What Are Incyte’s Revenue Streams?
What's Driving Incyte’s Valuation?
Incyte’s revenues
As discussed earlier, Incyte (INCY) reported revenues of $753.8 million in its 2015 results. This converts to a 47% revenue increase in 2015 as compared to $511.5 million in 2014. With increasing demand for Jakavi, as it’s the only FDA-approved product for the treatment of certain types of blood cancer, analysts estimate that the company’s revenues will increase by over 33% to $1.0 billion in 2016. The below graph shows Incyte’s revenue stream over the last five years. Incyte’s business revenues are reported under three segments.
Product revenues
To date, the only product approved for Incyte is Jakafi. Jakafi’s international non-proprietary name is ruxolitinib, and it’s the only FDA-approved drug for the treatment of myelofibrosis and polycythemia vera, rare types of blood cancer. Incyte Pharmaceuticals sells Jakafi in US markets.
Jakafi revenues increased to $601 million in 2015 as compared to $355 million in 2014 due to the increase in volume as well as the price of Jakafi in the US. Jakafi revenues are further estimated to increase to $818 million in 2016 and cross $1 billion in revenues for 2017 in US markets.
Royalty revenues
Incyte has collaborated with Novartis (NVS) for development and commercialization of Jakafi outside the US markets for all hematologic and oncologic indications. Novartis sells this drug under the name Jakavi outside the US markets.
Royalty revenues for 2015 were $75 million as compared to $49 million for 2014. The increase was mainly due to increased demand for Jakavi in international markets.
Contract revenues
The company has collaborative research and license agreements with Novartis and Eli Lilly (LLY). The revenues from these agreements are reported under the contract revenues. For 2015, the contract revenues decreased to $78 million, as compared to $105 million for 2014. The contract revenues are related to upfront fees towards the achievement of milestones as per the Eli Lilly agreement.
Investors can consider ETFs like the iShares Nasdaq Biotech ETF (IBB), which holds ~2.8% of its total assets in Incyte, or the SPDR S&P Biotech ETF (XBI), which holds ~1.0% of its total assets in Incyte, in order to divest company-specific risk. Apart from Incyte, IBB also holds 8.2% of its total assets in Amgen (AMGN) and 7.8% in Biogen (BIIB).
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