WILMINGTON, Del.--(BUSINESS WIRE)--Incyte (Nasdaq:INCY) announced today that it has scheduled its fourth quarter and year-end 2023 financial results conference call and webcast for 8:00 a.m. ET on Tuesday, February 13, 2024. The schedule for the press release and conference call/webcast is as follows: Q4 & YE 2023 Press Release: February 13, 2024 at 7:00 a.m. ET Q4 & YE 2023 Conference Call: February 13, 2024 at 8:00 a.m. ET Domestic Dial-In Number: 877-407-3042 International Dial-In Number: 201-38 ...

Financial Data and Key Metrics Changes - Total product revenues for Q3 2023 were $783 million, representing a 10% year-over-year increase, while total product revenues for the first nine months of 2023 were $2.3 billion, reflecting a 16% year-over-year increase [56] - Jakafi net product revenues were $636 million for Q3 and $1.9 billion for the first nine months of 2023, with an 8% growth compared to the same period last year [15][27] - Opzelura net product revenues for Q3 were $92 million, a 141% increase year-over-year, with total revenues for the first nine months reaching $229 million [57][27] Business Line Data and Key Metrics Changes - Jakafi experienced steady demand growth, with total patients growing 8% year-over-year across all indications [30] - Opzelura's growth was driven by new patient flow and refills, with total prescriptions growing 72% year-over-year and refills increasing by 19% compared to the prior quarter [46][13] - The gross-to-net for Opzelura in Q3 was 54%, down from 55% in Q2 and 60% in Q1, with expectations to remain around the 55% level [16] Market Data and Key Metrics Changes - Approximately 84% commercial coverage for Opzelura in atopic dermatitis, covering over 127 million lives, and significant progress in vitiligo coverage, improving by roughly 30% throughout 2023 [76] - The anticipated preferred brand status for Opzelura on CVS Caremark and Aetna formularies starting in 2024 is expected to benefit around 30 million commercial lives [28] Company Strategy and Development Direction - The company is focusing on eight high-potential programs to increase decision-making rigor, accelerate pipeline progression, and optimize resource allocation [48] - The introduction of a novel program targeting the JAK2V617F mutation is expected to solidify the company's leadership in myeloproliferative neoplasms [49][50] - The company plans to initiate a Phase III study for povorcitinib in 2024, following positive Phase II results [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term potential of Opzelura, citing strong uptake and positive momentum [13] - The company expects Jakafi to continue being a leader in myelofibrosis, particularly with new data showing a 44% reduction in the risk of major thrombosis for patients switched to Jakafi [45] - Management highlighted the importance of early intervention for patients with polycythemia vera (PV) and the potential for increased market penetration [21] Other Important Information - Total R&D expenses for Q3 were $376 million, a 2% year-over-year decrease, while total SG&A expenses were $268 million, representing a 1% year-over-year growth [87] - The company reported a $14 million negative impact on reported net sales due to a decrease in inventory levels during Q3 [86] Q&A Session Summary Question: How is the company thinking about the competitive landscape regarding Jakafi and the new approval for momelotinib? - Management noted that Jakafi remains the only drug with superior overall survival in myelofibrosis patients, despite the presence of other JAK inhibitors [65] Question: Can you provide insight on Opzelura's gross-to-net trends and any pricing concessions? - Management indicated that while there are negotiations with payers, the goal is to increase volume and access for patients, with expected improvements in copays [68] Question: What is the expected rate of tubes per patient for atopic dermatitis and vitiligo? - The company expects around two tubes per patient for atopic dermatitis, while more data is needed for vitiligo [95] Question: Can you discuss the Medicaid penetration for Opzelura? - Medicaid patients account for about 14% of paid patients, with good coverage across all states [128]

Incyte . xx Key Highlights Hervé Hoppenot Chief Executive Officer R&D Update Steven Stein Chief Medical Officer 2 3 HERVÉ HOPPENOT - CEO (Incyte) 5 | --- | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------|-------------------------------------|-------|-------|-------|-------|-------------------------------------------------------|-------|-------| | | Standard Benefit \nBeginning 2025 | 2025 | 2026 | 2027 | 2028 | Specified Small Manufacturer Phase-In Schedule \n2029 | 2030 | 2031 | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-12400 INCYTE CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdict ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-12400 INCYTE CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction o ...

23 xx 1Development of INCB33890 in collaboration with Merus. 25 1Source: Source: Wave 2 ATU fielded February 3 – March 2 Monjuvi sales up 11% Y/Y; continued growth in Community accounts (75% of total volume) Opzelura launch has outperformed other brands prescribed by dermatologists Atopic dermatitis and vitiligo patient relationship and support programs to help patients start and stay on therapy Treatment of choice in CCA and MLN for eligible patients in the U.S. Pemazyre launch is ongoing in 10 key markets ...

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents Incyte's unaudited condensed consolidated financial statements and notes for Q1 2023 and 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | ASSETS (in thousands) | March 31, 2023 (unaudited) | December 31, 2022* | | :-------------------- | :------------------------- | :------------------- | | Cash and cash equivalents | $2,821,051 | $2,951,422 | | Total current assets | $3,971,633 | $4,092,850 | | Total assets | $5,797,623 | $5,840,984 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | March 31, 2023 (unaudited) | December 31, 2022* | | Total current liabilities | $1,006,111 | $1,157,077 | | Total liabilities | $1,335,055 | $1,470,865 | | Total stockholders' equity | $4,462,568 | $4,370,119 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | (unaudited, in thousands, except per share amounts) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenues | $808,673 | $733,235 | | Total costs and expenses | $783,903 | $616,695 | | Income from operations | $24,770 | $116,540 | | Net income | $21,703 | $37,992 | | Net income per share: Basic | $0.10 | $0.17 | | Net income per share: Diluted | $0.10 | $0.17 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) | (unaudited, in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $21,703 | $37,992 | | Other comprehensive income (loss) | $5,873 | $(3,593) | | Comprehensive income | $27,576 | $34,399 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | (unaudited, in thousands, except number of shares) | Balance at January 1, 2023 | Balance at March 31, 2023 | | :----------------------------------------------- | :------------------------- | :------------------------ | | Common Stock | $223 | $223 | | Additional Paid-in Capital | $4,792,041 | $4,856,914 | | Accumulated Other Comprehensive Income | $15,069 | $20,942 | | Accumulated Deficit | $(437,214) | $(415,511) | | Total Stockholders' Equity | $4,370,119 | $4,462,568 | - Total stockholders' equity increased from **$4,370,119 thousand** at January 1, 2023, to **$4,462,568 thousand** at March 31, 2023, driven by net income, stock compensation, and other comprehensive income[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (unaudited, in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(105,603) | $215,741 | | Net cash used in investing activities | $(28,559) | $(16,748) | | Net cash provided by financing activities | $4,009 | $96 | | Net (decrease) increase in cash, cash equivalents, restricted cash and investments | $(130,352) | $199,299 | | Cash, cash equivalents, restricted cash and investments at end of period | $2,822,768 | $2,258,459 | - Net cash used in operating activities was **$(105.6) million** for the three months ended March 31, 2023, a significant decrease from **$215.7 million** provided in the prior year, primarily due to changes in working capital, specifically a reduction in accounts payable[20](index=20&type=chunk)[256](index=256&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Organization and Business](index=8&type=section&id=Note%201.