INCY Incyte
Diversifying phlama with cash, pipeline, and margins trading below fair value.
The story
Incyte has evolved from a one-trick Jakafi pony into a diversified pharma with Opzelura gaining traction and a deep pipeline (povorcitinib, CDK2, CAR-T). TTM revenue hit $5.8B with operating margins at 34%, and the $3.1B cash war chest funds R&D without leverage. The core question remains whether pipeline maturation can offset Jakafi's eventual erosion, but recent execution and margin expansion suggest the franchise is broadening.
Previous drivers are largely confirmed: TTM margin of 33.8% validates the 31% target as a conservative convergence below peak, and sales-to-capital nudged from 1.1 to 1.13 to match the actual 1.13 observed. Y1 growth stays at 11% as Opzelura and pipeline contributions offset Jakafi maturation. Beta held at 1.05 (slightly above industry anchor reflecting pipeline risk). The model baseline at $188.88 likely uses a higher margin or growth assumption; my 31% target and 2% terminal growth produce a more conservative intrinsic.
Value drivers
| Revenue growth (Y1) | 11.0% |
| Terminal growth | 2.0% |
| Forecast horizon | 8y |
| Target operating margin | 31.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.13 |
| Beta | 1.05 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.5% |
| Terminal WACC | 9.3% |
Valuation bridge
| PV of explicit FCFF | 8.34B |
| PV of terminal value | 13.48B |
| Equity value | 24.42B |
| ÷ shares → per share | $120.46 |
News
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Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 6.46B | 11.0% | 33.3% | 1.66B | 566.50M | 1.10B | 999.87M |
| 2 | 7.09B | 9.7% | 32.7% | 1.79B | 555.32M | 1.24B | 1.03B |
| 3 | 7.68B | 8.4% | 32.1% | 1.91B | 528.63M | 1.38B | 1.05B |
| 4 | 8.23B | 7.1% | 31.6% | 2.01B | 485.75M | 1.52B | 1.06B |
| 5 | 8.72B | 5.9% | 31.0% | 2.09B | 426.76M | 1.66B | 1.05B |
| 6 | 9.11B | 4.6% | 31.0% | 2.18B | 352.59M | 1.83B | 1.06B |
| 7 | 9.41B | 3.3% | 31.0% | 2.26B | 265.01M | 1.99B | 1.05B |
| 8 | 9.60B | 2.0% | 31.0% | 2.30B | 166.61M | 2.13B | 1.03B |
Key risks
- Jakafi revenue erosion as JAK2 competitors and generics approach
- Pipeline failure in late-stage trials (povorcitinib, CDK2)
- Margin reversion if R&D spend scales faster than revenue
Catalysts
- Povorcitinib Phase 3 readouts and regulatory submissions
- Opzelura label expansion into additional dermatology indications
- Strategic deployment of $3.1B cash for accretive acquisitions or partnerships