Biotech Beat: Analysts Remain Bullish on Incyte Corporation (INCY) and Vertex Pharmaceuticals Incorporated (VRTX)

By Sarah Roden

Analysts weigh in with bullish sentiments on both Incyte Corporation INCY and Vertex Pharmaceuticals Incorporated VRTX following the termination of the drug trial and an earnings release, respectively. Below, analysts explain why they are optimistic on both companies.

Incyte Corporation

After Incyte's decision to stop ruxolitinib trials in colorectal cancer, Eric Schmidt of Cowen & Co. weighed in on the company and the impact this decision will have. Following the announcement, Incyte shares plunged more than 10 percent.

Ruxolitinib is also known as Jakavi, which is being commercialized in Europe by Novartis to treat adults with specific forms of polycythemia vera, a bone marrow disorder, and splenomegaly, an abnormally large spleen. Ruxolitinib was being tested in combination with regorafenib to treat colorectal cancer, until yesterday's decision to stop the trial. Schmidt comments, "The company is not disclosing any data at this time, or whether other ongoing trials might include scheduled interim analyses… In addition, development of ruxo in colorectal cancer was not supported by any clinical evidence."

The analyst continues, "We are disappointed with today's news as we had held out some hope for success. We also believe negative data in colorectal cancer are likely to color investors' perceptions of the program, and impact the likelihood of success ascribed to tumors like pancreatic cancer."

Aside from this disappointing news, Schmidt points to royalties from Jakafi and baricitinib as positive points driving the stock. He explains that the company's leading pipeline is undervalued and "investors would be wise to take advantage of the weakness" stemming from the trail cancellation news. Overall, Schmidt reiterates an Outperform rating on the stock but does not provide a price target.

Eric Schmidt has a 35% success rate recommending stocks with an average return of +16.6% per rating. According to TipRanks, all 7 analysts who have rated Incyte in the last 3 months are bullish on the stock with an average 12-month price target of $128.57, marking a 71.45% potential upside from current levels.

Vertex Pharmaceuticals Incorporated

Cory Kasimov of J.P. Morgan weighed in on Vertex after the company reported Q4 and full year results yesterday, posting fourth quarter non-GAAP EPS of $0.17, Orkambi net quarterly sales of $220 million, and Kalydeco net quarterly sales of $181 million. For the most part, these figures bet Kasimov's estimates of $0.12, $223 million, and $164 million, respectively.

Orkambi and Kalydeco are both FDA-approved treatments for different types of cystic fibrosis. Orkambi was approved in July while the most recent variation of Kalydeco was approved in March, though forms of Kalydeco have been on the market since 2012. Kasimov reminds investors that Vertex has already issued Kalydeco guidance a few weeks ago, estimating full-year 2016 Kalydeco revenue between $670 million and $690 million while guiding R&D and other general expenses between $1.19 billion and $1.23 billion.

Looking forward, Kasimov comments, "The Ph3 trial of Orkambi in patients ages 6-11 met the primary safety endpoint supporting a sNDA submission in 2Q16 (in line with expectations). If approved, this indication would add an incremental 2,400 target patients to the 8,500 currently eligible for treatment."

In light of the earnings report and future pipeline catalysts, Kasimov maintains an Overweight rating on Vertex though he does not provide a price target.

Cory Kasimov has a 19% success rate recommending stocks with an average loss of 18.2% per rating. According to TipRanks, 6 analysts are bullish on the stock while 4 remain neutral. The average 12-month price target between these 10 analysts is $147.86, marking a 60% potential upside from where shares last closed.