Incyte May Be Undervalued Even After Rise, New CEO Says

Incyte Corp. (INCY), the cancer-drug maker whose shares have almost tripled since August, has unrecognized value in its experimental medicines that may fuel more growth than investors expect, its new chief executive officer said.

Incyte surged from about $23 as investors bought on the potential for expansion of the company’s only approved medicine, Jakafi for the bone marrow disorder myelofibrosis, CEO Hervé Hoppenot said in his first interview since taking the helm in January. There’s also excitement about another experimental drug that harnesses the immune system to fight cancer, he said.

“Around $20, the assumption was this pipeline was worthless and Jakafi was one small drug,” Hoppenot said in a Feb. 19 interview at the Bloomberg News office in Wilmington, Delaware, where the company is based. “But there is more than that.”

Jakafi generated $235.4 million in revenue for Incyte last year. Aside from that medicine, Incyte and partner Eli Lilly & Co. are conducting drug research in rheumatoid arthritis and psoriasis. The company also has compounds in testing for other kinds of cancer, Hoppenot said.

There’s value that “I’m not sure is fully integrated here,” he said.

Hoppenot, 54, took the reins at Incyte after spending a decade at Novartis AG (NOVN), most recently as president of its oncology unit. Jakafi was approved by U.S. regulators in 2011 as the first treatment for myelofibrosis. Novartis, based in Basel, Switzerland, markets the drug outside the U.S.

Analysts’ Target

Most analysts agree with Hoppenot’s assessment that the shares have room to rise. Of 18 analysts covering the company, 14 recommend buying, while one says hold and three sell. Their average target price over 12 months is $70.92, according to data compiled by Bloomberg.

Incyte gained 1.7 percent to $64.98 at the close in New York. On Aug. 21, the stock jumped 33 percent after Incyte announced the results of a mid-phase trial showing Jakafi had potential for a broader use.

“We view Incyte as the premier midcap oncology company,” Eric Schmidt, an analyst with Cowen & Co., wrote in a January research note. We “expect shares to outperform as additional data on JAK inhibition in solid tumors materializes,” said Schmidt, who has an outperform rating on the stock.

The data reported in August showed Jakafi, in combination with the chemotherapy capecitabine, helped some patients with pancreatic cancer whose disease had spread. The company is starting two late-stage clinical trials to learn more about the drug’s effect and to potentially support an application for approval. It’s also starting three mid-stage studies in other tumor types, including breast and lung cancers, Hoppenot said.

Lilly Collaboration

Incyte is working with Indianapolis-based Lilly on baricitinib, a medicine that, like Jakafi, aims at enzymes called JAK. It’s in testing for rheumatoid arthritis, psoriasis and diabetic nephropathy.

Beyond that, Incyte has additional medicines in testing for cancer, including one aimed at a target called PI3-kinase that’s also the focus of a drug being developed by Gilead Sciences Inc. (GILD) Analysts estimate that Gilead’s therapy, which is awaiting approval at the U.S. Food and Drug Administration, may draw $1 billion in revenue in 2017 for the Foster City, California-based company.

Trial Data

Incyte expects data from a late-stage study of Jakafi in a blood cancer called polycythemia vera early in the second quarter.

“Our discovery team never stops,” Hoppenot said, adding the company will have more drugs entering the clinic in the next few months.

“We’re at a point where, finally, science is catching up with cancer,” he said, pointing to Roche Holding AG (ROG)’s breast cancer drug Herceptin and Novartis’s Gleevec for leukemia as examples of the progress being made. Joining Incyte, he said, is “like going to one of the first Internet companies when the Internet was invented. What I see is a company entirely driven by this idea that science can solve some of the problems of cancer.”

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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