UPDATE: Bank of America Reports Development of New Incyte Model; Lowers PT

Bank of America has published a research report that shows Incyte Corp. INCY increasing operating expense assumptions for 2012 and lowering PT from $26 to $21. In the report, Bank of America comments, “We are increasing our operating expense assumptions for 2012 and beyond to reflect INCY's continued pipeline focus and expectation that earlier stage programs will demand more sizable R&D investments. SG&A expense should pick up as marketing efforts expand for recently launched Jakafi. COGS should be minimal in 2012, as Jakafi inventory was pre-expensed, and we continue to believe our 95% gross margins are achievable. These changes push our profitability assumption from 2013 to 2014. As part of our model review, we also lowered our 2014+ Jakafi PV sales ramp to a more conservative stance, which negatively impacts tail valuation in our DCF analysis, pushing our PO from $26 to $21. Upside drivers to our PO are success for LLY/INCY's '050 in rheumatoid arthritis, success in the early stage pipeline, or a better than expected Jakafi launch.” Bank of America maintains its Buy rating on Incyte Corp., which closed Friday at $17.28.