Incyte Has Limited Catalysts In Next 6 Months; But 2019 Could Be Pivotal, Morgan Stanley Says In Downgrade

Incyte Corporation INCY's pipeline is devoid of any major catalysts in 2018, according to Morgan Stanley. 

The Analyst

Analyst Matthew Harrison downgraded Incyte from Overweight to Equal-weight and maintained a $76 price target. 

The Thesis

Many of Incyte's pipeline programs are aimed at modestly sized markets, although the topical JAK program — for which detailed data is expected in September — and the FGFR oncology program hold potential, Harrison said in a Friday note.

The analyst sees upside in areas such as graft-versus-host-disease, or GVHD, where investors already have a positive view.

Harrison said he came away from Incyte's analyst day impressed with the depth and diversity of its pipeline. Yet the bulk of the upside could come in 2019, forcing the shares to trade in-line with the market or with other mid-sized biotechs, the analyst said.

Incyte has five ongoing clinical trials that are expected to read out in 2019, Harrison said. 

Morgan Stanley's valuation for Incyte incorporates $9 of risk-adjusted net present value for JAK inhibition in GVHD, $2/share of risk-adjusted NPV for INCB50465 in B-cell malignancies and $5/share for early clinical and preclinical assets and Incyte's drug discovery engine.

Incyte could hold incremental upside from emerging targeted clinical assets that are not explicity reflected in its valuation, Harrison said. 

The Price Action

Incyte shares have lost about 25 percent year-to-date. The stock was down 1.86 percent at $69.82 at the time of publication Friday morning. 

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