The stock price of Incyte, a biopharmaceutical company, has been on a downward trend, currently trading at $58 per share, 43% below its peak level of $100 in January 2021. This decline has been attributed to concerns regarding a significant fall in sales once its top-selling drug, Jakafi, loses market exclusivity in 2028. Despite this, there was an 8% increase in INCY stock after the company’s board approved a $2 billion share buyback plan, instilling some confidence in investors.
Over a longer period, INCY stock has seen a decline of 30% from $85 in early 2021 to $60 currently, compared to a 40% increase in the S&P 500 over the same timeframe. The stock’s performance has been volatile, with returns of -16% in 2021, 9% in 2022, and -22% in 2023. In comparison, the S&P 500 had returns of 27%, -19%, and 24% during the same years, suggesting that INCY underperformed the index in 2021 and 2023.
Given the challenging macroeconomic environment with high oil prices and elevated interest rates, there are concerns about INCY underperforming the S&P 500 in the next 12 months. However, from a valuation perspective, INCY stock appears to have potential for growth, trading at 3.3x revenues compared to a 4.9x average over the last three years. Incyte’s fundamentals have shown growth in revenue from $2.7 billion in 2020 to $3.7 billion in 2023, driven by strong sales of Jakafi and Opzelura.
During the 2007/2008 financial crisis, INCY stock declined by 77% from $10 in August 2008 to $2 in March 2009 before rebounding to $9 in early 2010. In contrast, the S&P 500 saw a 51% decrease and a subsequent 48% rally during the same period. Incyte has managed to maintain a strong financial position, with decreasing debt and increasing cash reserves, totaling $3.7 billion currently.
With the Federal Reserve’s efforts to control inflation easing market concerns, INCY stock has the potential for further gains once fears of a recession subside. While the company faces challenges with the upcoming patent cliff for Jakafi in 2028, its strong cash position can support inorganic growth strategies. Additionally, Incyte has several products in the pipeline that could drive future growth.
In conclusion, Incyte’s performance in the current market conditions and its ability to navigate challenges such as the patent cliff for Jakafi will impact its future stock performance. With a strong financial position and growth potential in its product portfolio, INCY stock may have room for growth in the coming months. It will be important to monitor how Incyte’s peers fare and how the overall market trends develop to assess its performance accurately.
