8 January 2026 | 5:01AM EST Equity Research Americas Healthcare: Biotechnology: Constructive backdrop for 2026 Following strong performance for the sector exiting 2025 (XBI +35% vs. S&P 500 +16%), driven by the convergence of a number of key factors, notably, broader market dynamics (e.g., macro/AI-trade rotations and rates), easing policy risks (e.g., Most-Favored-Nations (MFN) drug pricing deals), and improving fundamentals (e.g., stable/upward large-cap estimate revisions and SMID catalyst execution), we ...

Core Viewpoint - The technology sector, led by artificial intelligence (AI), is on track for a third consecutive year of over 20% gains, but signs of narrowing leadership and increased volatility are emerging, prompting a shift towards defensive stocks to balance risks in tech holdings [1]. Group 1: Defensive Sectors - Traditional defensive sectors such as blue-chip pharmaceuticals, regulated utilities, and essential consumer goods continue to play a significant role in investment strategies [3]. - Quantitative strategist Steven Cress has identified four high-quality defensive stocks that combine durable cash flows, essential services, and key growth metrics, suitable for investment if the tech sector cools down by 2026 [3]. Group 2: Brookfield Infrastructure (BIP.US) - Brookfield Infrastructure operates a global portfolio of high-quality infrastructure assets, generating predictable cash flows largely insulated from economic cycles, supported by long-term contracts linked to inflation [4]. - The company reported a funds from operations (FFO) of $654 million for Q3 2025, with a per unit FFO of $0.83, reflecting a 9% year-over-year growth [5]. - Brookfield aims to distribute 60-70% of its FFO as dividends, targeting a 5-9% annual dividend growth, making it a foundational holding for defensive allocations in 2026 [5][6]. Group 3: Iberdrola (IBDRY.US) - Iberdrola is one of the largest electric utility companies globally, with a strong focus on renewable energy and regulated pricing structures that provide profit visibility [7]. - The company reported a 16.6% year-over-year increase in net profit and a 4.4% growth in adjusted EBITDA for the first nine months of the year, supported by robust cash flow of $15 billion [7]. - Iberdrola offers a solid dividend yield of 3.40%, making it an attractive option for investors seeking stability and gradual growth [8]. Group 4: Vertex Pharmaceuticals (VRTX.US) - Vertex Pharmaceuticals is a biotechnology company known for its leadership in cystic fibrosis and sickle cell disease, providing strong recurring revenue and industry-leading profit growth [9]. - The company has a low price-to-earnings growth (PEG) ratio of 0.16, indicating an attractive valuation relative to its future earnings growth [9]. - Vertex is diversifying its pipeline beyond cystic fibrosis, which supports its strong forward growth indicators, including a projected EBITDA growth rate of nearly 12% [10]. Group 5: Incyte (INCY.US) - Incyte focuses on oncology and inflammatory diseases, with its flagship product Jakafi being a cornerstone of its revenue and cash flow [11]. - The company has a price-to-earnings ratio of 14.20, significantly lower than the industry median, and a PEG ratio of 0.07, indicating strong growth potential at an attractive valuation [11]. - Incyte's recent approval of a treatment option for certain adult follicular lymphomas further supports its growth outlook [11]. Summary - As the technology sector shows signs of fatigue, investors may find better risk-adjusted opportunities in defensive sectors with inherent growth drivers. Brookfield Infrastructure and Iberdrola provide classic, cash flow-driven utility defensive attributes, while Vertex Pharmaceuticals and Incyte enhance the resilience of the healthcare sector [12].