%20Organization%20and%20Business) Incyte is a biopharmaceutical company developing and commercializing proprietary therapeutics across a broad portfolio - Incyte Corporation is a biopharmaceutical company focused on developing and commercializing proprietary therapeutics[22](index=22&type=chunk) - Key commercialized products include JAKAFI® (ruxolitinib), ICLUSIG® (ponatinib), PEMAZYRE® (pemigatinib), OPZELURA™ (ruxolitinib cream), MINJUVI® (tafasitamab), MONJUVI® (tafasitamab-cxix), and ZYNYZ™ (retifanlimab-dlwr)[22](index=22&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=8&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines basis of presentation, consolidation principles, estimates, and accounting for intangibles and product costs - Unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information[23](index=23&type=chunk) - The company's financial statements include accounts of Incyte Corporation and its wholly-owned subsidiaries, with inter-company transactions eliminated[26](index=26&type=chunk) - Cost of product revenues includes product-related costs, royalties, and amortization of licensed intellectual property and capitalized milestone payments[29](index=29&type=chunk) [Note 3. Revenues](index=9&type=section&id=Note%203.%20Revenues) Total revenues increased to **$808.7 million** in Q1 2023, driven by JAKAFI and OPZELURA net product revenues Revenues Breakdown | Revenues (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Product revenues, net | $693,237 | $605,821 | | JAKAFI revenues, net | $579,969 | $544,464 | | OPZELURA revenues, net | $56,552 | $12,754 | | Total product royalty revenues | $115,436 | $122,414 | | OLUMIANT product royalty revenues | $34,155 | $48,064 | | Total revenues | $808,673 | $733,235 | - Total revenues increased by **$75.4 million** (**10.3%**) year-over-year[31](index=31&type=chunk) - JAKAFI net product revenues increased by **$35.5 million**, driven by volume and price increases, while OPZELURA net product revenues saw a substantial increase of **$43.8 million** due to increased patient demand and expanded coverage[31](index=31&type=chunk)[241](index=241&type=chunk) [Note 4. Fair Value of Financial Instruments](index=9&type=section&id=Note%204.%20Fair%20Value%20of%20Financial%20Instruments) Details fair value measurements of financial instruments, including marketable securities and contingent consideration Marketable Security Portfolio | Marketable Security Portfolio (in thousands) | March 31, 2023 | December 31, 2022 | | :----------------------------------------- | :------------- | :---------------- | | Amortized Cost | $294,278 | $292,580 | | Net Unrealized Losses | $(2,617) | $(5,037) | | Estimated Fair Value | $291,661 | $287,543 | - Marketable securities, primarily U.S. government debt securities, are classified as available-for-sale with contractual maturities of 12 to 18 months[32](index=32&type=chunk)[36](index=36&type=chunk) Level 3 Liabilities | Level 3 Liabilities (in thousands) | 2023 | | :--------------------------------- | :--- | | Balance at January 1, | $221,000 | | Contingent consideration earned but not yet paid | $(9,196) | | Change in fair value of contingent consideration | $6,196 | | Balance at March 31, | $218,000 | - The loss on change in fair value of acquisition-related contingent consideration for the three months ended March 31, 2023, was **$6.2 million**, primarily due to the passage of time[39](index=39&type=chunk) [Note 5. Concentration of Credit Risk and Current Expected Credit Losses](index=11&type=section&id=Note%205.%20Concentration%20of%20Credit%20Risk%20and%20Current%20Expected%20Credit%20Losses) Highlights credit risk concentration with partners and major customers, assessing expected credit losses as de minimis - Novartis and Lilly comprised **18%** of the accounts receivable balance as of March 31, 2023[41](index=41&type=chunk) Customer Revenue Concentration | Customer | Percentage of Total Net Product Revenues for the Three Months Ended March 31, 2023 | | :------- | :------------------------------------------------------------------------------- | | Customer A | 17 % | | Customer B | 11 % | | Customer C | 17 % | | Customer D | 10 % | | Customer E | 12 % | - Customers A, B, C, D, and E collectively comprised **40%** of the accounts receivable balance as of March 31, 2023[43](index=43&type=chunk) - The company assessed expected credit losses as de minimis and had no allowance for doubtful accounts as of March 31, 2023[44](index=44&type=chunk) [Note 6. Inventory](index=12&type=section&id=Note%206.%20Inventory) Total inventory increased to **$157.6 million**, with a significant portion classified as non-current Inventory Breakdown | Inventory (in thousands) | March 31, 2023 | December 31, 2022 | | :----------------------- | :------------- | :---------------- | | Raw materials | $29,448 | $31,874 | | Work-in-process | $93,829 | $54,455 | | Finished goods | $34,287 | $34,630 | | Total inventory | $157,564 | $120,959 | - Total inventory increased by **$36.6 million** from December 31, 2022, to March 31, 2023[45](index=45&type=chunk) - As of March 31, 2023, **$116.7 million** of inventory was classified as non-current, expected to be consumed beyond the next twelve months[45](index=45&type=chunk) - Inventory with approximately **$40.7 million** of pre-regulatory approval product costs is expected to be sold over the next 24 months, resulting in lower cost of product revenues[46](index=46&type=chunk) [Note 7. License Agreements](index=13&type=section&id=Note%207.%20License%20Agreements) Details significant license and collaboration agreements for development and commercialization rights, milestones, and royalties - Novartis holds exclusive development and commercialization rights to ruxolitinib (JAKAVI) outside the U.S. and capmatinib (TABRECTA) worldwide, with Incyte receiving tiered, double-digit royalties[47](index=47&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - Lilly holds exclusive worldwide rights to baricitinib (OLUMIANT) for inflammatory and autoimmune diseases, with Incyte eligible for tiered, double-digit royalties on global sales[51](index=51&type=chunk)[52](index=52&type=chunk) - Incyte has collaborations for immuno-therapeutics (Agenus), bispecific antibodies (Merus), PD-1 inhibitor retifanlimab (MacroGenics), gene control platform (Syros), CD19 antibody tafasitamab (MorphoSys), and CSF-1R monoclonal antibody axatilimab (Syndax), involving various milestone payments and royalty structures[56](index=56&type=chunk)[57](index=57&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - In March 2023, Incyte made a **$15.0 million** regulatory milestone payment to MacroGenics for the FDA approval of ZYNYZ, capitalized as an intangible asset[64](index=64&type=chunk) - Incyte's **50%** share of U.S. profit for tafasitamab commercialization was a **$1.4 million** profit for Q1 2023, compared to a **$4.7 million** loss for Q1 2022[74](index=74&type=chunk) [Note 8. Property and Equipment, net](index=18&type=section&id=Note%208.