Incyte (INCY) Up 3.4% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Incyte Corporation INCY. Shares have added about 3.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Incyte Q1 Loss Narrower than Expected, Revenues Beat

Incyte reported first-quarter 2017 loss of $0.96, a penny narrower than the Zacks Consensus Estimate of a loss of $0.97. Incyte had reported earnings of $0. 12 per share in the year-ago quarter.

Quarterly revenues were $384.1 million, up 45.8% year over year, and beat the Zacks Consensus Estimate of $353.6 million. The top line was driven by higher sales of Jakafi in the U.S. and Iclusig in Europe as well as royalties from ex-U.S. sales of Jakavi.

Quarter in Detail

Jakafi sales grew 37%, year over year to $251 million. Net product revenue of Iclusig amounted to $14 million. Product royalty revenues from Novartisfor the commercialization of Jakafi in ex-U.S. markets surged 31.8% to $29 million.
Contract revenues rose approximately 55.1% to $90 million.

Research and development (R&D) expenses were up significantly to $408 million from $157 million. The increase was primarily due to the expansion of the portfolio as well as upfront and milestone expenses of $209 million related to collaboration and license agreements. Selling, general and administration (SG&A) expenses amounted to $87 million, up 33.8% year over year.

2017 Outlook

The company continues to expect Jakafi revenues in the range of $1,020–$1,070 million. Iclusig revenues are expected in the range of $60–$65 million.

R&D expenses are now expected in the range of $1-1.1 billion, up from the earlier forecast of 990 million–$1,040 million. SG&A expenses are still expected in the range of $340–$360 million.

Pipeline Update

A phase III trial evaluating Jakafi in patients with graft-versus-host disease (GVHD) is underway while the pivotal program evaluating Jakfai in patients with essential thrombocythemia ET is likely to be initiated soon. A phase III trial, REACH3 evaluating Jakafi as a treatment for patients with steroid-refractory chronic GVHD is expected to begin in 2017.

Incyte also expanded its collaboration with Merck , growing the pivotal program studying epacadostat in combination with pembrolizumab to a total of five tumor types. Incyte and Merck will advance four additional tumor types beyond melanoma – non-small cell lung cancer (NSCLC), bladder, renal and head & neck cancers – across six phase III trials. These trials are expected to begin in 2017.

Additionally, Incyte expanded its collaboration with Bristol-Myers Squibb evaluating epacadostat in combination with nivolumab in pivotal studies in two tumor types.

The European Commission approved Olumiant in Feb 2017 for the treatment of moderate to severe active rheumatoid arthritis in adult patients who have responded inadequately to, or who are intolerant to, one or more disease-modifying anti-rheumatic drugs (DMARDs). However, the company suffered a setback when the FDA issued a complete response letter CRL for baricitinib in which the FDA indicated that additional clinical data are needed to determine the most appropriate doses. The FDA further stated that additional data are necessary to further characterize safety concerns across treatment arms.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Incyte Corporation Price and Consensus

 

Incyte Corporation Price and Consensus | Incyte Corporation Quote

VGM Scores

Currently, Incyte's stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with an 'A'.  The stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum investors based on our style scores.

Outlook

Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.