Core Insights - Incyte (INCY) has received approval from the European Commission (EC) for a label expansion of Minjuvi (tafasitamab) to treat adult patients with relapsed or refractory follicular lymphoma (FL) in combination with Revlimid (lenalidomide) and rituximab [1][9] Approval Details - This marks the second indication for Minjuvi in the EU, as it was previously approved for relapsed or refractory diffuse large B-cell lymphoma (DLBCL) [2] - The latest approval is based on the inMIND study, which demonstrated significantly improved progression-free survival for patients with relapsed or refractory FL when treated with Minjuvi, Revlimid, and rituximab [3][9] - Minjuvi was generally well-tolerated, with a safety profile comparable to the combination of Revlimid and rituximab [4] Market Context - Follicular lymphoma is the most common indolent form of B-cell non-Hodgkin lymphoma, accounting for approximately 30% of NHL cases globally, with a significant unmet need for new treatment options [5] - The approval of Minjuvi introduces the first dual-targeted CD19 and CD20 immunotherapy for eligible FL patients in Europe, showing a meaningful reduction in disease progression risk [6] Company Strategy - Incyte is diversifying its portfolio beyond its lead drug Jakafi, which is a JAK1/JAK2 inhibitor, by gaining new approvals for Minjuvi and other drugs [7][10] - The company has seen strong uptake of recently approved drugs, including Pemazyre, Monjuvi, and Tabrecta, which will further enhance its revenue base [10] Financial Performance - Incyte has performed well in 2025, with shares surging 45.6% over the year, significantly outperforming the industry growth of 16.9% [11] - The company has also entered a global collaboration with Qiagen to develop a diagnostic panel for myeloproliferative neoplasms, which is expected to support its pipeline of investigational treatments [12][13]

Company Overview - Incyte Corporation, based in Wilmington, Delaware, has a market cap of $18.7 billion and focuses on the discovery, development, and commercialization of innovative therapeutics across the U.S., Europe, Canada, and Japan [1] - The company is classified as a "large-cap" stock, with a strong clinical-stage pipeline supported by internal research and strategic collaborations [2] Stock Performance - Incyte's shares are down 12.7% from their 52-week high of $109.28, but have risen 14.8% over the past three months, outperforming the Nasdaq Composite's 4.8% gain during the same period [3] - Year-to-date, INCY stock is up 38.1%, exceeding the Nasdaq's 20.1% increase, and has gained 34.7% over the past 52 weeks compared to the Nasdaq's 16.5% return [4] Financial Results - Incyte reported Q3 2025 results on October 28, with adjusted EPS of $2.26 and total revenue of $1.37 billion, reflecting a 20% year-over-year increase [5] - The company reported strong product performance, with Jakafi revenue at $791 million, Opzelura at $188 million, and early uptake of Niktimvo generating $46 million in sales [5] - Incyte raised its full-year 2025 net product revenue guidance to between $4.23 billion and $4.32 billion, although the stock fell 1.5% on the day of the announcement [5] Analyst Sentiment - Compared to rival Exelixis, which has gained 22.8% year-to-date and 16.2% over the past 52 weeks, Incyte's performance has been stronger [6] - Analysts maintain a consensus rating of "Moderate Buy" for Incyte, with a mean price target of $101, indicating a potential premium of 5.9% to current levels [6]

Core Insights - Incyte (INCY) has received FDA Breakthrough Therapy designation for its investigational monoclonal antibody INCA033989, aimed at treating essential thrombocythemia (ET) patients with Type 1 CALR mutations who are resistant or intolerant to at least one cytoreductive therapy [1][6][10] Group 1: FDA Breakthrough Therapy Designation - The FDA's Breakthrough Therapy designation accelerates the development and review of drugs for serious conditions, granted when early clinical evidence indicates significant improvement over existing treatments [2] - This designation provides enhanced guidance and support from senior FDA managers [2] Group 2: Clinical Data and Efficacy - Early phase I data for INCA033989 showed it was well tolerated and resulted in rapid and sustained normalization of platelet counts, with stronger responses at higher doses [3][6] - The treatment demonstrated robust clinical benefits in CALR-mutant myelofibrosis, both as a standalone therapy and in combination with Jakafi [7][8] Group 3: Patient Population and Disease Context - Essential thrombocythemia (ET) is a chronic myeloproliferative neoplasm characterized by excessive platelet production, with CALR mutations present in about 25% of ET patients [4] - The Type 1 CALR deletion is linked to a higher risk of progression to myelofibrosis among ET patients [4] Group 4: Future Development Plans - Incyte plans to initiate a registrational phase III program for INCA033989 in mid-2026, targeting both Type 1 and non-Type 1 CALR mutation patients [10][12]

Core Focus - The company aims to transition from Jakafi to a hematology/oncology and immunology (hem/onc I&I) company, focusing on building a path to high growth and sustainable revenue post-2029 [2] Business Structure - The business is divided into three main parts: core business, pipeline, and business development, with a strong emphasis on R&D and commercial capabilities [3] Core Business Performance - The core business, which includes Jakafi and a growth portfolio consisting of Opzelura, Niktimvo, Monjuvi, and Zynyz, is performing exceptionally well, and maintaining solid fundamentals is crucial during the transition [4] Pipeline Development - The company has seven priority projects in its pipeline that are expected to create significant long-term value, with a current focus on two hematology projects, 989 and 617F, as well as three solid tumor programs [4]

