Incyte (INCY) Beats on Q3 Earnings & Sales, Ups Jakafi View

Incyte Corporation INCY reported strong results for the third quarter of 2019, wherein both earnings and sales beat expectations. The company also raised its annual revenue guidance for its lead drug, Jakafi.  Shares are up in pre-market trading.

Shares of the company have rallied 25.6% in the year so far against the industry’s 1.5% decline.

The company reported earnings of 82 cents per share, which easily surpassed the Zacks Consensus Estimate of 65 cents and 41 cents in the year-ago quarter.

Including milestones and contracts, revenues came in at $551.6 million, which grew 22.6% year over year and beat the Zacks Consensus Estimate of $538.95 million.

Quarter in Detail

Total product-related revenues came in at $453.9 million, up 23.4% from the year-ago quarter. Jakafi revenues came in at $433.4 million, increasing 25% from the year-ago quarter and beating the Zacks Consensus Estimate of $417 million. Robust demand for Jakafi in all three approved indications drove revenues.

Net product revenues of Iclusig amounted to $20.6 million, up from $20.1 million in the year-ago quarter.

Jakavi (name outside the United States) royalty revenues from Novartis AG NVS for commercialization in ex-U.S. markets grew 15% to $58.4 million. Olumiant’s product royalty revenues from Eli Lilly LLY came in at $21.6 million.

R&D expenses were $281.3 million, down from $292.5 million in the year-ago quarter. SG&A expenses amounted to $102.6 million, up from $96.5 million in the prior-year quarter.

2019 Outlook Updated

Based on a strong performance of Jakafi in the first nine months of 2019, the company raised its revenue guidance for the same.

The company expects Jakafi revenues of $1,650-$1,680 million for 2019 (previous guidance: $1,610-$1,650 million). Iclusig revenues are still expected to be $90-$100 million. R&D expenses are expected to be $1,020-$1,070 million. SG&A expenses are anticipated to be $420-$470 million.

Pipeline Update

Pipeline progress in the third quarter was impressive. REACH2, the phase III study evaluating Jakafi in patients with steroid-refractory acute graft-versus-host disease (GVHD), met its primary endpoint of superior overall response rate at day 28 with Jakafi treatment compared to best available therapy. The REACH2 and REACH3 trials, evaluating steroid-refractory acute and steroid-refractory chronic GVHD, respectively, are being conducted in collaboration with Novartis.

An Independent Data Monitoring Committee (IDMC) recommended that the phase III REACH3 trial should continue without modification following an interim efficacy and safety analysis.

Results from the global phase III GRAVITAS-301 trial on itacitinib for the treatment of patients with newly-diagnosed acute GVHD are expected before the end of 2019.

Incyte submitted the NDA for pemigatinib as a second-line treatment for cholangiocarcinoma patients with FGFR2 fusions or rearrangements to the FDA under Breakthrough Therapy designation.

The phase III TRuE-V development program of ruxolitinib cream in patients with vitiligo was initiated in September, with initial results expected in 2021. The phase III TRuE-AD development program of ruxolitinib cream in patients with atopic dermatitis is ongoing, with initial results expected in the first half of 2020.

Our Take

Incyte’s performance in the third quarter was impressive as demand for Jakafi in all three approved indications (polycythemiavera, myelofibrosis and the recent label expansion in acute GVHD) continues to grow. The increase in guidance was positive too and should boost investor sentiment. The company’s efforts to diversify its revenue base are encouraging as well and the label expansion of Jakafi in additional indications will further boost sales.

Zacks Rank & Stock to Consider

Incyte currently carries a Zacks Rank #1 (Strong Buy). Another top-ranked stock in the biotech sector is Alkermes plc ALKS, with the same rank as Incyte. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for Alkermes have increased 13 cents for 2019 in the past seven days.

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