Here's What Was Intriguing About Incyte's Q3 Report

Incyte Corporation INCY traded down 5.5 percent Wednesday despite posting 6-percent revenue and 143-percent earnings per share beat Tuesday.

But analysts were more receptive to the quarterly report. BMO Capital raised its price target to $166, Barclays reiterated positive outlook and Oppenheimer confirmed expected upside of 25.6 percent.

Earnings Insights

Sales were driven by the firm’s Jakafi, a janus kinase-1/2 inhibitor that beat Oppenheimer estimates by about 7 percent and still “has significant potential.”

Management reported the results with a pipeline update followed by the release of more than 30 abstracts to be presented at the annual American Society of Hematology conference.

Among the updates most “intriguing” to Oppenheimer was the phase 3 ECHO-306 study of epacadostat for 1L non-small cell lung cancer (NSCLC) PD-L1. The study, on which Incyte has not yet presented data, compares various combinations of epacadostat, chemotherapy and pembro, a model replicated in ECHO-204 and potentially indicative of strategies for future trials.

“We agree with the strategy of having a proprietary PD-1 for use in combination therapy,” Barclays analysts Geoff Meacham and Paul Choi<?a> concurred in a Wednesday note.

The Bottom Line

Foreseeing Jakafi’s potential for myelofibrosis, polycythemia vera and other potential indications, as well as eventual upside driven by baricitinib for rheumatoid arthritis, Oppenheimer maintains its Perform rating on the stock with a $135 price target.

“INCY's diverse pipeline has driven

takeover speculation, leading to a valuation premium and a fair market valuation, in our view,” analysts Jay Olson and Silvan Tuerkcan wrote Wednesday.

Barclays maintains an Overweight rating with a $165 price target.

“While we recognize that the wait for ECHO-301 creates an information vacuum, we take the new AZ [AstraZeneca plc (ADR) AZN] collaboration as yet another vote of confidence in epacadostat and view Incyte’s investment case as intact,” Meacham and Choi wrote.

Upcoming catalysts include the release of top-line results for both the ECHO-301 study for melanoma treatment and the ruxolitinib study for acute graft-versus-host disease in the first half of 2018. The following year may see regulatory approval and a U.S. launch of baricitinib.

At publication, Incyte was trading down 5.5 percent at a rate of $107.04.

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