Incyte Corporation (INCY) and Eli Lilly‘s rheumatoid arthritis drug has moved into Phase III trials, and could move into Phase III trials for psoriasis as well, opening up multibillion-dollar opportunities that are not factored into Incyte‘s current valuation, says Ian Somaiya, Managing Director and Senior Research Analyst at Piper Jaffray & Co.
“What’s absent from the valuation is the opportunity for another drug they have called baricitinib, which is partnered with Eli Lilly (LLY) and which has moved into Phase III trials for rheumatoid arthritis, and which could move into Phase III trials for psoriasis. And those are all multibillion-dollar opportunities, with Incyte collecting an 18% to roughly 28% royalty on sales, so very high profitability, one that approaches a profit-profit split, and that’s not factored into any of the valuations,” Somaiya said.
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INCY and LLY‘s new drug is a JAK1/2 inhibitor, so clinical trial and regulatory risks are both low, creating a very large market opportunity for both companies in the rheumatoid arthritis space over the next decade, Somaiya says.
“The market opportunity, If you more think of a biologics use in RA over the next seven to 10 years, it could be well north of $20 billion. So even getting some segment of that market is very meaningful for Lilly and also for Incyte, and that’s not being factored into valuation,” Somaiya said.
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