%20Property%20and%20Equipment%2C%20net) Property and equipment, net, increased slightly to **$741.7 million**, with buildings as the largest component | Property and Equipment, net (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------------------- | :------------- | :---------------- | | Office equipment | $23,144 | $22,734 | | Laboratory equipment | $195,999 | $192,141 | | Computer equipment | $94,661 | $92,115 | | Land | $10,484 | $10,429 | | Building and leasehold improvements | $567,863 | $564,170 | | Operating lease right-of-use assets | $21,818 | $23,311 | | Construction in progress | $53,408 | $47,224 | | Less accumulated depreciation and amortization | $(225,676) | $(212,814) | | Property and equipment, net | $741,701 | $739,310 | [Note 9. Accrued and Other Current Liabilities](index=18&type=section&id=Note%209.%20Accrued%20and%20Other%20Current%20Liabilities) Total accrued and other current liabilities increased to **$825.4 million**, driven by royalties and sales allowances Accrued and Other Current Liabilities Breakdown | Accrued and Other Current Liabilities (in thousands) | March 31, 2023 | December 31, 2022 | | :------------------------------------------------- | :------------- | :---------------- | | Royalties | $286,230 | $263,466 | | Clinical related costs | $117,417 | $130,570 | | Sales allowances | $220,753 | $192,133 | | Sales and marketing | $60,674 | $31,149 | | Other current liabilities | $129,922 | $72,047 | | Total accrued and other current liabilities | $825,443 | $701,053 | - Royalties increased by **$22.8 million**, sales allowances by **$28.6 million**, and sales and marketing by **$29.5 million**[81](index=81&type=chunk) [Note 10. Stock Compensation](index=18&type=section&id=Note%2010.%20Stock%20Compensation) Stock compensation expense increased to **$53.4 million**, allocated across R&D, SG&A, and product costs Stock Compensation Expense | Stock Compensation Expense (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Total stock compensation expense | $53,379 | $43,841 | | Research and development expense | $31,000 | $26,300 | | Selling, general and administrative expense | $21,600 | $16,900 | | Cost of product revenues | $800 | $600 | - Total stock compensation expense increased by **$9.6 million** year-over-year[82](index=82&type=chunk) - As of March 31, 2023, total unvested compensation costs were **$42.3 million** for options, **$202.8 million** for RSUs, and **$24.1 million** for PSUs, expected to be recognized over weighted average periods of 1.1, 1.8, and 1.7 years, respectively[90](index=90&type=chunk) [Note 11. Income Taxes](index=20&type=section&id=Note%2011.%20Income%20Taxes) Provision for income taxes was **$30.2 million**, with an effective tax rate of **58.1%** due to foreign losses Income Taxes Summary | Income Taxes | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------- | :-------------------------------- | :-------------------------------- | | Income before provision for income taxes | $51,856 | $70,535 | | Provision for income taxes | $30,153 | $32,543 | | Effective tax rate | 58.1% | 46.1% | - The effective tax rate increased from **46.1%** in 2022 to **58.1%** in 2023, primarily due to lower U.S. earnings while unbenefited foreign losses remained flat[91](index=91&type=chunk) - Unrecognized tax benefits increased by approximately **$2.7 million** during the period, driven by current year operations and R&D tax credits[92](index=92&type=chunk) [Note 12. Net Income Per Share](index=21&type=section&id=Note%2012.%20Net%20Income%20Per%20Share) Basic and diluted net income per share decreased to **$0.10** from **$0.17** due to lower net income Net Income Per Share Details | Net Income Per Share | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :-------------------------------- | :-------------------------------- | | Basic net income | $21,703 | $37,992 | | Weighted average common shares outstanding | 222,960 | 221,326 | | Basic net income per share | $0.10 | $0.17 | | Diluted net income per share | $0.10 | $0.17 | - Basic and diluted net income per share decreased by **$0.07** year-over-year[94](index=94&type=chunk) - Dilutive stock options and awards increased to **2,629 thousand** in 2023 from **1,624 thousand** in 2022[94](index=94&type=chunk) [Note 13. Employee Benefit Plans](index=21&type=section&id=Note%2013.%20Employee%20Benefit%20Plans) Details defined contribution and benefit plans, with **$5.6 million** expense for Q1 2023 Defined Contribution Expense | Defined Contribution Expense (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Defined contribution expense | $5.6 | $4.9 | Net Periodic Benefit Cost | Net Periodic Benefit Cost (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Service cost | $2,088 | $2,522 | | Interest cost | $617 | $64 | | Expected return on plan assets | $(1,540) | $(1,071) | | Amortization of prior service cost | $103 | $194 | | Amortization of actuarial losses | $90 | $88 | | Net periodic benefit cost | $1,358 | $1,797 | - The company expects to contribute **$8.0 million** to its pension plans in 2023[97](index=97&type=chunk) [Note 14. Commitments and Contingencies](index=22&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) Outlines potential future payments under collaboration agreements and risks from lawsuits and disputes - The company may be required to pay upfront fees, milestone payments, and royalties under collaboration agreements, contingent on future discovery, development, regulatory, or commercial milestones[98](index=98&type=chunk) - Reserves are recorded for lawsuits, proceedings, and other disputes when a liability is probable and the amount can be reasonably estimated[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Incyte's financial condition and results for Q1 2023, including revenues, expenses, and liquidity - Net income for the three months ended March 31, 2023, was **$21.7 million**, down from **$38.0 million** in the corresponding period in 2022[238](index=238&type=chunk) - Basic and diluted net income per share for Q1 2023 was **$0.10**, compared to **$0.17** in Q1 2022[238](index=238&type=chunk) [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) Highlights forward-looking statements regarding future operations, performance, and plans, subject to risks - The report contains forward-looking statements related to the discovery, development, manufacturing, and commercialization of compounds and drug candidates, including JAKAFI, PEMAZYRE, ICLUSIG, MONJUVI/MINJUVI, OPZELURA, and ZYNYZ[102](index=102&type=chunk) - Key areas of forward-looking statements include plans for international operations, clinical trials, collaboration strategies, regulatory approval processes, safety and effectiveness of drug candidates, and expected financial outcomes like expenses, revenues, and profitability[102](index=102&type=chunk) - These statements are subject to risks and uncertainties, such as litigation costs, competition, the impact of the COVID-19 pandemic, and the ability to obtain and maintain regulatory approvals and market share[104](index=104&type=chunk)[108](index=108&type=chunk) [Summary Risk Factors](index=26&type=section&id=Summary%20Risk%20Factors) Summarizes key business risks, including revenue dependence, reimbursement, distribution, and development challenges - Heavy dependence on JAKAFI/JAKAVI revenues, with potential material harm if revenues decrease[110](index=110&type=chunk) - Risks related to obtaining and maintaining adequate coverage and reimbursement for products from government and third-party payors[110](index=110&type=chunk) - Operational and financial risks due to reliance on a limited number of specialty pharmacies and wholesalers for product distribution[110](index=110&type=chunk) - Challenges in drug discovery and development, including the risk of unsuccessful clinical trials and regulatory approval failures[110](index=110&type=chunk) - Impact of the COVID-19 pandemic and other geopolitical events on business operations and financial results[110](index=110&type=chunk) [Overview](index=28&type=section&id=Overview) Incyte is a global biopharmaceutical company focused on Hematology/Oncology and IAI, with a diverse product portfolio - Incyte operates in two therapeutic areas: Hematology/Oncology (MPNs, GVHD, solid