Incyte shares fall on new revenue recognition model

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(Global Markets) - Incyte Corp (INCY.O) shares plunged as much as 29 percent after the company changed the way it recognizes revenue, creating uncertainty around the sales forecast for its key bone marrow disease drug.

The company, which posted a quarterly profit for the first time in six quarters, reported strong sales of the drug Jakafi in the second quarter, but said it was adopting a sell-in method for revenue recognition.

With the sell-in method, the company will recognize revenue when its product is received by the pharmacy, as opposed to the sell-through method, where a sale is clocked only when the pharmacy fills a prescription for a patient.

The company now estimates full-year sales of between $120 million to $135 million for Jakafi.

ThinkEquity analyst Mani Mohindru said "the outlook was not very clear cut and this is getting reflected in the stock."

Incyte shares were trading 20 percent down at $19.87 afternoon on the Nasdaq. They had touched a low of $17.75 earlier in the day.

"There was a lot of confusion around the guidance and what was built in to the guidance, like what kind of growth to expect going forward, and what the growth trajectory for Jakafi would be like quarter-over-quarter," Mohindru said.

Jakafi, the first drug to specifically treat the rare bone marrow disease myelofibrosis, received U.S. regulatory approval last year.

For the second quarter ended June 30, the company earned $4.0 million, or 3 cents per share, compared with a loss of $51.9 million, or 41 cents per share, a year earlier.

Revenue rose more than 400 percent to $86.5 million.

Analysts on average were expecting the company to break even, on revenue of $84.6 million, according to Thomson Global Markets I/B/E/S.

(Reporting by Shailesh Kuber & Prateek Kumar in Bangalore; Editing by Saumyadeb Chakrabarty)