The stock price of Incyte, a biopharmaceutical company, has seen a significant decline, trading at $58 per share, 43% below its peak level of $100 in January 2021. Despite a brief rise in early June 2022, INCY stock is now 24% below that level, compared to a 38% gain for the S&P 500 during the same period. The recent performance of INCY stock has been impacted by concerns about a fall in sales after its top-selling drug, Jakafi, loses market exclusivity in 2028.
Looking at a longer-term perspective, INCY stock has faced a decline of 30% from levels of $85 in early January 2021 to around $60 currently, underperforming the S&P 500 over the past three years. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, while INCY stock returned -16% in 2021, 9% in 2022, and -22% in 2023. Beating the S&P 500 consistently has been a challenge for individual stocks in recent years, even for heavyweight companies in the health care sector and tech giants.
Despite the challenging market conditions, the Trefis High Quality Portfolio has outperformed the S&P 500 each year over the same period, providing better returns with less risk. Could INCY face a similar situation in the future and underperform the S&P 500, or will it see a recovery? From a valuation perspective, INCY stock looks undervalued, trading at 3.3x revenues compared to a 4.9x average over the last three years.
The timeline of the 2022 inflation shock shows a peak at 9% in June, the highest level in 40 years, leading to market declines and aggressive interest rate hikes by the Federal Reserve. In contrast, during the 2007-08 financial crisis, INCY stock declined by 77% from its peak to bottom out, before recovering sharply. Incyte’s fundamentals have shown growth in revenue and sales of its key drugs, with a strong cash balance and minimal debt to weather the ongoing inflation shock.
With the Fed’s efforts to control inflation rates and fears of a recession, INCY stock has the potential for gains once market sentiments improve. The company’s top-line is expected to benefit from market share gains for its drugs, despite concerns about the patent cliff in 2028. Incyte’s strong cash position can be used for inorganic growth to counter the decline in Jakafi sales post-2028. With organic growth opportunities and a portfolio of promising products, INCY stock may see higher levels in the future. Investors can find valuable comparisons with Incyte’s peers across industries for a more comprehensive analysis.
