What: Shares of Incyte (NASDAQ:INCY), a biotechnology company focused on the development of therapies to treat cancer, soared 17% in May based, according to data from S&P Global Market Intelligence. In total, there appear to be four major catalysts that lifted Incyte's share price last month.

So what: Arguably the best news all month was Incyte's first-quarter earnings report. Although Incyte wound up falling short of Wall Street's profit projections of $0.17 per share, delivering only $0.12 per share in adjusted profit, it wound up generating $183 million in net product sales of Jakafi, a JAK inhibitor designed to treat myelofibrosis. More importantly, it boosted its full-year sales forecast for Jakafi to a range of $815 million-$830 million from a prior forecast of $800 million-$815 million.

Image source: Ariad Pharmaceuticals.

Secondly, Incyte announced the purchase of Ariad Pharmaceuticals' (NASDAQ: ARIA) European operations, which consist of the development and commercial rights to blood cancer drug Iclusig, for up to $275 million. The deal netted Ariad $140 million in up-front cash, which it needed to strengthen its balance sheet, while giving Ariad the opportunity to earn tiered royalties of between 32% and 50% in the European Union. Ariad will be eligible for another $135 million depending on development and regulatory milestones for Iclusig in the EU. For Incyte, the deal adds an immediate revenue stream and a future opportunity for label expansion.

Third, we received word mid-month that Incyte would be presenting on a number of clinical development candidates at the American Society of Clinical Oncology's annual meeting in the first week of June and the European Hematology Association's meeting in the second week of June. In total, the press release lists a half-dozen abstracts at ASCO and five at EHA. Presentations often drum up excitement about developing compounds.

Finally, an analyst at investment advisory firm Gabelli, via Barron's, recently implied that with the number of "buyable" biotech stocks dwindling, companies like Incyte could find their downside limited. In other words, Incyte could be a possible buyout target for a larger pharmaceutical company. Chatter like this often has a positive effect on the share price of the perceived target company.

Now what: There was a lot to be excited about for shareholders in May, but while I feel that Incyte made a smart move in purchasing Ariad's European operations, I'm still not excited about Incyte's $16 billion valuation.

Image source: Incyte.

My biggest issue with Incyte has always been that Jakafi is living on borrowed time. JAK inhibitors like Jakafi work to suppress the symptoms associated with myelofibrosis, such as enlarged spleen and anemia, but they do nothing in terms of slowing the progression of the disease. By contrast, Geron (NASDAQ:GERN), with the help of Johnson & Johnson (NYSE:JNJ), is developing imetelstat for myelofibrosis. In early-stage clinical trials, we saw both partial and complete responses in patients, which is something never before witnessed. It's my opinion that if imetelstat shows the same positive results in larger patient studies as it did during phase 1 trials, it'll wind up eating Incyte's revenue stream for lunch (and Johnson & Johnson will look like a genius once again for partnering with Geron).

There are exciting things going on with Incyte's pipeline, but (also in my opinion) with the exception of baricitinib for rheumatoid arthritis, a crowded indication, they might still be years away from hitting pharmacy shelves. Epacadostat has shown promise as an IDO-1 inhibitor in next-generation cancer immunotherapy, but we really haven't seen what it can do in a larger-scale study.

Long story short, Incyte looks to be a risky play at these heights, and I suggest investors look elsewhere for better value in the biotech space.