Incyte (INCY) Misses on Q3 Earnings & Revenues, Updates View

Incyte CorporationINCY reported disappointing results for the third quarter of 2018, wherein both earnings and revenues missed expectations. The company reported a net income of 38 cents per share, which missed the Zacks Consensus Estimate of 40 cents but was up from 19 cents reported in the year-ago quarter.

Quarterly revenues were $449.7 million, up 17.9% year over year. Excluding milestone payments, revenues came in at $429.7 million, which missed the Zacks Consensus Estimate of $443.0 million.

Quarter in Detail

Total product-related revenues came in at $367.7 million, up 14.2% from the year-ago quarter. Of these, Jakafi's revenues came in at $347.6 million, up 14% from the year-ago quarter, driven by strong patient demand. Net product revenues of Iclusig amounted to $20.1 million, up from $18.1 million in the year-ago quarter.

Product royalty revenues from Novartis AG NVS for the commercialization of Jakafi in ex-U.S. markets grew 23% to $50.9 million. Olumiant's product royalty revenues came in at $11 million.

R&D expenses were $251 million, up from $234 million in the year-ago quarter. SG&A expenses amounted to $85 million, up from $80 million in the prior-year quarter.

2018 Outlook Updated

The company expects Jakafi revenues of $1,370-$1,400 million (previous guidance: $1,350-$1,400 million). Iclusig revenues are expected to be $80-$85 million.

R&D expenses are now expected to be $993-$1,038 million, down from $1,008-$1,103 million projected earlier. SG&A expenses are expected to be $370-$385 million compared with the previous guidance of $340-$355 million.

Pipeline Update

Incyte's supplemental New Drug Application (sNDA), seeking a label expansion of Jakafi for the treatment of steroid-refractory acute GVHD, has been accepted for Priority Review by the FDA. The agency has set a target action date of Feb 24, 2019. The application for approval was based on the successful REACH1 trial, additional results from which are expected later in the year.

Meanwhile, the global phase III GRAVITAS-301 trial of itacitinib as a treatment for patients with newly-diagnosed acute GVHD is enrolling. Results from the study are expected in 2019. Assuming the trial is successful, Incyte expects to submit applications seeking marketing approval for itacitinib in major markets globally.

Data from the phase II trial on the cream formulation of Jakafi in adult patients with atopic dermatitis were encouraging. Hence, Incyte is planning to initiate a global, pivotal phase III trial for this indication. Data from the randomized phase II trial of Jakafi cream in patients with vitiligo are expected in 2019.

The trial evaluating pemigatinib (formerly INCB54828) show promising efficacy in advanced cholangiocarcinoma patients with FGFR2 translocations. Incyte expects to submit an NDA for pemigatinib as a treatment for patients with advanced cholangiocarcinoma in 2019. The company expects to start a phase III trial for the first-line treatment of patients with cholangiocarcinoma in the coming months. Enrollment in the continuous dosing cohort of the phase II trial of pemigatinib in patients with bladder cancer is now underway.

In June 2018, Incyte and partner Eli Lilly and Company LLY announced that the FDA has approved the 2 mg dose of Olumiant (baricitinib), a once-daily oral medication for the treatment of adults with moderately-to-severely active rheumatoid arthritis (RA) who have had an inadequate response to one or more tumor necrosis factor (TNF) inhibitor therapies.

Consequently, Incyte obtained a $100-million milestone payment from Eli Lilly. However, the 4 mg dose of the drug was not approved. Lilly recently initiated a phase III trial of Olumiant in patients with systemic lupus erythematosus and a phase II/III adaptive design trial of Olumiant in patients with severe alopecia areata.

Our Take

Incyte's performance in the third quarter was disappointing. Nevertheless, Jakafi sales continue to be impressive and the company's efforts to expand the drug's label is encouraging.

However, Incyte's stock has lost 36.3% in the year so far compared with the industry 's 6.0% decline.

The company suffered a huge setback with the failure of the phase III study, ECHO-301, as it was one of the most promising candidates for Incyte, evaluating epacadostat in combination with Merck's MRK Keytruda. Further, the approval of the 4mg dose of baricitinib is also doubtful.

Zacks Rank

Incyte currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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