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Understanding Incyte’s Revenue Stream for 2016

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Feb. 28 2017, Updated 2:35 p.m. ET

Incyte’s 2016 revenues

As we saw in the previous part of this series, Incyte (INCY) reported revenues of $1.1 billion for 2016. That converts to a rise of 47.0% in 2016 compared to $753.7 million in 2015. The rise comes with increasing demand for Jakafi, Incyte’s only product for the treatment of rare types of blood cancer that’s approved by the FDA (U.S. Food & Drug Administration).

The above graph shows Incyte’s revenue stream for the past eight quarters.

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Revenue performance

Incyte’s business revenues are reported under three segments: product, royalty, and contract. Let’s take a look at changes in these segments on a year-over-year basis.

Product revenues

To date, Incyte’s product portfolio includes three products: Jakafi, Iclusig, and the recently approved Olumiant. Jakafi (ruxolitinib) is the only drug for the treatment of myelofibrosis and polycythemia vera, rare types of blood cancer, that’s approved by the FDA. Incyte sells Jakafi in US markets.

Jakafi revenues rose to $852.8 million in 2016 from $601.0 million in 2015. The rise was due to an increase in volume as well as price for the drug in the United States. Jakafi’s revenues are estimated to cross $1.0 billion in 2017 in the United States.

Iclusig (ponatinib) reported revenues of $29.6 million for 2016. Incyte acquired rights for Iclusig from Ariad Pharmaceuticals (ARIA) in June 2016.

Olumiant (baricitinib) was approved by the European Commission on February 13, 2017. Incyte will receive a milestone payment of $65.0 million from Eli Lilly (LLY) for this approval. Incyte will report the payment in its 1Q17 revenues.

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Royalty revenues

Incyte has collaborated with Novartis (NVS) for the development and commercialization of Jakafi outside the United States for all hematologic and oncologic indications. Novartis sells the drug under the name Jakavi.

Royalty revenues were $110.7 million for 2016 compared to $74.8 million for 2015. The rise was mainly due to an increased demand for Jakavi in international markets.

Contract revenues

Incyte has collaborative research and license agreements with Novartis and Eli Lilly (LLY). Revenues from these agreements are reported under contract revenues, which rose to $112.5 million in 2016 from $77.9 million in 2015. Contract revenues are related to milestone payments.

To divest the risk, you can consider ETFs such as the iShares US Healthcare (IYH), which holds 0.70% of its total assets in Incyte.

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