Incyte Corporation Update

INCY : NASDAQ : US$51.99
Target: US$65.00

Incyte is a drug development company focused on discovering
and developing novel, small-molecule drugs for the treatment of
cancer and inflammatory diseases. INCY’s lead product is Jakafi,
a JAK1/2 inhibitor partnered with NVS, which is approved for the
treatment of myelofibrosis in the U.S., and is being developed for
the treatment polycythemia vera (in P3) and other indications.
Incyte is headquartered in Wilmington, DE.

Life Sciences — Biotechnology
We like INCY for 2014 given expectations for positive data, specifically P3
Jakafi for polycythemia vera (PV) in mid-H1 and two data sets at ASCO (May
30 – Jun 4, Chicago): P2 Jakafi in pancreatic cancer (biomarker-defined subset
may be announced earlier) and P1/2 IDO inhibitor (upside). Per physician
diligence, we also have increased confidence in the Jakafi revenue trajectory
in myelofibrosis (MF), with the key takeaways: 1) Jakafi MF data at ASH was
an incremental positive (long-term COMFORT-I maintained efficacy; no safety
signal emerged); 2) Jakafi competitive position in MF remains strong (SNY is
dropping fedratinib; GERN’s imetelstat data is early and needs to be repeated
in multi-center trials with larger patient populations). Physicians are also
optimistic on P3 Jakafi data in PV, for which they expect a nice commercial
outlook in patients not well-controlled on existing therapies and with more
severe symptoms. We expect three positive data catalysts (PV, pancreatic
cancer, IDO) to drive shares higher in 2014 supported by continued Jakafi
sales execution in MF and P3 baricitinib data in rheumatoid arthritis
(partnered with LLY) as a key 2015 catalyst. We are raising our PT to $65
from $55.
 Jakafi in PV represents a nice opportunity: Physicians we spoke to expect
the P3 RESPONSE trial to meet the primary endpoint of improvements in
phlebotomy eligibility and spleen volume vs. BAT (mid-H1), with the P3
RELIEF trial (symptomatic improvements; data expected in H2) also
demonstrating superiority vs. placebo. Although many patients are
satisfactorily treated with HU/aspirin/phlebotomy, physicians anticipate
25% -40% of PV patients will be eligible for Jakafi, providing upside to our
estimate (we model for peak WW sales of $711M in 2019 on 25% eligibility).
 Jakafi in pancreatic cancer and IDOs lead the pipeline: We expect shares to
trade higher into ASCO on expectations for two key data sets: P2 Jakafi in
metastatic pancreatic cancer, with the focus on the biomarker-defined
subset (may be disclosed prior to ASCO); and P1/2 ‘360 (IDO) + Yervoy in
melanoma, where we expect data on response rate and duration of therapy


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