay in approval of Olumiantin the U.S. is disappointing.

Zacks Rank

Incyte Corporation currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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