With a Strong Cancer Presence and Pipeline, Incyte Would Make a Sweet Acquisition

With a Strong Cancer Presence and Pipeline, Incyte Would Make a Sweet Acquisition Target July 15, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Incyte Corporation , headquartered in Wilmington, Delaware, has been viewed as a potential acquisition target for some time. In March, there was speculation that Amgen (AMGN) or Shire (SHPGY) might be interested. Today, Barron’s outlines the company’s appeal.

Incyte primarily focuses on oncology. It’s market value is about $13 billion. Its only approved drug is Jakafi, which accounts for about 70 percent of company revenue, and is expected to hit blockbuster status by 2020. In addition, the company has nine cancer drugs in its pipeline, three of which are JAK inhibitors.

Simos Simeonidis, writing for Barron’s, says, “Jakafi generated $600 million in 2015 U.S. sales following its 2011 approval in myelofibrosis (MF) and 2014 approval in polycythemia vera (PV). It’s marketed by Novartis outside the U.S. and generated $400 million in 2015 outside-U.S. sales with Incyte receiving double-digit royalties. We expect the Jakafi franchise to continue to grow and project peak 2026 sales of $1.6 billion U.S./$3.6 billion world-wide.”

The company also has Baricitinib in a partnership with Eli Lilly , which has shown positive results in a Phase III trial in rheumatoid arthritis (RA), including in a comparison study to Humira. The new drug application (NDA) and marketing authorization have been submitted to the FDA and European Medicines Agency (EMA) and results are expected early in 2017. Simeonidis writes, “We expect a positive decision, a 2017 launch, and project peak 2022 RA sales of $1.5 billion world-wide. Baricitinib is being developed in additional inflammatory indications with Incyte entitled to royalties of 20 percent to 29 percent on sales.”

Incyte also has an IDO1 inhibitor called epacadostat currently in a Phase III trial in melanoma in combination with Keytruda. It is also in another trial in patients in multiple tumor types in PD1/PDL1 immuno-oncology combinations. Simeonidis writes, “It’s one of the hottest assets in oncology and, if successful in melanoma, investors will be looking at its potential use in a wide array of solid tumors.”

On June 23 Incyte announced that the FDA had granted Jakafi Breakthrough Therapy Designation in Acute Graft-Versus-Host Disease (GVHD). There are presently no treatments for patients with acute GVHD.

“Receiving Breakthrough Therapy Designation from the FDA recognizes the severe nature of acute GVHD, the clear unmet medical need of these patients, and the potential, based on clinical evidence-to-date, for ruxolitinib to address the urgent needs of patients with this life-threatening disease,” said Steven Stein, Incyte’s chief medical officer, in a statement. “We are committed to working closely with the FDA in an attempt to bring ruxolitinib to patients with GVHD as soon as possible.”

Simeonidis writes, “To value Incyte at $105 a share, we use a sum-of-the-parts methodology and estimate the probability adjusted net present value of:

1) Jakafi sales and royalties in MF ($22 a share);

2) Jakafi sales and royalties in PV ($19 a share);

3) Iclusig sales in chronic myeloid leukemia and acute lymphoblastic leukemia ($1 a share);

4) baricitinib royalties in RA and other indications ($12 a share0;

5) epacadostat sales in melanoma and other indications ($25 a share);

6) Incyte’s pipeline assets ($25 a share); and

7) the company’s projected net cash position $1 a share). This price target supports an Outperform rating.”

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