Incyte(US:INCY)2024-04-30 20:02PART I: FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2024, highlighting significant growth in revenues and net income Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2024, reflects an increase in total assets to $7.14 billion and total stockholders' equity to $5.39 billion Key Balance Sheet Items (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $3,346,204 | $3,213,376 | | Total current assets | $4,849,091 | $4,645,402 | | Total Assets | $7,135,605 | $6,782,107 | | Current Liabilities | | | | Total current liabilities | $1,396,453 | $1,240,379 | | Total Liabilities | $1,741,334 | $1,592,270 | | Total Stockholders' Equity | $5,394,271 | $5,189,837 | Condensed Consolidated Statements of Operations Q1 2024 statements show total revenues increased by 9% to $880.9 million, with net income surging to $169.5 million due to an unrealized investment gain Q1 Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total revenues | $880,889 | $808,673 | | Income from operations | $91,898 | $24,770 | | Unrealized gain (loss) on long term investments | $99,947 | $(5,318) | | Net income | $169,548 | $21,703 | | Diluted net income per share | $0.75 | $0.10 | Condensed Consolidated Statements of Cash Flows Q1 2024 saw net cash provided by operating activities reach $218.8 million, a significant improvement, with total cash increasing to $3.35 billion Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $218,811 | $(105,603) | | Net cash used in investing activities | $(73,112) | $(28,559) | | Net cash (used in) provided by financing activities | $(12,413) | $4,009 | | Net increase (decrease) in cash | $132,610 | $(130,352) | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, revenue disaggregation, and key business events including acquisitions, collaborations, and contingent liabilities Disaggregated Revenue (in thousands) | Product/Royalty | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | JAKAFI revenues, net | $571,839 | $579,969 | | OPZELURA revenues, net | $85,724 | $56,552 | | Total product revenues, net | $729,923 | $693,237 | | Total product royalty revenues | $125,966 | $115,436 | | Milestone and contract revenues | $25,000 | $— | | Total revenues | $880,889 | $808,673 | - In February 2024, Incyte acquired exclusive global rights to tafasitamab (MONJUVI/MINJUVI) from MorphoSys for a $25.0 million payment, terminating their prior collaboration agreement44 - In March 2024, Incyte entered a collaboration with China Medical System Holdings Limited (CMSHL) for povorcitinib, recognizing a $25.0 million upfront payment as milestone and contract revenue72 - The company has accrued approximately $73.7 million as of March 31, 2024, for potential incremental Medicaid rebates if OPZELURA is deemed a "line extension" of JAKAFI by CMS99 - Subsequent to the quarter end, in April 2024, Incyte entered into an agreement to acquire Escient Pharmaceuticals for $750.0 million plus Escient's net cash101 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting a 9% revenue increase to $880.9 million, driven by product sales and pipeline advancements, alongside a strong liquidity position Overview Incyte is a global biopharmaceutical company focused on Hematology/Oncology and Inflammation & Autoimmunity, advancing a broad clinical pipeline and strategic acquisitions - The company's two primary therapeutic areas are Hematology/Oncology (including MPNs, GVHD, solid tumors) and Inflammation and Autoimmunity (IAI), which includes its Dermatology franchise116 - In February 2024, Incyte acquired exclusive global rights for tafasitamab (MONJUVI/MINJUVI) from MorphoSys, terminating their previous collaboration139 - A Biologics License Application (BLA) for axatilimab for chronic GVHD was submitted and accepted for Priority Review by the FDA in February 2024162 - In April 2024, Incyte entered an agreement to acquire Escient Pharmaceuticals, a clinical-stage company focused on immune and neuro-immune disorders, for $750 million plus net cash238239 Results of Operations Q1 2024 total revenues increased to $880.9 million, driven by OPZELURA growth and a milestone payment, while JAKAFI revenues slightly declined and net income benefited from an unrealized gain Q1 2024 vs Q1 2023 Revenue Breakdown (in millions) | Revenue Source | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | JAKAFI revenues, net | $571.8 | $580.0 | | OPZELURA revenues, net | $85.7 | $56.6 | | MINJUVI/MONJUVI revenues, net | $23.9 | $6.5 | | Total product revenues, net | $729.9 | $693.3 | | Total product royalty revenues | $126.0 | $115.4 | | Milestone and contract revenues | $25.0 | $— | | Total revenues | $880.9 | $808.7 | - The decrease in JAKAFI net product revenues was primarily driven by a decrease in channel inventory, which offset a price increase256 - The increase in MINJUVI/MONJUVI net product revenues was driven by the asset acquisition completed in February 2024, which gave Incyte exclusive global rights256 Q1 2024 vs Q1 2023 Operating Expenses (in millions) | Expense Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cost of product revenues | $61.0 | $56.8 | | Research and development | $429.3 | $406.6 | | Selling, general and administrative | $300.3 | $315.6 | Liquidity and Capital Resources As of March 31, 2024, Incyte maintained a strong liquidity position with $3.9 billion in cash and marketable securities, supported by $218.8 million in Q1 operating cash flow - As of March 31, 2024, the company had $3.9 billion in available cash, cash equivalents, and marketable securities275 - Net cash provided by operating activities for Q1 2024 was $218.8 million, compared to net cash used of $105.6 million in Q1 2023, primarily due to changes in working capital276 - The company has a $500.0 million senior unsecured revolving credit facility, which was undrawn as of March 31, 2024279 Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily stems from its $504.5 million investment portfolio in U.S. government debt, with a 10% interest rate increase deemed immaterial - The company's investments in marketable securities, totaling $504.5 million as of March 31, 2024, are primarily composed of U.S. government debt securities283 - The company is exposed to interest rate risk, but management has determined that a hypothetical 10% increase in market interest rates would not have a material impact on the portfolio's fair value283 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during Q1 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2024286 - There were no material changes in internal control over financial reporting during the first quarter of 2024287 PART II: OTHER INFORMATION Risk Factors This section outlines significant risks including heavy dependence on JAKAFI, competition, pricing pressures, and inherent uncertainties in drug development and manufacturing - The company depends heavily on its lead product, JAKAFI, and any decrease in its revenues could materially harm the business289 - The business faces significant risk from pricing and reimbursement pressures, including government health care reform measures like the Inflation Reduction Act, which could limit drug prices and profitability294338 - Competition is a major risk, with potential for decreased revenue from existing therapies, new products from competitors, and generic versions of Incyte's products, including a noted ANDA filing for a generic version of JAKAFI320322 - The company relies on third parties for manufacturing its key products, which creates risks related to supply constraints, quality control, and regulatory compliance354 - There are significant risks associated with the discovery and development of new drugs, including the possibility of clinical trial failures, inability to obtain regulatory approval, and the high costs involved328331 Other Information This section discloses that three company officers adopted prearranged trading plans under Rule 10b5-1(c) during Q1 2024 - Steven Stein, EVP and Chief Medical Officer, adopted a trading plan on February 20, 2024, for the sale of up to 20,147 shares410 - Barry Flannelly, EVP and General Manager, North America, adopted a trading plan on February 20, 2024, for the sale of up to 52,931 shares411 - Thomas Tray, VP, Chief Accounting Officer, adopted a trading plan on March 7, 2024, for the sale of up to 1,093 shares411 Exhibits This section lists exhibits filed with the Form 10-Q, including the 2024 Inducement Stock Incentive Plan and Sarbanes-Oxley Act certifications - The filing includes documents for the company's 2024 Inducement Stock Incentive Plan (Exhibits 10.1-10.4)414 - Certifications by the CEO and CFO under Rules 13a-14(a) and Section 906 of the Sarbanes-Oxley Act are included as Exhibits 31.1, 31.2, 32.1, and 32.2414