Despite News, Incyte's Competitive Advantage Intact

We are marginally lowering our fair value estimate for Incyte to $97 per share from $98 to incorporate the U.S. Food and Drug Administration's approval of Olumiant (baracitinib) at a 2 mg dose but not the 4 mg dose proposed by

We slightly lowered our top-line estimates for Olumiant in the U.S. market, as the smaller dose could limit the usage of the drug among severe treatment-refractory patients, who could have benefited from a more potent 4 mg dose. Olumiant's additional black box warning of thrombocytosis, which is not found in the label of incumbent JAK inhibitor Xeljanz, could also temper enthusiasm for the drug, though lower relative serious infections and malignancies seen in trials could provide a small window of opportunity for Incyte and Lilly. Based on positive phase 3 results in the rheumatoid arthritis population, competitor AbbVie plans to file another oral JAK inhibitor upadacitinib with the FDA in the second half of 2018, which would position the drug for a regulatory decision in 2019. Most notably, upadacitinib has shown high efficacy among rheumatoid arthritis patients with no sign of thrombotic events like Olumiant. Other up-and-coming pipeline candidates targeting different disease mechanisms are expected to further intensify the competition.

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