Credit Suisse has moved Incyte Corporation's (NASDAQ:INCY) baricitinib’s US launch to 2019 and lowered the probability of success on US revenues to 80% which lowers Credit Suisse's DCF valuation by $7/share. Credit Suisse has updated its model to reflect baricitinib's approval delay. Given the uncertainties surrounding the exact nature of FDA's requirements, the firm has pushed out its US launch forecast by ~2yrs to 2019 and decreased its probability of success (PoS) on US sales to 80% (vs. 100% previously).
Credit Suisse also notes that ~$130M of the $160M in baricitinib-related milestones could be at risk ($100M for US approval, ~$10M for Japanese approval, ~$30M for start of an additional ph3 program), though the firm continues to model their receipt. Credit Suisse has made its best guess at the Japan and additional Ph3 milestone though this has not been confirmed by the company. The additional ~$30M that INCY is slated to receive for the start of a ph3 psoriatic arthritis trial may not be at risk given LLY has guided to its start in 2017 per the press release. Credit Suisse has pushed back the $100M milestone INCY was slated to receive in Q2:17 from LLY upon US approval to 2019. These changes result in a ($7) decrease to the firm's TP ($167 vs. $174 previously). Credit Suisse's new 2020 US probability-adjusted sales are $121M vs. $606M previously. The firm estimates global 2020 probability-adjusted sales for baricitinib to be $356M vs. $841M previously.
As a result of the firm lowering near-term baricitinib sales, 2017, 2018, and 2019 EPS are at $1.23, $1.00, and $2.27 vs $1.89, $1.51, and $2.44 previously. Key risks to the firm's Outperform rating and $167 target price include clinical, regulatory or commercial setbacks.