Is Incyte Stock A Buy?

You would think in a world facing a global pandemic that biopharmaceutical companies’ stocks would be soaring on the wind. Some of them are, while others are tanking like never before. Why is that?

And where does Incyte Corp (INCY) fall on the spectrum? With a market cap of over $17 billion, Incyte is valued higher than nearly 90% of equities listed in the United States. But does that make Incyte stock a buy?

Incyte Treats Autoimmune Diseases, Oncology…

Incyte Corp was founded in the early 2000s in Wilmington, Delaware. The founders believed investing in sound science and relentlessly pursuing excellence in R&D would translate into positive patient solutions for this biopharma company.

These founders are a group of scientists and biologists that work on immunology research around the world, with locations in the United States, Europe, and Japan.

Incyte’s unique approach to medicine and chemistry enabled the company to create a portfolio of products to treat oncology, inflammation, and autoimmunity.

Incyte’s best performer is Jakafi, a drug treating numerous conditions, such as myelofibrosis, a cancer of the body’s bone marrow. But Jakafi has also been used for the treatment of GVHD that can sometimes present in patients after they’ve received a transplant of stem cells.

Jakafi sales are growing. At the end of Q4 2019, quarterly company revenue rested around $580 million – 24% higher than Q4 2018.

$466 million of this revenue was attributable to Jakafi and represents a 23% growth from Q4 2018. Overall, though, Jakafi is Incyte’s revenue runner. It continuously makes up around 80% of the company’s overall revenue totals.

Incyte’s decision to keep their focus on Jakafi seems to have paid off. As of November 5, 2020, Jakafi’s revenues for Incyte were over $1.91 billion.

It was thought that the pandemic might hinder sales of Jakafi and therefore curb Incyte’s growth. But – for all of Jakafi’s indications – the company foresees continued room for growth.

At the same time, the idea that a biopharmaceutical company sees the majority of its revenues from only one product is something those considering investing in Incyte should pay close attention to.

Is Incyte Stock A Buy?

In April 2020, Incyte received the go ahead to begin testing Jakafi for use in patients with COVID-19 on ventilators. It was thought that the treatment could possibly alleviate the inflammation caused in the lungs of COVID patients.

The treatment is aimed at those over 12 years of age who have especially severe cases and those who have recently suffered a cytokine storm.

This immune reaction occurs when a body’s immune system overreacts to an illness and begins attacking healthy tissues, such as the lungs.

It can threaten the life of a patient. However, because there are so many potential treatments for COVID-19, it appears unlikely that Incyte could profit from this application.

That said, Incyte has several other drugs in the pipeline. For instance, Pemazyre (pemigatinib) is a potential drug for cholangiocarcinoma, a form of cancer.

The company submitted the drug for FDA consideration in November 2019. The FDA expedited its approval on April 17, 2020.

The biopharma company has over 24 other drugs currently in its pipeline which, in time, could help reduce the company’s reliance on Jakafi and Pemazyre for all of its revenue.

Incyte Share Price Tumbled On Surprise Loss

While Incyte is currently rated a Buy by most analysts, this stock has steadily been declining in share price since July 21, 2020.

 The company’s recent quarterly results report showed a surprise loss of $0.07 per share when all hands were calling for a profit.

This could be due to Incyte’s attempts to go all-in with Jakafi for COVID treatment when there are so many companies attempting COVID cures of their own, or just a sign of the times for biopharma stocks overall.

This is a good time to maybe halt buying decisions and instead begin reviewing past performance reports and take a look at what analysts believe may occur in 2021 for Incyte.

Alternatives To Incyte Stock

Charles River Labs (CRL) helps pharmaceutical companies with research and development in both animal and human medication development and trials.

This is a company that investors should keenly take an interest in, as they’ve yet to see “the red”, and its stock continues its upwards trend.

AmGen (AMGN) is one of the world’s leading pharmaceutical research and development companies. The company believes in value-based medicine, and the incorporation of new ideas to bring about a revolution in the healthcare sciences.

Although this stock has seen some dips in 2020, they’ve been minor and short-lived. This is a stock that more conservative, long-term investors could consider given that it has a more diversified revenue stream than does Incyte.

Is Incyte Stock A Buy? – The Bottom Line

While Incyte’s Q3 performance looked bleak, Jakafi demand is still brimming with possibilities. Jakafi has three different FDA approved indications, and these approvals continue to bolster sales.

Plus, part of the reason the company’s earnings estimates missed the mark was the cost of purchasing a “priority voucher” to obtain fast-tracked status for COVID indication treatment. This also significantly increased the cost of research and development expenses.

At the same time, Incyte’s attempts to diversify revenue continues to encourage investors. As Jakafi’s label indications continue to expand, sales will continue to grow.

Pemazyre’s approval, along with those of Monjuvi and Tabrecta will also boost sales and further diversify revenue. The only concerns to date are potential setbacks within the current pipeline.

If you’re a patient, long-term investor, Incyte could be a great investment. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.