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Today on my subscription site I made Incyte #9 in my 10 Most dangerous Stocks for Earnings Season Special Report–and #5 on my Buy on Any Plunge Bonus Special Report.

Here’s what I wrote:

“There’s a good chance that Incyte (INCY) will miss Wall Street earnings and revenue projections when it reports first quarter results on April 30.

That’s because Incyte is a biotech adolescent. Think awkward.

The company is old enough to have substantial revenue from one drug, Jakafi, an oral JAK (janus kinase) inhibitor. In the short run that means that any negative perceptions about growth in sales for Jakafi–short term would include the April 30 earnings and revenue report for the first quarter–will outweigh news of progress on the eight drug candidates that look likely to report trial results in either 2019 or 2020. (Six of the eight are likely to report trial results in 2019.)The company’s guidance for sales from its Jakafi drug points to revenue of $1.58 to $1.65 billion in 2019. With peak revenue forecast at $2.5 billion a year. (Jakafi is the only treatment approved by the U.S. Food & Drug Administration for myelofibrosis. With its approval for polycythemia vera for refractory patients, the drug gained first-mover advantage over competing drugs still in the pipeline at other companies.)

If, that is, the company can keep expanding the market for Jakafi by expanding the number of approved uses for the drug. And if the company’s competitors in this market continue to stub their toes on their own drug development efforts. Jakafi doesn’t lose patent protection until 2026 so Incyte has a long runway to build sales.

But it also means that Incyte’s ability to grow Jakafi revenue each quarter gets a lot of attention from investors. Like many biotechs, Incyte’s revenue stream can be messy from quarter to quarter since big one-time milestone payments from research partners can take the quarterly figures on a wild ride. For example, the company’s total revenue for the first quarter of 2018 was $382 million while revenue for the fourth quarter came to $528 million.

If you take the 2109 projected revenue for Jakafi as $1.6 billion, then, in an effort to smooth quarterly revenue, you come up with an average of $400 million in revenue per quarter. That would only be about 5% above the $382 million of Jakafi revenue in the fourth quarter of 2018. (The rest of company-wide revenue that quarter was from royalty and milestone payments plus smaller amounts of revenue from Incyte’s other marketed drug an other JAK inhibitor, Olumiant (baricitinib), which was approved in Europe for rheumatoid arthritis in early 2017, and in the United States in 2018.)

If the company doesn’t deliver a Jakafi–and companywide–revenue growth surprise on April 30, I’d say there’s a good chance of Incyte moving down on the news. Benchmark revenue growth figures to watch are the 17% quarter to quarter sequential revenue growth in the fourth quarter of 2018 and the 19% year over year revenue growth in that quarter from the fourth quarter of 2017.Which brings me to my pick of Incyte for a buy on any plunge.

I’d put identifying a valuable pipeline of potential drugs and buying that pipeline at a good price near the top of any list of keys to making a profit in investing in biotech stocks. (I’d also include on this list a strong stomach for the plunges that strike most stocks in the sector so that you ride through temporary turbulence without selling.)

Any plunge in Incyte on a short-term revenue glitch would give us that good price for a buy.

The pipeline is extremely impressive. It includes itacitinib (a JAK1 inhibitor), which is in a Phase 3 trial in patients with steroid-naïve acute GVHD (with results expected in the second half of 2019) and pemigatinib for the second-line treatment of patients with FGFR2 translocated cholangiocarcinoma, a cancer of the bile ducts, that the company is planning to submit for FDA approval in the third quarter of 2019. Other drug candidates focus on cancer and autoimmune therapies. Among the most interesting is INCB86550, an oral, small molecule, targeted cancer compound. The company presented data on that drug candidate at the JPMorgan conference in January. I think Wall Street is still undervaluing this pipeline after a major trial setback for the company’s leading immuno-oncology candidate in 2018. But I think the value is there in this pipeline and I think Wall Street is gradually regaining its confidence in Incyte’s drug candidates.

I own shares of Incyte in my Jubak Picks 12-18 month portfolio and in my short-term trading Volatility Portfolio. The shares are up 86.69% in my Jubak Picks Portfolio since I added them on Aril 17, 2014. The position in the Volatility Portfolio on my and subscription sites is ahead 7.97% since I added it on January 25, 2019.

The stock traded at $83.15 today, April 10. My target price in the Jubak Picks Portfolio remains $97 a share.