Shares of Incyte (INCY) are on the rise after William Blair analyst Y. Katherine Xu upgraded the stock to Outperform, a buy-equivalent rating, saying the pipeline is finally “coming out of epacadostat shadow” and Incyte remains a “prime” M&A candidate. Also bullish on the shares, her peer at Gabelli upgraded Incyte to Buy, citing its increasing pipeline value and multiple catalysts expected in 2019.
BUY INCYTE: In a research note to investors on Thursday, William Blair’s Xu upgraded Incyte to Outperform from Market Perform and raised her fair value estimate on the shares to $100 from $85. Heading into 2019, Incyte is executing on both commercial and research and development fronts to balance driving near-term profitability growth and realizing long-term appreciation from a “resurgent” pipeline, she contended. The analyst argued that after two years of disappointing stock performance due to the epacadostat failure and Olumiant “debacle” in the U.S. regulatory process, the rest of the pipeline has finally reached an inflection point. Further, Incyte is an “ideal” takeover candidate for a large pharma company looking for a “blockbuster that moves the needle,” earnings accretion, and a healthy and innovative pipeline, Xu added. The analyst noted that regulatory catalysts in 2019 include approval of Jakafi in steroidrefractory acute GvHD, NDA submission of pemigatinib for refractory holangiocarcinoma, and NDA submission of capmatinib for NSCLC by partner Novartis (NVS), for which Incyte is entitled to milestones and 12%-14% royalties. Pivotal data catalysts in 2019 include Jakafi and itacitinib in various GvHD Phase III studies, Phase III data of baricitinib in atopic dermatitis by partner Eli Lilly (LLY), and pemigatinib pivotal data in bladder cancer in 2020, followed by an NDA filing, she added. Meanwhile, Gabelli analyst Jing He also upgraded Incyte to Buy from Hold, with a price target of $105. The analyst cited the company’s increasing pipeline value and multiple catalysts expected in 2019, noting the encouraging response rate data of its Pemigatinib program and the blockbuster potential of its fully-owned itacitinib that targets acute naive graft-versus-host disease, or GvHD.
PIPELINE, M&A OPTIONALITY: Last week, Goldman Sachs analyst Salveen Richter added Incyte to his firm’s Americas Conviction List and raised his price target on the shares to $111 from $102, saying the company provides pipeline and M&A optionality in the context of a solid commercial franchise. M&A potential in biotechnology is a focus following the announcement of two pending transactions, namely Bristol-Myers (BMY)/Celgene (CELG) and Eli Lilly/Loxo Oncology (LOXO), and company commentary on this front, he added. Richter sees pivotal and commercial-stage SMID oncology assets particularly as a key area of interest and at current levels, Incyte “screens as attractive” in the context of other commercial oncology assets, and sees significant value in its commercial franchise and pipeline optionality. The analyst reiterated a buy rating on Incyte’s stocks.
MOVING TO THE SIDELINES: Not as bearish on Incyte, UBS analyst Carter Gould downgraded Incyte to Neutral from Buy last week, while raising his price target on the shares to $82 from $75. The 36% rally in the shares since December 24, 2018 has largely stemmed from sector consolidation while company fundamentals remained unchanged, Gould argued. As such, the analyst sees a more balanced risk/reward profile at current share levels. Further, over the first half of 2019, Gould does not see a clinical catalyst offering meaningful upside for Incyte shares.