tumors, hematologic malignancies) and Inflammation and Autoimmunity (IAI), including Dermatology[114](index=114&type=chunk) - The company's global headquarters is in Wilmington, Delaware, with European headquarters in Morges, Switzerland, and offices in other European countries, Japan, and Canada[113](index=113&type=chunk) [Hematology and Oncology](index=28&type=section&id=Hematology%20and%20Oncology) Details Incyte's Hematology and Oncology franchise, including five approved products and active clinical development - The Hematology and Oncology franchise includes JAKAFI, MONJUVI/MINJUVI, PEMAZYRE, ICLUSIG, and ZYNYZ[115](index=115&type=chunk) - JAKAFI is approved for myelofibrosis (MF), polycythemia vera (PV), and steroid-refractory acute and chronic graft-versus-host disease (GVHD) in the U.S., and is the first-line standard of care in MF[116](index=116&type=chunk)[119](index=119&type=chunk) - MONJUVI (U.S.) / MINJUVI (EU) is approved in combination with lenalidomide for relapsed or refractory diffuse large B-cell lymphoma (DLBCL) not eligible for ASCT[137](index=137&type=chunk)[139](index=139&type=chunk) - PEMAZYRE is approved for previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with FGFR2 fusion/rearrangement (U.S., EU, Japan, China) and for myeloid/lymphoid neoplasms (MLNs) with FGFR1 rearrangement (U.S., Japan)[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - ZYNYZ (retifanlimab-dlwr) received accelerated FDA approval in March 2023 for metastatic or recurrent locally advanced Merkel cell carcinoma (MCC)[153](index=153&type=chunk) - In early 2023, Incyte discontinued certain programs, including parsaclisib in myelofibrosis and warm hemolytic anemia, and some early-stage programs, to optimize its R&D portfolio[154](index=154&type=chunk) [Inflammation and AutoImmunity (IAI)](index=36&type=section&id=Inflammation%20and%20AutoImmunity%20%28IAI%29) Incyte's IAI efforts focus on OPZELURA cream for AD and vitiligo, with pipeline expansion into new indications - OPZELURA (ruxolitinib) cream was approved by the FDA in September 2021 for mild to moderate atopic dermatitis and in July 2022 for nonsegmental vitiligo in patients 12 years and older[179](index=179&type=chunk)[182](index=182&type=chunk) - The European Commission approved OPZELURA for topical treatment of nonsegmental vitiligo with facial involvement in adults and adolescents 12 years and older in April 2023[185](index=185&type=chunk) - Ruxolitinib cream is being evaluated in Phase II trials for lichen planus, lichen sclerosus, and hidradenitis suppurativa, and in Phase III trials for prurigo nodularis[188](index=188&type=chunk) - Povorcitinib, an oral JAK1 inhibitor, is in Phase III trials for moderate to severe hidradenitis suppurativa and Phase II for vitiligo and prurigo nodularis[189](index=189&type=chunk)[190](index=190&type=chunk) - Auremolimab (anti-IL-15Rβ), acquired in November 2022, is expected to enter clinical studies in 2023 for vitiligo[193](index=193&type=chunk) [Clinical Programs in Other IAI](index=38&type=section&id=Clinical%20Programs%20in%20Other%20IAI) Initiated Phase II trial for INCB00928 (ALK2) in fibrodysplasia ossificans progressiva (FOP) - INCB00928 (ALK2) is in a Phase II trial for fibrodysplasia ossificans progressiva (FOP)[195](index=195&type=chunk) - INCB00928 has received Fast Track designation and orphan drug designation from the FDA for FOP[195](index=195&type=chunk) [Collaborative Partnered Programs](index=39&type=section&id=Collaborative%20Partnered%20Programs) Details milestone and royalty-generating partnered programs like OLUMIANT, JAKAVI, and TABRECTA - OLUMIANT (baricitinib), licensed to Lilly, is approved for rheumatoid arthritis (EU, Japan, U.S.), moderate-to-severe atopic dermatitis (EU, Japan), severe alopecia areata (U.S., EU, Japan), and COVID-19 in hospitalized adults (U.S.)[202](index=202&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[209](index=209&type=chunk) - JAKAVI (ruxolitinib), licensed to Novartis outside the U.S., is approved in Europe for acute or chronic GVHD in patients aged 12 years and older[217](index=217&type=chunk) - TABRECTA (capmatinib), licensed to Novartis, is approved in the U.S., Europe, and Japan for metastatic NSCLC with MET exon 14 skipping mutations[212](index=212&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) [License Agreements and Business Relationships](index=41&type=section&id=License%20Agreements%20and%20Business%20Relationships) Manages out-license and in-license agreements to support drug development and commercialization efforts - Out-license agreements include Novartis (ruxolitinib ex-U.S., capmatinib worldwide), Lilly (baricitinib worldwide), Innovent (pemigatinib, parsaclisib in Greater China), InnoCare (tafasitamab in Greater China), Maruho (ruxolitinib cream in Japan), and CMS Aesthetics (ruxolitinib cream in Greater China and Southeast Asia)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - In-license agreements include Agenus (immuno-therapeutics), Merus (bispecific antibodies), MacroGenics (retifanlimab), Syros (target discovery), MorphoSys (tafasitamab), and Syndax (axatilimab)[228](index=228&type=chunk)[229](index=229&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - In January 2022, Incyte opted out of MCLA-145 development with Merus, and in September 2022, terminated collaboration with Calithera Biosciences, Inc[230](index=230&type=chunk)[339](index=339&type=chunk) [Critical Accounting Policies and Significant Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) No significant changes to critical accounting policies or estimates during Q1 2023 - Financial statements rely on estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses[235](index=235&type=chunk) - No significant changes to critical accounting policies or estimates occurred during the three months ended March 31, 2023[236](index=236&type=chunk) [Recent Accounting Pronouncements](index=44&type=section&id=Recent%20Accounting%20Pronouncements) No new accounting pronouncements significantly affected financial statements since the 2022 Form 10-K - No new accounting pronouncements issued or adopted had a significant effect on the condensed consolidated financial statements since the 2022 Form 10-K filing[237](index=237&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Net income decreased to **$21.7 million** in Q1 2023, driven by increased operating expenses Financial Performance Summary | Financial Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $21.7 | $38.0 | | Basic and diluted net income per share | $0.10 | $0.17 | [Revenues](index=44&type=section&id=Revenues) Total revenues increased to **$808.7 million** in Q1 2023, primarily from JAKAFI and OPZELURA Revenue Breakdown | Revenues (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------- | :-------------------------------- | :-------------------------------- | | JAKAFI revenues, net | $580.0 | $544.5 | | OPZELURA revenues, net | $56.6 | $12.8 | | Total product revenues, net | $693.3 | $605.9 | | JAKAVI product royalty revenues | $76.7 | $70.8 | | OLUMIANT product royalty revenues | $34.1 | $48.0 | | Total product royalty revenues | $115.4 | $122.3 | | Milestone and contract revenues | $0.0 | $5.0 | | Total revenues | $808.7 | $733.2 | - JAKAFI net product revenues increased by **$35.5 million**, driven by volume and price, partially offset by higher gross-to-net deductions[241](index=241&type=chunk) - OPZELURA net product revenues increased significantly by **$43.8 million** due to increased patient demand and expanded coverage, though impacted by higher co-pay assistance and prior period refill acceleration[241](index=241&type=chunk) - OLUMIANT product royalty revenues decreased by **$13.9 million**, impacted by unfavorable foreign currency exchange rates and decreased net product sales for COVID-19 treatment[245](index=245&type=chunk) [Cost of Product Revenues](index=46&type=section&id=Cost%20of%20Product%20Revenues) Cost of