Incyte Earnings: Solid Performance From Key Drugs Jakafi and Opzelura Supports Our Fair Value

We’re maintaining our $88 fair value estimate for Incyte INCY following a strong second-quarter performance, particularly for two key drugs in the firm’s portfolio. Incyte reported 25% product revenue growth, with sales of hematology drug Jakafi growing 14% to more than $682 million and the Opzelura launch in atopic dermatitis and vitiligo resulting in sales surpassing $80 million. Management tightened its 2023 Jakafi U.S. sales guidance to the high end of the previous range ($2.58 billion-$2.63 billion); our estimate sits at $2.63 billion. While inventory drove some of the strong Jakafi sales, demand is still growing well, and the launch of GSK’s potentially competing myelofibrosis drug has been delayed probably until the fourth quarter. While Incyte’s regulatory delays with its once-daily version of Jakafi have been disappointing, we expect the firm to still easily launch the drug ahead of the 2028 patent expiration for twice-daily Jakafi. We see more uncertainty around potential single-tablet regimens combining Jakafi with other drugs to improve efficacy, although we think the firm’s ALK2 inhibitor has potential in first-line myelofibrosis, if data continues to improve with dose escalation. We think the shares look slightly undervalued at recent prices. We’re bullish on the firm’s potential to expand further into immunology as Opzelura launches in multiple indications and geographies and pipeline drug povorcitinib advances in trials. We think the Jakafi franchise as well as new launches like Opzelura secures Incyte a narrow economic moat.