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Insights on Incyte

08/19/2013 8:00 am EST


John McCamant

Editor, Medical Technology Stock Letter

We view this company as one of the dominant players in small molecule drug development, and that includes Big Bio and Big Pharma, suggests biotechnology expert John McCamant in The Medical Technology Stock Letter.

Incyte's (INCY) crackerjack medicinal chemistry team continues to show that they can create better and differentiated drug candidates from the competition.

The key near-term driver for INCY is Jakafi growth, and with the increased sales guidance, the company is delivering. The drug's overall profile continues to improve and the recent survival data proves that Jakafi does much more for myelofibrosis patients than just control symptoms.

We expect results from the pivotal Phase III trial for patients with polycythemia vera—known by the name, RESPONSE—early next year, which will allow INCY to submit a supplemental new drug application for Jakafi in the first half of 2014.

Pancreatic data is the next clinical catalyst; the release of Phase II Jakafi data in pancreatic patients is expected this quarter.

INCB39110 is INCY's second-generation JAK inhibitor that is currently being tested in a broad Phase II program in psoriasis, rheumatoid arthritis, and myelofibrosis.

INCB24360 is one of INCY's most intriguing drug candidates. It has an immune enhancing mechanism distinct from those of other immunotherapies and has shown excellent tolerability.

It is currently in Phase II clinical development as a monotherapy for ovarian cancer and in combination with ipilimumab for metastatic melanoma. In our view, investor interest in this program is growing and will only increase over the next 6-12 months.

The ability to create multiple JAK inhibitors to treat different diseases is a testament to their skills. Additionally, the IDO inhibitor and Pi3K programs show that they are not just savvy in JAK development, but can tackle any small molecule target.

In our view, the long-term Jakafi opportunity remains under-appreciated by the Street. Current momentum is strong and, in our view, sustainable.

The pancreatic trial, the ISTs, and PV in Phase III, in combination, has the potential to significantly grow Jakafi sales.

As a reminder, the Phase III PV program is on track and expected to readout in early 2014, and the company has recently expressed confidence in the trial, as well as the commercial opportunity potentially being equal to, or larger than, MF.

Lastly, we would add that INCY, as an M&A candidate, fits the profile perfectly, as the company is derisked with Jakafi approved and a deep and growing pipeline.

We believe that INCY has delivered positive data for 110 in both psoriasis and RA, and this has not been fully reflected in the company's stock price.

Thus, as a reflection of the company's currently strong growth and outstanding prospects from their constantly burgeoning pipeline, we are raising our buy limit to $30 and our target price to $40.

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