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Shares of Incyte (NASDAQ:INCY) traded lower on Tuesday after BMO Capital Markets downgraded the drugmaker to underperform from market perform, citing the potential consequences of the company’s recently announced $2B share buybacks.
The transaction targeted for up to $1.672B worth of Incyte’s (INCY) common stock “appears to do little to increase shareholder value, while making it more difficult to acquire and expand the pipeline,” BMO’s Evan David Seigerman wrote.
With M&A capacity under pressure, attention now turns to the company’s R&D engine, which, according to Seigerman, is overinvested, taking up as much as 47% of INCY’s 2023 product sales.
However, the analyst notes some of the company’s recent clinical successes for drugs such as its oral JAK inhibitor, povorcitinib. Yet, he added that they target indications with smaller revenue contributions, and their potential is more weighted towards the latter part of the decade or 2030s amid an ongoing patent cliff for the company’s blockbuster drug, Jakafi.
With the rating change, Seigerman lowered his price target for INCY to $48 from $52 per share.