Incyte FY Conference Summary Company Overview - **Company**: Incyte (NasdaqGS: INCY) - **Focus**: Transitioning from Jakafi to a hematology-oncology (Heme-Onc) and immunology (I&I) company, aiming for high growth and durable revenue post-2029 [2][3] Core Business and Pipeline - **Core Business**: Includes Jakafi and a growth portfolio with Opzelura, Niktimvo, Monjuvi, and Zynyz, performing well [2] - **Pipeline**: Seven priority projects identified, focusing on hematology and solid tumors, with several programs moving into phase three in 2026 [3] - **Hematology**: Focus on 989 and V617F - **Solid Tumors**: Programs in pancreatic, colorectal, and ovarian cancers - **I&I**: Developing povorcitinib for hidradenitis, prurigo nodularis, and vitiligo, with NDA submission planned for Q1 2026 [3] Anemia and Treatment Efficacy - **Anemia Improvement**: 55% of patients showed improvement in anemia, with 15% achieving major improvement, indicating the drug's potential to shift blood cell production from malignant to benign cells [12][15] - **Jakafi Comparison**: Jakafi improves symptoms and shrinks the spleen but worsens anemia, while 989 addresses all three issues effectively [15][16] Regulatory Considerations - **FDA Discussions**: Proposing spleen and anemia as co-primary endpoints for regulatory approval, which is a significant shift in treatment evaluation [17][18] - **Development Strategy**: Staggered approach for second-line and first-line treatments in myelofibrosis (MF), with ongoing patient enrollment for true first-line data [19] V617F Program and Prelude Collaboration - **V617F Inhibitor**: Ongoing studies with a focus on improving solubility and exposure of the molecule, with backup programs in place [24] - **Prelude Asset**: Collaboration with Prelude to explore a different chemical space for V617F inhibitors, with an option to acquire the asset based on clinical data [25] Commercial Strategy - **Jakafi XR**: Expected approval in mid-2026, with a potential switch rate from twice a day to once a day estimated between 15%-20%, preserving approximately $750 million of Jakafi revenue through the transition [30] - **Niktimvo Performance**: Anticipated strong fourth quarter with annualized sales exceeding $200 million, showing effectiveness post-Jakafi use [31] Market Potential - **TAFA Expansion**: The first-line DLBCL study could significantly expand the addressable market, potentially increasing the value of Incyte's offerings [29] Conclusion - Incyte is strategically positioning itself for future growth through a robust pipeline, innovative treatment approaches, and a focus on regulatory advancements, while maintaining strong performance in its core business segments [2][3][31]

Question-and-Answer SessionThank you. All right. Well, let's just kind of kick off the conversation, if we could, with Jakafi and just talk about the overall strategy in terms of Jakafi and what you're doing to drive growth in the company as Jakafi moves beyond the LOE, which obviously is widely expected and you're, of course, very well prepared to address.William MeuryCEO, President & Director Listen, our focus right now is, as you said, transitioning the business from Jakafi to a hem/onc I&I company and b ...