product revenues increased to **$56.8 million**, driven by higher product-related and royalty costs Cost of Product Revenues Breakdown | Cost of Product Revenues (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Product costs | $23.5 | $12.0 | | Royalty expense | $24.4 | $22.4 | | Total cost of product revenues | $56.8 | $42.6 | - The increase of **$14.2 million** was primarily driven by product-related costs for commercial products, including OPZELURA[246](index=246&type=chunk) [Operating Expenses](index=46&type=section&id=Operating%20Expenses) Total operating expenses increased significantly due to higher R&D and SG&A, and other non-operating items [Research and development expenses](index=46&type=section&id=Research%20and%20development%20expenses) R&D expenses increased due to higher headcount and clinical research activities Research and Development Expenses Breakdown | Research and Development Expenses (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Salary and benefits related | $100.4 | $84.5 | | Stock compensation | $31.0 | $26.3 | | Clinical research and outside services | $229.9 | $210.1 | | Total research and development expenses | $406.6 | $353.4 | - Total R&D expenses increased by **$53.2 million**, primarily due to increased development headcount and higher clinical research and outside services expenses[247](index=247&type=chunk)[248](index=248&type=chunk) - R&D expenses for Q1 2023 included **$2.7 million** in upfront and milestone expenses, compared to **$20.0 million** in Q1 2022[248](index=248&type=chunk) [Selling, general and administrative expenses](index=47&type=section&id=Selling%2C%20general%20and%20administrative%20expenses) SG&A expenses increased due to higher headcount and promotional activities for OPZELURA Selling, General and Administrative Expenses Breakdown | Selling, General and Administrative Expenses (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Salary and benefits related | $72.9 | $67.3 | | Stock compensation | $21.6 | $16.9 | | Other contract services and outside costs | $221.1 | $125.4 | | Total selling, general and administrative expenses | $315.6 | $209.6 | - Total SG&A expenses increased by **$106.0 million**, driven by increased headcount for the dermatology commercial organization and higher promotional activities for OPZELURA[250](index=250&type=chunk) [Loss on change in fair value of acquisition-related contingent consideration](index=47&type=section&id=Loss%20on%20change%20in%20fair%20value%20of%20acquisition-related%20contingent%20consideration) Loss on contingent consideration was **$6.2 million**, primarily due to the passage of time - The loss on change in fair value of acquisition-related contingent consideration was **$6.2 million** for Q1 2023, compared to **$6.4 million** in Q1 2022, primarily due to the passage of time[251](index=251&type=chunk) [(Profit) and loss sharing under collaboration agreements](index=47&type=section&id=%28Profit%29%20and%20loss%20sharing%20under%20collaboration%20agreements) Profit from tafasitamab commercialization was **$1.4 million** for Q1 2023 - Incyte's **50%** share of U.S. profit for tafasitamab commercialization was a **$1.4 million** profit for Q1 2023, a significant improvement from a **$4.7 million** loss in Q1 2022[252](index=252&type=chunk) [Interest income and other, net](index=47&type=section&id=Interest%20income%20and%20other%2C%20net) Interest income and other, net, increased substantially to **$32.9 million** in Q1 2023 - Interest income and other, net, increased substantially to **$32.9 million** for Q1 2023 from **$1.3 million** in Q1 2022, primarily due to an increase in interest income[253](index=253&type=chunk) [Unrealized loss on long term investments](index=48&type=section&id=Unrealized%20loss%20on%20long%20term%20investments) Unrealized loss on long-term investments decreased to **$5.3 million** in Q1 2023 Unrealized Loss on Long Term Investments Breakdown | Unrealized Loss on Long Term Investments (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Agenus | $(10.6) | $(9.2) | | Merus | $10.4 | $(19.0) | | MorphoSys | $1.4 | $(9.6) | | Syndax | $(6.2) | $(6.4) | | Syros | $(0.1) | $(1.9) | | Total unrealized loss on long term investments | $(5.3) | $(46.6) | - Total unrealized loss on long term investments decreased to **$5.3 million** for Q1 2023 from **$46.6 million** in Q1 2022, primarily due to a gain on Merus investments[254](index=254&type=chunk) [Provision for income taxes](index=48&type=section&id=Provision%20for%20income%20taxes) Provision for income taxes was **$30.2 million**, with an effective tax rate of **58.1%** - The provision for income taxes was **$30.2 million** for Q1 2023, with an effective tax rate of **58.1%**, higher than the U.S. statutory rate due to unbenefited foreign losses and lower U.S. earnings[254](index=254&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) Incyte had **$3.1 billion** in cash and marketable securities, with **$105.6 million** net cash used in operations - As of March 31, 2023, Incyte had **$3.1 billion** in available cash, cash equivalents, and marketable securities[255](index=255&type=chunk) - Net cash used in operating activities was **$105.6 million** for Q1 2023, compared to **$215.7 million** provided in Q1 2022, primarily due to a reduction in accounts payable[256](index=256&type=chunk) - Net cash used in investing activities was **$28.6 million** for Q1 2023, including purchases of marketable securities (**$54.9 million**), payments for intangible assets (**$15.0 million**), and capital expenditures (**$11.9 million**)[257](index=257&type=chunk) - The company has a **$500.0 million**, three-year senior unsecured revolving credit facility with no outstanding borrowings as of March 31, 2023[260](index=260&type=chunk) - U.S. income tax payments are expected to increase significantly in 2023 due to the full utilization of R&D and orphan drug tax credit carryforwards in 2022 and the mandatory capitalization and amortization of R&D expenses[261](index=261&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Marketable securities totaling **$291.7 million** are subject to market risks, with minimal interest rate sensitivity - Marketable securities, primarily U.S. government debt securities, totaled **$291.7 million** as of March 31, 2023[264](index=264&type=chunk) - These investments are subject to default, credit rating changes, and interest rate risk[264](index=264&type=chunk) - A **10%** increase in market interest rates would not materially affect the fair value of marketable securities[264](index=264&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes - Disclosure controls and procedures are designed to ensure timely and accurate reporting of information required by the Exchange Act[265](index=265&type=chunk) - As of March 31, 2023, the CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level[266](index=266&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[267](index=267&type=chunk) [PART II: OTHER INFORMATION](index=50&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section presents other information, including detailed risk factors, exhibits, and corporate signatures [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) Outlines numerous risks impacting business, financial results, and strategy, categorized by operational area [RISKS RELATING TO COMMERCIALIZATION OF OUR PRODUCTS](index=50&type=section&id=RISKS%20RELATING%20TO%20COMMERCIALIZATION%20OF%20OUR%20PRODUCTS) Commercialization risks include revenue dependence, reimbursement challenges, distribution reliance, and intense competition - Heavy dependence on JAKAFI (ruxolitinib) revenues; a decrease could materially harm the business[269](index=269&type=chunk)[272](index=272&type=chunk) - Inability to obtain or maintain anticipated levels of coverage and reimbursement for products from government and other third-party payors could harm product sales and financial