Incyte Earnings: Jakafi Provides Steady Growth as Opzelura Launch Shows Promise

We’re maintaining our $88 fair value estimate for Incyte INCY following first-quarter results that were relatively in line with our expectations, despite sales for both hematology drug Jakafi (up 7% year over year to $580 million in the U.S.) and launching topical immunology drug Opzelura ($57 million) that were slightly lower than we had forecast. First-quarter sales are typically weaker as co-pay assistance from Incyte counters the unmet deductibles in the new insurance plan year, although this quarter was also hit by lower Jakafi wholesaler inventories as well as rapidly increasing Opzelura sales in the lower-priced Medicaid channel. We think fundamental demand for both products looks strong, and we continue to see strong peak sales for both Opzelura ($2 billion) and U.S. Jakafi ($3 billion in 2027). We think shares look slightly undervalued at recent prices, as we’re bullish on the firm’s potential to expand further into immunology with Opzelura and pipeline drug povorcitinib. We’re more cautious on the potential for Incyte to refresh its hematology franchise, particularly given the recent failure of combination trials of Jakafi and parsaclisib, delays in the approval of a once-daily Jakafi to be used in future combination regimens, and the competitive landscape for lymphoma drug Monjuvi. In addition, the upcoming potential launch this year of GSK’s competing myelofibrosis drug momelotinib could slightly pressure Jakafi sales. However, we’re closely watching updates for ALK2 and BET inhibitor combination regimens expected later this year to get a sense of their potential to help revitalize Incyte’s hematology arm heading into the late 2020s. We think the firm’s Jakafi franchise as well as new launches like Opzelura secure Incyte a narrow moat. Due to Incyte’s steady Jakafi sales growth and the firm’s recent diversification into immunology as Opzelura gains traction in atopic dermatitis and vitiligo, we’re lowering our Uncertainty Rating from High to Medium.