I am on vacation until August 26. I am using that downtime to catch up on some of the earnings reports I missed during the very busy second quarter earnings season.
On July 30 Incyte (INCY) reported second quarter earnings of 26 cents a share, 4 cents below the Wall Street projection of 30 cents a share. Revenue was up $521.5 million, an increase of 59.7% year over year. That was ahead of Wall Street projections for $464.8 million in revenue. A large part of that pop came from a milestone payment of $100 million. But product revenue grew by 29% year over year to $421.5 million. The bulk of that was from sales of Jakafi, the company’s flagship drug to date. Revenue from Jakafi climbed to $345.6 million in the quarter, up 25% year over year.
Although Incyte is closer to a established drug company on sales of Jakafi, this is still a early stage biotech where it’s the pipeline that counts. Back in April the shares took a pounding on disappointing news from a drug trial. Shares, which had traded at $83.07, closed at $64.44 on August 10.
The news from the pipeline, however, is encouraging. The company reported results from the first completed Phase II trial of a JAK inhibitor in lupus in The Lancet. The trial trial showed that a statistically significant proportion of patients treated with 4 mg achieved resolution of their lupus-related arthritis or rash compared to placebo at week 24. Incyte and its partner Eli Lilly (LLY) plan to begin Phase III trials to evaluate the safety and efficacy of the JAK inhibitor baricitinib in lupus in the second half of 2018.
Also in the immune oncology pipeline are INCAGN1876 (GITR inhibitor), INCAGN1949 (OX40 inhibitor), INCAGN2385 (LAG-3 inhibitor), and ICAGN2390 (TIM-3 inhibitor) with all these drug candidates scheduled to enter clinical  proof-of-concept studies in 2018 or 2019.
Incyte has also announced plans to file a new drug application with FDA Breakthrough Therapy Designation for Jakafi to treat GVHD in the third quarter of 2018 with a goal of U.S. Food & Drug Administration approval in the first quarter of 2019. (GVHD, Graft-Versus-Host-Disease, is a medical complication that follows on the receipt of transplanted tissue from a genetically different person. GVHD is commonly associated with stem cell transplants such as bone marrow transplants to treat cancer.)  The company reports that pre-launch meetings with payers indicate there should be no issues obtaining coverage for GVHD.
All this progress in the pipeline puts Incyte on the road to recover on that earlier disappointment. I am, however, cutting my 12-month target price to $95 from a pre-disappointment $145.
Incyte is a member of my Jubak’s Picks and Volatility Portfolios. The shares are up 44.68% since I added them to the Picks portfolio in April 2014. I intend to sell the very deep in the red call options in the Volatility Portfolio and roll them into a call with a lower strike price sometime in early September.
I own shares of Incyte in my personal portfolios.
