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Recently, Incyte Corporation (NASDAQ:INCY) announced that its lead candidate INCB18424 (ruxolitinib) fared well in a late-stage study (COMFORT-II). The study (n=219) evaluated the safety and efficacy of INCB18424 (also known as INC424) in patients suffering from myelofibrosis (MF), a rare bone marrow disorder.

Data from the randomized, open-label European study, conducted by partner Novartis (NYSE:NVS), revealed that there was significant reduction in spleen size in MF patients treated with INCB18424 compared to those treated with the best available therapy for MF. Novartis intends to present complete data from the study at an upcoming medical conference.

We remind investors that Incyte inked a deal with Novartis in 2009, for two of its pipeline candidates – INCB18424 and INCB28060. Under the terms of the deal, Incyte enjoys exclusive rights for the development and potential commercialization of INCB18424 in the US with Novartis having the same responsibility outside the US.

The US portion of the study, COMFORT-I, was completed late last year. In December 2010, Incyte announced positive top-line data from the late-stage study in MF patients. Incyte expects to seek approval from the US Food and Drug Administration (FDA) in the second quarter of 2011 based on data from both (COMFORT-I and COMFORT-II) studies. European approval is expected to be sought soon after. We believe the successful commercialization of the MF drug will be a path-breaking achievement for the company.

Our Take

Even though we believe that the diversified pipeline at Incyte has huge potential, the early to mid stage status of the pipeline concerns us. Apart from INCB18424, most of the candidates are several years away from hitting the market. The debt burden at Incyte is another area of concern. These concerns are reflected by the Zacks #4 Rank (‘Sell’ rating) carried by the stock in the short run.

We prefer to remain on the sidelines till further visibility is obtained on the pipeline development at Incyte and have a ‘Neutral’ stance on the stock in the long-run.