Financial Data and Key Metrics Changes - The company expects to transition its business model post-Jakafi, aiming for a five-year compound annual growth rate (CAGR) of 15%-20% with multiple products projected to generate over $1 billion in revenue [7][19] - Jakafi sales are anticipated to be preserved with the launch of a once-daily formulation, expected to convert 15%-30% of patients, potentially maintaining nearly $750 million in sales through 2029 [9][10] Business Line Data and Key Metrics Changes - The core business, excluding Jakafi, is projected to grow significantly, potentially matching Jakafi's revenue by 2029 [5] - The company has seven late-stage pipeline projects, including targeted treatments for hematological conditions and solid tumors, which are expected to enhance the core business [6][19] Market Data and Key Metrics Changes - Opzelura finished the year with approximately $650 million in sales, with a potential 10% CAGR over the next five years, driven by increased market penetration and new indications [27][28] - The company anticipates significant growth in the HS market, estimating a potential market size of over $1 billion across HS, PN, and vitiligo [44] Company Strategy and Development Direction - The company is focused on transitioning to a Hematology/Oncology and Immunology (I&I) company, with a strategy to build a sustainable growth curve post-2029 [5] - Business development efforts will aim to extend the core in hematology, oncology, and immunology [6][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline's potential, emphasizing the importance of execution and the ability to replicate positive clinical data [7][26] - The company is optimistic about the competitive positioning of its products, particularly in the context of ongoing clinical trials and market dynamics [26][80] Other Important Information - The company is preparing for the EU submission of Tropovo and anticipates a U.S. submission for povorcitinib in early 2026, with potential approval timelines extending into late 2026 or early 2027 [40][42] - The company is actively pursuing combination therapies to enhance treatment efficacy and expand market opportunities [66][70] Q&A Session Summary Question: What is the expected growth for Jakafi and its new formulation? - The once-daily formulation is expected to launch in mid-2026, with a conversion rate of 15%-30% of patients, preserving significant sales [9][10] Question: Can you elaborate on the 989 mutant CalR antibody and its significance? - The 989 antibody shows promising results in normalizing platelet counts in patients with essential thrombocythemia and has potential disease-modifying effects [14][17] Question: What is the growth outlook for Opzelura? - Opzelura is projected to grow at a 10% CAGR, with significant contributions from increased market penetration and new indications [27][28] Question: How does the company plan to address competition in the market? - The company acknowledges competition but believes its strong prescriber base and clinical data will support its market position [35][36] Question: What are the timelines for upcoming clinical trials? - The company plans to implement multiple phase III trials in 2026 for various indications, with specific timelines dependent on data availability [24][68]

Financial Data and Key Metrics Changes - The company expects to transition its business model post-Jakafi, aiming for a five-year compound annual growth rate (CAGR) of 15%-20% with multiple products projected to generate over $1 billion in revenue [7][19] - Jakafi sales are anticipated to be preserved with the launch of a once-daily formulation, expected in mid-2026, which could convert 15%-30% of patients to this new version, potentially saving nearly $750 million in sales [9][10] Business Line Data and Key Metrics Changes - The core business, excluding Jakafi, is projected to grow significantly, potentially matching Jakafi's revenue by 2029 [5] - The company has seven late-stage pipeline projects, including targeted treatments for myeloproliferative neoplasms and solid tumor oncology programs [6][19] - Opzelura, a topical treatment, finished the year with approximately $650 million in sales and is expected to grow at a 10% CAGR, potentially doubling by 2030 [27] Market Data and Key Metrics Changes - The U.S. market is seeing a shift from topical corticosteroids to non-steroidal topicals, with Opzelura positioned to benefit from this trend [27] - The company anticipates approval for Opzelura in moderate atopic dermatitis in Europe by mid to late 2026, which could significantly drive growth [28][29] Company Strategy and Development Direction - The company is focused on transitioning to a Hematology/Oncology and Immunology (I&I) company, with a strategy to build a sustainable growth curve post-2029 [5] - Business development efforts will aim to extend the core in hematology, oncology, and immunology [6] - The goal is to have a targeted therapy for every patient with myeloproliferative neoplasms by the end of the decade [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline's potential, emphasizing the importance of execution and the favorable positioning of their products in the market [7][26] - The company is aware of competition but believes it has a strong lead in its pipeline, particularly with the 989 mutant CalR antibody [26][19] Other Important Information - The company is preparing for the U.S. submission of povorcitinib in early 2026, with expectations of a launch by late 2026 or early 2027 [42] - The market for hidradenitis suppurativa (HS) is estimated to have around 5 million eligible patients, with the potential for povorcitinib to capture a significant share [44] Q&A Session Summary Question: What is the expected growth for Jakafi and its new formulation? - The once-daily formulation is expected to launch in mid-2026, with a potential conversion of 15%-30% of patients, preserving significant sales [9][10] Question: Can you elaborate on the 989 mutant CalR antibody and its significance? - The 989 antibody has shown promising results in normalizing platelet counts in patients with essential thrombocythemia and is expected to expand into myelofibrosis [14][15] Question: What is the growth outlook for Opzelura? - Opzelura is projected to grow at a 10% CAGR, with significant contributions from increased market penetration and potential new indications [27][28] Question: How does the company plan to address competition in the market? - The company acknowledges competition but believes its strong data and extensive prescriber base will help maintain its market position [36][26] Question: What are the timelines for upcoming submissions and approvals? - The company plans to submit for U.S. approval of povorcitinib in early 2026, with potential approval by late 2026 or early 2027 [42]