condition[274](index=274&type=chunk) - Reliance on a limited number of specialty pharmacies and wholesalers for JAKAFI and most other drug products poses a risk of significant reduction in sales[282](index=282&type=chunk) - Failure to establish and maintain effective sales, marketing, and distribution capabilities, especially for new dermatology indications like OPZELURA, could hinder successful commercialization[283](index=283&type=chunk)[284](index=284&type=chunk) - Non-compliance with applicable laws and regulations could lead to loss of marketing approval, civil or criminal penalties, and product recalls[285](index=285&type=chunk)[288](index=288&type=chunk) - Product liability claims or perceived harm to patients from product use could lead to regulatory approval revocation, costly lawsuits, and negative impact on sales and reputation[289](index=289&type=chunk)[291](index=291&type=chunk)[293](index=293&type=chunk) - Intense competition from existing therapies, generic drugs, and new product candidates could decrease revenue and harm business[302](index=302&type=chunk) - JAKAFI faces potential generic competition, with patents covering ruxolitinib phosphate and its use expiring in 2028[303](index=303&type=chunk) [OTHER RISKS RELATING TO OUR BUSINESS](index=58&type=section&id=OTHER%20RISKS%20RELATING%20TO%20OUR%20BUSINESS) Details broader business risks, including epidemics, drug development uncertainties, and international operations - Public health epidemics and pandemics, such as COVID-19, have caused and could continue to cause disruptions to operations, sales, clinical trials, and supply chains[308](index=308&type=chunk)[309](index=309&type=chunk)[311](index=311&type=chunk) - Unsuccessful drug discovery, development, and commercialization efforts for new drug products or indications could hinder long-term success and revenue diversification[312](index=312&type=chunk)[315](index=315&type=chunk) - Inability to obtain regulatory approval for drug candidates in the U.S. and foreign jurisdictions would prevent commercialization[317](index=317&type=chunk) - Dependence on collaborators and licensees for development and commercialization of out-licensed drug candidates, with risks of conflicts or agreement terminations[332](index=332&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - Reliance on third parties for manufacturing drug products and candidates could lead to supply shortages, delays, increased costs, or withdrawal of regulatory approval[345](index=345&type=chunk)[346](index=346&type=chunk) - Failure to comply with extensive legal and regulatory requirements in the healthcare industry could result in increased costs, penalties, and loss of business[350](index=350&type=chunk) - Risks associated with international operations, including conflicting laws, management difficulties, financial risks, and geopolitical events, could adversely affect business[358](index=358&type=chunk)[360](index=360&type=chunk) - Product liability lawsuits could result in substantial liabilities, limit commercialization, and harm results of operations[361](index=361&type=chunk) [RISKS RELATING TO OUR FINANCIAL RESULTS](index=72&type=section&id=RISKS%20RELATING%20TO%20OUR%20FINANCIAL%20RESULTS) Financial risks include potential future losses, capital needs, market risks on investments, and tax law changes - Expectation to incur significant expenses for drug discovery and development, potentially leading to future losses and difficulty in achieving sustained profitability[367](index=367&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) - Need for additional capital in the future, with uncertainty regarding the ability to raise funds on acceptable terms, potentially limiting R&D or commercialization efforts[371](index=371&type=chunk)[372](index=372&type=chunk) - Marketable securities and long-term investments are subject to risks that could adversely affect the overall financial position, including losses on holdings and impaired liquidity[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk) - Changes in tax laws or regulations, such as the mandatory capitalization of R&D expenditures and the Inflation Reduction Act of 2022, could adversely affect results of operations and financial condition[377](index=377&type=chunk) - Substantial portion of revenues derived from royalties and milestone payments; failure to achieve milestones or develop licensable product candidates could decrease revenues[378](index=378&type=chunk) [RISKS RELATING TO INTELLECTUAL PROPERTY AND LEGAL MATTERS](index=75&type=section&id=RISKS%20RELATING%20TO%20INTELLECTUAL%20PROPERTY%20AND%20LEGAL%20MATTERS) IP and legal risks include litigation, enforcement challenges, and potential impacts from changes in patent laws - Arbitration, litigation, and infringement claims could be costly and disrupt drug discovery and development efforts, potentially leading to significant liabilities or licensing requirements[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) - Inability to adequately protect or enforce proprietary information may result in unauthorized use, loss of revenue, or reduced ability to compete, especially against generic versions of products[383](index=383&type=chunk)[385](index=385&type=chunk) - Changes in U.S. patent laws, such as the America Invents Act, or changes in interpretation, could decrease the effective term and value of patents, or narrow their scope[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk) - International patent protection is uncertain and costly, with involvement in opposition proceedings potentially leading to substantial expenses and loss of rights[390](index=390&type=chunk) [RISKS RELATING TO INFORMATION TECHNOLOGY AND DATA PRIVACY](index=77&type=section&id=RISKS%20RELATING%20TO%20INFORMATION%20TECHNOLOGY%20AND%20DATA%20PRIVACY) IT and data privacy risks include system disruptions, security breaches, ERP implementation, and compliance challenges - Significant disruptions of IT systems, data security breaches, or unauthorized disclosures of sensitive data could adversely affect business, lead to liability, or cause reputational damage[391](index=391&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) - The implementation of a new enterprise resource planning system carries inherent costs and risks, including potential delays and errors[392](index=392&type=chunk) - Compliance with rapidly evolving data privacy laws and regulations, such as GDPR, UK GDPR, and CCPA, increases business costs and complexity, with potential for large penalties for noncompliance[395](index=395&type=chunk) - Increasing use of social media by employees and contractors could lead to inadvertent disclosure of sensitive data, liability, or reputational damage[396](index=396&type=chunk) [Item 6. Exhibits](index=79&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the report, including certifications and XBRL documents - The exhibits include Rule 13a-14(a) Certifications of the CEO and CFO, Statements of the CEO and CFO under Section 906 of Sarbanes-Oxley Act, and XBRL Instance, Schema, Calculation, Label, and Presentation Linkbase Documents[398](index=398&type=chunk) [Signatures](index=80&type=section&id=Signatures) Official signatures of the Chairman, President, CEO, and CFO, dated May 2, 2023 - The report is signed by Hervé Hoppenot, Chairman, President, and Chief Executive Officer, and Christiana Stamoulis, Chief Financial Officer, on May 2, 2023[403](index=403&type=chunk)

Incyte Corporation (NASDAQ:INCY) Q4 2022 Earnings Conference Call February 7, 2023 8:00 AM ET Company Participants Christine Chiou - Head, Investor Relations Hervé Hoppenot - Chairman, President and Chief Executive Officer Barry Flannelly - Executive Vice President and General Manager-North America Steven Stein - Executive Vice President and Chief Medical Officer Christiana Stamoulis - Executive Vice President and Chief Financial Officer Dash Dhanak - Executive Vice President and Chief Scientific Officer Co ...

