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JMP has downgraded Incyte (NASDAQ:INCY) to market perform, asserting that the company will likely need an acquisition to ensure its current cash flow.
In its note, the investment bank said the downgrade was based on a “missed opportunity” to acquire MorphoSys (MOR), a lack of “meaningful” near-term drivers, and the lowering of its discounted revenue/earnings multiples for the company.
JMP said it believes Incyte needs to achieve one of three things to boost its valuation: a “raging” biotech market, “competitive” LIMBER data and progress on its drug rux-XR, or an acquisition of a company or asset to ensure its current cash flow.
“We believe the latter will be required and until a meaningful acquisition is made, or investors go back to rewarding companies that are generating cash flow, we believe shares are likely to trade in line with the market,” the analysts added.
JMP withdrew its $93 price target for the stock, but didn’t set a new one.