Incyte Earnings: Maintaining Our $88 Fair Value Estimate as Shares Remain Significantly Undervalued

Incyte’s INCY total revenue grew 12% in the third quarter, driven by hematology drug Jakafi and topical autoimmune disease drug Opzelura. Management largely maintained its guidance for the full year, only slightly narrowing Jakafi U.S. sales guidance to a range of $2.59 billion-$2.62 billion. We maintain our $88 per share fair value estimate, and shares look undervalued, as we think the market is failing to recognize potential in Incyte’s pipeline. Incyte ended the quarter with $3.5 billion in cash, which it could also use to supplement its portfolio with bolt-on acquisitions as the Jakafi patent expiration in 2028 starts to enter the radar of investors. We think the firm’s Jakafi franchise as well as new launches like Opzelura secure Incyte a narrow moat.

We expect to get more clarity over the next few months on the success of Incyte’s strategy to extend Jakafi revenue in the long term. Jakafi sales were slightly below our expectations in the quarter, growing only 3% to $636 million in the quarter, although this was at least partly due to inventory fluctuations. We’re also watching the launches of competing myelofibrosis therapies like Sobi’s Vonjo and GSK’s Ojjaara, but we expect these therapies are likely to carve out niches among certain subsets of patients, such as those with anemia or low platelet counts, and that Jakafi will remain the dominant therapy in this market. Incyte has potential to counter this competition with combination use of Jakafi with its BET and ALK2 inhibitors in phase 2 testing (updated data expected in December, moving to phase 3 by early 2024). In addition, management noted that 41% of Jakafi patients have myelofibrosis, with potentially stronger growth prospects and less competition in its second-biggest approved indication, polycythemia vera. Incyte also highlighted two early-stage programs that target specific mutations, which could improve efficacy across Jakafi’s approved indications, although the timeline to market here is longer.