Incyte Corp. (NASDAQ: INCY) is one of the health care stocks that hit it big in 2016 — that is, after it crashed and burned. As we all know, 2016 got off to a bad start, but a very strong finish that made up for it. Unfortunately, Incyte posted a loss on the year despite making an incredibly recovery from its February lows. Looking ahead, one analyst sees solid upside for this stock. Credit Suisse has an Outperform rating with a $137 price target, implying an upside of 15% from Friday’s close at $117.22.

Earlier this month, Incyte and Merck announced a decision to advance the clinical development program investigating the combination of epacadostat, Incyte’s investigational oral selective IDO1 inhibitor, with Keytruda (pembrolizumab), Merck’s anti-PD-1 therapy. With the expansion of the clinical development program, the companies plan to initiate pivotal studies of epacadostat in combination with Keytruda in four additional tumors: non-small cell lung cancer, renal cell carcinoma, bladder cancer and squamous cell carcinoma of the head and neck.

Credit Suisse sees future earnings growth from Incyte’s pipeline, with epacadostat’s potential as a best-in-class immunotherapy combination agent making the stock an attractive takeout target for big biotech and pharma. The firm is positive on Incyte’s continued geographic expansion, with a long-term positive earnings impact as wholly owned early-stage assets enter clinical development and commercial markets.

The firm continued in its report saying:

We are bullish on Jakafi’s continued expansion into MF/PV driving earnings in 2017. We see future earnings growth from INCY’s pipeline, with epacadostat’s potential as a best-in-class immunotherapy combination agent making INCY an attractive takeout target for Big Biotech/Pharma. We are positive on INCY’s continued geographic expansion, with a long-term positive earnings impact as wholly owned early-stage assets enter clinical development and commercial markets.

Credit Suisse added:

We see the announcement of epacadostat data at ASCO ’17 as one of the most significant near-term inflection points. These data warranted the Jan ’17 decision for ph3 trial expansion into NSCLC, bladder cancer, head and neck cancer, and RCC. We see INCB50465 in lymphoma, INCB54828 in bladder cancer/cholangiocarcinoma, and Itacitinib in treatment-naïve GvHD as keys to INCY growth beyond 2020.

The question is whether one of the major players in big biotech and pharma will move to acquire Incyte. If this should happen, Credit Suisse values Incyte’s stock up to $167 per share to a potential acquirer. The firm views Incyte as having scarcity value as a commercial-stage oncology company. Credit Suisse remains bullish on M&A, with potential for tax-related U.S. political tailwinds.

Shares of Incyte were last seen trading up 1.3% at $118.74 on Monday, with a consensus analyst price target of $122.21 and a 52-week trading range of $55.00 to $122.68.

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