What’s in Store for Incyte Corporation (INCY) After “Big Time” Clinical Miss? Reni Benjamin Chimes In

Raymond James' Reni Benjamin may scale back his expectations on INCY, but still bets on 24% in return potential for shares.


Here’s the thing about Incyte Corporation (NASDAQ:INCY); this drug maker “missed big time” with its pivotal Phase III ECHO-301 trial in metastatic melanoma, notes Raymond James analyst Reni Benjamin. INCY’s epacadostat coupled with Merck’s pembrolizumab, or Keytruda failed to achieve the primary endpoint: improving progression-free survival (PFS). In reaction, shares are crashing almost 17% in trading today and Benjamin is lowering his expectations.

As such, the analyst maintains an Outperform rating on INCY stock while slashing the price target from $159 to $85, which nonetheless implies a 24% upside from current levels. (To watch Benjamin’s track record, click here)

True, Benjamin scales back his expectations, going as far as to admit “we were wrong.” The analyst likewise is not expecting overall survival (OS) to fare any better. However, Benjamin stands by his bullish thesis, urging investors to “buy on weakness for long-term returns.”

Keep in mind, argues the analyst, there are still short-term fundamental drivers left in INCY’s back pocket: from the prospective green light of rheumatoid arthritis asset baricitinib in the U.S.; topline data from the REACH1 trial evaluating ruxolitinib in acute GVHD; and opening data from FGFR1/2/3 inhibitor INCB54828 in cholangiocarcinoma. Don’t forget, INCY’s “Jakafi franchise is solid,” writes Benjamin, betting on sales potential to hit $2.5 to $3.0 billion by 20207.

Ultimately, “In our view, this event taints the entire epacadostat franchise and therefore we are removing all revenues associated with melanoma and other indications from our models. While we are disappointed with the results, we believe the failure has created another attractive entry point (similar to when Ruxolitinib failed in solid tumors in early 2016), and advise long-term investors to buy shares at discounted prices. If we are right, shares should recover over the next 12 months as investors refocus on the growing Jakafi franchise (peak sales expected to reach >$2.5 B), the potential for baricitinib in the U.S. (adcom panel on April 23) and EU (approved), as well as the company‚Äôs burgeoning pipeline of I/0 and targeted therapies in development,” Benjamin contends, adding: “Our sense is there were many investors waiting for ECHO-301 to fail to re-establish a long position. Lastly, given the current valuation, we would not be surprised if the M&A thesis becomes more compelling.”

TipRanks reveals the drug maker is one most bulls were betting on when looking at consensus sentiment. Out of 11 analysts polled in the last 3 months, 8 are bullish on INCY stock while 3 remain sidelined. With a return potential of nearly 92%, the stock’s consensus target price stands at $130.43.