Incyte Corporation’s (INCY) second quarter 2011 loss of $0.41 per share was wider than the Zacks Consensus Estimate by $0.05. The wider loss suffered in the reported quarter was attributable to lower revenues and higher operating expenses. The company earned $0.02 per share in the corresponding period of 2010.
Total revenues in the reported quarter declined to $16.8 million versus $49.8 million recorded a year-ago. The year-ago revenues were boosted by the recognition of $33.0 million as milestone payments received from partners Eli Lilly and Company (LLY) and Pfizer (PFE). Revenues in the second quarter of 2011 fell short of the Zacks Consensus Estimate of $20 million.
Total cost and expenses in the reported quarter climbed 60.0% to $57.9 million. Both R&D expenses (up 59.9%) and SG&A expenses (up 58.4%) were on the upswing during the quarter. Incyte’s efforts to develop its pipeline contributed to the rise in R&D expenses. The jump in SG&A expenses was attributable to the expenses incurred by the company for INCB18424 (also known as INC424).
The candidate is being developed to treat patients suffering from myelofibrosis (MF), a rare bone marrow disorder. Incyte submitted a new drug application (NDA) to the US Food and Drug Administration (FDA) seeking marketing approval for the MF candidate in June 2011.
Approval has been sought on the basis of encouraging data from two late-stage studies – COMFORT (COntrolled MyeloFibrosis Study with ORal JAK Inhibitor Therapy) – I (US trial) and COMFORT-II (European portion of the study).
While Incyte was responsible for the COMFORT-I study, COMFORT-II was conducted by partner Novartis (NVS). Management expects a decision from the FDA regarding INCB18424 by year-end. Novartis is seeking approval of the candidate in the European Union.
2011 Outlook
Incyte maintained its outlook for R&D and SG&A expenses. R&D expenses for 2011 are expected in the range of $175 million – $185 million. SG&A expenses are expected in the range of $50 million-$55 million in 2011. Incyte also projects 2011 cash usage in the range of $185 million-$200 million.
Our Recommendation
Currently, we have a Neutral stance on Incyte in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.
