Incyte (INCY) to Report Q3 Earnings: What's in the Cards?

Incyte CorporationINCY is scheduled to report third-quarter 2018 results on Oct 30, before the market opens.

Incyte Corporation Price and Consensus

Incyte Corporation Price and Consensus | Incyte Corporation Quote

In the last reported quarter, the company missed estimates by 13.33%. Incyte's earnings track record has been mixed so far. Over the last four quarters, the company's earnings surpassed expectations twice, delivering an average positive earnings surprise of 40.3%.

Factors Driving Growth

Incyte's lead drug, Jakafi (ruxolitinib) is a first-in-class JAK1/JAK2 inhibitor, approved for the treatment of patients with polycythemia vera ("PV"), and those with intermediate or high-risk myelofibrosis ("MF"), including primary MF, post-PV MF and post-essential thrombocythemia MF. While Incyte markets the drug in the United States, it is marketed by Novartis NVS as Jakavi outside the country.

Incyte continues to gain traction from Jakafi's performance. Jakafi's revenues came in at $345.6 million, up 25% from the year-ago quarter, driven by strong patient demand.

We expect the trend to continue in the third quarter. The sales guidance for 2018 was also impressive. The company continues to expect Jakafi revenues to be $1,350-$1,400 million in 2018.In order to expand patient population and increase commercial potential of the drug, the company is working toward expanding Jakafi's label, further.

We expect investors to also focus on the pipeline development efforts, given the recent setbacks.

Incyte announced positive results from its randomized, dose-ranging, vehicle- and active-controlled phase IIb study, evaluating Jakafi cream in patients with atopic dermatitis (AD) who are candidates for topical therapy. The study, part of the True-AD clinical trial program, met its primary endpoint, demonstrating that Jakafi cream 1.5% administered twice daily (BID) significantly improved Eczema Area and Severity Index (EASI) scores from baseline versus vehicle control (non-medicated cream) at Week 4.

Meanwhile, Incyte plans to file a Supplemental New Drug Application (sNDA) with the FDA for the label expansion of Jakafi for the treatment of steroid-refractory acute GVHD, in the coming months.

In addition, we remind investors that while Jakafi sales and royalties are key components of Incyte's revenue growth, Iclusig sales and Olumiant royalties are also contributing to the top line. Iclusig revenues are expected to be $80-$85 million.

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. As part of the approval, the companies have agreed to conduct a randomized controlled clinical trial to evaluate the long-term safety of baricitinib in patients with rheumatoid arthritis.

Recently, both the companies announced findings from an updated integrated safety analysis of Olumiant based on an ongoing long-term extension (LTE) study of rheumatoid arthritis (RA) patients treated up to six years. The results further reinforce Olumiant's safety profile.

The company also updated its guidance along with second-quarter results announcement. R&D expenses are now expected to be $1,008-$1,103 million, down from 1,013-$1,108 million projected earlier. SG&A expenses are expected to be $340-$355 million.

Share Price Performance

Incyte's stock has lost 34% in the year so far, worse than the industry 's decline of 15.3%.

Earnings Whispers

Our proven model does not conclusively show that Incyte will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP : For Incyte, Earnings ESP is -5.29%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Incyte currently carries a Zacks Rank #2. Although the rank is favorable, the company's negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here is a health care stock worth considering with the right combination of elements to beat on earnings:

Amgen Inc. AMGN is scheduled to release its third-quarter results on Oct 30. The company has an Earnings ESP of +0.56% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank 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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