Incyte Corporation’s (INCY) fourth quarter 2010 earnings of 24 cents per share surpassed the Zacks Consensus Estimate by 5 cents. The company suffered a loss of approximately 45 cents (excluding special items) in the year-ago quarter. Earnings in the final quarter of 2010 were helped by a surge in revenues and a fall in total cost and expenses.
Total revenues in the reported quarter jumped to $85.9 million from $6.9 million in the year-ago quarter. Revenues were boosted by the amortization of the upfront payments received by Incyte from its agreements with Novartis (NVS) and Eli Lilly (LLY). Moreover, the $69 million received as milestone payments under the above agreements also contributed to the huge rise in revenues. Revenues in the final quarter of 2010 were in line with the Zacks Consensus Estimate.
Total cost and expenses in the reported quarter slipped 9.4% to $43.6 million. Both research and development (R&D) expenses (down 4.4%) and selling, general and administrative (SG&A) expenses (down 2.2%) were on the downswing during the quarter. The fall was primarily attributable to the legal and transaction expenses incurred in the year ago quarter pertaining to the deals with Novartis and Eli Lilly.
For the full year 2010, Incyte suffered an adjusted loss of 23 cents as opposed to a loss of $1.67 suffered in 2009. Revenues in 2010 jumped to $169.9 million from $9.3 million reported in 2009. The Zacks Consensus Estimate for 2010 hinted at a loss of 31 cents on revenues of $170 million.
2011 Outlook
Apart from disclosing financial results, Incyte also provided guidance for 2011. The company expects revenues of $67 million in 2011 excluding the receipt of milestone payments. The Zacks Consensus Estimate is $84 million for 2011.
R&D expenses for the year are expected in the range of $175 million – $185 million as against $123 million incurred in 2010. The increase is attributable to Incyte’s efforts to develop its pipeline.
SG&A expenses are expected in the range of $50 million-$55 million in 2011 as opposed to $32.3 million incurred in 2010. The increase is attributable to the preparations related to the US launch of INCB18424 for treating patients suffering from myelofibrosis (MF). Incyte expects to submit a new drug application to the US Food and Drug Administration (FDA) for the MF candidate in the first half of 2011.
Incyte also projects 2011 cash usage in the range of $185 million – $200 million as against $154 million used in 2010. The increase is attributable to the company’s endeavor to develop its pipeline and prepare for the launch of INCB18424 during the course of 2011.
Our Recommendation
Incyte currently carries a Zacks #4 Rank (Sell rating) in the short run primarily due to the absence of marketed products, early/mid stage pipeline (majority of the candidates are several years away from hitting the market ) and huge debt burden.
However, we are impressed by the company’s efforts to develop its diversified pipeline. Moreover, we believe that Incyte’s association with established players such as Eli Lilly and Novartis will bolster the company with much needed financial strength as well as rich experience. The stable outlook prompts our long-term Neutral stance on the stock.
INCYTE CORP (INCY): Free Stock Analysis Report
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