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Incyte's (INCY) Beats on Q4 Earnings, Provides 2017 Outlook

Incyte CorporationINCY reported fourth-quarter earnings of 15 cents beating the Zacks Consensus Estimate of 14 cents. Incyte had reported earnings of 29 cents per share in the year-ago quarter.

Quarterly revenues came in at $326.5 million, up 33.9% year over year, and beat the Zacks Consensus Estimate of $325.7 million. The strong top-line growth 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.

Incyte's share price has gained 68.3% in the past one year, while the Zacks classified industry fell 3.8%.

Incyte's share price has gained 68.3% in the past one year, while the Zacks classified Medical - Biomedical and Genetics industry fell 3.8%.

Quarter in Detail

Jakafi sales grew 30%, year over year to $237.5 million. Net product revenue of Iclusig amounted to $12.9 million. Product royalty revenues from Novartis for the commercialization of Jakafi in ex-U.S. markets surged 41% to $33.2 million. Contract revenues rose approximately 12.2% to $42.9 million.

Research and development (R&D) expenses were up 38.5% to $161.6 million. Selling, general and administration (SG&A) expenses amounted to $96.0 million, up 83.1% year over year.

2016 Results

Revenues for 2016 came in at $1.1 billion, up 46.7% from $753.7 million in 2015. The reported revenues were in line with the Zacks Consensus Estimate of $1.1 billion. Earnings per share came in at 54 cents, up from 3 cents in 2015.

2017 Outlook

The company expects Jakafi revenues in the range of $1,020-$1,070 million. Iclusig revenues are, however, still expected in the range of $60-$65 million.

R&D expenses are now expected in the range of $785-$835 million. SG&A expenses are still expected in the range of $340-$360 million.

Pipeline Update

Concurrent with the quarterly result, Incyte announced that the Euorpean Commission approved Olumiant (baricitinib) for patients with rheumatoid arthritis (RA). The drug has been licensed to Eli Lilly and Company LLY and is under regulatory reviews. The approval triggers a $65 million payment to Incyte from Lilly, along with additional potential milestone payments, as well as royalties on sales of Olumiant. Lilly announced that it plans to begin a phase III trial on baricitinib in patients with psoriatic arthritis during 2017.

A phase II trial, REACH1 on Jakafi for the treatment of patients with graft-versus-host disease (GVHD) has enrolled its first patient in Dec 2016 while REACH2 and REACH3 in steroid-refractory acute and steroid-refractory chronic GVHD, respectively, are expected to begin in 2017 in collaboration with Novartis NVS . Jakafi is also being evaluated as a treatment means for patients with essential thrombocythemia and a trial is expected to begin in 2017.

Meanwhile, in Jan 2017, Incyte and Merck MRK announced that the companies will expand the clinical development program evaluating epacadostat with Keytruda, and plan to initiate phase III trials of the combination in four additional tumors beyond melanoma: non-small cell lung cancer, renal cell carcinoma, bladder cancer and squamous cell carcinoma of the head and neck. These trials are expected to begin in 2017.

Our Take

Incyte's fourth-quarter results were positive beating on both top and bottom line. The growth in Jakafi sales is driven by patient demand and should boost revenues further. While most of the demand is due to a larger established patient base in myelofibrosis, polycythemia vera is also expected to be a major long-term driver of Jakafi growth. This is owing to the larger potential patient population and the possibility for longer duration of treatment.

The peak sales of the drug are estimated at $2 billion. The top-line will also be boosted by the inclusion of royalties for Olumiant and additional milestone payments from Lilly as the drug enters phase III trials for other indications.

Incyte Corporation Price and EPS Surprise

Incyte Corporation Price and EPS Surprise | Incyte Corporation Quote

Zacks Rank

Incyte Corporation currently carries a Zacks Rank #3 (Hold).

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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