Shares of recently struggling biopharma Incyte (NASDAQ: INCY) finally turned in a positive performance in May, gaining over 10% last month, according to data provided by S&P Global Market Intelligence. That was a welcomed reprieve for shareholders that have endured a steady stream of disappointing updates from the clinic, including the spectacular phase 3 fail of the combination therapy of epacadostat and Keytruda at the end of April.
The stock’s ascension was catalyzed by solid first-quarter 2018 results and a decision by the U.S. Food and Drug Administration to approve the use of Olumiant in treating rheumatoid arthritis, which could deliver peak sales of $2.5 billion if expanded further. Considering Incyte has double-digit royalties on sales from partner Eli Lilly, the approval has caught the attention of investors.
A logjam of bad news has cut Incyte’s market cap in half in the last year, from a peak of $28 billion to just $14.6 billion today. Then again, that still makes this a sizable biopharma. Healthy sales growth from its blockbuster Jakafi certainly helps. The drug posted $314 million in revenue in the first quarter of 2018, which represented a 25% increase from the year-ago period.
And despite numerous clinical failures in recent years, investors haven’t lost complete faith in the company’s pipeline. In 2018, Jakafi is expected to deliver results from multiple trials evaluating the drug as a potential treatment for graft-versus-host disease. Success has the potential to greatly expand the blockbuster’s sales footprint. Meanwhile, epacadostat is being evaluated in multiple clinical trials that remain ongoing, so its recent failure may not completely wipe out the once-promising drug candidate’s future.
Even when including the strong showing from May, Incyte stock is still down 43.5% in the last year. However, the company could be a more attractive investment at its current market cap of around $15 billion. Rapidly expanding sales of Jakafi and the recent U.S. approval of Olumiant in rheumatoid arthritis could make this a solidly profitable business in a few years’ time.
Does management think that’s a realistic possibility? Investors might find out later this month, when the latest pipeline updates and development strategy are announced at the company-hosted investor and analyst event on June 21.
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