Shares of Incyte INCY have risen 12.7% in the past six months against the industry’s decline of 0.5%. The stock has also outperformed the sector and the S&P 500 during this time frame.

The outperformance can be attributed to positive data readouts and new drug approvals. Lead drug Jakafi (ruxolitinib) also maintains momentum.

INCY Outperforms Industry, Sector and S&P 500

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INCY’s Lead Drug Jakafi Maintains Momentum

Incyte’s lead drug, Jakafi, is a JAK1/JAK2 inhibitor approved for the treatment of polycythemia vera (PV) in adults who have had an inadequate response to or are intolerant of hydroxyurea; intermediate or high-risk myelofibrosis (MF), including primary MF, post-polycythemia vera MF and post-essential thrombocythemia MF in adults; steroid-refractory acute graft-versus-host disease (GVHD) in adult and pediatric patients 12 years and older; and chronic GVHD after failure of one or two lines of systemic therapy in adult and pediatric patients aged 12 years and older.

Sales in all indications continue to be strong and should maintain momentum.

Jakafi is marketed by Incyte in the United States and by Novartis NVS as Jakavi in ex-U.S. markets. Incyte earns royalties from NVS on sales outside the country.

Approval of New Drugs Boosts INCY

The FDA’s approval of the cream formulation of ruxolitinib for the treatment of mild to moderate atopic dermatitis (under the brand name Opzelura) has been a significant boost for the company. The drug has also been approved for the topical treatment of nonsegmental vitiligo in adult and pediatric patients aged 12 years and above. The approval makes Opzelura the first and only topical formulation of a JAK inhibitor approved in the United States. The uptake of Opzelura has been strong.

The uptake of Pemazyre and other newly-approved drugs like Monjuvi and Tabrecta is impressive as well.

Incyte and partner Syndax Pharmaceuticals recently obtained FDA approval for axatilimab-csfr, an anti-CSF-1R antibody, for the treatment of GVHD after the failure of at least two prior lines of systemic therapy in adult and pediatric patients weighing at least 40 kg. The candidate was approved under the brand name Niktimvo. The drug is Incyte’s second approved treatment for chronic GVHD.

The recent pipeline progress has been encouraging, with positive data readout on Monjuvi. INCY has other promising candidates in its pipeline as well.

Incyte is also looking to expand its pipeline through strategic acquisitions. In May 2024, Incyte acquired Escient Pharmaceuticals and added EP262, a first-in-class, potent, highly selective, once-daily small molecule antagonist of Mas-related G protein-coupled receptor (MRGPRX2) and EP547, a first-in-class oral MRGPRX4 antagonist to its pipeline.

INCY’s Dependence on Jakafi

While the uptake of recently approved drugs has been good and a potential approval of the additional drugs should diversify its portfolio, INCY is heavily dependent on Jakafi for its top-line growth. Jakafi sales totaled $2.6 billion in 2023, contributing 70% to total revenues.

Moreover, competition has increased for some of Jakafi’s approved indications. The FDA’s approval of GSK plc’s GSK Ojjaara for the treatment of intermediate or high-risk MF, including primary MF or secondary MF (post-polycythemia vera and post-essential thrombocythaemia), in adults with anemia, poses a concern. 

Jakafi is also expected to lose patent protection in a few years. Hence, INCY faces an uphill task.

Valuation & Estimates

Going by the price/sales ratio, INCY’s shares currently trade at 2.73x forward sales, lower than its mean of 3.03x but higher than 1.68x for the biotech industry.

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The Zacks Consensus Estimate for 2024 earnings per share (EPS) has gone down to $1.54 from $1.86 over the past 30 days. However, the EPS estimate for 2025 has moved north 10 cents to $6.15 during the same timeframe.

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Conclusion

While large biotech companies are generally considered safe havens for investors interested in this sector, we would advise them to wait as of now before turning optimistic. Although the recent rally is positive, Jakafi’s performance amid increasing competition vouches a cautious stance.

While newer drugs are gaining traction and generating incremental revenues for INCY, they will still take some time to contribute significantly to the top line. For investors already owning the stock, staying invested would be a prudent move, given the levels at which the stock is trading.

INCY currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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