Budding biotech company Incyte (INCY -0.39%), which specializes in developing novel JAK inhibitors, released solid second-quarter earnings on Wednesday. The company grew revenue and added to its cash position thanks to strong demand for Jakafi -- an oral JAK1 and JAK2 inhibitor developed with Novartis (NVS -1.28%) that's approved to treat myelofibrosis. Management even raised its revenue guidance for the treatment from $210 million-$225 million to $220 million-$230 million. It is great to see success for Incyte's marketed therapy, but most of the potential for shareholders lies in the pipeline. Are investors any closer to gauging the success of mid- to late-stage trials?
Financially speaking...
First things first. Incyte notched some impressive growth last quarter compared to the prior-year period.
|
2Q13 |
2Q12 |
% Growth | |
|---|---|---|---|
|
Jakafi net sales |
$54.1 million |
$29.7 million |
82.2% |
|
Total revenue |
$101.7 million |
$86.5 million |
17.6% |
|
International royalties |
$5.8 million |
$0 |
-- |
|
Net income |
($0.02) |
$0.03 |
-- |
Source: Company release.
The only noticeable blemish above is net income, which swung $6.6 million from last year. In my opinion, it is a marginal data point for a company that is still largely in development mode. For instance, consider that a large chunk of Incyte's revenue came from research collaborations with Novartis. A total of $41.7 million exchanged hands from contract revenues in the second quarter this year -- compared to $56.7 million last year. A profitable future surely awaits investors should the company be successful in expanding indications for Jakafi and gaining approval for compounds in the pipeline.
Clinical updates
It is still a bit early, but Incyte has one heck of a pipeline under development. In a few years the company could have nearly 10 phase 3 trials ongoing! Better yet, it probably wouldn't take many approvals to boost the company's valuation from a relatively lowly $3.3 billion today. Here's how the pipeline stacks up as of Aug. 1.
Source: Incyte website.
With a pipeline like that, it should be no surprise that Incyte spent most of its conference call giving clinical trial updates. You can get the full list in the company's press release, but here are some important highlights:
Jakafi
- The phase 3 COMFORT-II trial demonstrated improved overall survival for myelofibrosis patients taking Jakafi compared to the next best treatment option.
- The phase 3 RESPONSE trial evaluating the drug in patients with polycythemia vera (PV) is expecting data in early 2014 and a potential new drug application submission by the first half of 2014.
- Top-line results for a phase 2 trial evaluating the drug in patients with pancreatic cancer are expected in the current quarter of this year.
Baricitinib (JAK1 and JAK2)
- In development with Eli Lilly (LLY -0.54%) for various autoimmune indications, the drug is currently being evaluated in a phase 3 trial for rheumatoid arthritis. If all goes well, it will be the second product launched by Incyte and should go a long way is cementing the company's status in the JAK inhibitor space.
- Currently, Pfizer (PFE -0.85%) wields the only JAK inhibitor (Xeljanz) approved for rheumatoid arthritis. Baricitinib is a good bet to shake up the market in the next few years and is also being evaluated in two additional phase 2 trials for psoriasis and diabetic nephropathy.
The ongoing trials for Jakafi are crucial for maximizing the drug's potential. Expanding into PV and pancreatic cancer would give Incyte and Novartis a powerful next-generation multi-cancer treatment option for patients and shareholders. Additionally, investors cannot forget about baricitinib, which has massive potential for the company in autoimmune diseases. Earlier-stage trials are ongoing that could eventually have big potential, but realistically speaking they shouldn't be movers for several years.
Foolish bottom line
Investors should get a boost from the great second-quarter results announced on Wednesday, but the majority of the potential lies in the pipeline. The good news is that all trials are progressing as planned and making early headway. The most immediate movers for Incyte stock will surely be the phase 3 trial data release later this quarter and additional approvals for Jakafi. Next up will be results from baricitinib -- an important potential second product for the company. Given the impressive future potential, I will certainly look to add shares to my personal portfolio in the next year. Will you be joining me?
