Holding Incyte In My Jubak Picks Portfolio For Mid-Year Catalysts

When I sold Acadia Pharmaceuticals (ACAD) out of my Jubak Picks portfolio on March 5, one reason I gave was that the catalysts for this biotech were too far out–results from critical drug trials weren’t likely to be reported for two years.

The reason to hold onto shares of Incyte (INCY), however, is how close catalysts are. In the first half of 2018 the biotech will report Phase III results for its ECHO-301 trial of its IDO immuno-onology drug in combination with Merck’s (MRK) market leading Keytruda in the $30 billion market for PDL-1 cancer treatments. AND the company will report a decision from the U.S. Food & Drug Administration on the re-submission of baricitinib in rheumatoid arthritis, also around the middle of 2018. The company has run further trials with partner Eli Lilly (LLY) in response to an April 2017 request from the FDA for longer-term follow up data as well as data from other ongoing trials in different indications. That FDA decision, which required additional trials before resubmission in January 2018, has been a key reason for weakness in Incyte shares that stretches back into 2017.

There’s good reason to think that both announcements will be positive this year. The first news is likely to be from the ECHO-301 trials in combination with Keytruda. Data reported so far show high response rates, and durations of response that exceed 100 weeks in some patients. Positive results from the Nektar Therapeutics (NKTR)/Bristol-Myers Squibb (BMS) partnership on therapies that use Bristol-Myers’ Optivo has increased pressure on Merck’s Keytruda and positive results from the ECHO-301 trials could well result in an extremely lucrative deal with Merck for Incyte.

I’ve currently got a $145 target price on Incyte, which closed at $91.09 on March 5. (The stock fell 2.84% to $88.50 in after hours trading on March 5 as stocks in general sold off on the news that Gary Cohn, chief economic advisor to President Trump, had resigned over the decision to impose tariffs on imported steel and aluminum. S&P 500 futures were down 1% in after hours trading.)