Financial Performance - Total revenues for 2022 increased to $3,394,635K, up 13.7% from $2,986,267K in 2021[445] - Net income for 2022 decreased to $340,660K, down 64.1% from $948,581K in 2021[445] - Cash and cash equivalents increased to $2,951,422K in 2022, up 43.5% from $2,057,440K in 2021[442] - Research and development expenses for 2022 were $1,585,936K, up 8.8% from $1,458,179K in 2021[445] - Product revenues, net for 2022 increased to $2,746,897K, up 18.3% from $2,322,012K in 2021[445] - Total assets for 2022 increased to $5,840,984K, up 18.4% from $4,933,352K in 2021[442] - Accumulated deficit improved to $(437,214)K in 2022, compared to $(777,874)K in 2021[450] - Basic net income per share for 2022 was $1.53, down 64.4% from $4.30 in 2021[445] - Total stockholders' equity for 2022 increased to $4,370,119K, up 15.9% from $3,770,004K in 2021[442] - Comprehensive income for 2022 was $375,183K, down 60.3% from $944,487K in 2021[447] - Net income for 2022 was $340.66 million, a significant decrease from $948.58 million in 2021, and a recovery from a loss of $295.70 million in 2020[452] - Net cash provided by operating activities in 2022 was $969.94 million, up from $749.49 million in 2021 and a significant improvement from a net cash used in operating activities of $124.60 million in 2020[452] - Depreciation and amortization expenses increased to $67.86 million in 2022, compared to $57.84 million in 2021 and $51.81 million in 2020[452] - Stock-based compensation rose to $188.42 million in 2022, up from $183.01 million in 2021 and $177.88 million in 2020[452] - Net cash used in investing activities decreased to $78.54 million in 2022, compared to $207.70 million in 2021 and $269.00 million in 2020[452] - Cash, cash equivalents, and restricted cash at the end of 2022 stood at $2.95 billion, up from $2.06 billion in 2021 and $1.51 billion in 2020[452] - Income taxes paid in 2022 were $136.24 million, significantly higher than $67.73 million in 2021 and $70.71 million in 2020[452] - Total product revenues for 2022 were $2,746.9 million, with JAKAFI contributing $2,409.2 million, ICLUSIG $105.8 million, PEMAZYRE $83.4 million, MINJUVI $19.7 million, and OPZELURA $128.7 million[503] - Total product royalty revenues for 2022 were $482.7 million, with JAKAVI contributing $331.6 million, OLUMIANT $134.5 million, TABRECTA $15.4 million, and PEMAZYRE $1.2 million[503] - Milestone and contract revenues for 2022 were $165.0 million, compared to $95.0 million in 2021 and $205.0 million in 2020[503] - The fair value of acquisition-related contingent consideration decreased to $221.0 million in 2022 from $244.0 million in 2021, primarily due to updated projections of future net revenues of ICLUSIG[512] - The company's cash and cash equivalents increased to $2,951.4 million in 2022 from $2,057.4 million in 2021[511] - Debt securities (government) had an estimated fair value of $287.5 million in 2022, down from $290.8 million in 2021[506] - Long term investments decreased to $133.7 million in 2022 from $221.3 million in 2021[511] - The company's total assets measured at fair value were $3,372.6 million in 2022, up from $2,569.5 million in 2021[511] - The company's total liabilities measured at fair value were $221.0 million in 2022, down from $244.0 million in 2021[512] - Contingent consideration earned but not yet paid was $9.3 million as of December 31, 2022, compared to $19.6 million in 2021[513] - Collaboration partners comprised 20% and 36% of the accounts receivable balance as of December 31, 2022 and 2021, respectively[515] - Customer A accounted for 19% of total net product revenues in 2022, up from 18% in 2021[516] - Total inventory increased to $120.96 million as of December 31, 2022, from $56.94 million in 2021[521] - The company recognized $157.0 million in development milestones, $340.0 million in regulatory milestones, and $200.0 million in sales milestones under the Novartis agreement through December 31, 2022[524] - Royalties on JAKAVI net sales outside the U.S. totaled $331.6 million in 2022, compared to $338.0 million in 2021[530] - The company recognized $70.0 million in milestone and contract revenue under the Lilly agreement in 2022, up from $50.0 million in 2021[537] - The company recorded $134.5 million in product royalty revenues related to Lilly's net sales of OLUMIANT outside the U.S. in 2022, down from $220.9 million in 2021[537] - The company made a $20.0 million milestone payment to Lilly in March 2022 following the European Medicines Agency's positive recommendation for ruxolitinib in the GVHD field[538] - Agenus is eligible to receive up to an additional $500.0 million in future contingent development, regulatory, and commercialization milestones across all programs in the collaboration[540] - The fair market value of the long-term investment in Agenus as of December 31, 2022, was $29.0 million, down from $38.9 million in 2021[541] - Merus is eligible to receive up to $100.0 million in future contingent development and regulatory milestones and up to $250.0 million in commercialization milestones for programs without co-funding rights[545] - The fair market value of the long-term investment in Merus as of December 31, 2022, was $54.9 million, down from $112.9 million in 2021[547] - MacroGenics is eligible to receive up to an additional $335.0 million in future contingent development and regulatory milestones and up to $330.0 million in sales milestones[554] - Research and development expenses under the MacroGenics agreement totaled $89.2 million for the year ended December 31, 2022[556] - Syros is eligible to receive up to $54.0 million in target selection and option exercise fees and up to $50.0 million in development and regulatory milestones for each of the seven validated targets[557] - The fair market value of the long-term investment in Syros as of December 31, 2022, was $0.3 million, down from $3.1 million in 2021[558] - Zai Lab terminated the agreement for INCMGA0012 development and commercialization rights in mainland China, Hong Kong, Macau, and Taiwan, effective January 11, 2023[560] - The fair market value of the long-term investment in Calithera as of December 31, 2022, was $0.3 million, down from $1.1 million in 2021[550] - The company recorded a 50% share of US losses for tafasitamab commercialization: $8.0 million in 2022, $37.0 million in 2021, and $42.8 million in 2020. R&D expenses for tafasitamab were $99.7 million in 2022, $77.0 million in 2021, and $88.2 million in 2020[566] - The company entered a collaboration with Syndax for axatilimab, paying an upfront $117.0 million in 2021. Syndax is eligible for up to $220.0 million in development milestones and $230.0 million in sales milestones, with royalties ranging from mid-teens to low double digits[569] - The company purchased 1.4 million shares of Syndax common stock for $35.0 million in 2021, with a fair market value of $36.2 million as of December 31, 2022[570] - The company entered a collaboration with CMS Aesthetics for ruxolitinib cream in Greater China and Southeast Asia, receiving an upfront payment of $30.0 million in 2022[572] - Property and equipment, net, totaled $739.3 million as of December 31, 2022, up from $723.9 