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Incyte Guidance on Jakafi Sends Stock High

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Incyte updates Jakafi’s revenue

On May 23, 2016, Incyte (INCY) was the biggest gainer among the large-cap stocks of the iShares Nasdaq Biotechnology ETF (IBB) with a gain of 3.9%. In its presentation at the UBS Global Healthcare Conference, Incyte management told investors that it now expects the revenue from Jakafi sales for 2016 to be in the range of $815 million–$830 million, as compared to the earlier guidance of $800 million to $815 million.

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It also provided an update on Baricitinib, a molecule discovered by the Incyte research team and its partner, Eli Lilly (LLY), for development in non-oncology indications. It mentioned that it had met the primary endpoint and successfully completed four Phase 3 trials. Incyte has submitted the New Drug Application (NDA) in US and Marketing Authorization Application (MAA) in Europe. If the drug is approved by the authorities, it will bring additional revenue to Incyte. Baricitinib is developed for the treatment of early rheumatoid arthritis (RA), which Incyte claims is better than Abbvie’s (ABBV) Humira.

YTD (year-to-date), Incyte has fallen by ~25.6%, whereas IBB has declined by 21.4%. SPY is up by 0.7%.

Incyte closed at $80.68 and was trading above the 20-day moving average price of $73.5. On May 23, 2016, the stock was trading at a 2016 forward PE (price-to-earnings) multiple of ~245.2x, the highest among IBB’s large-caps.

Book value

Incyte has a book value of $1.22 per share. At its current price, the stock is trading at a price-to-book value of ~66.4x. Incyte has a weight of ~2.9% in IBB’s portfolio. The analyst consensus estimate for Incyte’s 12-month target price is $91.50. Among 18 analysts, 16 analysts have issued a “buy” recommendation on the stock, while only two analysts have recommended a “hold.” No analyst has recommended a “sell.”

IBB large-cap underperformer

BioMarin Pharmaceuticals (BMRN) was the worst-performing stock in the iShares Nasdaq Biotechnology ETF and declined by 1.1% on profit booking, with trading volumes of 831,000 shares. This compares to its three-month average trading volume of ~1.6 million shares per day.

BioMarin closed at $85.51 on May 23 and was trading above its 20-day moving average price of $84.9. YTD, however, BioMarin has declined by 18.4%. BioMarin has a book value of $14.12 per share. At its current price, the stock is trading at a price-to-book value of ~6.1x. BioMarin has a weight of ~2.8% in IBB’s portfolio.

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