After Soaring to $150, Can Incyte Stir Up More Upside?

Back in November, I thought shares of Incyte (INCY) could hit $100 a share. I was wrong. I was 50 points too low. The stock is up nearly 50% year to date and 120% in the last 12 months. At Tuesday's close of $150.96, the stock is just pennies off its 52-week high.

Incyte has been on a roll. Jakafi, the company's therapy for the treatment of polycythemia vera and myelofibrosis, is expected to produce just over $1 billion in revenue this year and the biotech could get up to an additional $300 million in milestone payments from research partners.

Incyte also markets Iclusig, an oral treatment for chronic myeloid leukemia that was developed by Ariad Pharmaceuticals (ARIA) . The company sells Iclusig in Europe. The drug could produce revenue of $60 million-$65 million this year.

Primary myelofibrosis (MF) is a chronic blood cancer in which excessive scar tissue forms in the bone marrow and impairs its ability to produce normal blood cells.

Polycythemia vera (PV) is a rare type of blood cancer that starts in the bone marrow. This disorder causes the bone marrow to produce too many red blood cells. This causes the blood to thicken and blood clots to form.

Jakafi is known as a JAK2 inhibitor. It targets the JAK2 gene mutations to prevent clotting. Jakafi is often given to patients who cannot tolerate Hydroxyurea. Hydroxyurea prevents bone marrow from creating new cells without stopping and is often the first line of defense for patients with PV.

In mid-February, the company reported fourth quarter and full-year 2016 results. Full year sales of Jakafi were $853 million, up 42%. New patients and the total number of patients on therapy drove Jakafi's growth.

Incyte has a robust drug development pipeline and investors are waiting for more data from several clinical trials. Specifically, investors are awaiting approval for baricitinib in patients with rheumatoid arthritis. FDA approval could come as early as April. Itacitinib, for steroid-naive acute graft-versus-host disease, could enter a pivotal clinical trial later this year. Phase 2 data for baricitinib in atopic dermatitis and systemic lupus erythematous is expected in early 2018.

And the company has partnered with Merck (MRK) to test epacadostat in combination with Keytruda in four pivotal clinical trials this year. Data could be released as early as June at the American Society of Clinical Oncology meeting.

Two things are driving the stock's surge. First, On Feb. 28, Incyte replaced Spectra Energy (SE) in the S&P 500. Index funds need to add INCY to their portfolios and that helped push the stock into overdrive. Second, rumors that Gilead Sciences GILD might be interested in buying the company have surfaced.

Incyte's pipeline, drug trials and future prospects are well known, so I would wait for a correction to add to my position.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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