million in 2021. Depreciation expense was $46.3 million in 2022, $36.3 million in 2021, and $29.6 million in 2020[574][576] - The company capitalized $158.2 million in building and office equipment for its new laboratory and office building in Wilmington, Delaware, completed in December 2021[577] - The company's total lease liabilities as of December 31, 2022, were $55.6 million, with a weighted average lease term of 12.0 years for finance leases and 5.5 years for operating leases[581][584] - Operating lease expenses for 2022 were $11.7 million, a decrease from $14.2 million in 2021 and $12.5 million in 2020[587] - Amortization expense for intangible assets was $21.5 million annually for 2022, 2021, and 2020, with future amortization projected at $21.536 million per year through 2027[588] - Total accrued and other current liabilities increased to $701.053 million in 2022 from $533.595 million in 2021, driven by higher royalties ($263.466 million) and sales allowances ($192.133 million)[590] - The company has 5,428,932 shares of common stock available for future issuance under stock compensation plans as of December 31, 2022[592] - The 2010 Stock Incentive Plan was amended in May 2021 to increase reserved shares from 44,453,475 to 53,953,475[594] Financial Risks and Liabilities - The company had an accumulated deficit of $0.4 billion as of December 31, 2022[309] - The company may need additional capital in the future, which could impact research and development or commercialization efforts[313] - The company's marketable securities and long-term investments are subject to risks that could adversely affect its financial position[315] - The company's marketable securities were valued at $287.5 million as of December 31, 2022, primarily composed of U.S. government securities[426] - The company's acquisition-related contingent consideration liability was $221.0 million as of December 31, 2022, subject to significant estimation uncertainty[439] - Liabilities related to sales allowances, including Medicaid Drug Rebate Program rebates, totaled $192.1 million as of December 31, 2022[436] - The company's IT systems are vulnerable to disruptions, malicious intrusion, and cybersecurity risks, exacerbated by remote work due to COVID-19[334] - The company's reliance on third-party IT systems and social media usage increases risks of data breaches and reputational damage[336][339] - The company's IT system enhancements may not result in productivity improvements sufficient to outweigh implementation costs[335] - The company's marketable securities consist of investments in U.S. government debt securities, classified as available-for-sale and carried at fair value[461] - Inventory costs are primarily accounted for under the specific identification method, with inventory capitalized after regulatory approval[463] - The company evaluates potential excess inventory by analyzing current and future product demand relative to the remaining product shelf life, which is approximately 36 months for most products[464] - Goodwill impairment assessment completed as of October 1, 2022, with no impairment identified[472] - Valuation allowance on the majority of U.S. deferred tax assets released as of December 31, 2021[473] - Revenue recognition follows ASC 606, with revenue recognized when control of goods or services is transferred to customers[477] - Revenue recognition net of allowances for customer credits, including rebates, chargebacks, discounts, and government rebates[479] - Full buy-down programs for OPZELURA ended effective January 31, 2023[481] - Medicare Part D coverage gap funding increased by 30% starting January 2020 due to changes in the True Out of Pocket (TrOOP) calculation methodology[483] - Royalty revenues recognized from sales of JAKAVI, OLUMIANT, TABRECTA, and PEMAZYRE by Novartis, Lilly, and Innovent[485] - Milestone revenues recognized upon achievement of pre-specified developmental or regulatory events[489] - Research and development costs expensed as incurred, including collaboration payments and clinical trial expenses[494] - Advertising expenses for 2022 were $196.4 million, a significant increase from $66.0 million in 2021 and $28.9 million in 2020[497] Intellectual Property and Legal Risks - The company faces risks related to intellectual property, including potential infringement claims and the need to protect proprietary information[322][325] - The company may be involved in future lawsuits or legal proceedings, which could be costly and disrupt drug discovery and development efforts[324] - The company's patents may be challenged, invalidated, or fail to provide competitive advantages, potentially impacting revenues[325][331] - The company's foreign patent protection is uncertain and costly, with potential loss of rights in certain jurisdictions[333] - The company's patent litigation risks have increased due to recent U.S. Supreme Court rulings on reverse payment settlements[332] Regulatory and Tax Risks - Changes in tax laws, such as the Tax Cuts and Jobs Act of 2017 and the Inflation Reduction Act of 2022, could adversely affect the company's tax liability and financial condition[319] - The company faces potential fines of up to €20 million or 4% of annual global revenues for noncompliance with the GDPR[338] Research and Development - The company anticipates increased expenditures on drug discovery and development, including preclinical tests and clinical trials[310] - The company has not generated significant revenues from drug products other than JAKAFI and cannot assure substantial revenues from drug candidates like ICLUSIG, PEMAZYRE, MONJUVI/MINJUVI, and OPZELURA[311] - The company is implementing a new enterprise resource planning system, which involves substantial capital expenditures and operational risks[335] - The company completed the acquisition of Villaris Therapeutics for an upfront payment of $70.3 million, with potential milestone payments up to $1.05 billion[518][520] - The company received exclusive commercialization rights outside the US for tafasitamab, with co-commercialization rights in the US shared with MorphoSys. The company is responsible for 55% of global and US-specific clinical trial costs, while MorphoSys covers 45%[562] - The company paid MorphoSys an upfront non-refundable payment of $750.0 million in 2020, with potential future milestones of up to $737.5 million for development and regulatory, and $315.0 million for commercialization. Royalties range from mid-teens to mid-twenties on net sales outside the US[563] - The company purchased MorphoSys ADSs for $150.0 million, with a fair market value of $13.0 million as of December 31, 2022, down from $34.2 million in 2021[564]

官方 | W ■ == 00 00 10 100 Incyte 2022 Third Quarter Financial and Corporate Update NÖVEMBER 1, 2022 Forward-Looking Statements 2 Except for the historical information set forth herein, the matters set forth in this presentation contain predictions, estimates and other forward-looking statements, including any discussion of the following: the growth potential of Incyte's oncology and dermatology franchises and the opportunities presented by Incyte's portfolio; expectations with respect to demand for and uptak ...