Incyte Corporation INCY reported a first-quarter 2015 loss of 11 cents per share, wider than the Zacks Consensus Estimate of a loss of 6 cents but narrower than the year-ago loss of 21 cents per share.
First-quarter revenues climbed 75.2% year over year to $159.3 million but failed to beat the Zacks Consensus Estimate of $163.5 million. The year-over-year increase in revenues was mainly driven by Jakafi sales.
The Quarter in Detail
Total revenues comprised net product revenues, product royalty revenues, contract revenues and others. Incyte recorded net product revenues of $115.3 million in the first quarter, up 65.6% year over year thanks to Jakafi sales.
We remind investors that Incyte has a collaborative agreement with Novartis NVS for the commercialization of Jakavi in ex-U.S. markets.
During the reported quarter, Incyte received product royalty revenues of $15.7 million from Novartis, compared with $9.8 million a year ago. Contract revenues were up 176.2% to $28.2 million. The increase in contract revenues was primarily due to an increase in milestone payments earned from Novartis.
We note that Jakafi is approved in the U.S. for the treatment of patients suffering from intermediate or high-risk myelofibrosis (MF), including primary MF, post-polycythemia vera MF and post-essential thrombocythemia MF. Last December, the FDA approved Jakafi for the treatment of patients with polycythemia vera (PV) who have had an inadequate response or are intolerant to hydroxyurea. The drug was approved in the EU as well for the PV indication.
R&D expenses increased 56.6% to $118.4 million from the year-ago quarter mainly due to increased pipeline investment. SG&A expenses were $44.9 million, up 21.4% from the year-ago quarter. This was due to higher commercialization expenses related to Jakafi including the launch of Jakafi for the PV indication.
Pipeline Update
Incyte is also evaluating Jakafi for multiple types of cancer including metastatic pancreatic cancer, colorectal, breast and non-small cell lung cancer. Data from the two phase III studies (JANUS 1 and JANUS 2) on Jakafi are expected in 2016.
During the first quarter, Incyte and Eli Lilly LLY reported encouraging results from the phase III RA-BUILD study on baricitinib (rheumatoid arthritis). Additional results from two other phase III studies are expected this year. Incyte is collaborating with Eli Lilly for baricitinib.
Meanwhile, Incyte has several mid-stage candidates in its pipeline.
Our Take
We are pleased with the strong Jakafi sales during the first quarter. Successful commercialization and label expansion of Jakafi should drive growth. We expect investor focus to remain on Jakafi’s performance in the coming quarters.
Incyte currently carries a Zacks Rank #2 (Buy). Another better-ranked stock in the health care sector is Biogen Inc. BIIB carrying a Zacks Rank #1 (Strong Buy).
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